-----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, E611SMsjxoDJsdTQ20ZTxINwVIsY2EXpfnJzhZqaK1V7QWLoMG9stqL+txjUisH/ yaE5LRE4RZzWqQx/sWcaHg== 0000950152-09-003396.txt : 20090401 0000950152-09-003396.hdr.sgml : 20090401 20090401083913 ACCESSION NUMBER: 0000950152-09-003396 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20090131 FILED AS OF DATE: 20090401 DATE AS OF CHANGE: 20090401 EFFECTIVENESS DATE: 20090401 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: 09721354 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126714321 MAIL ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: AXP 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 c49565nvcsr.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, 2009 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........... 6 RiverSource Income Builder Enhanced Income Fund........... 9 Manager Commentary................. 12 The Fund's Long-Term Performance... 16 Investment Changes................. 22 Fund Expenses Examples............. 28 Investments in Affiliated Funds.... 32 Statements of Assets and Liabilities...................... 38 Statements of Operations........... 39 Statements of Changes in Net Assets........................... 40 Financial Highlights............... 43 Notes to Financial Statements...... 55 Report of Independent Registered Public Accounting Firm........... 64 Federal Income Tax Information..... 65 Board Members and Officers......... 66 Proxy Voting....................... 68
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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 fell 16.43% (excluding sales charge) for the 12 months ended Jan. 31, 2009. > The Fund's bond benchmark, the Barclays Capital U.S. Aggregate Bond Index (formerly the Lehman Brothers U.S. Aggregate Bond Index), gained 2.59% during the same time frame. > The Fund's domestic equity benchmark, the Russell 3000(R) Value Index, fell 41.37% for the period. > The Citigroup 3-Month U.S. Treasury Bill Index advanced 1.52% during the period. > The Fund underperformed 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 declined 10.28% for the annual period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2009) - --------------------------------------------------------------------------------
Since inception 1 year 2/16/06 - ------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income Fund Class A (excluding sales charge) -16.43% -2.13% - ------------------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index (unmanaged) +2.59% +5.33% - ------------------------------------------------------------------------------------------- Russell 3000(R) Value Index (unmanaged) -41.37% -13.61% - ------------------------------------------------------------------------------------------- Citigroup 3-Month U.S. Treasury Bill Index (unmanaged) +1.52% +3.70% - ------------------------------------------------------------------------------------------- Blended Index (unmanaged) -10.28% +0.41% - -------------------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 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 expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Income Builder Basic Income Fund AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2009 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 2/16/06) -16.43% -2.13% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -17.00% -2.86% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -16.97% -2.82% - -------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) -15.93% -1.60% - -------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -20.39% -3.72% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -21.01% -4.04% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -17.78% -2.82% - --------------------------------------------------------------------------------------------
AT DEC. 31, 2008 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 2/16/06) -14.88% -1.16% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -15.57% -1.93% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -15.54% -1.90% - -------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) -14.48% -0.66% - -------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -18.93% -2.82% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -19.66% -3.17% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -16.36% -1.90% - --------------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R4 shares. Class R4 is available to 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 portfolio 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 -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Basic Income Fund ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Net fund and Acquired fund acquired fund Total annual fund (underlying fund) (underlying fund) operating expenses(a) fees and expenses(b) fees and expenses(b) - ---------------------------------------------------------------------------------------------------------------- Class A 0.41% 0.61% 1.02% - ---------------------------------------------------------------------------------------------------------------- Class B 1.16% 0.61% 1.77% - ---------------------------------------------------------------------------------------------------------------- Class C 1.16% 0.61% 1.77% - ---------------------------------------------------------------------------------------------------------------- Class R4 0.37% 0.61% 0.98% - ----------------------------------------------------------------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses of the Fund until Jan. 31, 2010, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds) will not exceed 0.45% for Class A, 1.21% for Class B, 1.20% for Class C and 0.41% for Class R4. (b) In addition to the total annual fund operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the acquired funds in which the Fund invests. The Fund's acquired fund (underlying fund) fees and expenses is based on its allocations in the acquired funds. Because acquired funds will have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred by the Fund with respect to such investments will vary. The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses for Class I shares on a number of acquired funds until the end of the acquired funds' next fiscal year end, unless sooner terminated at the discretion of the acquired fund's Board. Any amounts waived will not be reimbursed by the Fund. Before taking the fee waivers into account, the acquired fund (underlying fund) fees and expenses would have been 0.69 for all classes, and the net fund and acquired fund (underlying fund) fees and expenses would have been 1.10% for Class A, 1.85% for Class B, 1.85% for Class C and 1.06% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 5 YOUR FUND AT A GLANCE ---------------------------------------------------------- RiverSource Income Builder Moderate Income Fund FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Income Builder Moderate Income Fund (the Fund) Class A shares decreased 19.51% (excluding sales charge) for the 12 months ended Jan. 31, 2009. > The Fund's bond benchmark, the Barclays Capital U.S. Aggregate Bond Index (formerly the Lehman Brothers U.S. Aggregate Bond Index), gained 2.59% during the same time frame. > The Fund's domestic equity benchmark, the Russell 3000(R) Value Index, fell 41.37% for the period. > The Citigroup 3-Month U.S. Treasury Bill Index advanced 1.52% during the period. > The Fund underperformed 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 fell 10.24% for the annual period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2009) - --------------------------------------------------------------------------------
Since inception 1 year 2/16/06 - ------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income Fund Class A (excluding sales charge) -19.51% -3.44% - ------------------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index (unmanaged) +2.59% +5.33% - ------------------------------------------------------------------------------------------- Russell 3000(R) Value Index (unmanaged) -41.37% -13.61% - ------------------------------------------------------------------------------------------- Citigroup 3-Month U.S. Treasury Bill Index (unmanaged) +1.52% +3.70% - ------------------------------------------------------------------------------------------- Blended Index (unmanaged) -10.24% +0.49% - -------------------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 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 expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 6 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income Fund AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2009 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 2/16/06) -19.51% -3.44% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -20.17% -4.17% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -20.14% -4.12% - -------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) -19.18% -3.19% - -------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -23.34% -5.01% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -24.01% -5.33% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -20.91% -4.12% - --------------------------------------------------------------------------------------------
AT DEC. 31, 2008 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 2/16/06) -19.01% -2.62% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -19.68% -3.35% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -19.65% -3.30% - -------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) -18.69% -2.36% - -------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -22.85% -4.25% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -23.56% -4.56% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -20.42% -3.30% - --------------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R4 shares. Class R4 is available to 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 portfolio 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. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 7 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Income Builder Moderate Income Fund ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Net fund and Acquired fund acquired fund Total annual fund (underlying fund) (underlying fund) operating expenses(a) fees and expenses(b) fees and expenses(b) - ---------------------------------------------------------------------------------------------------------------- Class A 0.40% 0.67% 1.07% - ---------------------------------------------------------------------------------------------------------------- Class B 1.15% 0.67% 1.82% - ---------------------------------------------------------------------------------------------------------------- Class C 1.15% 0.67% 1.82% - ---------------------------------------------------------------------------------------------------------------- Class R4 0.35% 0.67% 1.02% - ----------------------------------------------------------------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses of the Fund until Jan. 31, 2010, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds) will not exceed 0.45% for Class A, 1.21% for Class B, 1.20% for Class C and 0.41% for Class R4. (b) In addition to the total annual fund operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the acquired funds in which the Fund invests. The Fund's acquired fund (underlying fund) fees and expenses is based on its allocations in the acquired funds. Because acquired funds will have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred by the Fund with respect to such investments will vary. The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses for Class I shares on a number of acquired funds until the end of the acquired funds' next fiscal year end, unless sooner terminated at the discretion of the acquired fund's Board. Any amounts waived will not be reimbursed by the Fund. Before taking the fee waivers into account, the acquired fund (underlying fund) fees and expenses would have been 0.72% for all classes, and the net fund and acquired fund (underlying fund) fees and expenses would have been 1.12% for Class A, 1.87% for Class B, 1.87% for Class C and 1.07% for Class R4. - -------------------------------------------------------------------------------- 8 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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 declined 20.46% (excluding sales charge) for the 12 months ended Jan. 31, 2009. > The Fund's bond benchmark, the Barclays Capital U.S. Aggregate Bond Index (formerly the Lehman Brothers U.S. Aggregate Bond Index), gained 2.59% during the same time frame. > The Fund's domestic equity benchmark, the Russell 3000(R) Value Index, fell 41.37% for the period. > The Citigroup 3-Month U.S. Treasury Bill Index advanced 1.52% during the period. > The Fund underperformed 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 decreased 10.23% for the annual period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2009) - --------------------------------------------------------------------------------
Since inception 1 year 2/16/06 - ------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund Class A (excluding sales charge) -20.46% -4.02% - ------------------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index (unmanaged) +2.59% +5.33% - ------------------------------------------------------------------------------------------- Russell 3000(R) Value Index (unmanaged) -41.37% -13.61% - ------------------------------------------------------------------------------------------- Citigroup 3-Month U.S. Treasury Bill Index (unmanaged) +1.52% +3.70% - ------------------------------------------------------------------------------------------- Blended Index (unmanaged) -10.23% +0.53% - -------------------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 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 expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 9 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Income Builder Enhanced Income Fund AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2009 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 2/16/06) -20.46% -4.02% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -21.12% -4.75% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -21.09% -4.74% - -------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) -20.23% -3.78% - -------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -24.22% -5.58% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -24.90% -5.89% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -21.84% -4.74% - --------------------------------------------------------------------------------------------
