-----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, F4PvWX+jqpyeQ2YMUKnVRuAMw2Vo3tqQEnEFL9MhM4lql6ctlo5TZOYuTkbCEvX4 +fYn1r95TIk2aQEB0yJ7Vg== 0000950123-10-032313.txt : 20100406 0000950123-10-032313.hdr.sgml : 20100406 20100406111311 ACCESSION NUMBER: 0000950123-10-032313 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20100131 FILED AS OF DATE: 20100406 DATE AS OF CHANGE: 20100406 EFFECTIVENESS DATE: 20100406 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVERSOURCE INCOME SERIES, INC. CENTRAL INDEX KEY: 0000052407 IRS NUMBER: 410839316 STATE OF INCORPORATION: MN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-00499 FILM NUMBER: 10733471 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 612-671-4321 MAIL ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: AXP INCOME SERIES INC DATE OF NAME CHANGE: 20021118 FORMER COMPANY: FORMER CONFORMED NAME: AXP SELECTIVE FUND INC /MN/ DATE OF NAME CHANGE: 20000829 FORMER COMPANY: FORMER CONFORMED NAME: IDS SELECTIVE FUND INC DATE OF NAME CHANGE: 19920703 0000052407 S000003435 RiverSource Income Builder Basic Income Fund C000009499 RiverSource Income Builder Basic Income Fund Class A RBBAX C000009500 RiverSource Income Builder Basic Income Fund Class B RBBBX C000009501 RiverSource Income Builder Basic Income Fund Class C RBBCX C000042931 RiverSource Income Builder Basic Income Fund Class R4 0000052407 S000003436 RiverSource Income Builder Moderate Income Fund C000009503 RiverSource Income Builder Moderate Income Fund Class A RSMAX C000009504 RiverSource Income Builder Moderate Income Fund Class B RSMBX C000009505 RiverSource Income Builder Moderate Income Fund Class C RSMCX C000042932 RiverSource Income Builder Moderate Income Fund Class R4 0000052407 S000003437 RiverSource Income Builder Enhanced Income Fund C000009507 RiverSource Income Builder Enhanced Income Fund Class A RSBAX C000009508 RiverSource Income Builder Enhanced Income Fund Class B REIVX C000009509 RiverSource Income Builder Enhanced Income Fund Class C RIECX C000042933 RiverSource Income Builder Enhanced Income Fund Class R4 N-CSR 1 c56467nvcsr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-499 RIVERSOURCE INCOME SERIES, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 1/31 Date of reporting period: 1/31 Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE INCOME BUILDER SERIES ANNUAL REPORT FOR THE PERIOD ENDED JANUARY 31, 2010 THIS ANNUAL REPORT DESCRIBES THREE FUNDS, EACH OF WHICH INVESTS IN OTHER RIVERSOURCE FUNDS. THE OBJECTIVE OF EACH FUND IS A HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL. RiverSource Income Builder Basic Income Fund RiverSource Income Builder Moderate Income Fund RiverSource Income Builder Enhanced Income Fund (ADVICE-BUILT(SM) SOLUTIONS LOGO) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance RiverSource Income Builder Basic Income Fund.................... 3 RiverSource Income Builder Moderate Income Fund........... 5 RiverSource Income Builder Enhanced Income Fund........... 7 Manager Commentary................. 9 The Fund's Long-term Performance... 12 Investment Changes................. 18 Fund Expenses Examples............. 24 Investments in Affiliated Funds.... 28 Statements of Assets and Liabilities...................... 34 Statements of Operations........... 35 Statements of Changes in Net Assets........................... 36 Financial Highlights............... 38 Notes to Financial Statements...... 46 Report of Independent Registered Public Accounting Firm........... 53 Federal Income Tax Information..... 54 Board Members and Officers......... 55 Proxy Voting....................... 58
- -------------------------------------------------------------------------------- 2 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- RiverSource Income Builder Basic Income Fund FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Income Builder Basic Income Fund (the Fund) Class A shares gained 23.35% (excluding sales charge) for the 12 months ended Jan. 31, 2010. > The Fund's bond benchmark, the Barclays Capital U.S. Aggregate Bond Index, increased 8.51% during the same time frame. > The Fund's domestic equity benchmark, the Russell 3000(R) Value Index, rose 31.84% for the 12-month period. > The Citigroup 3-Month U.S. Treasury Bill Index advanced 0.15% during the annual period. > The Fund outperformed its Blended Index composed of 65% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000(R) Value Index and 10% Citigroup 3- Month U.S. Treasury Bill Index, which increased 13.62% for the same period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2010) - --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 - ---------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income Fund Class A (excluding sales charge) +23.35% +1.85% +3.77% - ---------------------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index (unmanaged) +8.51% +6.60% +6.12% - ---------------------------------------------------------------------------------------------- Russell 3000(R) Value Index (unmanaged) +31.84% -10.16% -3.87% - ---------------------------------------------------------------------------------------------- Citigroup 3-Month U.S. Treasury Bill Index (unmanaged) +0.15% +2.07% +2.79% - ---------------------------------------------------------------------------------------------- Blended Index (unmanaged) +13.62% +2.20% +3.60% - ----------------------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of each Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. Each Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Income Builder Basic Income Fund AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2010 SINCE Without sales charge 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) +23.35% +1.85% +3.77% - ---------------------------------------------------------------------------------------------- Class B (inception 2/16/06) +22.38% +1.10% +2.98% - ---------------------------------------------------------------------------------------------- Class C (inception 2/16/06) +22.35% +1.11% +3.01% - ---------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) +23.31% +2.34% +4.18% - ---------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) +17.49% +0.21% +2.50% - ---------------------------------------------------------------------------------------------- Class B (inception 2/16/06) +17.37% +0.18% +2.30% - ---------------------------------------------------------------------------------------------- Class C (inception 2/16/06) +21.35% +1.11% +3.01% - ----------------------------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R4 shares. Class R4 is available to qualifying institutional investors only. 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. The RiverSource Income Builder Series funds are "funds of funds" comprised of holdings in several different RiverSource Funds, which may include small-cap, mid-cap, large-cap, money market, international, bond, and/or sector funds. Each of the underlying funds in which the Fund invests has its own investment risks, and those risks can affect the value of the portfolio's shares and investments. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. Non-investment grade securities have more volatile prices and carry more risk to principal and income than investment grade securities. 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. Investments in small- and mid-capitalization companies involve greater risks and potential volatility than investments in larger, more established companies. See the Funds' prospectus for more information on these and other risks that may be associated with the underlying funds. - -------------------------------------------------------------------------------- 4 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- RiverSource Income Builder Moderate Income Fund FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Income Builder Moderate Income Fund (the Fund) Class A shares gained 25.95% (excluding sales charge) for the 12 months ended Jan. 31, 2010. > The Fund's bond benchmark, the Barclays Capital U.S. Aggregate Bond Index, increased 8.51% during the same time frame. > The Fund's domestic equity benchmark, the Russell 3000(R) Value Index, rose 31.84% for the 12-month period. > The Citigroup 3-Month U.S. Treasury Bill Index advanced 0.15% during the annual period. > The Fund outperformed its Blended Index composed of 70% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000(R) Value Index and 5% Citigroup 3-Month U.S. Treasury Bill Index, which increased 14.07% for the same period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2010) - --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 - ---------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income Fund Class A (excluding sales charge) +25.95% +0.80% +3.27% - ---------------------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index (unmanaged) +8.51% +6.60% +6.12% - ---------------------------------------------------------------------------------------------- Russell 3000(R) Value Index (unmanaged) +31.84% -10.16% -3.87% - ---------------------------------------------------------------------------------------------- Citigroup 3-Month U.S. Treasury Bill Index (unmanaged) +0.15% +2.07% +2.79% - ---------------------------------------------------------------------------------------------- Blended Index (unmanaged) +14.07% +2.41% +3.76% - ----------------------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of each Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. Each Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Income Builder Moderate Income Fund AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2010 SINCE Without sales charge 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) +25.95% +0.80% +3.27% - ---------------------------------------------------------------------------------------------- Class B (inception 2/16/06) +25.00% +0.02% +2.49% - ---------------------------------------------------------------------------------------------- Class C (inception 2/16/06) +24.94% +0.02% +2.52% - ---------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) +25.94% +1.01% +3.47% - ---------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) +19.97% -0.83% +2.00% - ---------------------------------------------------------------------------------------------- Class B (inception 2/16/06) +20.00% -0.88% +1.82% - ---------------------------------------------------------------------------------------------- Class C (inception 2/16/06) +23.94% +0.02% +2.52% - ----------------------------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R4 shares. Class R4 is available to qualifying institutional investors only. 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. The RiverSource Income Builder Series funds are "funds of funds" comprised of holdings in several different RiverSource Funds, which may include small-cap, mid-cap, large-cap, money market, international, bond, and/or sector funds. Each of the underlying funds in which the Fund invests has its own investment risks, and those risks can affect the value of the portfolio's shares and investments. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. Non-investment grade securities have more volatile prices and carry more risk to principal and income than investment grade securities. 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. Investments in small- and mid-capitalization companies involve greater risks and potential volatility than investments in larger, more established companies. See the Funds' prospectus for more information on these and other risks that may be associated with the underlying funds. - -------------------------------------------------------------------------------- 6 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Income Builder Enhanced Income Fund (the Fund) Class A shares gained 30.07% (excluding sales charge) for the 12 months ended Jan. 31, 2010. > The Fund's bond benchmark, the Barclays Capital U.S. Aggregate Bond Index, increased 8.51% during the same time frame. > The Fund's domestic equity benchmark, the Russell 3000(R) Value Index, rose 31.84% for the 12-month period. > The Citigroup 3-Month U.S. Treasury Bill Index advanced 0.15% during the annual period. > The Fund outperformed its Blended Index composed of 72.5% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000(R) Value Index and 2.5% Citigroup 3-Month U.S. Treasury Bill Index, which increased 14.30% for the period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2010) - --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 - ---------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund Class A (excluding sales charge) +30.07% +1.07% +3.64% - ---------------------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index (unmanaged) +8.51% +6.60% +6.12% - ---------------------------------------------------------------------------------------------- Russell 3000(R) Value Index (unmanaged) +31.84% -10.16% -3.87% - ---------------------------------------------------------------------------------------------- Citigroup 3-Month U.S. Treasury Bill Index (unmanaged) +0.15% +2.07% +2.79% - ---------------------------------------------------------------------------------------------- Blended Index (unmanaged) +14.30% +2.52% +3.84% - ----------------------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of each Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. Each Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 7 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Income Builder Enhanced Income Fund AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2010 SINCE Without sales charge 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) +30.07% +1.07% +3.64% - ---------------------------------------------------------------------------------------------- Class B (inception 2/16/06) +29.21% +0.32% +2.88% - ---------------------------------------------------------------------------------------------- Class C (inception 2/16/06) +29.16% +0.32% +2.88% - ---------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) +30.07% +1.29% +3.84% - ---------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) +23.89% -0.55% +2.37% - ---------------------------------------------------------------------------------------------- Class B (inception 2/16/06) +24.21% -0.56% +2.21% - ---------------------------------------------------------------------------------------------- Class C (inception 2/16/06) +28.16% +0.32% +2.88% - ----------------------------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R4 shares. Class R4 is available to qualifying institutional investors only. 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. The RiverSource Income Builder Series funds are "funds of funds" comprised of holdings in several different RiverSource Funds, which may include small-cap, mid-cap, large-cap, money market, international, bond, and/or sector funds. Each of the underlying funds in which the Fund invests has its own investment risks, and those risks can affect the value of the portfolio's shares and investments. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. Non-investment grade securities have more volatile prices and carry more risk to principal and income than investment grade securities. 