AT DEC. 31, 2008 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 2/16/06) -21.28% -3.60% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -21.92% -4.33% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -21.91% -4.31% - -------------------------------------------------------------------------------------------- Class R4 (inception 2/16/06) -21.02% -3.35% - -------------------------------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -25.05% -5.21% - -------------------------------------------------------------------------------------------- Class B (inception 2/16/06) -25.67% -5.51% - -------------------------------------------------------------------------------------------- Class C (inception 2/16/06) -22.66% -4.31% - --------------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R4 shares. Class R4 is available to 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 portfolio 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. - -------------------------------------------------------------------------------- 10 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Net fund and Acquired fund acquired fund Total annual fund (underlying fund) (underlying fund) operating expenses(a) fees and expenses(b) fees and expenses(b) - ---------------------------------------------------------------------------------------------------------------- Class A 0.41% 0.72% 1.13% - ---------------------------------------------------------------------------------------------------------------- Class B 1.17% 0.72% 1.89% - ---------------------------------------------------------------------------------------------------------------- Class C 1.16% 0.72% 1.88% - ---------------------------------------------------------------------------------------------------------------- Class R4 0.36% 0.72% 1.08% - ----------------------------------------------------------------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses of the Fund until Jan. 31, 2010, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds) will not exceed 0.45% for Class A, 1.21% for Class B, 1.20% for Class C and 0.41% for Class R4. (b) In addition to the total annual fund operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the acquired funds in which the Fund invests. The Fund's acquired fund (underlying fund) fees and expenses is based on its allocations in the acquired funds. Because acquired funds will have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred by the Fund with respect to such investments will vary. The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses for Class I shares on a number of acquired funds until the end of the acquired funds' next fiscal year end, unless sooner terminated at the discretion of the acquired fund's Board. Any amounts waived will not be reimbursed by the Fund. Before taking the fee waivers into account, the acquired fund (underlying fund) fees and expenses would have been 0.76% for all classes, and the net fund and acquired fund (underlying fund) fees and expenses would have been 1.17% for Class A, 1.93% for Class B, 1.92% for Class C and 1.12% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 11 MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, RiverSource Income Builder Series funds underperformed 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, 2009. - - RiverSource Income Builder Basic Income Fund fell 16.43%. 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, declined 10.28% for the period. - - RiverSource Income Builder Moderate Income Fund decreased 19.51%. 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, fell 10.24% for the period. - - RiverSource Income Builder Enhanced Income Fund declined 20.46%. 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, decreased 10.23% for the period. The funds' bond benchmark, the Barclays Capital U.S. Aggregate Bond Index gained 2.59%. The funds' domestic equity benchmark, the Russell 3000(R) Value Index, fell 41.37%, while the cash benchmark, the Citigroup 3-Month U.S. Treasury Bill Index, advanced 1.52%. Index returns are for the 12-month period ended Jan. 31, 2009. SIGNIFICANT PERFORMANCE FACTORS RiverSource Income Builder Series was designed to outperform a mix of bonds, stocks and cash over time through long-term strategic allocation and tactical asset allocation. It would be an understatement to say that the 12 months ended Jan. 31, 2009 were a most challenging time. Most segments of the equity market experienced dramatic losses during the annual period. High quality fixed income sectors turned in mixed performance. In addition, lower quality fixed income sectors, such as high yield bonds, high yield bank loans and emerging market bonds, declined. Cash produced only modest returns while the RiverSource Income Builder Series' exposure to equities and to lower quality bonds detracted from performance. Tactically, RiverSource Income Builder Series can overweight or underweight the strategic target weightings for each sector based on a disciplined, quantitative investment process that considers price momentum, valuations, yield and other factors. During the period, tactical asset allocation favored lower quality fixed income sectors over high quality fixed income sectors, which further hurt the funds' results. That said, even amidst a broad market decline, some allocation strategies and certain underlying funds performed relatively better than others during the annual period. On the fixed income side, RiverSource Income Builder Series benefited from exposure to high quality U.S. and global government bonds, including Treasury Inflation-Protected Securities (TIPS). This exposure, especially to non-U.S. government bonds via RiverSource Global Bond Fund, helped returns. However, this contribution was more than offset by a greater allocation to high yield bank loans, high yield bonds and emerging market bonds, which detracted. High yield bank loans, where the funds had their largest weighting to lower quality fixed income via RiverSource Floating Rate Fund, was the worst performing fixed income sector during the period. To a lesser degree, RiverSource Income Builder Series' defensive duration* stance also detracted from results, as interest rates declined during the period. The Federal Reserve aggressively reduced the targeted federal funds rate to a range of 0.00% to 0.25% in an effort to combat the economic slowdown. The underlying fixed income funds in RiverSource Income Builder Series produced mixed results during the period. RiverSource High Yield Bond Fund meaningfully outperformed its benchmark, adding value above and beyond the effect of the sector allocation decision. RiverSource Diversified Bond Fund and RiverSource U.S. Government Mortgage Fund, however, materially trailed their respective benchmarks. - -------------------------------------------------------------------------------- 12 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- Within equities, allocations to small-cap stocks via RiverSource Disciplined Small Cap Value Fund and RiverSource Disciplined Small and Mid Cap Equity Fund boosted performance, as small-cap stocks did not decline as much as large-cap stocks during the annual period. Also, a greater exposure to U.S. equities than to international equities helped, as U.S. equities detracted less from performance. Exposure to real estate investment trusts (REITs), though modest, hurt results, as this segment of the equity market experienced the worst returns across the investable universe. Among the underlying equity funds, RiverSource Disciplined Small Cap Value Fund slightly outperformed its benchmark index. RiverSource Disciplined International Equity Fund meaningfully underperformed its benchmark index. Within cash and alternative investment strategies, the underlying RiverSource Cash Management Fund and RiverSource Absolute Return Currency and Income Fund outperformed their benchmarks during the annual period. * Duration is a measure of sensitivity to changes in interest rates. CHANGES TO THE FUNDS' PORTFOLIOS As indicated above, asset class and investment category decisions are based on a disciplined, quantitative approach to asset allocation that considers price momentum, valuations compared with historic averages and yield, among other factors. Allocation changes are implemented monthly, generally limiting turnover to no more than 3% of each portfolio's assets. For the annual period, the portfolio turnover rates for RiverSource Income Builder Series ranged from 36% to 40%. More specifically, during the annual period, the quantitative models gradually increased the funds' allocations to higher quality assets. The models shifted approximately 10% of each fund's net assets out of lower quality bonds -- mostly emerging market bonds and to a lesser extent high yield bonds and high yield bank loans. The models also shifted approximately 5% of each fund's net assets out of equities, mostly large-cap value equities. The models correspondingly increased the funds' exposure to high quality bonds, mostly U.S. government mortgage securities, and to cash. At the end of the period, each fund in RiverSource Income Builder Series was relatively close to its respective neutral long-term target allocations to equities, high quality bonds, lower quality bonds and cash. The largest positions in each of these categories included large-cap value stocks, U.S. government mortgages and high yield bank loans, respectively. In spite of the turmoil experienced during the annual period within virtually every asset class, the disciplined, quantitative approach that we employ in RiverSource Income Builder Series continued to respect both long-term valuations and price performance, thereby keeping allocations close to long-term targets. In our view, such positioning should enable the funds to benefit from an eventual recovery in equities and lower quality fixed income. At the same time, it should be noted that each fund had less overall exposure to risk at the end of January 2009 than it did at the start of the annual period to help mitigate downside movement in the event of a prolonged economic and market crisis. It would be an understatement to say that the 12 months ended Jan. 31, 2009 were a most challenging time. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 13 MANAGER COMMENTARY (continued) ------------------------------------------------- OUR FUTURE STRATEGY RiverSource Income Builder Series will continue to follow a quantitative discipline that seeks a high level of income, capital growth and managed risk. As mentioned, sector allocation changes are implemented monthly and may be due to changes in yields, valuations, price momentum and correlations to other asset classes. Each of the underlying funds is managed to generate competitive performance vs. their benchmarks as well as their peer groups. (PHOTO - Bertsimas) (PHOTO - 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 RiverSource Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource Fund. - -------------------------------------------------------------------------------- 14 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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 1/31/09) as compared to the performance of two widely cited performance indices, the Barclays Capital U.S. Aggregate Bond Index and the Russell 3000 Value Index, as well as a Blended Index, consisting of Barclays Capital U.S. Aggregate Bond Index, Russell 3000 Value Index and 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 institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Jan. 31, 2009 SINCE INCEPTION 1 YEAR 2/16/06 RIVERSOURCE INCOME BUILDER BASIC INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $7,961 $8,938 - ------------------------------------------------------------------------ Average annual total return -20.39% -3.72% - ------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(1) Cumulative value of $10,000 $10,259 $11,659 - ------------------------------------------------------------------------ Average annual total return +2.59% +5.33% - ------------------------------------------------------------------------ RUSSELL 3000 VALUE INDEX(2) Cumulative value of $10,000 $5,863 $6,487 - ------------------------------------------------------------------------ Average annual total return -41.37% -13.61% - ------------------------------------------------------------------------ CITIGROUP 3-MONTH U.S. TREASURY BILL INDEX(3) Cumulative value of $10,000 $10,152 $11,116 - ------------------------------------------------------------------------ Average annual total return +1.52% +3.70% - ------------------------------------------------------------------------ BLENDED INDEX(4) Cumulative value of $10,000 $8,972 $10,120 - ------------------------------------------------------------------------ Average annual total return -10.28% +0.41% - ------------------------------------------------------------------------
Results for other share classes can be found on page 4. - -------------------------------------------------------------------------------- 16 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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 U.S. AGGREGATE RUSSELL 3000 U.S. TREASURY BILL SALES CHARGE) BOND INDEX(1) VALUE INDEX(2) INDEX(3) BLENDED INDEX(4) ------------------ ---------------- -------------- ----------------- ---------------- 2/16/06 $ 9,525 $10,000 $10,000 $10,000 $10,000 7/31/06 9,728 10,078 10,387 10,209 10,169 1/31/07 10,436 10,446 11,798 10,467 10,774 7/31/07 10,557 10,640 11,734 10,726 10,924 1/31/08 10,695 11,366 11,065 10,949 11,281 7/31/08 10,392 11,294 10,003 11,054 10,980 1/31/09 8,938 11,659 6,487 11,116 10,120