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. Investments in small- and mid-capitalization companies involve greater risks and potential volatility than investments in larger, more established companies. See the Funds' prospectus for more information on these and other risks that may be associated with the underlying funds. - -------------------------------------------------------------------------------- 8 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- On September 30, 2009, Ameriprise Financial, Inc., the parent company of RiverSource Investments, LLC (RiverSource), the investment manager to RiverSource Income Builder Series Funds (the Funds), announced the acquisition of the long-term asset management business of Columbia Management Group, LLC, and its affiliated companies (Columbia) (the Columbia Transaction). The Columbia Transaction is subject to certain approvals and other conditions to closing, and is currently expected to close in the spring of 2010 (the Closing). In connection with the anticipated integration of the long-term asset management businesses of Columbia and RiverSource following the Closing, RiverSource has determined that the portfolio manager primarily responsible for overseeing the Funds' investments, effective upon and subject to the Closing, will be Colin J. Lundgren, CFA. Please see the Funds' current prospectus, as supplemented, for additional biographical information about the portfolio manager. The Funds' current prospectus may be obtained by contacting your financial advisor or RiverSource Service Corporation at 1(800) 221-2450. Dear Shareholder, RiverSource Income Builder Series funds (the Funds) outperformed their respective Blended Index benchmarks during the reporting period. All fund returns listed below are for Class A shares (excluding sales charge) for the 12- month period ended Jan. 31, 2010. - - RiverSource Income Builder Basic Income Fund rose 23.35%. The Fund's Blended Index, composed of 65% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000(R) Value Index and 10% Citigroup 3-Month U.S. Treasury Bill Index, gained 13.62% for the period. - - RiverSource Income Builder Moderate Income Fund increased 25.95%. The Fund's Blended Index, composed of 70% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000(R) Value Index and 5% Citigroup 3-Month U.S. Treasury Bill Index, rose 14.07% for the period. - - RiverSource Income Builder Enhanced Income Fund gained 30.07%. The Fund's Blended Index, composed of 72.5% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000(R) Value Index and 2.5% Citigroup 3-Month U.S. Treasury Bill Index, increased 14.30% for the period. The Funds' bond benchmark, the Barclays Capital U.S. Aggregate Bond Index gained 8.51%. The Funds' domestic equity benchmark, the Russell 3000(R) Value Index, rose 31.84%, while the Citigroup 3-Month U.S. Treasury Bill Index, advanced 0.15%. Index returns are for the 12-month period ended Jan. 31, 2010. SIGNIFICANT PERFORMANCE FACTORS Financial markets generated mostly strong positive returns during the 12 months ended Jan. 31, 2010, especially equities and lower quality sectors of the fixed income market. High yield corporate bonds and high yield bank loans generated the highest returns in the Funds' investable universe, outpacing even the notably strong returns of real estate investment trusts (REITs) and virtually all segments of the equity market. Cash and higher quality bonds produced the lowest returns in the Funds' investable universe, but still gained ground. Against this backdrop, the performance of the Funds was aided by three primary factors. First, the Funds benefited from its design to have a long-term strategic allocation to equities and to the lower quality sectors of the fixed income market, including high yield corporate bonds and high yield bank loans. As indicated, these sectors generated the strongest returns during the fiscal year. Second, our tactical decision to maintain and subsequently increase the overweighting to lower quality bonds above that of the long-term strategic target - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- weightings established for each fund of the RiverSource Income Builder Series further enhanced returns. Third, value was added by the fact that most of the underlying funds in which the Funds invest outperformed their respective benchmark indices during the annual period. On the equity side, in addition to the long-term strategic allocation to this asset class, the outperformance of RiverSource Dividend Opportunities Fund and RiverSource Real Estate Fund, two underlying funds, versus their respective benchmark indices notably boosted performance for the annual period. Conversely, the underperformance of RiverSource Disciplined Small Cap Fund, another underlying fund, detracted from performance, though only modestly. Further, an emphasis on large-cap equities detracted somewhat, as small-cap equities outperformed large-cap equities during the 12 months ended Jan. 31, 2010. During the annual period, the performance of U.S. equities versus international equities was not a significant factor impacting the Funds returns. On the fixed income side, an overweighted exposure to lower quality fixed income sectors helped both absolute and relative performance most significantly, as these segments delivered the strongest gains during the annual period. More specifically, the Funds had significant exposure to high yield corporate bonds and high yield bank loans. Further, results were boosted by the outperformance of the underlying RiverSource Emerging Market Bond Fund versus its benchmark index during the fiscal year. On the other hand, the Funds' exposure to cash detracted, as this sector lagged due to low short-term interest rates. Further, the underperformance of the underlying RiverSource Floating Rate Fund and RiverSource High Yield Bond Fund versus their respective benchmark indices negatively impacted relative performance during the annual period. CHANGES TO THE FUNDS' PORTFOLIOS Sector allocation decisions made during the annual period followed a disciplined quantitative approach that balances momentum, value and yield. The quantitative models we use prompted incremental adjustments to decrease the funds' exposure to higher quality bonds, primarily mortgage-backed securities, and increase exposure to lower quality bonds, primarily high yield corporate bonds and emerging market bonds. To a lesser extent, the quantitative models also prompted an increase in exposure to equities. At the end of the annual period, each fund in the RiverSource Income Builder Series maintained a modest overweighting to equities, relative to its respective Blended Index, and strongly favored lower quality bonds over higher quality bonds, consistent with the model recommendations. At the same time, each fund of the RiverSource Income Builder Series remained well diversified across and within asset classes. OUR FUTURE STRATEGY The Funds will continue to follow a quantitative discipline that seeks to generate a high level of income and capital growth while managing downside risk. Sector allocation changes may be implemented monthly and may be due to changes in yields, valuations, price momentum and correlations to other asset classes. (PHOTO - DIMITRIS BERTSIMAS) (PHOTO - COLIN LUNDGREN) Dimitris Bertsimas, Ph. D. Colin Lundgren, CFA(R) Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- 10 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- RIVERSOURCE INCOME BUILDER BASIC INCOME FUND The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Income Builder Basic Income Fund Class A shares (from 2/16/06 to 1/31/10) as compared to the performance of the Barclays Capital U.S. Aggregate Bond Index, and the Russell 3000 Value Index, as well as a Blended Index, consisting of the Barclays Capital U.S. Aggregate Bond Index, the Russell 3000 Value Index and the Citigroup 3-Month U.S. Treasury Bill 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 4.75%, 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 intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Jan. 31, 2010 SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 RIVERSOURCE INCOME BUILDER BASIC INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,749 $10,063 $11,025 - ------------------------------------------------------------------- Average annual total return +17.49% +0.21% +2.50% - ------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(1) Cumulative value of $10,000 $10,851 $12,112 $12,526 - ------------------------------------------------------------------- Average annual total return +8.51% +6.60% +6.12% - ------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) Cumulative value of $10,000 $13,184 $7,250 $8,554 - ------------------------------------------------------------------- Average annual total return +31.84% -10.16% -3.87% - ------------------------------------------------------------------- CITIGROUP 3-MONTH U.S. TREASURY BILL INDEX(3) Cumulative value of $10,000 $10,015 $10,635 $11,150 - ------------------------------------------------------------------- Average annual total return +0.15% +2.07% +2.79% - ------------------------------------------------------------------- BLENDED INDEX(4) Cumulative value of $10,000 $11,362 $10,674 $11,499 - ------------------------------------------------------------------- Average annual total return +13.62% +2.20% +3.60% - -------------------------------------------------------------------
Results for other share classes can be found on page 4. - -------------------------------------------------------------------------------- 12 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE INCOME BUILDER BASIC INCOME FUND LINE GRAPH)
RIVERSOURCE INCOME BUILDER BASIC INCOME FUND CLASS A BARCLAYS CAPITAL CITIGROUP 3-MONTH (INCLUDES SALES U.S. AGGREGATE RUSSELL 3000 U.S. TREASURY CHARGE) BOND INDEX(1) VALUE INDEX(2) BILL INDEX(3) BLENDED INDEX(4) ------------------ ---------------- -------------- ----------------- ---------------- 2/16/06 $ 9,525 $10,000 $10,000 $10,000 $10,000 4/30/06 9,652 9,933 10,384 10,106 10,061 7/31/06 9,728 10,078 10,387 10,227 10,170 10/31/06 10,118 10,390 11,145 10,355 10,571 1/31/07 10,437 10,446 11,798 10,485 10,774 4/30/07 10,698 10,664 12,201 10,614 11,028 7/31/07 10,558 10,640 11,735 10,744 10,924 10/31/07 11,006 10,950 12,266 10,867 11,267 1/31/08 10,696 11,366 11,067 10,967 11,281 4/30/08 10,681 11,396 11,043 11,028 11,306 7/31/08 10,392 11,294 10,005 11,072 10,981 10/31/08 9,322 10,983 7,811 11,118 10,172 1/31/09 8,938 11,660 6,488 11,134 10,121 4/30/09 9,408 11,834 6,779 11,139 10,366 7/31/09 10,189 12,180 7,727 11,144 10,922 10/31/09 10,693 12,497 8,167 11,148 11,271 1/31/10 11,025 12,526 8,554 11,150 11,499
(1) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. (2) The Russell 3000 Value Index, an unmanaged index, measures the performance of those Russell 3000(R) Index companies with lower price-to-book ratios and lower forecasted growth values. (3) The Citigroup 3-Month U.S. Treasury Bill Index, an unmanaged index, is representative of the performance of three-month Treasury bills. (4) The Income Builder Basic Income Fund Blended Index consists of 65% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000 Value Index and 10% Citigroup 3-Month U.S. Treasury Bill Index. The Citigroup 3-Month U.S. Treasury Bill Index is shown in the table because it is a separate component of the Blended Index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 13 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Income Builder Moderate Income Fund Class A shares (from 2/16/06 to 1/31/10) as compared to the performance of the Barclays Capital U.S. Aggregate Bond Index and the Russell 3000 Value Index, as well as a Blended Index, consisting of the Barclays Capital U.S. Aggregate Bond Index, the Russell 3000 Value Index and the Citigroup 3-Month U.S. Treasury Bill 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 4.75%, 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 intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Jan. 31, 2010 SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,997 $9,754 $10,815 - ------------------------------------------------------------------- Average annual total return +19.97% -0.83% +2.00% - ------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(1) Cumulative value of $10,000 $10,851 $12,112 $12,526 - ------------------------------------------------------------------- Average annual total return +8.51% +6.60% +6.12% - ------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) Cumulative value of $10,000 $13,184 $7,250 $8,554 - ------------------------------------------------------------------- Average annual total return +31.84% -10.16% -3.87% - ------------------------------------------------------------------- CITIGROUP 3-MONTH U.S. TREASURY BILL INDEX(3) Cumulative value of $10,000 $10,015 $10,635 $11,150 - ------------------------------------------------------------------- Average annual total return +0.15% +2.07% +2.79% - ------------------------------------------------------------------- BLENDED INDEX(4) Cumulative value of $10,000 $11,407 $10,742 $11,573 - ------------------------------------------------------------------- Average annual total return +14.07% +2.41% +3.76% - -------------------------------------------------------------------
Results for other share classes can be found on page 6. - -------------------------------------------------------------------------------- 14 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND LINE GRAPH)
RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND CLASS A BARCLAYS CAPITAL CITIGROUP 3-MONTH (INCLUDES SALES U.S. AGGREGATE RUSSELL 3000 U.S. TREASURY CHARGE) BOND INDEX(1) VALUE INDEX(2) BILL INDEX(3) BLENDED INDEX(4) ------------------ ---------------- -------------- ----------------- ---------------- 2/16/06 $ 9,525 $10,000 $10,000 $10,000 $10,000 4/30/06 9,647 9,933 10,384 10,106 10,053 7/31/06 9,755 10,078 10,387 10,227 10,163 10/31/06 10,197 10,390 11,145 10,355 10,574 1/31/07 10,562 10,446 11,798 10,485 10,773 4/30/07 10,862 10,664 12,201 10,614 11,032 7/31/07 10,659 10,640 11,735 10,744 10,920 10/31/07 11,166 10,950 12,266 10,867 11,272 1/31/08 10,668 11,366 11,067 10,967 11,303 4/30/08 10,670 11,396 11,043 11,028 11,326 7/31/08 10,345 11,294 10,005 11,072 10,993 10/31/08 8,990 10,983 7,811 11,118 10,166 1/31/09 8,587 11,660 6,488 11,134 10,145 4/30/09 9,082 11,834 6,779 11,139 10,398 7/31/09 9,932 12,180 7,727 11,144 10,971 10/31/09 10,482 12,497 8,167 11,148 11,336 1/31/10 10,815 12,526 8,554 11,150 11,573
(1) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. (2) The Russell 3000 Value Index, an unmanaged index, measures the performance of those Russell 3000(R) Index companies with lower price-to-book ratios and lower forecasted growth values. (3) The Citigroup 3-Month U.S. Treasury Bill Index, an unmanaged index, is representative of the performance of three-month Treasury bills. (4) The Income Builder Moderate Income Fund Blended Index consists of 70% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000 Value Index and 5% Citigroup 3-Month U.S. Treasury Bill Index. The Citigroup 3-Month U.S. Treasury Bill Index is shown in the table because it is a separate component of the Blended Index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 15 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Income Builder Enhanced Income Fund Class A shares (from 2/16/06 to 1/31/10) as compared to the performance of the Barclays Capital U.S. Aggregate Bond Index and the Russell 3000 Value Index, as well as a Blended Index, consisting of the Barclays Capital U.S. Aggregate Bond Index, the Russell 3000 Value Index and the Citigroup 3-Month U.S. Treasury Bill 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 4.75%, 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 intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Jan. 31, 2010 SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $12,389 $9,835 $10,972 - ------------------------------------------------------------------- Average annual total return +23.89% -0.55% +2.37% - ------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(1) Cumulative value of $10,000 $10,851 $12,112 $12,526 - ------------------------------------------------------------------- Average annual total return +8.51% +6.60% +6.12% - ------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) Cumulative value of $10,000 $13,184 $7,250 $8,554 - ------------------------------------------------------------------- Average annual total return +31.84% -10.16% -3.87% - ------------------------------------------------------------------- CITIGROUP 3-MONTH U.S. TREASURY BILL INDEX(3) Cumulative value of $10,000 $10,015 $10,635 $11,150 - ------------------------------------------------------------------- Average annual total return +0.15% +2.07% +2.79% - ------------------------------------------------------------------- BLENDED INDEX(4) Cumulative value of $10,000 $11,430 $10,776 $11,609 - ------------------------------------------------------------------- Average annual total return +14.30% +2.52% +3.84% - -------------------------------------------------------------------
Results for other share classes can be found on page 8. - -------------------------------------------------------------------------------- 16 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND LINE GRAPH)
RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND CLASS A BARCLAYS CAPITAL CITIGROUP 3-MONTH (INCLUDES SALES U.S. AGGREGATE RUSSELL 3000 U.S. TREASURY CHARGE) BOND INDEX(1) VALUE INDEX(2) BILL INDEX(3) BLENDED INDEX(4) ------------------ ---------------- -------------- ----------------- ---------------- 2/16/06 $ 9,525 $10,000 $10,000 $10,000 $10,000 4/30/06 9,652 9,933 10,384 10,106 10,049 7/31/06 9,718 10,078 10,387 10,227 10,160 10/31/06 10,193 10,390 11,145 10,355 10,575 1/31/07 10,627 10,446 11,798 10,485 10,773 4/30/07 10,984 10,664 12,201 10,614 11,034 7/31/07 10,680 10,640 11,735 10,744 10,918 10/31/07 11,240 10,950 12,266 10,867 11,275 1/31/08 10,620 11,366 11,067 10,967 11,314 4/30/08 10,653 11,396 11,043 11,028 11,336 7/31/08 10,341 11,294 10,005 11,072 10,999 10/31/08 8,707 10,983 7,811 11,118 10,163 1/31/09 8,435 11,660 6,488 11,134 10,157 4/30/09 9,081 11,834 6,779 11,139 10,414 7/31/09 10,008 12,180 7,727 11,144 10,995 10/31/09 10,632 12,497 8,167 11,148 11,368 1/31/10 10,972 12,526 8,554 11,150 11,609
(1) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. (2) The Russell 3000 Value Index, an unmanaged index, measures the performance of those Russell 3000(R) Index companies with lower price-to-book ratios and lower forecasted growth values. (3) The Citigroup 3-Month U.S. Treasury Bill Index, an unmanaged index, is representative of the performance of three-month Treasury bills. (4) The Income Builder Enhanced Income Fund Blended Index consists of 72.5% Barclays Capital U.S. Aggregate Bond Index, 25% Russell 3000 Value Index and 2.5% Citigroup 3-Month U.S. Treasury Bill Index. The Citigroup 3-Month U.S. Treasury Bill Index is shown in the table because it is a separate component of the Blended Index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 17 INVESTMENT CHANGES ------------------------------------------------------------- RIVERSOURCE INCOME BUILDER BASIC INCOME FUND Fund holdings at Jan. 31, 2010
% OF FUND'S % OF FUND'S PORTFOLIO ASSETS PORTFOLIO ASSETS 6 MONTHS AGO - -------------------------------------------------------------------------------------- DOMESTIC EQUITY FUNDS/INTERNATIONAL EQUITY FUNDS - -------------------------------------------------------------------------------------- Includes large cap, international, mid cap, real estate, small cap, small-mid cap - -------------------------------------------------------------------------------------- RiverSource Disciplined Equity Fund 8.0% 8.0% - -------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Fund 1.3% 0.3% - -------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Fund 4.5% 4.5% - -------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 4.2% 5.7% - -------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Fund 8.0% 8.1% - -------------------------------------------------------------------------------------- RiverSource Real Estate Fund 2.8% 2.4% ====================================================================================== 28.8% 29.0% - -------------------------------------------------------------------------------------- FIXED-INCOME FUNDS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities, floating rate, global, high yield, inflation protected - -------------------------------------------------------------------------------------- RiverSource Diversified Bond Fund 10.9% 8.0% - -------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 5.5% 2.8% - -------------------------------------------------------------------------------------- RiverSource Floating Rate Fund 5.9% 5.7% - -------------------------------------------------------------------------------------- RiverSource Global Bond Fund 1.6% 1.1% - -------------------------------------------------------------------------------------- RiverSource High Yield Bond Fund 13.5% 10.9% - -------------------------------------------------------------------------------------- RiverSource Income Opportunities Fund 1.3% 1.2% - -------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities Fund 7.0% --% - -------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 18.1% 28.5% ====================================================================================== 63.8% 58.2% - -------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities - -------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund 2.3% 3.8% - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- CASH EQUIVALENTS - -------------------------------------------------------------------------------------- RiverSource Cash Management Fund 5.1% 9.0% ====================================================================================== 100.0% 100.0% - --------------------------------------------------------------------------------------
PORTFOLIO ALLOCATION ----------------------------------------------------------- (at Jan. 31, 2010; % of portfolio assets) Equity Funds(1) 28.8% - ---------------------------------------------------------------- Fixed Income Funds(2) 63.8% - ---------------------------------------------------------------- Alternative Investments(3) 2.3% - ---------------------------------------------------------------- Cash Equivalents(4) 5.1% - ----------------------------------------------------------------
(1) Includes U.S. Large Cap 12.5%, Dividend Income 8.0%, U.S. Small Cap 4.2%, Real Estate 2.8% and International 1.3%. (2) Includes Investment Grade 29.0%, High Yield 14.8%, Inflation Protected Securities 7.0%, Floating Rate 5.9%, International 5.5% and Global Bond 1.6%. (3) Comprised entirely of an investment in the RiverSource Absolute Return Currency and Income Fund. (4) Comprised entirely of an investment in the RiverSource Cash Management Fund. - -------------------------------------------------------------------------------- 18 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- TOP FIVE HOLDINGS -------------------------------------------------------------- (at Jan. 31, 2010; % of portfolio assets) RiverSource U.S. Government Mortgage Fund 18.1% - ----------------------------------------------------------------- RiverSource High Yield Bond Fund 13.5% - ----------------------------------------------------------------- RiverSource Diversified Bond Fund 10.9% - ----------------------------------------------------------------- RiverSource Disciplined Equity Fund 8.0% - ----------------------------------------------------------------- RiverSource Dividend Opportunity Fund 8.0% - -----------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Investments in Affiliated Funds." 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. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 19 INVESTMENT CHANGES ------------------------------------------------------------- RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND Fund holdings at Jan. 31, 2010
% OF FUND'S % OF FUND'S PORTFOLIO ASSETS PORTFOLIO ASSETS 6 MONTHS AGO - -------------------------------------------------------------------------------------- DOMESTIC EQUITY FUNDS/INTERNATIONAL EQUITY FUNDS - -------------------------------------------------------------------------------------- Includes large cap, international, mid cap, real estate, small cap, small-mid cap - -------------------------------------------------------------------------------------- RiverSource Disciplined Equity Fund 6.3% 6.4% - -------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Fund 3.6% 0.4% - -------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Fund 2.9% 1.6% - -------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 4.2% 5.5% - -------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Fund 9.5% 9.8% - -------------------------------------------------------------------------------------- RiverSource Real Estate Fund 4.7% 5.4% ====================================================================================== 31.2% 29.1% - -------------------------------------------------------------------------------------- FIXED-INCOME FUNDS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities, floating rate, global, high yield, inflation protected - -------------------------------------------------------------------------------------- RiverSource Diversified Bond Fund 9.4% 9.3% - -------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 11.6% 5.0% - -------------------------------------------------------------------------------------- RiverSource Floating Rate Fund 11.3% 10.8% - -------------------------------------------------------------------------------------- RiverSource Global Bond Fund 1.8% 1.6% - -------------------------------------------------------------------------------------- RiverSource High Yield Bond Fund 14.5% 8.2% - -------------------------------------------------------------------------------------- RiverSource Income Opportunities Fund 3.2% 3.1% - -------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities Fund 0.2% --% - -------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 13.4% 24.7% ====================================================================================== 65.4% 62.7% - -------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities - -------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund 3.4% 3.8% - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- CASH EQUIVALENTS - -------------------------------------------------------------------------------------- RiverSource Cash Management Fund --% 4.4% ====================================================================================== 100.0% 100.0% - --------------------------------------------------------------------------------------
PORTFOLIO ALLOCATION ----------------------------------------------------------- (at Jan. 31, 2010; % of portfolio assets) Equity Funds(1) 31.2% - ---------------------------------------------------------------- Fixed Income Funds(2) 65.4% - ---------------------------------------------------------------- Alternative Investments(3) 3.4% - ---------------------------------------------------------------- Cash Equivalents(4) --% - ----------------------------------------------------------------
(1) Includes Dividend Income 9.5%, U.S. Large Cap 9.2%, Real Estate 4.7%, U.S. Small Cap 4.2% and International 3.6%. (2) Includes Investment Grade 22.8%, High Yield 17.7%, International 11.6%, Floating Rate 11.3%, Global Bond 1.8% and Inflation Protected Securities 0.2%. (3) Comprised entirely of an investment in the RiverSource Absolute Return Currency and Income Fund. (4) Comprised entirely of an investment in the RiverSource Cash Management Fund. - -------------------------------------------------------------------------------- 20 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- TOP FIVE HOLDINGS -------------------------------------------------------------- (at Jan. 31, 2010; % of portfolio assets) RiverSource High Yield Bond Fund 14.5% - ----------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 13.4% - ----------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 11.6% - ----------------------------------------------------------------- RiverSource Floating Rate Fund 11.3% - ----------------------------------------------------------------- RiverSource Dividend Opportunity Fund 9.5% - -----------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Investments in Affiliated Funds." 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. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 21 INVESTMENT CHANGES ------------------------------------------------------------- RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND Fund holdings at Jan. 31, 2010
% OF FUND'S % OF FUND'S PORTFOLIO ASSETS PORTFOLIO ASSETS 6 MONTHS AGO - -------------------------------------------------------------------------------------- DOMESTIC EQUITY FUNDS/INTERNATIONAL EQUITY FUNDS - -------------------------------------------------------------------------------------- Includes large cap, international, mid cap, real estate, small cap, small-mid cap - -------------------------------------------------------------------------------------- RiverSource Disciplined Equity Fund 3.3% 3.3% - -------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Fund 6.4% 0.7% - -------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Fund 0.6% 0.6% - -------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 3.5% 3.6% - -------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Fund 7.8% 7.9% - -------------------------------------------------------------------------------------- RiverSource Real Estate Fund 7.5% 8.9% ====================================================================================== 29.1% 25.0% - -------------------------------------------------------------------------------------- FIXED-INCOME FUNDS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities, floating rate, global, high yield, inflation protected - -------------------------------------------------------------------------------------- RiverSource Diversified Bond Fund 10.0% 9.6% - -------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 11.2% 10.0% - -------------------------------------------------------------------------------------- RiverSource Floating Rate Fund 12.2% 14.0% - -------------------------------------------------------------------------------------- RiverSource Global Bond Fund 2.3% 2.2% - -------------------------------------------------------------------------------------- RiverSource High Yield Bond Fund 17.6% 10.1% - -------------------------------------------------------------------------------------- RiverSource Income Opportunities Fund 5.2% 5.1% - -------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities Fund 0.8% --% - -------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 9.8% 18.7% ====================================================================================== 69.1% 69.7% - -------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities - -------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund 1.7% 3.8% - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- CASH EQUIVALENTS - -------------------------------------------------------------------------------------- RiverSource Cash Management Fund 0.1% 1.5% ====================================================================================== 100.0% 100.0% - --------------------------------------------------------------------------------------
PORTFOLIO ALLOCATION ----------------------------------------------------------- (at Jan. 31, 2010; % of portfolio assets) Equity Funds(1) 29.1% - ---------------------------------------------------------------- Fixed Income Funds(2) 69.1% - ---------------------------------------------------------------- Alternative Investments(3) 1.7% - ---------------------------------------------------------------- Cash Equivalents(4) 0.1% - ----------------------------------------------------------------