(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 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 -- 2009 ANNUAL REPORT 17 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 1/31/09) as compared to the performance of two widely cited performance indices, the Barclays Capital U.S. Aggregate Bond Index and the Russell 3000 Value Index, as well as a Blended Index, consisting of Barclays Capital U.S. Aggregate Bond Index, Russell 3000 Value Index and 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 institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Jan. 31, 2009 SINCE INCEPTION 1 YEAR 2/16/06 RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $7,666 $8,586 - ------------------------------------------------------------------------ Average annual total return -23.34% -5.01% - ------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(1) Cumulative value of $10,000 $10,259 $11,659 - ------------------------------------------------------------------------ Average annual total return +2.59% +5.33% - ------------------------------------------------------------------------ RUSSELL 3000 VALUE INDEX(2) Cumulative value of $10,000 $5,863 $6,487 - ------------------------------------------------------------------------ Average annual total return -41.37% -13.61% - ------------------------------------------------------------------------ CITIGROUP 3-MONTH U.S. TREASURY BILL INDEX(3) Cumulative value of $10,000 $10,152 $11,116 - ------------------------------------------------------------------------ Average annual total return +1.52% +3.70% - ------------------------------------------------------------------------ BLENDED INDEX(4) Cumulative value of $10,000 $8,976 $10,146 - ------------------------------------------------------------------------ Average annual total return -10.24% +0.49% - ------------------------------------------------------------------------
Results for other share classes can be found on page 7. - -------------------------------------------------------------------------------- 18 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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 U.S. AGGREGATE RUSSELL 3000 U.S. TREASURY SALES 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 7/31/06 9,755 10,078 10,387 10,209 10,163 1/31/07 10,561 10,446 11,798 10,467 10,774 7/31/07 10,658 10,640 11,734 10,726 10,920 1/31/08 10,668 11,366 11,065 10,949 11,304 7/31/08 10,345 11,294 10,003 11,054 10,994 1/31/09 8,586 11,659 6,487 11,116 10,146
(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 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 -- 2009 ANNUAL REPORT 19 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 1/31/09) as compared to the performance of two widely cited performance indices, the Barclays Capital U.S. Aggregate Bond Index and the Russell 3000 Value Index, as well as a Blended Index, consisting of Barclays Capital U.S. Aggregate Bond Index, Russell 3000 Value Index and 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 institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Jan. 31, 2009 SINCE INCEPTION 1 YEAR 2/16/06 RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $7,578 $8,436 - ----------------------------------------------------------------------- Average annual total return -24.22% -5.58% - ----------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(1) Cumulative value of $10,000 $10,259 $11,659 - ----------------------------------------------------------------------- Average annual total return +2.59% +5.33% - ----------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) Cumulative value of $10,000 $5,863 $6,487 - ----------------------------------------------------------------------- Average annual total return -41.37% -13.61% - ----------------------------------------------------------------------- CITIGROUP 3-MONTH U.S. TREASURY BILL INDEX(3) Cumulative value of $10,000 $10,152 $11,116 - ----------------------------------------------------------------------- Average annual total return +1.52% +3.70% - ----------------------------------------------------------------------- BLENDED INDEX(4) Cumulative value of $10,000 $8,977 $10,157 - ----------------------------------------------------------------------- Average annual total return -10.23% +0.53% - -----------------------------------------------------------------------
Results for other share classes can be found on page 10. - -------------------------------------------------------------------------------- 20 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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 U.S. AGGREGATE RUSSELL 3000 U.S. TREASURY SALES 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 7/31/06 9,718 10,078 10,387 10,209 10,159 1/31/07 10,627 10,446 11,798 10,467 10,773 7/31/07 10,680 10,640 11,734 10,726 10,918 1/31/08 10,619 11,366 11,065 10,949 11,314 7/31/08 10,341 11,294 10,003 11,054 11,000 1/31/09 8,436 11,659 6,487 11,116 10,157
(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 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 -- 2009 ANNUAL REPORT 21 INVESTMENT CHANGES ------------------------------------------------------------- RIVERSOURCE INCOME BUILDER BASIC INCOME FUND Fund holdings at Jan. 31, 2009
% 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 7.3% 8.8% - -------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Fund 0.8% 2.1% - -------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Fund 3.4% --% - -------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 5.3% 2.7% - -------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Fund 7.9% 8.9% - -------------------------------------------------------------------------------------- RiverSource Real Estate Fund 1.8% 1.0% ====================================================================================== 26.5% 23.5% - -------------------------------------------------------------------------------------- FIXED-INCOME FUNDS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities, floating rate, global, high yield, inflation protected - -------------------------------------------------------------------------------------- RiverSource Diversified Bond Fund 3.0% 6.8% - -------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 2.7% 2.5% - -------------------------------------------------------------------------------------- RiverSource Floating Rate Fund 6.1% 7.1% - -------------------------------------------------------------------------------------- RiverSource Global Bond Fund 0.4% 5.1% - -------------------------------------------------------------------------------------- RiverSource High Yield Bond Fund 3.8% 2.5% - -------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities Fund 4.1% 9.1% - -------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 37.2% 31.0% ====================================================================================== 57.3% 64.1% - -------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities - -------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund 4.1% 4.2% - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- CASH EQUIVALENTS - -------------------------------------------------------------------------------------- RiverSource Cash Management Fund 12.1% 8.2% ====================================================================================== 100.0% 100.0% - --------------------------------------------------------------------------------------
PORTFOLIO ALLOCATION ----------------------------------------------------------- (at Jan. 31, 2009; % of portfolio assets) Equity Funds(1) 26.5% - ---------------------------------------------------------------- Fixed Income Funds(2) 57.3% - ---------------------------------------------------------------- Alternative Investments(3) 4.1% - ---------------------------------------------------------------- Cash Equivalents(4) 12.1% - ----------------------------------------------------------------
(1) Includes U.S. Large Cap 10.7%, Dividend Income 7.9%, U.S. Small Cap 5.3%, Real Estate 1.8% and International 0.8%. (2) Includes Investment Grade 40.2%, Floating Rate 6.1%, Inflation Protected Securities 4.1%, High Yield 3.8%, International 2.7% and Global Bond 0.4%. (3) Comprised entirely of an investment in the RiverSource Absolute Return Currency and Income Fund. (4) Comprised entirely of Money Market. - -------------------------------------------------------------------------------- 22 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- TOP FIVE HOLDINGS -------------------------------------------------------------- (at Jan. 31, 2009; % of portfolio assets) RiverSource U.S. Government Mortgage Fund 37.2% - ---------------------------------------------------------------- RiverSource Cash Management Fund 12.1% - ---------------------------------------------------------------- RiverSource Dividend Opportunity Fund 7.9% - ---------------------------------------------------------------- RiverSource Disciplined Equity Fund 7.3% - ---------------------------------------------------------------- RiverSource Floating Rate Fund 6.1% - ----------------------------------------------------------------
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 -- 2009 ANNUAL REPORT 23 INVESTMENT CHANGES ------------------------------------------------------------- RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND Fund holdings at Jan. 31, 2009
% 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 6.0% 7.5% - -------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Fund 1.9% 3.6% - -------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Fund 1.2% --% - -------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 5.2% 1.5% - -------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Fund 9.2% 11.5% - -------------------------------------------------------------------------------------- RiverSource Real Estate Fund 4.5% 1.7% ====================================================================================== 28.0% 25.8% - -------------------------------------------------------------------------------------- FIXED-INCOME FUNDS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities, floating rate, global, high yield, inflation protected - -------------------------------------------------------------------------------------- RiverSource Diversified Bond Fund 3.8% 5.2% - -------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 5.5% 5.1% - -------------------------------------------------------------------------------------- RiverSource Floating Rate Fund 13.6% 15.3% - -------------------------------------------------------------------------------------- RiverSource Global Bond Fund 1.0% 5.6% - -------------------------------------------------------------------------------------- RiverSource High Yield Bond Fund 5.3% 5.0% - -------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities Fund 4.8% 9.1% - -------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 28.2% 20.5% ====================================================================================== 62.2% 65.8% - -------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities - -------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund 4.1% 4.2% - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- CASH EQUIVALENTS - -------------------------------------------------------------------------------------- RiverSource Cash Management Fund 5.7% 4.2% ====================================================================================== 100.0% 100.0% - --------------------------------------------------------------------------------------
PORTFOLIO ALLOCATION ----------------------------------------------------------- (at Jan. 31, 2009; % of portfolio assets) Equity Funds(1) 28.0% - ---------------------------------------------------------------- Fixed Income Funds(2) 62.2% - ---------------------------------------------------------------- Alternative Investments(3) 4.1% - ---------------------------------------------------------------- Cash Equivalents(4) 5.7% - ----------------------------------------------------------------
(1) Includes Dividend Income 9.2%, U.S. Large Cap 7.2%, U.S. Small Cap 5.2%, Real Estate 4.5% and International 1.9%. (2) Includes Investment Grade 32.0%, Floating Rate 13.6%, International 5.5%, High Yield 5.3%, Inflation Protected Securities 4.8% and Global Bond 1.0%. (3) Comprised entirely of an investment in the RiverSource Absolute Return Currency and Income Fund. (4) Comprised entirely of Money Market. - -------------------------------------------------------------------------------- 24 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- TOP FIVE HOLDINGS -------------------------------------------------------------- (at Jan. 31, 2009; % of portfolio assets) RiverSource U.S. Government Mortgage Fund 28.2% - ---------------------------------------------------------------- RiverSource Floating Rate Fund 13.6% - ---------------------------------------------------------------- RiverSource Dividend Opportunity Fund 9.2% - ---------------------------------------------------------------- RiverSource Disciplined Equity Fund 6.0% - ---------------------------------------------------------------- RiverSource Cash Management Fund 5.7% - ----------------------------------------------------------------
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 -- 2009 ANNUAL REPORT 25 INVESTMENT CHANGES ------------------------------------------------------------- RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND Fund holdings at Jan. 31, 2009
% 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 3.2% 4.0% - -------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Fund 3.4% 5.8% - -------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Fund 0.4% --% - -------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 4.6% 2.1% - -------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Fund 7.7% 9.4% - -------------------------------------------------------------------------------------- RiverSource Real Estate Fund 4.3% 1.1% ====================================================================================== 23.6% 22.4% - -------------------------------------------------------------------------------------- FIXED-INCOME FUNDS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities, floating rate, global, high yield, inflation protected - -------------------------------------------------------------------------------------- RiverSource Diversified Bond Fund 0.1% 1.1% - -------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 10.3% 10.2% - -------------------------------------------------------------------------------------- RiverSource Floating Rate Fund 20.3% 20.2% - -------------------------------------------------------------------------------------- RiverSource Global Bond Fund 3.3% 8.1% - -------------------------------------------------------------------------------------- RiverSource High Yield Bond Fund 10.5% 10.0% - -------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities Fund 5.1% 8.0% - -------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 19.6% 12.0% ====================================================================================== 69.2% 69.6% - -------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS - -------------------------------------------------------------------------------------- Includes government, corporate, mortgage and agency securities - -------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund 4.1% 4.2% - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- CASH EQUIVALENTS - -------------------------------------------------------------------------------------- RiverSource Cash Management Fund 3.1% 3.8% ====================================================================================== 100.0% 100.0% - --------------------------------------------------------------------------------------
PORTFOLIO ALLOCATION ----------------------------------------------------------- (at Jan. 31, 2009; % of portfolio assets) Equity Funds(1) 23.6% - ---------------------------------------------------------------- Fixed Income Funds(2) 69.2% - ---------------------------------------------------------------- Alternative Investments(3) 4.1% - ---------------------------------------------------------------- Cash Equivalents(4) 3.1% - ----------------------------------------------------------------
(1) Includes Dividend Income 7.7%, U.S. Small Cap 4.6%, Real Estate 4.3%, U.S. Large Cap 3.6% and International 3.4%. (2) Includes Floating Rate 20.3%, Investment Grade 19.7%, High Yield 10.5%, International 10.3%, Inflation Protected Securities 5.1% and Global Bond 3.3%. (3) Comprised entirely of an investment in the RiverSource Absolute Return Currency and Income Fund. (4) Comprised entirely of Money Market. - -------------------------------------------------------------------------------- 26 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- TOP FIVE HOLDINGS -------------------------------------------------------------- (at Jan. 31, 2009; % of portfolio assets) RiverSource Floating Rate Fund 20.3% - ---------------------------------------------------------------- RiverSource U.S. Government Mortgage Fund 19.6% - ---------------------------------------------------------------- RiverSource High Yield Bond Fund 10.5% - ---------------------------------------------------------------- RiverSource Emerging Markets Bond Fund 10.3% - ---------------------------------------------------------------- RiverSource Dividend Opportunity Fund 7.7% - ----------------------------------------------------------------
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 -- 2009 ANNUAL REPORT 27 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 expenses of the 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 cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. 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, 2009. 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 "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. - -------------------------------------------------------------------------------- 28 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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, 2008 JAN. 31, 2009 THE PERIOD(A) THE PERIOD(B),(C) - -------------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 860.10 $1.91 $4.65 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.95 $2.07 $5.06 - -------------------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 857.60 $5.43 $8.17 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.91 $8.88 - -------------------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 857.70 $5.39 $8.13 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.86 $8.83 - -------------------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 862.60 $1.54(e) $4.28(e) - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,023.35 $1.67(e) $4.65(e) - --------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED (UNDERLYING FUND) NET FUND EXPENSE RATIO FEES AND EXPENSES(C) EXPENSES - --------------------------------------------------------------------------------------------------------- Class A .41% .59% 1.00% - --------------------------------------------------------------------------------------------------------- Class B 1.17% .59% 1.76% - --------------------------------------------------------------------------------------------------------- Class C 1.16% .59% 1.75% - --------------------------------------------------------------------------------------------------------- Class R4 .33% .59% .92% - ---------------------------------------------------------------------------------------------------------
(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 183/366 (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 183/366 (to reflect the one-half year period). (c) 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 the end of the underlying funds' next fiscal year. 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, 2009, the actual expenses paid would have been $5.12 for Class A, $8.64 for Class B, $8.59 for Class C and $4.75 for Class R4; the hypothetical expenses paid would have been $5.56 for Class A, $9.39 for Class B, $9.34 for Class C and $5.16 for Class R4. (d) Based on the actual return for the six months ended Jan. 31, 2009: -13.99% for Class A, -14.24% for Class B, -14.23% for Class C and -13.74% for Class R4. (e) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Jan. 31, 2010, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.41% for Class R4. Any amounts waived will not be reimbursed by the Fund. This change was effective Feb. 1, 2009. If this change had been in place for the entire six month period ended Jan. 31, 2009, the actual direct expenses paid would have been $1.68 for Class R4; the hypothetical direct expenses paid would have been and $1.82 for Class R4. Additionally, had this change been in place for the entire six month period ended Jan. 31, 2009, the actual direct and indirect expenses paid would have been $4.42 for Class R4; the hypothetical direct and indirect expenses paid would have been $4.81 for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 29 FUND EXPENSES EXAMPLE (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, 2008 JAN. 31, 2009 THE PERIOD(A) THE PERIOD(B),(C) - -------------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 830.00 $1.88 $4.85 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.95 $2.07 $5.36 - -------------------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 826.50 $5.34 $8.31 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.91 $9.19 - -------------------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 826.70 $5.30 $8.27 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.86 $9.14 - -------------------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 831.50 $1.51(e) $4.49(e) - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,023.35 $1.67(e) $4.96(e) - --------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED (UNDERLYING FUND) NET FUND EXPENSE RATIO FEES AND EXPENSES(C) EXPENSES - --------------------------------------------------------------------------------------------------------- Class A .41% .65% 1.06% - --------------------------------------------------------------------------------------------------------- Class B 1.17% .65% 1.82% - --------------------------------------------------------------------------------------------------------- Class C 1.16% .65% 1.81% - --------------------------------------------------------------------------------------------------------- Class R4 .33% .65% .98% - ---------------------------------------------------------------------------------------------------------
(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 183/366 (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 183/366 (to reflect the one-half year period). (c) 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 the end of the underlying funds' next fiscal year. Before taking the fee waivers into account, the acquired fund (underlying fund) fees and expenses would have been 0.72% for all classes. Had these commitments not been in place for the entire six month period ended Jan. 31, 2009, the actual expenses paid would have been $5.17 for Class A, $8.63 for Class B, $8.59 for Class C and $4.81 for Class R4; the hypothetical expenses paid would have been $5.71 for Class A, $9.54 for Class B, $9.49 for Class C and $5.31 for Class R4. (d) Based on the actual return for the six months ended Jan. 31, 2009: -17.00% for Class A, -17.35% for Class B, -17.33% for Class C and -16.85% for Class R4. (e) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Jan. 31, 2010, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.41% for Class R4. Any amounts waived will not be reimbursed by the Fund. This change was effective Feb. 1, 2009. If this change had been in place for the entire six month period ended Jan. 31, 2009, the actual direct expenses paid would have been $1.65 for Class R4; the hypothetical direct expenses paid would have been and $1.82 for Class R4. Additionally, had this change been in place for the entire six month period ended Jan. 31, 2009, the actual direct and indirect expenses paid would have been $4.62 for Class R4; the hypothetical direct and indirect expenses paid would have been $5.11 for Class R4. - -------------------------------------------------------------------------------- 30 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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, 2008 JAN. 31, 2009 THE PERIOD(A) THE PERIOD(B),(C) - -------------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 815.80 $1.86 $5.04 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.95 $2.07 $5.61 - -------------------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 812.40 $5.30 $8.47 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.91 $9.44 - -------------------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 812.50 $5.26 $8.43 - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.86 $9.39 - -------------------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 817.40 $1.50(e) $4.68(e) - -------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,023.35 $1.67(e) $5.21(e) - --------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED (UNDERLYING FUND) NET FUND EXPENSE RATIO FEES AND EXPENSES(C) EXPENSES - --------------------------------------------------------------------------------------------------------- Class A .41% .70% 1.11% - --------------------------------------------------------------------------------------------------------- Class B 1.17% .70% 1.87% - --------------------------------------------------------------------------------------------------------- Class C 1.16% .70% 1.86% - --------------------------------------------------------------------------------------------------------- Class R4 .33% .70% 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 183/366 (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 183/366 (to reflect the one-half year period). (c) 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 the end of the underlying funds' next fiscal year. 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, 2009, the actual expenses paid would have been $5.27 for Class A, $8.70 for Class B, $8.65 for Class C and $4.91 for Class R4; the hypothetical expenses paid would have been $5.87 for Class A, $9.69 for Class B, $9.64 for Class C and $5.46 for Class R4. (d) Based on the actual return for the six months ended Jan. 31, 2009: -18.42% for Class A, -18.76% for Class B, -18.75% for Class C and -18.26% for Class R4. (e) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Jan. 31, 2010, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.41% for Class R4. Any amounts waived will not be reimbursed by the Fund. This change was effective Feb. 1, 2009. If this change had been in place for the entire six month period ended Jan. 31, 2009, the actual direct expenses paid would have been $1.59 for Class R4; the hypothetical direct expenses paid would have been and $1.77 for Class R4. Additionally, had this change been in place for the entire six month period ended Jan. 31, 2009, the actual direct and indirect expenses paid would have been $4.77 for Class R4; the hypothetical direct and indirect expenses paid would have been $5.31 for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 31 INVESTMENTS IN AFFILIATED FUNDS ------------------------------------------------ RiverSource Income Builder Basic Income Fund JAN. 31, 2009 (Percentages represent value of investments compared to net assets)