(1) Includes Dividend Income 7.8%, Real Estate 7.5%, International 6.4%, U.S. Large Cap 3.9% and U.S. Small Cap 3.5%. (2) Includes High Yield 22.8%, Investment Grade 19.8%, Floating Rate 12.2%, International 11.2%, Global Bond 2.3%, and Inflation Protected Securities 0.8%. (3) Comprised entirely of an investment in the RiverSource Absolute Return Currency and Income Fund. (4) Comprised entirely of an investment in the RiverSource Cash Management Fund. - -------------------------------------------------------------------------------- 22 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- TOP FIVE HOLDINGS -------------------------------------------------------------- (at Jan. 31, 2010; % of portfolio assets) RiverSource High Yield Bond Fund 17.6% - ----------------------------------------------------------------- RiverSource Floating Rate Fund 12.2% - ----------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 11.2% - ----------------------------------------------------------------- RiverSource Diversified Bond Fund 10.0% - ----------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 9.8% - -----------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Investments in Affiliated Funds." 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. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 23 FUND EXPENSES EXAMPLES --------------------------------------------------------- (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 distribution and service (12b-1) fees; and other Fund fees and expenses. These examples are 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 each Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any underlying funds (also referred to as "acquired funds") in which each Fund invests. The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Jan. 31, 2010. ACTUAL EXPENSES The first line of each 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 "Direct expenses paid during the period" to estimate the expenses you paid on your account during this period. You can also estimate the direct and indirect expenses you paid over the period by using the number in the first line under the heading "Direct and indirect expenses paid during the period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of each table provides information about hypothetical account values and hypothetical expenses based on each 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 with the cost of investing in other funds. To do so, compare each 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 each 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 each 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. - -------------------------------------------------------------------------------- 24 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Basic Income Fund
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING AUG. 1, 2009 JAN. 31, 2010 THE PERIOD(a) THE PERIOD(b),(c) - -------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,082.00 $2.23 $5.50 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.79 $2.17 $5.35 - -------------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,078.00 $6.11 $9.38 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.05 $5.94 $9.11 - -------------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,077.90 $6.11 $9.38 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.05 $5.94 $9.11 - -------------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,081.40 $2.02 $5.29 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.99 $1.97 $5.14 - --------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED (UNDERLYING FUND) NET FUND EXPENSE RATIO FEES AND EXPENSES(c) EXPENSES - --------------------------------------------------------------------------------------------------------- Class A .43% .63% 1.06% - --------------------------------------------------------------------------------------------------------- Class B 1.18% .63% 1.81% - --------------------------------------------------------------------------------------------------------- Class C 1.18% .63% 1.81% - --------------------------------------------------------------------------------------------------------- Class R4 .39% .63% 1.02% - ---------------------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund (underlying fund) fees and expenses, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (c) RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive fees and expenses for Class I shares on a number of underlying funds until at least the end of the underlying funds' next fiscal year, unless sooner terminated at the sole discretion of the underlying funds' Board. Before taking the fee waivers into account, the acquired fund (underlying fund) fees and expenses would have been 0.69% for all classes. Had these commitments not been in place for the entire six month period ended Jan. 31, 2010, the actual direct and indirect expenses paid would have been $5.81 for Class A, $9.69 for Class B, $9.69 for Class C and $5.60 for Class R4; the hypothetical direct and indirect expenses paid would have been $5.65 for Class A, $9.41 for Class B, $9.41 for Class C and $5.45 for Class R4. (d) Based on the actual return for the six months ended Jan. 31, 2010: +8.20% for Class A, +7.80% for Class B, +7.79% for Class C and +8.14% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 25 FUND EXPENSES EXAMPLES (continued) --------------------------------------------- RiverSource Income Builder Moderate Income Fund
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING AUG. 1, 2009 JAN. 31, 2010 THE PERIOD(a) THE PERIOD(b),(c) - -------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,088.90 $2.14 $5.62 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.89 $2.07 $5.45 - -------------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,085.10 $6.08 $9.57 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.10 $5.89 $9.26 - -------------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,084.70 $6.03 $9.51 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.84 $9.21 - -------------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,089.50 $1.88 $5.37 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,023.14 $1.82 $5.20 - --------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED (UNDERLYING FUND) NET FUND EXPENSE RATIO FEES AND EXPENSES(c) EXPENSES - --------------------------------------------------------------------------------------------------------- Class A .41% .67% 1.08% - --------------------------------------------------------------------------------------------------------- Class B 1.17% .67% 1.84% - --------------------------------------------------------------------------------------------------------- Class C 1.16% .67% 1.83% - --------------------------------------------------------------------------------------------------------- Class R4 .36% .67% 1.03% - ---------------------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund (underlying fund) fees and expenses, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (c) RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive fees and expenses for Class I shares on a number of underlying funds until at least the end of the underlying funds' next fiscal year, unless sooner terminated at the sole discretion of the underlying funds' Board. Before taking the fee waivers into account, the acquired fund (underlying fund) fees and expenses would have been 0.73% for all classes. Had these commitments not been in place for the entire six month period ended Jan. 31, 2010, the actual direct and indirect expenses paid would have been $5.94 for Class A, $9.88 for Class B, $9.82 for Class C and $5.68 for Class R4; the hypothetical direct and indirect expenses paid would have been $5.75 for Class A, $9.56 for Class B, $9.51 for Class C and $5.50 for Class R4. (d) Based on the actual return for the six months ended Jan. 31, 2010: +8.89% for Class A, +8.51% for Class B, +8.47% for Class C and +8.95% for Class R4. - -------------------------------------------------------------------------------- 26 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING AUG. 1, 2009 JAN. 31, 2010 THE PERIOD(a) THE PERIOD(b),(c) - -------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,096.30 $2.30 $5.91 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.74 $2.22 $5.70 - -------------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,092.40 $6.21 $9.81 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.00 $5.99 $9.46 - -------------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,091.90 $6.21 $9.80 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.00 $5.99 $9.46 - -------------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,096.10 $1.99 $5.59 - -------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,023.04 $1.92 $5.40 - --------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED (UNDERLYING FUND) NET FUND EXPENSE RATIO FEES AND EXPENSES(c) EXPENSES - --------------------------------------------------------------------------------------------------------- Class A .44% .69% 1.13% - --------------------------------------------------------------------------------------------------------- Class B 1.19% .69% 1.88% - --------------------------------------------------------------------------------------------------------- Class C 1.19% .69% 1.88% - --------------------------------------------------------------------------------------------------------- Class R4 .38% .69% 1.07% - ---------------------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund (underlying fund) fees and expenses, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (c) RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive fees and expenses for Class I shares on a number of underlying funds until at least the end of the underlying funds' next fiscal year, unless sooner terminated at the sole discretion of the underlying funds' Board. Before taking the fee waivers into account, the acquired fund (underlying fund) fees and expenses would have been 0.75% for all classes. Had these commitments not been in place for the entire six month period ended Jan. 31, 2010, the actual direct and indirect expenses paid would have been $6.22 for Class A, $10.12 for Class B, $10.12 for Class C and $5.91 for Class R4; the hypothetical direct and indirect expenses paid would have been $6.00 for Class A, $9.77 for Class B, $9.77 for Class C and $5.70 for Class R4. (d) Based on the actual return for the six months ended Jan. 31, 2010: +9.63% for Class A, +9.24% for Class B, +9.19% for Class C and +9.61% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 27 INVESTMENTS IN AFFILIATED FUNDS ------------------------------------------------ RiverSource Income Builder Basic Income Fund JAN. 31, 2010 (Percentages represent value of investments compared to net assets)
EQUITY FUNDS (28.8%) SHARES VALUE(a) DIVIDEND INCOME (8.0%) RiverSource Dividend Opportunity Fund 2,744,970 $18,281,498 - ------------------------------------------------------------------------------------- INTERNATIONAL (1.3%) RiverSource Disciplined International Equity Fund 446,535 2,964,993 - ------------------------------------------------------------------------------------- REAL ESTATE (2.8%) RiverSource Real Estate Fund 765,685 6,378,157 - ------------------------------------------------------------------------------------- U.S. LARGE CAP (12.5%) RiverSource Disciplined Equity Fund 3,992,964 18,247,845 RiverSource Disciplined Large Cap Value Fund 1,384,646 10,287,918 --------------- Total 28,535,763 - ------------------------------------------------------------------------------------- U.S. SMALL CAP (4.2%) RiverSource Disciplined Small Cap Value Fund 1,339,537(c) 9,684,850 - ------------------------------------------------------------------------------------- TOTAL EQUITY FUNDS (Cost: $74,828,943) $65,845,261 - ------------------------------------------------------------------------------------- FIXED INCOME FUNDS (63.8%) SHARES VALUE(a) FLOATING RATE (5.9%) RiverSource Floating Rate Fund 1,583,608 $13,524,009 - ------------------------------------------------------------------------------------- GLOBAL BOND (1.6%) RiverSource Global Bond Fund 535,329 3,720,540 - ------------------------------------------------------------------------------------- HIGH YIELD (14.9%) RiverSource High Yield Bond Fund 11,699,998 31,004,996 RiverSource Income Opportunities Fund 315,261 3,001,285 --------------- Total 34,006,281 - ------------------------------------------------------------------------------------- INFLATION PROTECTED SECURITIES (7.0%) RiverSource Inflation Protected Securities Fund 1,569,031 15,941,356 - ------------------------------------------------------------------------------------- INTERNATIONAL (5.5%) RiverSource Emerging Markets Bond Fund 1,210,476 12,673,680 - ------------------------------------------------------------------------------------- INVESTMENT GRADE (28.9%) RiverSource Diversified Bond Fund 5,101,301 24,843,335 RiverSource U.S. Government Mortgage Fund 8,203,096(c) 41,425,635 --------------- Total 66,268,970 - ------------------------------------------------------------------------------------- TOTAL FIXED INCOME FUNDS (Cost: $137,749,446) $146,134,836 - ------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS (2.3%) SHARES VALUE(a) RiverSource Absolute Return Currency and Income Fund 518,893(b) $5,235,634 - ------------------------------------------------------------------------------------- TOTAL ALTERNATIVE INVESTMENTS (Cost: $5,148,835) $5,235,634 - ------------------------------------------------------------------------------------- CASH EQUIVALENTS (5.1%) SHARES VALUE(a) MONEY MARKET RiverSource Cash Management Fund 11,605,843 $11,605,843 - ------------------------------------------------------------------------------------- TOTAL CASH EQUIVALENTS (Cost: $11,605,843) $11,605,843 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN AFFILIATED FUNDS (Cost: $229,333,067)(d) $228,821,574 =====================================================================================
NOTES TO INVESTMENTS IN AFFILIATED FUNDS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Investments in Underlying Affiliated Funds which exceed 5% of the underlying fund's shares outstanding -- See Note 6 to the financial statements. (d) At Jan. 31, 2010, the cost of securities for federal income tax purposes was $235,956,638 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $7,006,329 Unrealized depreciation (14,141,393) -------------------------------------------------------------------------------------- Net unrealized depreciation $(7,135,064) --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 28 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Basic Income Fund FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2010:
FAIR VALUE AT JAN. 31, 2010 --------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - --------------------------------------------------------------------------------------------------------------- Investments in Affiliated Funds $228,821,574 $-- $-- $228,821,574
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 29 INVESTMENTS IN AFFILIATED FUNDS ------------------------------------------------ RiverSource Income Builder Moderate Income Fund JAN. 31, 2010 (Percentages represent value of investments compared to net assets)