EQUITY FUNDS (26.5%) SHARES VALUE(a) DIVIDEND INCOME (7.9%) RiverSource Dividend Opportunity Fund 3,483,066 $17,693,974 - ------------------------------------------------------------------------------------- INTERNATIONAL (0.8%) RiverSource Disciplined International Equity Fund 363,327 1,776,667 - ------------------------------------------------------------------------------------- REAL ESTATE (1.8%) RiverSource Real Estate Fund 706,544 4,119,153 - ------------------------------------------------------------------------------------- U.S. LARGE CAP (10.7%) RiverSource Disciplined Equity Fund 4,532,057 16,315,404 RiverSource Disciplined Large Cap Value Fund 1,279,847(b) 7,499,903 --------------- Total 23,815,307 - ------------------------------------------------------------------------------------- U.S. SMALL CAP (5.3%) RiverSource Disciplined Small Cap Value Fund 2,205,201(b) 11,952,191 - ------------------------------------------------------------------------------------- TOTAL EQUITY FUNDS (Cost: $93,408,169) $59,357,292 - ------------------------------------------------------------------------------------- FIXED INCOME FUNDS (57.2%) SHARES VALUE(a) FLOATING RATE (6.1%) RiverSource Floating Rate Fund 2,095,935 $13,728,374 - ------------------------------------------------------------------------------------- GLOBAL BOND (0.4%) RiverSource Global Bond Fund 144,803 880,401 - ------------------------------------------------------------------------------------- HIGH YIELD (3.7%) RiverSource High Yield Bond Fund 4,181,546 8,404,908 - ------------------------------------------------------------------------------------- INFLATION PROTECTED SECURITIES (4.1%) RiverSource Inflation Protected Securities Fund 981,260 9,233,652 - ------------------------------------------------------------------------------------- INTERNATIONAL (2.7%) RiverSource Emerging Markets Bond Fund 767,492 5,955,735 - ------------------------------------------------------------------------------------- INVESTMENT GRADE (40.2%) RiverSource Diversified Bond Fund 1,551,074 6,793,705 RiverSource U.S. Government Mortgage Fund 18,001,431(b) 83,346,625 --------------- Total 90,140,330 - ------------------------------------------------------------------------------------- TOTAL FIXED INCOME FUNDS (Cost: $146,269,495) $128,343,400 - ------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS (4.1%) SHARES VALUE(a) RiverSource Absolute Return Currency and Income Fund 925,466 $9,162,116 - ------------------------------------------------------------------------------------- TOTAL ALTERNATIVE INVESTMENTS (Cost: $9,619,425) $9,162,116 - ------------------------------------------------------------------------------------- CASH EQUIVALENTS (12.1%) SHARES VALUE(a) MONEY MARKET RiverSource Cash Management Fund 27,104,222 $27,104,222 - ------------------------------------------------------------------------------------- TOTAL CASH EQUIVALENTS (Cost: $27,104,222) $27,104,222 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN AFFILIATED FUNDS (Cost: $276,401,311)(c) $223,967,030 =====================================================================================
NOTES TO INVESTMENTS IN AFFILIATED FUNDS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Investments in Underlying Affiliated Funds which exceed 5% of the underlying fund's shares outstanding -- See Note 5 to the financial statements. (c) At Jan. 31, 2009, the cost of securities for federal income tax purposes was $280,116,894 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $-- Unrealized depreciation (56,149,864) --------------------------------------------------------------------------------------- Net unrealized depreciation $(56,149,864) ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 32 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2009:
FAIR VALUE AT JAN. 31, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------------------------- Investments in affiliated funds $223,967,030 $-- $-- $223,967,030
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 33 INVESTMENTS IN AFFILIATED FUNDS ------------------------------------------------ RiverSource Income Builder Moderate Income Fund JAN. 31, 2009 (Percentages represent value of investments compared to net assets)
EQUITY FUNDS (28.0%) SHARES VALUE(a) DIVIDEND INCOME (9.2%) RiverSource Dividend Opportunity Fund 7,155,073 $36,347,772 - ------------------------------------------------------------------------------------- INTERNATIONAL (1.9%) RiverSource Disciplined International Equity Fund 1,535,164 7,506,950 - ------------------------------------------------------------------------------------- REAL ESTATE (4.5%) RiverSource Real Estate Fund 3,047,478(b) 17,766,798 - ------------------------------------------------------------------------------------- U.S. LARGE CAP (7.2%) RiverSource Disciplined Equity Fund 6,586,581 23,711,693 RiverSource Disciplined Large Cap Value Fund 766,487(b) 4,491,612 --------------- Total 28,203,305 - ------------------------------------------------------------------------------------- U.S. SMALL CAP (5.2%) RiverSource Disciplined Small Cap Value Fund 3,794,798(b) 20,567,805 - ------------------------------------------------------------------------------------- TOTAL EQUITY FUNDS (Cost: $184,332,826) $110,392,630 - ------------------------------------------------------------------------------------- FIXED INCOME FUNDS (62.1%) SHARES VALUE(a) FLOATING RATE (13.6%) RiverSource Floating Rate Fund 8,165,759(b) $53,485,720 - ------------------------------------------------------------------------------------- GLOBAL BOND (1.0%) RiverSource Global Bond Fund 637,029 3,873,135 - ------------------------------------------------------------------------------------- HIGH YIELD (5.3%) RiverSource High Yield Bond Fund 10,423,106 20,950,443 - ------------------------------------------------------------------------------------- INFLATION PROTECTED SECURITIES (4.8%) RiverSource Inflation Protected Securities Fund 2,015,612 18,966,906 - ------------------------------------------------------------------------------------- INTERNATIONAL (5.4%) RiverSource Emerging Markets Bond Fund 2,771,809(b) 21,509,236 - ------------------------------------------------------------------------------------- INVESTMENT GRADE (32.0%) RiverSource Diversified Bond Fund 3,460,417 15,156,629 RiverSource U.S. Government Mortgage Fund 23,942,141(b) 110,852,111 --------------- Total 126,008,740 - ------------------------------------------------------------------------------------- TOTAL FIXED INCOME FUNDS (Cost: $294,008,377) $244,794,180 - ------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS (4.1%) SHARES VALUE(a) RiverSource Absolute Return Currency and Income Fund 1,641,359 $16,249,459 - ------------------------------------------------------------------------------------- TOTAL ALTERNATIVE INVESTMENTS (Cost: $17,036,273) $16,249,459 - ------------------------------------------------------------------------------------- CASH EQUIVALENTS (5.7%) SHARES VALUE(a) MONEY MARKET RiverSource Cash Management Fund 22,378,919 $22,378,919 - ------------------------------------------------------------------------------------- TOTAL CASH EQUIVALENTS (Cost: $22,378,919) $22,378,919 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN AFFILIATED FUNDS (Cost: $517,756,395)(c) $393,815,188 =====================================================================================
NOTES TO INVESTMENTS IN AFFILIATED FUNDS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Investments in Underlying Affiliated Funds which exceed 5% of the underlying fund's shares outstanding -- See Note 5 to the financial statements. (c) At Jan. 31, 2009, the cost of securities for federal income tax purposes was $524,629,744 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $-- Unrealized depreciation (130,814,556) --------------------------------------------------------------------------------------- Net unrealized depreciation $(130,814,556) ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 34 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2009:
FAIR VALUE AT JAN. 31, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------------------------- Investments in affiliated funds $393,815,188 $-- $-- $393,815,188
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 35 INVESTMENTS IN AFFILIATED FUNDS ------------------------------------------------ RiverSource Income Builder Enhanced Income Fund JAN. 31, 2009 (Percentages represent value of investments compared to net assets)
EQUITY FUNDS (23.6%) SHARES VALUE(a) DIVIDEND INCOME (7.7%) RiverSource Dividend Opportunity Fund 2,887,433 $14,668,159 - ------------------------------------------------------------------------------------- INTERNATIONAL (3.4%) RiverSource Disciplined International Equity Fund 1,309,677 6,404,318 - ------------------------------------------------------------------------------------- REAL ESTATE (4.3%) RiverSource Real Estate Fund 1,424,004(b) 8,301,945 - ------------------------------------------------------------------------------------- U.S. LARGE CAP (3.6%) RiverSource Disciplined Equity Fund 1,706,364 6,142,909 RiverSource Disciplined Large Cap Value Fund 116,878 684,905 --------------- Total 6,827,814 - ------------------------------------------------------------------------------------- U.S. SMALL CAP (4.6%) RiverSource Disciplined Small Cap Value Fund 1,638,969(b) 8,883,210 - ------------------------------------------------------------------------------------- TOTAL EQUITY FUNDS (Cost: $75,964,141) $45,085,446 - ------------------------------------------------------------------------------------- FIXED INCOME FUNDS (69.2%) SHARES VALUE(a) FLOATING RATE (20.3%) RiverSource Floating Rate Fund 5,904,324(b) $38,673,324 - ------------------------------------------------------------------------------------- GLOBAL BOND (3.3%) RiverSource Global Bond Fund 1,038,692 6,315,249 - ------------------------------------------------------------------------------------- HIGH YIELD (10.5%) RiverSource High Yield Bond Fund 10,011,498 20,123,111 - ------------------------------------------------------------------------------------- INFLATION PROTECTED SECURITIES (5.1%) RiverSource Inflation Protected Securities Fund 1,038,883 9,775,889 - ------------------------------------------------------------------------------------- INTERNATIONAL (10.3%) RiverSource Emerging Markets Bond Fund 2,542,406(b) 19,729,068 - ------------------------------------------------------------------------------------- INVESTMENT GRADE (19.7%) RiverSource Diversified Bond Fund 46,138 202,085 RiverSource U.S. Government Mortgage Fund 8,082,644(b) 37,422,642 --------------- Total 37,624,727 - ------------------------------------------------------------------------------------- TOTAL FIXED INCOME FUNDS (Cost: $166,862,421) $132,241,368 - ------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS (4.1%) SHARES VALUE(a) RiverSource Absolute Return Currency and Income Fund 790,247 $7,823,444 - ------------------------------------------------------------------------------------- TOTAL ALTERNATIVE INVESTMENTS (Cost: $8,095,113) $7,823,444 - ------------------------------------------------------------------------------------- CASH EQUIVALENTS (3.1%) SHARES VALUE(a) MONEY MARKET RiverSource Cash Management Fund 5,972,564 $5,972,564 - ------------------------------------------------------------------------------------- TOTAL CASH EQUIVALENTS (Cost: $5,972,564) $5,972,564 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN AFFILIATED FUNDS (Cost: $256,894,239)(c) $191,122,822 =====================================================================================
NOTES TO INVESTMENTS IN AFFILIATED FUNDS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Investments in Underlying Affiliated Funds which exceed 5% of the underlying fund's shares outstanding -- See Note 5 to the financial statements. (c) At Jan. 31, 2009, the cost of securities for federal income tax purposes was $261,268,912 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $-- Unrealized depreciation (70,146,090) --------------------------------------------------------------------------------------- Net unrealized depreciation $(70,146,090) ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 36 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2009:
FAIR VALUE AT JAN. 31, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------------------------- Investments in affiliated funds $191,122,822 $-- $-- $191,122,822
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 37 STATEMENTS OF ASSETS AND LIABILITIES -------------------------------------------
RIVERSOURCE RIVERSOURCE RIVERSOURCE INCOME BUILDER INCOME BUILDER INCOME BUILDER BASIC INCOME MODERATE INCOME ENHANCED INCOME JAN. 31, 2009 FUND FUND FUND ASSETS Investments in affiliated funds, at value (identified cost $276,401,311, $517,756,395, and $256,894,239, respectively) $223,967,030 $ 393,815,188 $191,122,822 Capital shares receivable 329,756 785,857 166,877 Dividends receivable 112,618 215,121 119,943 Receivable for affiliated investments sold 633,960 -- 102,139 - ------------------------------------------------------------------------------------------------------------ Total assets 225,043,364 394,816,166 191,511,781 - ------------------------------------------------------------------------------------------------------------ LIABILITIES Capital shares payable 797,266 622,004 293,493 Payable for affiliated investments purchased -- 228,799 -- Accrued distribution fees 2,317 3,854 1,875 Accrued transfer agency fees 683 1,292 675 Accrued administration services fees 124 217 105 Accrued plan administration services fees -- -- 1 Other accrued expenses 42,743 72,908 42,546 - ------------------------------------------------------------------------------------------------------------ Total liabilities 843,133 929,074 338,695 - ------------------------------------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $224,200,231 $ 393,887,092 $191,173,086 - ------------------------------------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 272,001 $ 501,549 $ 251,672 Additional paid-in capital 288,538,236 543,968,666 274,000,280 Undistributed net investment income 99,431 202,092 132,490 Accumulated net realized gain (loss) (12,275,156) (26,844,008) (17,439,939) Unrealized appreciation (depreciation) on affiliated investments (52,434,281) (123,941,207) (65,771,417) - ------------------------------------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $224,200,231 $ 393,887,092 $191,173,086 - ------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares: Class A $186,970,729 $338,875,864 $164,090,568 Class B $ 27,939,305 $ 40,992,857 $ 18,998,046 Class C $ 9,281,940 $ 14,003,542 $ 7,980,635 Class R4 $ 8,257 $ 14,829 $ 103,837 Outstanding shares of capital stock: Class A shares 22,677,468 43,137,952 21,598,784 Class B shares 3,394,885 5,230,164 2,503,256 Class C shares 1,126,721 1,784,927 1,051,482 Class R4 shares 1,000 1,885 13,670 Net asset value per share: Class A(1) $ 8.24 $ 7.86 $ 7.60 Class B $ 8.23 $ 7.84 $ 7.59 Class C $ 8.24 $ 7.85 $ 7.59 Class R4 $ 8.26 $ 7.87 $ 7.60 - --------------------------------------------------------------------------------------------------------------------
(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 $8.65, $8.25 and $7.98, 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. - -------------------------------------------------------------------------------- 38 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT STATEMENTS OF OPERATIONS -------------------------------------------------------
RIVERSOURCE RIVERSOURCE RIVERSOURCE INCOME BUILDER INCOME BUILDER INCOME BUILDER BASIC INCOME MODERATE INCOME ENHANCED INCOME YEAR ENDED JAN. 31, 2009 FUND FUND FUND INVESTMENT INCOME Income: Dividend distributions from underlying affiliated funds $ 11,840,615 $ 24,439,862 $ 13,714,243 - ------------------------------------------------------------------------------------------------------------ Expenses: Distribution fees Class A 593,211 1,158,585 580,823 Class B 362,603 587,094 278,815 Class C 112,193 185,812 110,421 Transfer agency fees Class A 209,119 435,972 231,992 Class B 34,017 58,716 29,545 Class C 10,210 18,089 11,406 Class R4 8 10 60 Administrative services fees 56,956 108,149 54,275 Plan administration services fees -- Class R4 39 48 302 Custodian fees 1,557 1,919 1,758 Printing and postage 57,410 78,234 42,224 Registration fees 57,056 69,808 43,763 Professional fees 21,127 22,431 27,660 Other 2,561 3,539 3,317 - ------------------------------------------------------------------------------------------------------------ Total expenses 1,518,067 2,728,406 1,416,361 Expenses waived/reimbursed by the Investment Manager and its affiliates (46) (53) (344) Earnings credits on cash balances (25) (36) (123) - ------------------------------------------------------------------------------------------------------------ Total net expenses 1,517,996 2,728,317 1,415,894 - ------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 10,322,619 21,711,545 12,298,349 - ------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Sales of underlying affiliated funds (12,962,452) (27,937,345) (16,665,361) Capital gain distributions from underlying affiliated funds 1,495,031 2,299,488 810,884 - ------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments (11,467,421) (25,637,857) (15,854,477) Net change in unrealized appreciation (depreciation) on affiliated investments (47,732,431) (106,106,830) (53,995,107) - ------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (59,199,852) (131,744,687) (69,849,584) - ------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $(48,877,233) $(110,033,142) $(57,551,235) - ------------------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 39 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
RIVERSOURCE INCOME BUILDER BASIC INCOME FUND YEAR ENDED PERIOD ENDED YEAR ENDED JAN. 31, 2009 JAN. 31, 2008(A) MAY 31, 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 10,322,619 $ 7,859,667 $ 4,995,723 Net realized gain (loss) on affiliated investments (11,467,421) 2,439,722 1,925,330 Net change in unrealized appreciation (depreciation) on affiliated investments (47,732,431) (12,864,302) 8,303,647 - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (48,877,233) (2,564,913) 15,224,700 - ----------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (9,456,788) (7,621,913) (4,704,031) Class B (1,156,853) (1,028,182) (661,655) Class C (364,273) (277,845) (134,563) Class R4 (662) (2,564) (6,530) Net realized gain Class A -- (2,333,475) (37,577) Class B -- (370,837) (6,423) Class C -- (102,173) (1,275) Class R4 -- (308) (58) - ----------------------------------------------------------------------------------------------------------- Total distributions (10,978,576) (11,737,297) (5,552,112) - ----------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 67,713,230 108,249,588 183,856,568 Class B shares 12,993,382 20,948,253 31,758,854 Class C shares 4,062,063 5,116,856 7,471,559 Class R4 shares -- -- 173,969 Reinvestment of distributions at net asset value Class A shares 8,575,448 9,163,939 4,277,858 Class B shares 1,059,525 1,280,606 627,552 Class C shares 293,963 316,036 113,576 Class R4 shares 236 2,361 6,124 Payments for redemptions Class A shares (99,777,123) (42,539,784) (17,946,648) Class B shares (20,723,797) (11,621,604) (5,113,877) Class C shares (4,382,955) (1,319,827) (465,200) Class R4 shares (23,586) (72,900) (128,787) - ----------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (30,209,614) 89,523,524 204,631,548 - ----------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (90,065,423) 75,221,314 214,304,136 Net assets at beginning of year 314,265,654 239,044,340 24,740,204 - ----------------------------------------------------------------------------------------------------------- Net assets at end of year $224,200,231 $314,265,654 $239,044,340 - ----------------------------------------------------------------------------------------------------------- Undistributed net investment income $ 99,431 $ -- $ 31,324 - -----------------------------------------------------------------------------------------------------------
(a) For the period from June 1, 2007 to Jan. 31, 2008. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 40 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND YEAR ENDED PERIOD ENDED YEAR ENDED JAN. 31, 2009 JAN. 31, 2008(A) MAY 31, 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 21,711,545 $ 18,047,803 $ 12,057,977 Net realized gain (loss) on affiliated investments (25,637,857) 4,597,387 4,447,507 Net change in unrealized appreciation (depreciation) on affiliated investments (106,106,830) (41,636,292) 24,381,476 - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (110,033,142) (18,991,102) 40,886,960 - ----------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (19,873,829) (17,754,835) (11,538,368) Class B (2,042,635) (2,059,390) (1,445,188) Class C (661,524) (566,587) (283,067) Class R4 (907) (783) (740) Net realized gain Class A -- (4,717,406) (96,904) Class B -- (637,741) (14,179) Class C -- (180,014) (2,705) Class R4 -- (188) (4) Tax return of capital Class A -- (756,070) -- Class B -- (88,758) -- Class C -- (24,473) -- Class R4 -- (33) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (22,578,895) (26,786,278) (13,381,155) - ----------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 84,827,821 190,882,788 405,161,074 Class B shares 10,761,116 27,762,389 62,874,133 Class C shares 4,055,507 9,297,031 13,375,001 Class R4 shares -- 2,677 58,537 Reinvestment of distributions at net asset value Class A shares 17,777,933 21,188,455 10,469,811 Class B shares 1,850,744 2,572,304 1,345,946 Class C shares 515,460 632,871 230,767 Class R4 shares 466 519 258 Payments for redemptions Class A shares (194,903,429) (86,244,919) (37,221,790) Class B shares (31,028,450) (20,759,742) (8,947,264) Class C shares (7,167,813) (2,591,126) (860,076) Class R4 shares (2,028) -- (81,653) - ----------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (113,312,673) 142,743,247 446,404,744 - ----------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (245,924,710) 96,965,867 473,910,549 Net assets at beginning of year 639,811,802 542,845,935 68,935,386 - ----------------------------------------------------------------------------------------------------------- Net assets at end of year $ 393,887,092 $639,811,802 $542,845,935 - ----------------------------------------------------------------------------------------------------------- Undistributed net investment income $ 202,092 $ -- $ 38,463 - -----------------------------------------------------------------------------------------------------------
(a) For the period from June 1, 2007 to Jan. 31, 2008. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 41 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND YEAR ENDED PERIOD ENDED YEAR ENDED JAN. 31, 2009 JAN. 31, 2008(A) MAY 31, 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 12,298,349 $ 11,051,275 $ 8,148,724 Net realized gain (loss) on affiliated investments (15,854,477) 1,092,286 3,582,024 Net change in unrealized appreciation (depreciation) on affiliated investments (53,995,107) (28,630,052) 17,435,810 - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (57,551,235) (16,486,491) 29,166,558 - ----------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (11,029,760) (10,796,758) (7,504,790) Class B (1,099,315) (1,194,841) (983,690) Class C (445,505) (398,867) (247,532) Class R4 (6,527) (2,392) (1,678) Net realized gain Class A -- (3,204,892) (147,447) Class B -- (402,562) (23,066) Class C -- (139,974) (5,595) Class R4 -- (696) (30) Tax return of capital Class A -- (715,333) -- Class B -- (79,162) -- Class C -- (26,427) -- Class R4 -- (159) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (12,581,107) (16,962,063) (8,913,828) - ----------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 30,424,661 99,646,966 219,075,982 Class B shares 4,363,937 12,244,678 32,082,197 Class C shares 1,975,067 4,706,931 8,505,388 Class R4 shares 126,009 41,300 1,881 Reinvestment of distributions at net asset value Class A shares 9,521,547 13,089,182 6,669,701 Class B shares 951,505 1,483,245 876,697 Class C shares 367,471 473,372 207,039 Class R4 shares 6,045 2,703 1,193 Payments for redemptions Class A shares (104,778,466) (61,569,464) (25,861,840) Class B shares (15,995,500) (12,173,574) (6,377,708) Class C shares (4,485,255) (1,636,000) (735,578) Class R4 shares (43,540) (21,462) -- - ----------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (77,566,519) 56,287,877 234,444,952 - ----------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (147,698,861) 22,839,323 254,697,682 Net assets at beginning of year 338,871,947 316,032,624 61,334,942 - ----------------------------------------------------------------------------------------------------------- Net assets at end of year $ 191,173,086 $338,871,947 $316,032,624 - ----------------------------------------------------------------------------------------------------------- Undistributed net investment income $ 132,490 $ -- $ 43,463 - -----------------------------------------------------------------------------------------------------------
(a) For the period from June 1, 2007 to Jan. 31, 2008. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 42 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- RiverSource Income Builder Basic Income Fund CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.27 $10.79 $9.98 $10.05 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .38(d) .30(d) .42 .10 Net gains (losses) (both realized and unrealized) (2.03) (.39) .84 (.07) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.65) (.09) 1.26 .03 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.36) (.45) (.10) Distributions from realized gains -- (.07) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.38) (.43) (.45) (.10) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.24 $10.27 $10.79 $9.98 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $187 $260 $197 $19 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) .41% .40%(g) .46% 3.62%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) .41% .40%(g) .45% .45%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.75% 4.26%(g) 4.02% 3.44%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 39% 19% 27% 1% - ----------------------------------------------------------------------------------------------------------- Total return(j) (16.43%) (.84%)(k) 12.89% .31%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 43 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Basic Income Fund (continued) CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.25 $10.77 $9.97 $10.05 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .31(d) .25(d) .35 .08 Net gains (losses) (both realized and unrealized) (2.02) (.39) .83 (.07) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.71) (.14) 1.18 .01 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.31) (.31) (.38) (.09) Distributions from realized gains -- (.07) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.31) (.38) (.38) (.09) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.23 $10.25 $10.77 $9.97 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $28 $42 $33 $5 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.16% 1.15%(g) 1.22% 4.20%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.16% 1.15%(g) 1.21% 1.21%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.96% 3.50%(g) 3.27% 2.70%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 39% 19% 27% 1% - ----------------------------------------------------------------------------------------------------------- Total return(j) (17.00%) (1.34%)(k) 12.01% .07%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 44 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.26 $10.78 $9.99 $10.05 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .31(d) .25(d) .35 .09 Net gains (losses) (both realized and unrealized) (2.02) (.39) .82 (.07) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.71) (.14) 1.17 .02 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.31) (.31) (.38) (.08) Distributions from realized gains -- (.07) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.31) (.38) (.38) (.08) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.24 $10.26 $10.78 $9.99 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $9 $12 $8 $1 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.16% 1.15%(g) 1.21% 4.30%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.16% 1.15%(g) 1.20% 1.21%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.00% 3.53%(g) 3.27% 2.74%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 39% 19% 27% 1% - ----------------------------------------------------------------------------------------------------------- Total return(j) (16.97%) (1.33%)(k) 