EQUITY FUNDS (31.2%) SHARES VALUE(a) DIVIDEND INCOME (9.5%) RiverSource Dividend Opportunity Fund 5,538,764 $36,888,167 - ------------------------------------------------------------------------------------- INTERNATIONAL (3.6%) RiverSource Disciplined International Equity Fund 2,093,810 13,902,899 - ------------------------------------------------------------------------------------- REAL ESTATE (4.7%) RiverSource Real Estate Fund 2,197,115(c) 18,301,964 - ------------------------------------------------------------------------------------- U.S. LARGE CAP (9.2%) RiverSource Disciplined Equity Fund 5,356,339 24,478,467 RiverSource Disciplined Large Cap Value Fund 1,479,315 10,991,313 --------------- Total 35,469,780 - ------------------------------------------------------------------------------------- U.S. SMALL CAP (4.2%) RiverSource Disciplined Small Cap Value Fund 2,255,566(c) 16,307,743 - ------------------------------------------------------------------------------------- TOTAL EQUITY FUNDS (Cost: $140,888,145) $120,870,553 - ------------------------------------------------------------------------------------- FIXED INCOME FUNDS (65.4%) SHARES VALUE(a) FLOATING RATE (11.3%) RiverSource Floating Rate Fund 5,122,395(c) $43,745,250 - ------------------------------------------------------------------------------------- GLOBAL BOND (1.8%) RiverSource Global Bond Fund 1,006,585 6,995,769 - ------------------------------------------------------------------------------------- HIGH YIELD (17.6%) RiverSource High Yield Bond Fund 21,178,696 56,123,545 RiverSource Income Opportunities Fund 1,282,335 12,207,827 --------------- Total 68,331,372 - ------------------------------------------------------------------------------------- INFLATION PROTECTED SECURITIES (0.2%) RiverSource Inflation Protected Securities Fund 79,940 812,185 - ------------------------------------------------------------------------------------- INTERNATIONAL (11.6%) RiverSource Emerging Markets Bond Fund 4,283,842(c) 44,851,826 - ------------------------------------------------------------------------------------- INVESTMENT GRADE (22.9%) RiverSource Diversified Bond Fund 7,494,918 36,500,252 RiverSource U.S. Government Mortgage Fund 10,293,307(c) 51,981,201 --------------- Total 88,481,453 - ------------------------------------------------------------------------------------- TOTAL FIXED INCOME FUNDS (Cost: $240,776,306) $253,217,855 - ------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS (3.4%) SHARES VALUE(a) RiverSource Absolute Return Currency and Income Fund 1,294,465(b,c) $13,061,152 - ------------------------------------------------------------------------------------- TOTAL ALTERNATIVE INVESTMENTS (Cost: $13,393,157) $13,061,152 - ------------------------------------------------------------------------------------- CASH EQUIVALENTS (--%) SHARES VALUE(a) MONEY MARKET RiverSource Cash Management Fund 31,933 $31,933 - ------------------------------------------------------------------------------------- TOTAL CASH EQUIVALENTS (Cost: $31,933) $31,933 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN AFFILIATED FUNDS (Cost: $395,089,541)(d) $387,181,493 =====================================================================================
NOTES TO INVESTMENTS IN AFFILIATED FUNDS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Investments in Underlying Affiliated Funds which exceed 5% of the underlying fund's shares outstanding -- See Note 6 to the financial statements. (d) At Jan. 31, 2010, the cost of securities for federal income tax purposes was $405,425,096 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $21,762,503 Unrealized depreciation (40,006,106) --------------------------------------------------------------------------------------- Net unrealized depreciation $(18,243,603) ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 30 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income Fund FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2010:
FAIR VALUE AT JAN. 31, 2010 --------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - --------------------------------------------------------------------------------------------------------------- Investments in Affiliated Funds $387,181,493 $-- $-- $387,181,493
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 31 INVESTMENTS IN AFFILIATED FUNDS ------------------------------------------------ RiverSource Income Builder Enhanced Income Fund JAN. 31, 2010 (Percentages represent value of investments compared to net assets)
EQUITY FUNDS (29.2%) SHARES VALUE(a) DIVIDEND INCOME (7.8%) RiverSource Dividend Opportunity Fund 2,294,079 $15,278,567 - ------------------------------------------------------------------------------------- INTERNATIONAL (6.4%) RiverSource Disciplined International Equity Fund 1,881,770 12,494,952 - ------------------------------------------------------------------------------------- REAL ESTATE (7.6%) RiverSource Real Estate Fund 1,772,578(c) 14,765,576 - ------------------------------------------------------------------------------------- U.S. LARGE CAP (3.9%) RiverSource Disciplined Equity Fund 1,435,032 6,558,098 RiverSource Disciplined Large Cap Value Fund 147,170 1,093,472 --------------- Total 7,651,570 - ------------------------------------------------------------------------------------- U.S. SMALL CAP (3.5%) RiverSource Disciplined Small Cap Value Fund 935,563(c) 6,764,120 - ------------------------------------------------------------------------------------- TOTAL EQUITY FUNDS (Cost: $60,125,876) $56,954,785 - ------------------------------------------------------------------------------------- FIXED INCOME FUNDS (69.2%) SHARES VALUE(a) FLOATING RATE (12.2%) RiverSource Floating Rate Fund 2,793,661(c) $23,857,865 - ------------------------------------------------------------------------------------- GLOBAL BOND (2.3%) RiverSource Global Bond Fund 653,789 4,543,831 - ------------------------------------------------------------------------------------- HIGH YIELD (22.9%) RiverSource High Yield Bond Fund 13,010,910 34,478,913 RiverSource Income Opportunities Fund 1,066,133 10,149,583 --------------- Total 44,628,496 - ------------------------------------------------------------------------------------- INFLATION PROTECTED SECURITIES (0.8%) RiverSource Inflation Protected Securities Fund 156,871 1,593,809 - ------------------------------------------------------------------------------------- INTERNATIONAL (11.2%) RiverSource Emerging Markets Bond Fund 2,080,042(c) 21,778,036 - ------------------------------------------------------------------------------------- INVESTMENT GRADE (19.8%) RiverSource Diversified Bond Fund 4,021,146 19,582,979 RiverSource U.S. Government Mortgage Fund 3,782,791(c) 19,103,095 --------------- Total 38,686,074 - ------------------------------------------------------------------------------------- TOTAL FIXED INCOME FUNDS (Cost: $129,153,542) $135,088,111 - ------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS (1.7%) SHARES VALUE(a) RiverSource Absolute Return Currency and Income Fund 335,789(b) $3,388,112 - ------------------------------------------------------------------------------------- TOTAL ALTERNATIVE INVESTMENTS (Cost: $3,413,578) $3,388,112 - ------------------------------------------------------------------------------------- CASH EQUIVALENTS (--%) SHARES VALUE(a) MONEY MARKET RiverSource Cash Management Fund 71,207 $71,207 - ------------------------------------------------------------------------------------- TOTAL CASH EQUIVALENTS (Cost: $71,207) $71,207 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN AFFILIATED FUNDS (Cost: $192,764,203)(d) $195,502,215 =====================================================================================
NOTES TO INVESTMENTS IN AFFILIATED FUNDS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Investments in Underlying Affiliated Funds which exceed 5% of the underlying fund's shares outstanding -- See Note 6 to the financial statements. (d) At Jan. 31, 2010, the cost of securities for federal income tax purposes was $199,180,648 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $6,337,620 Unrealized depreciation (10,016,053) -------------------------------------------------------------------------------------- Net unrealized depreciation $(3,678,433) --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 32 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2010:
FAIR VALUE AT JAN. 31, 2010 --------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - --------------------------------------------------------------------------------------------------------------- Investments in Affiliated Funds $195,502,215 $-- $-- $195,502,215
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 33 STATEMENTS OF ASSETS AND LIABILITIES -------------------------------------------
RIVERSOURCE RIVERSOURCE RIVERSOURCE INCOME BUILDER INCOME BUILDER INCOME BUILDER BASIC INCOME MODERATE INCOME ENHANCED INCOME JAN. 31, 2010 FUND FUND FUND ASSETS Investments in affiliated funds, at value (identified cost $229,333,067, $395,089,541, and $192,764,203, respectively) $228,821,574 $387,181,493 $195,502,215 Capital shares receivable 127,320 284,006 203,065 Dividends receivable 161,521 287,075 159,863 Receivable for affiliated investments sold 279,728 167,700 303,553 - ------------------------------------------------------------------------------------------------------------ Total assets 229,390,143 387,920,274 196,168,696 - ------------------------------------------------------------------------------------------------------------ LIABILITIES Capital shares payable 376,179 514,199 891,491 Accrued distribution fees 2,343 3,704 1,877 Accrued transfer agency fees 630 1,084 573 Accrued administration services fees 126 213 108 Other accrued expenses 44,162 58,383 42,065 - ------------------------------------------------------------------------------------------------------------ Total liabilities 423,440 577,583 936,114 - ------------------------------------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $228,966,703 $387,342,691 $195,232,582 - ------------------------------------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 234,473 $ 409,079 $ 206,669 Additional paid-in capital 255,177,643 464,858,398 236,012,885 Undistributed net investment income 136,949 247,531 130,491 Accumulated net realized gain (loss) (26,070,869) (70,264,269) (43,855,475) Unrealized appreciation (depreciation) on affiliated investments (511,493) (7,908,048) 2,738,012 - ------------------------------------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $228,966,703 $387,342,691 $195,232,582 - ------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares: Class A $191,609,144 $336,673,414 $169,340,312 Class B $ 24,940,436 $ 35,116,660 $ 17,093,815 Class C $ 12,407,352 $ 15,534,369 $ 8,762,187 Class R4 $ 9,771 $ 18,248 $ 36,268 Outstanding shares of capital stock: Class A shares 19,630,870 35,567,971 17,933,995 Class B shares 2,547,850 3,701,134 1,803,903 Class C shares 1,267,551 1,636,863 925,152 Class R4 shares 1,000 1,926 3,844 Net asset value per share: Class A(1) $ 9.76 $ 9.47 $ 9.44 Class B $ 9.79 $ 9.49 $ 9.48 Class C $ 9.79 $ 9.49 $ 9.47 Class R4 $ 9.77 $ 9.47 $ 9.43 - --------------------------------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A for RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Moderate Income Fund and RiverSource Income Builder Enhanced Income Fund is $10.25, $9.94 and $9.91, respectively. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 4.75%. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 34 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT STATEMENTS OF OPERATIONS -------------------------------------------------------
RIVERSOURCE RIVERSOURCE RIVERSOURCE INCOME BUILDER INCOME BUILDER INCOME BUILDER BASIC INCOME MODERATE INCOME ENHANCED INCOME YEAR ENDED JAN. 31, 2010 FUND FUND FUND INVESTMENT INCOME Income: Dividend distributions from underlying affiliated funds $ 9,699,800 $ 18,426,925 $ 9,723,788 - ------------------------------------------------------------------------------------------------------------ Expenses: Distribution fees Class A 471,671 843,392 420,462 Class B 273,352 386,458 181,976 Class C 105,503 146,186 83,149 Transfer agency fees Class A 196,556 367,540 192,077 Class B 30,488 45,259 22,284 Class C 11,269 16,393 9,790 Class R4 4 8 27 Administrative services fees 45,313 78,128 38,950 Plan administration services fees -- Class R4 23 42 135 Custodian fees 9,911 9,817 9,953 Printing and postage 23,870 49,688 31,737 Registration fees 43,676 28,170 47,785 Professional fees 21,210 20,710 20,700 Other 2,388 1,489 2,292 - ------------------------------------------------------------------------------------------------------------ Total expenses 1,235,234 1,993,280 1,061,317 - ------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 8,464,566 16,433,645 8,662,471 - ------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain(loss) on: Sale of underlying affiliated funds (13,821,318) (43,447,636) (26,418,336) Capital gain distributions from underlying affiliated funds 403,951 431,861 44,168 - ------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on affiliated investments (13,417,367) (43,015,775) (26,374,168) Net change in unrealized appreciation (depreciation) on affiliated investments 51,922,788 116,033,159 68,509,429 - ------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments 38,505,421 73,017,384 42,135,261 - ------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 46,969,987 $ 89,451,029 $ 50,797,732 - ------------------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 35 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
RIVERSOURCE RIVERSOURCE INCOME BUILDER BASIC INCOME INCOME BUILDER MODERATE INCOME FUND FUND YEAR ENDED JAN. 31, 2010 2009 2010 2009 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 8,464,566 $ 10,322,619 $ 16,433,645 $ 21,711,545 Net realized gain (loss) on affiliated investments (13,417,367) (11,467,421) (43,015,775) (25,637,857) Net change in unrealized appreciation (depreciation) on affiliated investments 51,922,788 (47,732,431) 116,033,159 (106,106,830) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 46,969,987 (48,877,233) 89,451,029 (110,033,142) - --------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (7,713,954) (9,456,788) (15,063,360) (19,873,829) Class B (773,278) (1,156,853) (1,241,698) (2,042,635) Class C (317,777) (364,273) (486,863) (661,524) Class R4 (385) (662) (771) (907) - --------------------------------------------------------------------------------------------------------------- Total distributions (8,805,394) (10,978,576) (16,792,692) (22,578,895) - --------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 24,900,934 64,209,056 32,886,470 78,285,815 Class B shares 6,030,159 12,993,382 5,839,955 10,761,116 Class C shares 3,423,381 4,062,063 2,912,506 4,055,507 Reinvestment of distributions at net asset value Class A shares 6,825,618 8,575,448 13,255,837 17,777,933 Class B shares 682,683 1,059,525 1,109,679 1,850,744 Class C shares 239,155 293,963 364,249 515,460 Class R4 shares -- 236 366 466 Conversions from Class B to Class A Class A shares 2,765,708 3,504,174 4,946,814 6,542,006 Class B shares (2,765,708) (3,504,174) (4,946,814) (6,542,006) Payments for redemptions Class A shares (61,399,560) (99,777,123) (115,680,570) (194,903,429) Class B shares (11,823,067) (17,219,623) (15,418,072) (24,486,444) Class C shares (2,277,424) (4,382,955) (4,473,158) (7,167,813) Class R4 shares -- (23,586) -- (2,028) - --------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (33,398,121) (30,209,614) (79,202,738) (113,312,673) - --------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 4,766,472 (90,065,423) (6,544,401) (245,924,710) Net assets at beginning of year 224,200,231 314,265,654 393,887,092 639,811,802 - --------------------------------------------------------------------------------------------------------------- Net assets at end of year $228,966,703 $224,200,231 $ 387,342,691 $ 393,887,092 - --------------------------------------------------------------------------------------------------------------- Undistributed net investment income $ 136,949 $ 99,431 $ 247,531 $ 202,092 - ---------------------------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 36 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - --------------------------------------------------------------------------------
RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND YEAR ENDED JAN. 31, 2010 2009 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 8,662,471 $ 12,298,349 Net realized gain (loss) on affiliated investments (26,374,168) (15,854,477) Net change in unrealized appreciation (depreciation) on affiliated investments 68,509,429 (53,995,107) - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 50,797,732 (57,551,235) - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (7,796,156) (11,029,760) Class B (619,198) (1,099,315) Class C (287,961) (445,505) Class R4 (2,523) (6,527) - -------------------------------------------------------------------------------------------------- Total distributions (8,705,838) (12,581,107) - -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 19,921,381 28,449,158 Class B shares 2,583,082 4,363,937 Class C shares 1,247,491 1,975,067 Class R4 shares 21,031 126,009 Reinvestment of distributions at net asset value Class A shares 6,628,674 9,521,547 Class B shares 539,495 951,505 Class C shares 240,724 367,471 Class R4 shares 2,110 6,045 Conversions from Class B to Class A Class A shares 2,375,846 1,975,503 Class B shares (2,375,846) (1,975,503) Payments for redemptions Class A shares (59,858,797) (104,778,466) Class B shares (6,750,775) (14,019,997) Class C shares (2,506,227) (4,485,255) Class R4 shares (100,587) (43,540) - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (38,032,398) (77,566,519) - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 4,059,496 (147,698,861) Net assets at beginning of year 191,173,086 338,871,947 - -------------------------------------------------------------------------------------------------- Net assets at end of year $195,232,582 $ 191,173,086 - -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 130,491 $ 132,490 - --------------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 37 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand each Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2008 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. RiverSource Income Builder Basic Income Fund
YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS A -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $8.24 $10.27 $10.79 $9.98 $10.05 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .35 .38 .30 .42 .10 Net gains (losses) (both realized and unrealized) 1.55 (2.03) (.39) .84 (.07) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 1.90 (1.65) (.09) 1.26 .03 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.38) (.36) (.45) (.10) Distributions from realized gains -- -- (.07) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.38) (.38) (.43) (.45) (.10) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.76 $8.24 $10.27 $10.79 $9.98 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 23.35% (16.43%) (.84%) 12.89% .31% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement .42% .41% .40%(d) .46% 3.62%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) .42% .41% .40%(d) .45% .45%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.87% 3.75% 4.26%(d) 4.02% 3.44%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $192 $187 $260 $197 $19 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 41% 39% 19% 27% 1% - ------------------------------------------------------------------------------------------------------------ YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS B -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $8.23 $10.25 $10.77 $9.97 $10.05 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .28 .31 .25 .35 .08 Net gains (losses) (both realized and unrealized) 1.54 (2.02) (.39) .83 (.07) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 1.82 (1.71) (.14) 1.18 .01 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.31) (.31) (.38) (.09) Distributions from realized gains -- -- (.07) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.26) (.31) (.38) (.38) (.09) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.79 $8.23 $10.25 $10.77 $9.97 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 22.38% (17.00%) (1.34%) 12.01% .07% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.18% 1.16% 1.15%(d) 1.22% 4.20%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) 1.18% 1.16% 1.15%(d) 1.21% 1.21%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.06% 2.96% 3.50%(d) 3.27% 2.70%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $25 $28 $42 $33 $5 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 41% 39% 19% 27% 1% - ------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 38 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Basic Income Fund (continued)
YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS C -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $8.24 $10.26 $10.78 $9.99 $10.05 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .29 .31 .25 .35 .09 Net gains (losses) (both realized and unrealized) 1.53 (2.02) (.39) .82 (.07) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 1.82 (1.71) (.14) 1.17 .02 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.27) (.31) (.31) (.38) (.08) Distributions from realized gains -- -- (.07) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.27) (.31) (.38) (.38) (.08) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.79 $8.24 $10.26 $10.78 $9.99 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 22.35% (16.97%) (1.33%) 11.91% .23% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.17% 1.16% 1.15%(d) 1.21% 4.30%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) 1.17% 1.16% 1.15%(d) 1.20% 1.21%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.16% 3.00% 3.53%(d) 3.27% 2.74%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $12 $9 $12 $8 $1 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 41% 39% 19% 27% 1% - ------------------------------------------------------------------------------------------------------------ YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS R4 -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $8.26 $10.28 $10.80 $9.99 $10.05 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .36 .42 .33 .43 .11 Net gains (losses) (both realized and unrealized) 1.54 (2.01) (.34) .84 (.07) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 1.90 (1.59) (.01) 1.27 .04 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.43) (.44) (.46) (.10) Distributions from realized gains -- -- (.07) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.39) (.43) (.51) (.46) (.10) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.77 $8.26 $10.28 $10.80 $9.99 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 23.31% (15.93%) (.08%) 13.02% .43% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement .36% .37% .37%(d) .42% 6.84%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) .36% .08% .08%(d) .29% .29%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.95% 3.90% 4.32%(d) 4.39% 3.25%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 41% 39% 19% 27% 1% - ------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from June 1, 2007 to Jan. 31, 2008. Effective Jan. 31, 2008, the Fund's fiscal year end was changed from May 31 to Jan. 31. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (c) 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 underlying funds in which the Fund invests. Such indirect expenses are not included in the reported expense ratios. (d) Annualized. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 39 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Moderate Income Fund
YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS A -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.86 $10.21 $10.99 $9.98 $10.07 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .38 .39 .32 .45 .10 Net gains (losses) (both realized and unrealized) 1.62 (2.33) (.64) 1.04 (.08) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 2.00 (1.94) (.32) 1.49 .02 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.41) (.38) (.48) (.11) Distributions from realized gains -- -- (.06) -- -- Tax return of capital -- -- (.02) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.39) (.41) (.46) (.48) (.11) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.47 $7.86 $10.21 $10.99 $9.98 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 25.95% (19.51%) (2.95%) 15.22% .17% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement .41% .40% .38%(d) .42% 1.77%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) .41% .40% .38%(d) .42% .45%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 4.31% 4.12% 4.50%(d) 4.23% 3.59%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $337 $339 $545 $458 $57 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 39% 40% 19% 29% --% - ------------------------------------------------------------------------------------------------------------ YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS B -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.84 $10.19 $10.97 $9.96 $10.06 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .30 .31 .27 .37 .08 Net gains (losses) (both realized and unrealized) 1.63 (2.33) (.64) 1.04 (.08) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 1.93 (2.02) (.37) 1.41 -- - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.28) (.33) (.34) (.40) (.10) Distributions from realized gains -- -- (.06) -- -- Tax return of capital -- -- (.01) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.28) (.33) (.41) (.40) (.10) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.49 $7.84 $10.19 $10.97 $9.96 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 25.00% (20.17%) (3.45%) 14.45% (.05%) - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.17% 1.15% 1.14%(d) 1.17% 2.41%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) 1.17% 1.15% 1.14%(d) 1.17% 1.21%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.51% 3.32% 3.74%(d) 3.48% 2.88%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $35 $41 $73 $69 $10 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 39% 40% 19% 29% --% - ------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 40 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income Fund (continued)
YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS C -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.85 $10.20 $10.98 $9.97 $10.06 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .31 .32 .27 .37 .09 Net gains (losses) (both realized and unrealized) 1.62 (2.33) (.64) 1.04 (.08) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 1.93 (2.01) (.37) 1.41 .01 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.29) (.34) (.34) (.40) (.10) Distributions from realized gains -- -- (.06) -- -- Tax return of capital -- -- (.01) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.29) (.34) (.41) (.40) (.10) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.49 $7.85 $10.20 $10.98 $9.97 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 24.94% (20.14%) (3.43%) 14.45% .05% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.16% 1.15% 1.13%(d) 1.17% 2.35%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) 1.16% 1.15% 1.13%(d) 1.17% 1.21%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.58% 3.38% 3.76%(d) 3.44% 2.83%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $16 $14 $21 $15 $2 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 39% 40% 19% 29% --% - ------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 41 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Moderate Income Fund (continued)
YEAR ENDED JAN. 31, YEAR ENDED MAY 31, CLASS R4 -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.87 $10.22 $11.00 $9.98 $10.07 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .39 .42 .34 .46 .10 Net gains (losses) (both realized and unrealized) 1.61 (2.33) (.63) 1.05 (.08) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 2.00 (1.91) (.29) 1.51 .02 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.40) (.44) (.41) (.49) (.11) Distributions from realized gains -- -- (.06) -- -- Tax return of capital -- -- (.02) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.40) (.44) (.49) (.49) (.11) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.47 $7.87 $10.22 $11.00 $9.98 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 25.94% (19.18%) (2.75%) 15.41% .18% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement .35% .35% .35%(d) .33% 5.51%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) .35% .08% .08%(d) .29% .20%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 4.41% 4.45% 4.78%(d) 3.92% 3.88%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 39% 40% 19% 29% --% - ------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from June 1, 2007 to Jan. 31, 2008. Effective Jan. 31, 2008, the Fund's fiscal year end was changed from May 31 to Jan. 31. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (c) 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 underlying funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (d) Annualized. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 42 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund
Year ended Jan. 31, Year ended May 31, CLASS A -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.60 $10.05 $11.08 $9.96 $10.06 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .39 .43 .35 .47 .11 Net gains (losses) (both realized and unrealized) 1.85 (2.44) (.86) 1.15 (.09) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 2.24 (2.01) (.51) 1.62 .02 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.40) (.44) (.38) (.49) (.12) Distributions from realized gains -- -- (.11) (.01) -- Tax return of capital -- -- (.03) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.40) (.44) (.52) (.50) (.12) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.44 $7.60 $10.05 $11.08 $9.96 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 30.07% (20.46%) (4.58%) 16.68% .15% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement .44% .41% .41%(d) .43% 2.04%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) .44% .41% .41%(d) .43% .45%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 4.55% 4.63% 4.93%(d) 4.51% 3.96%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $169 $164 $289 $266 $50 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 46% 36% 24% 27% --% - ------------------------------------------------------------------------------------------------------------ Year ended Jan. 31, Year ended May 31, CLASS B -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.59 $10.04 $11.07 $9.96 $10.06 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .32 .35 .30 .39 .09 Net gains (losses) (both realized and unrealized) 1.86 (2.43) (.86) 1.15 (.09) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 2.18 (2.08) (.56) 1.54 -- - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.29) (.37) (.34) (.42) (.10) Distributions from realized gains -- -- (.11) (.01) -- Tax return of capital -- -- (.02) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.29) (.37) (.47) (.43) (.10) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.48 $7.59 $10.04 $11.07 $9.96 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 29.21% (21.12%) (5.17%) 15.74% .02% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.20% 1.17% 1.16%(d) 1.19% 2.79%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) 1.20% 1.17% 1.16%(d) 1.19% 1.21%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.77% 3.83% 4.15%(d) 3.77% 3.24%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $17 $19 $37 $39 $10 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 46% 36% 24% 27% --% - ------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 43 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Enhanced Income Fund (continued)
Year ended Jan. 31, Year ended May 31, CLASS C -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.59 $10.04 $11.07 $9.96 $10.06 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .33 .36 .30 .39 .09 Net gains (losses) (both realized and unrealized) 1.85 (2.43) (.86) 1.15 (.09) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 2.18 (2.07) (.56) 1.54 -- - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.30) (.38) (.34) (.42) (.10) Distributions from realized gains -- -- (.11) (.01) -- Tax return of capital -- -- (.02) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.30) (.38) (.47) (.43) (.10) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.47 $7.59 $10.04 $11.07 $9.96 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 29.16% (21.09%) (5.06%) 15.75% .02% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.20% 1.16% 1.16%(d) 1.18% 2.63%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) 1.20% 1.16% 1.16%(d) 1.18% 1.21%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.80% 3.88% 4.19%(d) 3.73% 3.22%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $9 $8 $13 $11 $2 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 46% 36% 24% 27% --% - ------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 44 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund (continued)