11.91% .23%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 45 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Basic Income Fund (continued) CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(A) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.28 $10.80 $9.99 $10.05 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .42(d) .33(d) .43 .11 Net gains (losses) (both realized and unrealized) (2.01) (.34) .84 (.07) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.59) (.01) 1.27 .04 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.43) (.44) (.46) (.10) Distributions from realized gains -- (.07) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.43) (.51) (.46) (.10) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.26 $10.28 $10.80 $9.99 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) .37% .37%(g) .42% 6.84%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) .08% .08%(g) .29% .29%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.90% 4.32%(g) 4.39% 3.25%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 39% 19% 27% 1% - ----------------------------------------------------------------------------------------------------------- Total return (15.93%) (.08%)(j) 13.02% .43%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 46 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income Fund CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.21 $10.99 $9.98 $10.07 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .39(d) .32(d) .45 .10 Net gains (losses) (both realized and unrealized) (2.33) (.64) 1.04 (.08) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.94) (.32) 1.49 .02 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.41) (.38) (.48) (.11) Distributions from realized gains -- (.06) -- -- Tax return of capital -- (.02) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.41) (.46) (.48) (.11) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.86 $10.21 $10.99 $9.98 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $339 $545 $458 $57 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) .40% .38%(g) .42% 1.77%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) .40% .38%(g) .42% .45%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.12% 4.50%(g) 4.23% 3.59%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 40% 19% 29% --% - ----------------------------------------------------------------------------------------------------------- Total return(j) (19.51%) (2.95%)(k) 15.22% .17%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 47 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Moderate Income Fund (continued) CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.19 $10.97 $9.96 $10.06 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .31(d) .27(d) .37 .08 Net gains (losses) (both realized and unrealized) (2.33) (.64) 1.04 (.08) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (2.02) (.37) 1.41 -- - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.33) (.34) (.40) (.10) Distributions from realized gains -- (.06) -- -- Tax return of capital -- (.01) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.33) (.41) (.40) (.10) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.84 $10.19 $10.97 $9.96 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $41 $73 $69 $10 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.15% 1.14%(g) 1.17% 2.41%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.15% 1.14%(g) 1.17% 1.21%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.32% 3.74%(g) 3.48% 2.88%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 40% 19% 29% --% - ----------------------------------------------------------------------------------------------------------- Total return(j) (20.17%) (3.45%)(k) 14.45% (.05%)(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 48 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.20 $10.98 $9.97 $10.06 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .32(d) .27(d) .37 .09 Net gains (losses) (both realized and unrealized) (2.33) (.64) 1.04 (.08) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (2.01) (.37) 1.41 .01 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.34) (.34) (.40) (.10) Distributions from realized gains -- (.06) -- -- Tax return of capital -- (.01) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.34) (.41) (.40) (.10) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.85 $10.20 $10.98 $9.97 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $14 $21 $15 $2 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.15% 1.13%(g) 1.17% 2.35%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.15% 1.13%(g) 1.17% 1.21%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.38% 3.76%(g) 3.44% 2.83%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 40% 19% 29% --% - ----------------------------------------------------------------------------------------------------------- Total return(j) (20.14%) (3.43%)(k) 14.45% .05%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 49 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Moderate Income Fund (continued) CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.22 $11.00 $9.98 $10.07 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .42(d) .34(d) .46 .10 Net gains (losses) (both realized and unrealized) (2.33) (.63) 1.05 (.08) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.91) (.29) 1.51 .02 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.44) (.41) (.49) (.11) Distributions from realized gains -- (.06) -- -- Tax return of capital -- (.02) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.44) (.49) (.49) (.11) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.87 $10.22 $11.00 $9.98 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) .35% .35%(g) .33% 5.51%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) .08% .08%(g) .29% .20%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.45% 4.78%(g) 3.92% 3.88%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 40% 19% 29% --% - ----------------------------------------------------------------------------------------------------------- Total return (19.18%) (2.75%)(j) 15.41% .18%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 50 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Fund CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.05 $11.08 $9.96 $10.06 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .43(d) .35(d) .47 .11 Net gains (losses) (both realized and unrealized) (2.44) (.86) 1.15 (.09) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (2.01) (.51) 1.62 .02 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.44) (.38) (.49) (.12) Distributions from realized gains -- (.11) (.01) -- Tax return of capital -- (.03) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.44) (.52) (.50) (.12) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.60 $10.05 $11.08 $9.96 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $164 $289 $266 $50 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) .41% .41%(g) .43% 2.04%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) .41% .41%(g) .43% .45%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.63% 4.93%(g) 4.51% 3.96%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 36% 24% 27% --% - ----------------------------------------------------------------------------------------------------------- Total return(j) (20.46%) (4.58%)(k) 16.68% .15%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 51 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Enhanced Income Fund (continued) CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.04 $11.07 $9.96 $10.06 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .35(d) .30(d) .39 .09 Net gains (losses) (both realized and unrealized) (2.43) (.86) 1.15 (.09) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (2.08) (.56) 1.54 -- - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.34) (.42) (.10) Distributions from realized gains -- (.11) (.01) -- Tax return of capital -- (.02) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.37) (.47) (.43) (.10) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.59 $10.04 $11.07 $9.96 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $19 $37 $39 $10 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.17% 1.16%(g) 1.19% 2.79%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.17% 1.16%(g) 1.19% 1.21%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.83% 4.15%(g) 3.77% 3.24%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 36% 24% 27% --% - ----------------------------------------------------------------------------------------------------------- Total return(j) (21.12%) (5.17%)(k) 15.74% .02%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 52 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.04 $11.07 $9.96 $10.06 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .36(d) .30(d) .39 .09 Net gains (losses) (both realized and unrealized) (2.43) (.86) 1.15 (.09) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (2.07) (.56) 1.54 -- - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.34) (.42) (.10) Distributions from realized gains -- (.11) (.01) -- Tax return of capital -- (.02) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.38) (.47) (.43) (.10) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.59 $10.04 $11.07 $9.96 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $8 $13 $11 $2 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.16% 1.16%(g) 1.18% 2.63%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.16% 1.16%(g) 1.18% 1.21%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.88% 4.19%(g) 3.73% 3.22%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 36% 24% 27% --% - ----------------------------------------------------------------------------------------------------------- Total return(j) (21.09%) (5.06%)(k) 15.75% .02%(k) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 53 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Income Builder Enhanced Income Fund (continued) CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED JAN. 31, JAN. 31, MAY 31, MAY 31, 2009 2008(b) 2007 2006(c) Net asset value, beginning of period $10.06 $11.09 $9.97 $10.06 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .46(d) .37(d) .49 .12 Net gains (losses) (both realized and unrealized) (2.44) (.86) 1.15 (.09) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.98) (.49) 1.64 .03 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.48) (.40) (.51) (.12) Distributions from realized gains -- (.11) (.01) -- Tax return of capital -- (.03) -- -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.48) (.54) (.52) (.12) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.60 $10.06 $11.09 $9.97 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) .36% .38%(g) .36% 5.75%(g) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) .08% .12%(g) .29% .29%(g) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 5.12% 5.24%(g) 4.67% 3.66%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 36% 24% 27% --% - ----------------------------------------------------------------------------------------------------------- Total return (20.23%) (4.49%)(j) 16.82% .27%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2007 to Jan. 31, 2008. (c) For the period from Feb. 16, 2006 (when shares became publicly available) to May 31, 2006. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Expense ratio is before reduction for earnings credits on cash balances. (f) 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 above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of underlying funds). (i) Expense ratio is before reduction for earnings credits on cash balances. Earnings credits were less than 0.01% of average net assets for the periods ended Jan. 31, 2009 and 2008. (j) Not annualized. The accompanying Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- 54 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Each Fund is a series of RiverSource Income Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. RiverSource Income Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). 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 sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class R4 shares are sold without a front-end sales charge or CDSC and are offered 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. Each Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF INVESTMENTS Effective Feb. 1, 2008, each Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statements of Operations for a fiscal period. There was no impact to each of the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Investments in Affiliated Funds. Investments in the underlying funds are valued at their net asset value at the close of each business day. 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. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 55 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 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. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of 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 additional paid-in capital by the following:
UNDISTRIBUTED ACCUMULATED ADDITIONAL NET INVESTMENT NET REALIZED PAID-IN-CAPITAL FUND INCOME GAIN (LOSS) REDUCTION (INCREASE) - --------------------------------------------------------------------------------------------------------- Basic Income Fund $ 755,388 $ (755,388) $-- Moderate Income Fund 1,069,442 (1,069,442) -- Enhanced Income Fund 415,248 (415,248) --
The tax character of distributions paid for the periods indicated is as follows:
YEAR ENDED PERIOD ENDED YEAR ENDED JAN. 31, 2009 JAN. 31, 2008* MAY 31, 2007 ORDINARY LONG-TERM ORDINARY LONG-TERM TAX RETURN ORDINARY LONG-TERM FUND INCOME CAPITAL GAIN INCOME CAPITAL GAIN OF CAPITAL INCOME CAPITAL GAIN - ------------------------------------------------------------------------------------------------------------------------ Basic Income Fund Class A $ 9,456,788 $-- $ 8,234,010 $1,721,378 $ -- $ 4,741,608 $-- Class B 1,156,853 -- 1,125,459 273,560 -- 668,078 -- Class C 364,273 -- 304,647 75,371 -- 135,838 -- Class R4 662 -- 2,645 227 -- 6,588 -- Moderate Income Fund Class A 19,873,829 -- 18,980,323 3,491,918 756,070 11,635,272 -- Class B 2,042,635 -- 2,224,966 472,165 88,758 1,459,367 -- Class C 661,524 -- 613,347 133,254 24,473 285,772 -- Class R4 907 -- 832 139 33 744 -- Enhanced Income Fund Class A 11,029,760 -- 12,195,858 1,805,792 715,333 7,652,237 -- Class B 1,099,315 -- 1,370,594 226,809 79,162 1,006,756 -- Class C 445,505 -- 459,977 78,864 26,427 253,127 -- Class R4 6,527 -- 2,696 392 159 1,708 --