Year ended Jan. 31, Year ended May 31, CLASS R4 -------------------------------- ------------------- PER SHARE DATA 2010 2009 2008(a) 2007 2006(b) Net asset value, beginning of period $7.60 $10.06 $11.09 $9.97 $10.06 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .39 .46 .37 .49 .12 Net gains (losses) (both realized and unrealized) 1.85 (2.44) (.86) 1.15 (.09) - ------------------------------------------------------------------------------------------------------------ Total from investment operations 2.24 (1.98) (.49) 1.64 .03 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.41) (.48) (.40) (.51) (.12) Distributions from realized gains -- -- (.11) (.01) -- Tax return of capital -- -- (.03) -- -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.41) (.48) (.54) (.52) (.12) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.43 $7.60 $10.06 $11.09 $9.97 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN 30.07% (20.23%) (4.49%) 16.82% .27% - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement .38% .36% .38%(d) .36% 5.75%(d) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) .38% .08% .12%(d) .29% .29%(d) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 4.63% 5.12% 5.24%(d) 4.67% 3.66%(d) - ------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 46% 36% 24% 27% --% - ------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from June 1, 2007 to Jan. 31, 2008. Effective Jan. 31, 2008, the Fund's fiscal year end was changed from May 31 to Jan. 31. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (c) 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 underlying funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (d) Annualized. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Each Fund is a series of RiverSource Income Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by each Corporation's Board of Directors (the Board). Each Fund is a "fund of funds" and seeks to achieve its objective by investing in a combination of underlying affiliated funds* for which RiverSource Investments, LLC (RiverSource Investments) or an affiliate acts as investment manager or principal underwriter. RiverSource Investments is the Investment Manager for the Funds. The primary objective of each Fund is as follows: RiverSource Income Builder Basic Income Fund (Basic Income Fund) is designed for investors seeking a high level of current income and growth of capital, with a more conservative level of both risk to principal and potential for high current income, relative to RiverSource Income Builder Moderate Income Fund (Moderate Income Fund) and RiverSource Income Builder Enhanced Income Fund (Enhanced Income Fund). Moderate Income Fund is designed for investors seeking a high level of current income and growth of capital, with a higher level of both risk to principal and potential for high current income, relative to Basic Income Fund, and a more moderate level of risk to principal and potential for high current income relative to Enhanced Income Fund. Enhanced Income Fund is designed for investors seeking a high level of current income and growth of capital, with a higher level of both risk to principal and potential for high current income relative to Basic Income Fund and Moderate Income Fund. Each Fund offers Class A, Class B, Class C and Class R4 shares. - - Class A shares are offered with a front-end sales charge, which may be waived under certain circumstances. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class R4 shares are offered without a front-end sales charge or CDSC to qualifying institutional investors. 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. * For information on the goals, investment strategies and risks of the underlying funds please refer to Appendix A and B in the Funds' most recent prospectus. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on each Fund's financial statements. 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 INVESTMENTS Investments in the underlying funds are valued at their net asset value at the close of each business day. - -------------------------------------------------------------------------------- 46 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- GUARANTEES AND INDEMNIFICATIONS Under each Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to each Fund. In addition, certain of each Fund's contracts with its service providers contain general indemnification clauses. Each Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against each Fund cannot be determined and each Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES Each Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to shareholders. No provision for income or excise taxes is thus required. Each Fund is treated as a separate entity for federal income tax purposes. Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Funds are evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared and payable monthly, are reinvested in additional shares of each Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions, normally shares of the underlying funds, are accounted for as of trade date. Income and capital gain distributions from the underlying funds, if any, are recorded on the ex-dividend date. 3. EXPENSES AND SALES CHARGES MANAGEMENT FEES AND UNDERLYING FUND FEES The Funds do not pay the Investment Manager a direct management fee for managing its assets. In addition to the fees and expenses which each Fund bears directly, each Fund indirectly bears a pro rata share of the fees and expenses of the underlying funds (also referred to as "acquired funds") in which a Fund invests. Each Fund also indirectly receives a pro rata share of earnings credits from overnight cash balances of the underlying funds which reduced the underlying funds transfer agency fees. Because the underlying funds have varied expense and fee levels and each Fund may own different proportions of underlying funds at different times, the amount of fees and expenses incurred indirectly by each Fund will vary. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, each Fund pays Ameriprise Financial Inc. (Ameriprise Financial), parent company of the Investment Manager, an annual fee for administration and accounting services at an annual rate of 0.02% of each Fund's average daily net assets. COMPENSATION TO BOARD MEMBERS Compensation to board members and certain other core expenses are paid by the affiliated underlying funds in which each Fund invests. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. Each Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Transfer Agent also charges an annual fee of $3 per account serviced directly by each Fund or its designated agent for Class A, Class B and Class C shares. Each Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of each Fund's average daily net assets attributable to Class R4 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for the 12 month period from the date the account becomes inactive. These fees are included in the transfer agency fees in the Statements of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, each Fund pays an annual fee at a rate of 0.25% of each Fund's average daily net assets attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES Each Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, each Fund pays a fee at an annual rate of up to 0.25% of each Fund's average daily net assets attributable to Class A shares and a fee at an annual rate of up to 1.00% of each Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately as follows:
FUND CLASS B CLASS C - -------------------------------------------------------------------------------------------- Basic Income Fund $1,794,000 $70,000 Moderate Income Fund 2,408,000 88,000 Enhanced Income Fund 1,241,000 54,000
These amounts are based on the most recent information available as of Oct. 31, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing the Funds' shares for the year ended Jan. 31, 2010 were as follows:
FUND CLASS A CLASS B CLASS C - ---------------------------------------------------------------------------------------------- Basic Income Fund $220,843 $23,303 $1,316 Moderate Income Fund 265,804 26,740 1,425 Enhanced Income Fund 170,318 18,212 540
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES Under an agreement which was effective until Jan. 31, 2010, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of underlying funds) would not exceed the following percentage of each class' average daily net assets:
FUND CLASS A CLASS B CLASS C CLASS R4 - -------------------------------------------------------------------------------------------------- Basic Income Fund 0.45% 1.21% 1.20% 0.41% Moderate Income Fund 0.45 1.21 1.20 0.41 Enhanced Income Fund 0.45 1.21 1.20 0.41
- -------------------------------------------------------------------------------- 48 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- Effective Feb. 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until March 31, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of underlying funds) will not exceed the following percentage of each class' average daily net assets:
FUND CLASS A CLASS B CLASS C CLASS R4 - -------------------------------------------------------------------------------------------------- Basic Income Fund 0.45% 1.21% 1.20% 0.42% Moderate Income Fund 0.45 1.21 1.20 0.42 Enhanced Income Fund 0.45 1.21 1.20 0.42
4. SECURITIES TRANSACTIONS For the year ended Jan. 31, 2010, cost of purchases and proceeds from sales of investments in underlying affiliated funds aggregated for each Fund are as follows:
FUND PURCHASES PROCEEDS - ---------------------------------------------------------------------------------------------- Basic Income Fund $ 93,985,061 $127,231,987 Moderate Income Fund 153,430,687 232,649,905 Enhanced Income Fund 88,623,000 126,334,700
Realized gains and losses are determined on an identified cost basis. 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for each Fund for the periods indicated are as follows:
BASIC INCOME FUND MODERATE INCOME FUND ENHANCED INCOME FUND YEAR ENDED JAN. 31, 2010 2009* 2010 2009* 2010 2009* - ----------------------------------------------------------------------------------------------------------------- CLASS A - ----------------------------------------------------------------------------------------------------------------- Sold 2,754,458 6,697,264 3,769,528 8,269,632 2,297,606 3,065,780 Converted from Class B** 299,644 356,477 555,189 672,354 269,359 205,782 Reinvested distributions 741,096 915,258 1,499,406 1,943,041 762,253 1,070,351 Redeemed (6,841,796) (10,659,474) (13,394,104) (21,146,428) (6,994,007) (11,495,907) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) (3,046,598) (2,690,475) (7,569,981) (10,261,401) (3,664,789) (7,153,994) - ----------------------------------------------------------------------------------------------------------------- CLASS B - ----------------------------------------------------------------------------------------------------------------- Sold 683,131 1,357,143 683,591 1,136,770 308,464 476,849 Reinvested distributions 74,820 113,245 127,073 202,385 62,822 107,107 Converted to Class A** (299,969) (357,204) (556,438) (673,739) (269,359) (205,996) Redeemed (1,305,017) (1,828,502) (1,783,256) (2,630,342) (801,280) (1,525,776) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) (847,035) (715,318) (1,529,030) (1,964,926) (699,353) (1,147,816) - ----------------------------------------------------------------------------------------------------------------- CLASS C - ----------------------------------------------------------------------------------------------------------------- Sold 367,769 422,511 330,759 429,730 143,614 210,178 Reinvested distributions 25,887 31,432 41,283 56,551 27,813 41,535 Redeemed (252,826) (466,352) (520,106) (782,173) (297,757) (500,101) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) 140,830 (12,409) (148,064) (295,892) (126,330) (248,388) - ----------------------------------------------------------------------------------------------------------------- CLASS R4 - ----------------------------------------------------------------------------------------------------------------- Sold -- -- -- -- 2,553 12,580 Reinvested distributions -- 23 41 51 253 688 Redeemed -- (2,303) -- (265) (12,632) (5,091) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) -- (2,280) 41 (214) (9,826) 8,177 - -----------------------------------------------------------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. INVESTMENTS IN UNDERLYING AFFILIATED FUNDS The Funds do not invest in the underlying funds for the purpose of exercising management or control. At Jan. 31, 2010, each Fund held the following positions, which exceed 5% of the underlying fund's shares outstanding: Basic Income Fund
UNDERLYING FUND PERCENT OF SHARES HELD - ----------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 21.83% RiverSource U.S. Government Mortgage Fund 19.39
Moderate Income Fund
UNDERLYING FUND PERCENT OF SHARES HELD - ----------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 36.76% RiverSource U.S. Government Mortgage Fund 24.33 RiverSource Emerging Markets Bond Fund 16.61 RiverSource Real Estate Fund 10.84 RiverSource Floating Rate Fund 10.64 RiverSource Absolute Return Currency and Income Fund 6.02
Enhanced Income Fund
UNDERLYING FUND PERCENT OF SHARES HELD - ----------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 15.25% RiverSource U.S. Government Mortgage Fund 8.94 RiverSource Real Estate Fund 8.75 RiverSource Emerging Markets Bond Fund 8.06 RiverSource Floating Rate Fund 5.81
7. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of the reclassification of short term capital gains earned in the underlying affiliated funds, post- October losses 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 Funds. On the Statements of Assets and Liabilities, as a result of permanent book-to- tax differences, undistributed net investment income and accumulated net realized gain (loss) have been increased (decreased), resulting in net reclassification adjustments to paid-in capital by the following:
UNDISTRIBUTED ACCUMULATED ADDITIONAL (EXCESS OF DISTRIBUTIONS OVER) NET REALIZED PAID-IN CAPITAL FUND NET INVESTMENT INCOME GAIN (LOSS) REDUCTION (INCREASE) - ------------------------------------------------------------------------------------------------------------------- Basic Income Fund $378,346 $(378,346) $-- Moderate Income Fund 404,486 (404,486) -- Enhanced Income Fund 41,368 (41,368) --
The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JAN. 31, 2010 2009 ORDINARY LONG-TERM ORDINARY LONG-TERM FUND INCOME CAPITAL GAIN INCOME CAPITAL GAIN - ---------------------------------------------------------------------------------------------------------- Basic Income Fund $ 8,805,394 $-- $10,978,576 $-- Moderate Income Fund 16,792,692 -- 22,578,895 -- Enhanced Income Fund 8,705,838 -- 12,581,107 --
- -------------------------------------------------------------------------------- 50 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- At Jan. 31, 2010, the components of distributable earnings on a tax basis are as follows:
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ORDINARY ACCUMULATED NET REALIZED APPRECIATION FUND INCOME LONG-TERM GAIN (LOSS) (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------- Basic Income Fund $136,949 $-- $(19,447,298) $ (7,135,064) Moderate Income Fund 247,530 -- (59,928,714) (18,243,603) Enhanced Income Fund 130,491 -- (37,439,030) (3,678,433)
For federal income tax purposes, capital loss carry-overs at Jan. 31, 2010 were as follows:
FUND CARRY-OVER - ----------------------------------------------------------------------------------------- Basic Income Fund $18,803,160 Moderate Income Fund 58,414,032 Enhanced Income Fund 37,439,030
At the end of the most recent fiscal year, if the capital loss carry-overs are not offset by subsequent capital gains, they will expire as follows:
FUND 2017 2018 - --------------------------------------------------------------------------------------------- Basic Income Fund $2,942,103 15,861,057 Moderate Income Fund 7,376,558 51,037,474 Enhanced Income Fund 5,920,892 31,518,138
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Funds are permitted to treat net capital losses realized between Nov. 1, 2009 and their fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Jan. 31, 2010, post-October losses that are treated for income tax purposes as occurring on Feb. 1, 2010 were as follows:
FUND POST-OCTOBER LOSS - --------------------------------------------------------------------------------------------- Basic Income Fund $ 644,138 Moderate Income Fund 1,514,682 Enhanced Income Fund --
It is unlikely the Board will authorize distributions of any net realized capital gains until the available capital loss carry-overs have been offset or expire. There is no assurance that the Funds will be able to utilize all of its capital loss carry-overs before they expire. 8. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statements of Assets and Liabilities through the date of issuance of each Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in each Fund's financial statements. 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 (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- 52 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE INCOME BUILDER BASIC INCOME FUND, RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND AND RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND: We have audited the accompanying statements of assets and liabilities, including the schedules of investments in affiliated funds, of RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Moderate Income Fund and RiverSource Income Builder Enhanced Income Fund (the Funds) (the portfolios constituting the RiverSource Income Series, Inc.) as of January 31, 2010, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the two years then ended and the period from June 1, 2007 to January 31, 2008. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Funds for each of the periods presented through May 31, 2007, were audited by other auditors whose report dated July 20, 2007, 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 Funds' 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 Funds' 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 January 31, 2010, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. 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 each of the Funds listed above constituting portfolios within RiverSource Income Series, Inc. at January 31, 2010, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the each of the two years in the period then ended and the period from June 1, 2007 to January 31, 2008, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota March 23, 2010 - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 53 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) Each 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. RiverSource Income Builder Basic Income Fund Fiscal year ended Jan. 31, 2010
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 23.21% Dividends Received Deduction for corporations................ 20.79% U.S. Government Obligations.................................. 1.72%
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. RiverSource Income Builder Moderate Income Fund Fiscal year ended Jan. 31, 2010
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 22.16% Dividends Received Deduction for corporations................ 19.04% U.S. Government Obligations.................................. 0.86%
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. RiverSource Income Builder Enhanced Income Fund Fiscal year ended Jan. 31, 2010
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 17.15% Dividends Received Deduction for corporations................ 13.81% U.S. Government Obligations.................................. 0.90%
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- 54 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds. Under current Board policy, members may serve until the next regular shareholders' meeting, until he or she reaches the mandatory retirement age established by the Board, or the fifteenth anniversary of the first Board meeting they attended as members of the Board. INDEPENDENT BOARD MEMBERS
OTHER PRESENT OR PAST NAME, POSITION HELD DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN AGE LENGTH OF SERVICE DURING PAST FIVE YEARS PAST 5 YEARS) - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 1/11/06 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1/5/99 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 11/11/07 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 11/1/04 University; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 3/1/85 Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 11/1/05 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 1/1/07, College Inc. (manufactures Minneapolis, MN 55402 Board member irrigation systems) Age 71 since 1/1/02 - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member Retired President and Chief Executive Officer and None 901 S. Marquette Ave. since 11/7/08 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 11/1/04 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. since 11/7/08 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 11/13/02 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 55 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
OTHER PRESENT OR PAST NAME, POSITION HELD DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN AGE LENGTH OF SERVICE DURING PAST FIVE YEARS PAST 5 YEARS) - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise since 11/7/01, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds. The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial 11/8/06 Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; 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 4/9/03 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 12/5/06 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial 7/10/02 Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- 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 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 12/5/06 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; 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 - -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 4/7/09 Kenwood Capital Management LLC, Ameriprise Certificate New York, NY 10010 Company and RiverSource Service Corporation since 2009; Age 58 Chief Compliance Officer for each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 56 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT - -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 11/9/05 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 46 Prevention Officer since 2008 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT 57 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 58 RIVERSOURCE INCOME BUILDER SERIES -- 2010 ANNUAL REPORT (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE INCOME BUILDER SERIES 734 AMERIPRISE FINANCIAL CENTER MINNEAPOLIS, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (C)2010 RiverSource Investments, LLC. S-6394 G (4/10) Item 2. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as an exhibit to this form N-CSR. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a). Item 3. The Registrant's board of directors has determined that independent directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P. Jones, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services (a) Audit Fees. The fees for the year ended Jan. 31, to Ernst & Young LLP for professional services rendered for the audit of the annual financial statements for RiverSource Income Series, Inc. were as follows: 2010 - $50,673 2009 - $49,755 (b) Audit-Related Fees. The fees for the year ended Jan. 31, to Ernst & Young LLP for additional professional services rendered related to the semiannual financial statement review, the 2010 transfer agent 17Ad-13 review and the registrant's 2009 security count pursuant to Rule 17f-2 for RiverSource Income Series, Inc. were as follows: 2010 - $1,682 2009 - $2,625 (c) Tax Fees. The fees for the year ended Jan. 31, to Ernst & Young LLP for tax compliance related services rendered for RiverSource Income Series, Inc. were as follows: 2010 - $8,586 2009 - $8,586 (d) All Other Fees. The fees for the year ended Jan. 31, to Ernst & Young LLP for additional professional services rendered for RiverSource Income Series, Inc. were as follows: 2010 - $0 2009 - $0 (e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by Ernst & Young LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2010 and 2009 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees for the year ended Jan. 31, to Ernst & Young LLP by the registrant for non-audit fees and by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows: 2010 - $1,737,254 2009 - $618,531 (h) 100% of the services performed in item (g) above during 2010 and 2009 were pre-approved by the Ameriprise Financial Audit Committee and/or the RiverSource Mutual Funds Audit Committee. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) The complete schedule of investments is included in Item 1 of this Form N-CSR. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics as applies to the Registrant's principal executive officer and principal financial officer, as required to be disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Income Series, Inc. By /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date April 6, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date April 6, 2010 By /s/ Jeffrey P. Fox ----------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date April 6, 2010 EX-99.CODE ETH 2 c56467exv99wcodeeth.txt EX-99.CODE ETH CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS PURPOSE OF THE CODE; COVERED OFFICERS This code of ethics (the "Code") for the RiverSource Funds (collectively, the "Funds," and each a "Fund")(1) applies to the Funds' Principal Executive Officer and Principal Financial Officer (the "Covered Officers," each of whom is identified in Exhibit A) for the purpose of promoting, in connection with his or her duties: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; compliance with laws and governmental rules and regulations applicable to the conduct of the Funds' business and their financial reporting; the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually - ---------- (1) For purposes of this Code, the Seligman Funds (including each of the Seligman branded registered investment companies and the separate series thereof) are considered part of the RiverSource Complex of Funds. engage in certain transactions, such as the purchase or sale of securities or other property, with the Funds because of their status as "affiliated persons" of the Funds. The compliance programs and procedures of the Funds and of Ameriprise Financial, Inc. and its affiliates ("Ameriprise") are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Funds and Ameriprise, of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties, whether formally for the Funds or for Ameriprise, or for both, be involved in establishing policies and implementing decisions that will have different effects on Ameriprise and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and Ameriprise and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. Each Covered Officer must: not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; and not use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. DISCLOSURE AND COMPLIANCE Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Funds; should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including any member of the Board of Directors or Board of Trustees of any Fund ("Boards"), auditors, governmental regulators, and representatives of self-regulatory organizations; should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and Ameriprise with the goal of promoting full, fair, accurate, timely, and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules, and regulations. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he or she has received, read, and understands the Code; - annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code; - not retaliate against any other Covered Officer or any employee of Ameriprise for reports of potential violations that are made in good faith; and - notify the Funds' General Counsel promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. APPLYING THE CODE The Funds' General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. Any approvals or waivers sought by a Covered Officers will be considered by each Board or appropriate committee of the Board. The Funds' General Counsel - shall notify the Boards whenever any evidence of a material violation has been reported, it being understood that the Funds' General Counsel may determine whether to provide such notice immediately or at the next meetings of the Boards based on the nature of the violation; - will take all appropriate action to investigate such reported violations; - shall make a determination after the investigation, and if the Funds' General Counsel believes that no violation has occurred, the Boards will be so notified and no further action is required; if the Funds' General Counsel believes a violation has occurred, the matter shall be reported to the Boards or the committees of the Funds affected by the potential violation for further determination; if the Boards or the committees determine that a violation has occurred the Boards will consider appropriate action, which may include: a review of applicable policies and procedures; the appropriate modifications to such policies and procedures; the notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; will cause to be made such disclosures as are required by SEC rules if any changes to or waivers of this Code is made by the Boards; and shall maintain a record of each reported evidence of material violation, the response thereto, and all related correspondence for a period of not less than 10 years. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or Ameriprise govern or purport to govern the activities of the Covered Officers, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. Ameriprise's code of ethics under Rule 17j-1 under the Investment Company Act is a separate requirement applying to the Covered Officers and others, and is not part of this Code. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of each Fund's Board, including a majority of its independent directors. Adopted: July 9, 2003; Amended: April 12, 2006; Amended: November 13, 2008 EXHIBIT A Persons Covered by this Code of Ethics: Patrick T. Bannigan President Jeffrey P. Fox Treasurer (RiverSource Brand Registered Investment Companies, Including Separate Series Thereof) EX-99.CERT 3 c56467exv99wcert.txt EX-99.CERT Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Patrick T. Bannigan, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Income Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 22, 2010 /s/ Patrick T. Bannigan - ------------------------------------- Name: Patrick T. Bannigan Title: President and Principal Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey P. Fox, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Income Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 22, 2010 /s/ Jeffrey P. Fox - ------------------------------------- Name: Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906CERT 4 c56467exv99w906cert.txt EX-99.906CERT CERTIFICATION RIVERSOURCE INCOME SERIES, INC. (the Registrant) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that 1. This report on Form N-CSR of the Registrant (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: March 22, 2010 /s/ Patrick T. Bannigan ---------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date: March 22, 2010 /s/ Jeffrey P. Fox ---------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----