* For the period from June 1, 2007 to Jan. 31, 2008. - -------------------------------------------------------------------------------- 56 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- At Jan. 31, 2009, the components of distributable earnings on a tax basis for each Fund are as follows:
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ORDINARY ACCUMULATED REALIZED APPRECIATION FUND INCOME LONG-TERM GAIN LOSS (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------ Basic Income Fund $ 99,431 $-- $ (8,559,573) $ (56,149,864) Moderate Income Fund 202,092 -- (19,970,659) (130,814,556) Enhanced Income Fund 132,490 -- (13,065,266) (70,146,090)
RECENT ACCOUNTING PRONOUNCEMENTS Each Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At Jan. 31, 2009, the Funds did not own nor were they a party to any credit derivative contracts within the scope of these amendments. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of Jan. 31, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared daily 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. 2. EXPENSES AND SALES CHARGES MANAGEMENT FEES AND UNDERLYING FUND FEES Each Fund does 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, a 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Each Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 57 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Class B and $21.00 for Class C for this service. Each Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on 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 agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, 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, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately as follows:
FUND CLASS B CLASS C - ------------------------------------------------------------------------------------------ Basic Income Fund $1,885,000 $56,000 Moderate Income Fund 2,675,000 74,000 Enhanced Income Fund 1,327,000 50,000
These amounts are based on the most recent information available as of Jan. 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 received by the Distributor for distributing the Funds' shares for the year ended Jan. 31, 2009 were as follows:
FUND CLASS A CLASS B CLASS C - -------------------------------------------------------------------------------------------- Basic Income Fund $398,562 $62,911 $4,743 Moderate Income Fund 577,806 67,820 9,311 Enhanced Income Fund 248,679 42,211 6,087
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Jan. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of underlying funds) were as follows:
FUND CLASS R4 - --------------------------------------------------------------------------------------- Basic Income Fund 0.08% Moderate Income Fund 0.08 Enhanced Income Fund 0.08
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows:
FUND CLASS R4 - --------------------------------------------------------------------------------------- Basic Income Fund $ 7 Moderate Income Fund 5 Enhanced Income Fund 42
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows:
FUND CLASS R4 - ------------------------------------------------------------------------------------------ Basic Income Fund $ 39 Moderate Income Fund 48 Enhanced Income Fund 302
- -------------------------------------------------------------------------------- 58 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- Under an agreement which was effective until Jan. 31, 2009, 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 Fund's average daily net assets:
FUND CLASS A CLASS B CLASS C CLASS R4 - ------------------------------------------------------------------------------------------------- Basic Income Fund 0.45% 1.21% 1.20% 0.33% Moderate Income Fund 0.45 1.21 1.20 0.33 Enhanced Income Fund 0.45 1.21 1.20 0.33
Effective Feb. 1, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Jan. 31, 2010, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of underlying funds) will not exceed the following percentage of each Fund's 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
EARNINGS CREDITS AND CUSTODIAN FEES For the year ended Jan. 31, 2009, each Fund's custodian fees were reduced as a result of earnings credits from overnight cash balances were as follows:
FUND AMOUNT - ------------------------------------------------------------------------------------- Basic Income Fund $ 25 Moderate Income Fund 36 Enhanced Income Fund 123
Effective Dec. 15, 2008, each Fund pays custodian fees to JPMorgan Chase Bank, N.A. Prior to Dec. 15, 2008, each Fund had a custodian agreement with Ameriprise Trust Company, a subsidiary of Ameriprise Financial. For the period from Feb. 1, 2008 through Dec. 15, 2008, the Funds did not pay any custodian fees directly to Ameriprise Trust Company. 3. SECURITIES TRANSACTIONS For the year ended Jan. 31, 2009, 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 $112,220,761 $141,590,750 Moderate Income Fund 214,872,430 325,892,892 Enhanced Income Fund 96,771,540 173,344,665
Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 59 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for each Fund for the periods indicated are as follows:
YEAR ENDED JAN. 31, 2009 ISSUED FOR REINVESTED NET FUND SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ------------------------------------------------------------------------------------------------------------ Basic Income Fund Class A 7,053,741 915,258 (10,659,474) (2,690,475) Class B 1,357,143 113,245 (2,185,706) (715,318) Class C 422,511 31,432 (466,352) (12,409) Class R4 -- 23 (2,303) (2,280) Moderate Income Fund Class A 8,941,986 1,943,041 (21,146,428) (10,261,401) Class B 1,136,770 202,385 (3,304,081) (1,964,926) Class C 429,730 56,551 (782,173) (295,892) Class R4 -- 51 (265) (214) Enhanced Income Fund Class A 3,271,562 1,070,351 (11,495,907) (7,153,994) Class B 476,849 107,107 (1,731,772) (1,147,816) Class C 210,178 41,535 (500,101) (248,388) Class R4 12,580 688 (5,091) 8,177 - ------------------------------------------------------------------------------------------------------------ PERIOD ENDED JAN. 31, 2008* ISSUED FOR REINVESTED NET FUND SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ------------------------------------------------------------------------------------------------------------ Basic Income Fund Class A 10,226,133 874,238 (4,038,942) 7,061,429 Class B 1,986,573 122,432 (1,097,463) 1,011,542 Class C 484,448 30,187 (125,781) 388,854 Class R4 -- 223 (6,811) (6,588) Moderate Income Fund Class A 17,814,698 2,007,517 (8,138,039) 11,684,176 Class B 2,598,121 244,323 (1,939,085) 903,359 Class C 867,576 60,067 (243,506) 684,137 Class R4 244 49 -- 293 Enhanced Income Fund Class A 9,298,829 1,248,704 (5,842,332) 4,705,201 Class B 1,143,952 141,694 (1,137,244) 148,402 Class C 441,085 45,256 (155,560) (330,781) Class R4 3,802 258 (2,091) 1,969 - ------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2007 ISSUED FOR REINVESTED NET FUND SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ------------------------------------------------------------------------------------------------------------ Basic Income Fund Class A 17,675,545 407,731 (1,704,156) 16,379,120 Class B 3,051,926 59,960 (489,695) 2,622,191 Class C 713,917 10,820 (44,411) 680,326 Class R4 17,057 587 (12,271) 5,373 Moderate Income Fund Class A 38,530,389 986,430 (3,487,818) 36,029,001 Class B 5,990,163 127,231 (853,957) 5,263,437 Class C 1,263,283 21,737 (80,210) 1,204,810 Class R4 5,880 25 (8,066) (2,161) Enhanced Income Fund Class A 20,861,872 628,525 (2,424,619) 19,065,778 Class B 3,062,356 82,864 (604,908) 2,540,312 Class C 809,755 19,528 (69,308) 759,975 Class R4 173 113 -- 286 - ------------------------------------------------------------------------------------------------------------
* For the period from June 1, 2007 to Jan. 31, 2008. 5. 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, 2009, 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 Large Cap Value Fund 31.21% RiverSource U.S. Government Mortgage Fund 24.41 RiverSource Disciplined Small Cap Value Fund 23.59
Moderate Income Fund
UNDERLYING FUND PERCENT OF SHARES HELD - ---------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 40.51% RiverSource U.S. Government Mortgage Fund 32.45 RiverSource Disciplined Large Cap Value Fund 18.68 RiverSource Floating Rate Fund 17.87 RiverSource Real Estate Fund 15.04 RiverSource Emerging Markets Bond Fund 12.21
Enhanced Income Fund
UNDERLYING FUND PERCENT OF SHARES HELD - ---------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund 17.50% RiverSource Floating Rate Fund 12.93 RiverSource Emerging Markets Bond Fund 11.21 RiverSource U.S. Government Mortgage Fund 10.96 RiverSource Real Estate Fund 7.10
- -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 61 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS For federal income tax purposes, capital loss carry-overs at Jan. 31, 2009 that will expire in 2017 were as follows:
FUND CARRY-OVER - --------------------------------------------------------------------------------------- Basic Income Fund $2,942,103 Moderate Income Fund 7,376,558 Enhanced Income Fund 5,920,892
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 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. At Jan. 31, 2009, post- October losses that are treated as occurring on Feb. 1, 2009 were as follows:
FUND POST-OCTOBER LOSS - ------------------------------------------------------------------------------------------- Basic Income Fund $ 5,617,470 Moderate Income Fund 12,594,101 Enhanced Income Fund 7,144,374
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. 7. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and the distributor of the - -------------------------------------------------------------------------------- 62 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- Seligman Funds, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. 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. 8. CHANGE OF FUNDS' FISCAL YEAR Effective Jan. 31, 2008, each Fund changed its fiscal year end from May 31 to Jan. 31. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 63 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, 2009, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year ended January 31, 2009 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, 2009, 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, 2009, and the results of their operations for the year then ended and changes in their net assets and the financial highlights for the year ended January 31, 2009 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, 2009 - -------------------------------------------------------------------------------- 64 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 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, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 15.15% Dividends Received Deduction for corporations................ 13.39% U.S. Government Obligations.................................. 17.97%
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. RiverSource Income Builder Moderate Income Fund Fiscal year ended Jan. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 16.58% Dividends Received Deduction for corporations................ 14.02% U.S. Government Obligations.................................. 14.64%
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. RiverSource Income Builder Enhanced Income Fund Fiscal year ended Jan. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 14.00% Dividends Received Deduction for corporations................ 10.32% U.S. Government Obligations.................................. 10.32%
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 65 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource complex of funds that each Board member oversees consists of 163 funds, which includes 104 RiverSource funds and 59 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 54 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None 901 S. Marquette Ave. 1999 Minnesota Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 54 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley College Age 58 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 73 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 64 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 56 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 66 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. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 64 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 66 RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. and President, Financial Center Vice President since Chairman of the Board and Chief Investment Officer, Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director, Age 48 President and Chief Executive Officer, Ameriprise Certificate Company and Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Chief Executive Officer and President, RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. 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 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 43 since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 44 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company 5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice Center Minneapolis, MN President -- Operations and Compliance, RiverSource 55474 Investments, LLC, 2004-2006; Director of Product Age 43 Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 Minneapolis, MN 55474 Age 53 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 49 since 2006; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - -------------------------------------------------------------------------------------------------------- Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer, 172 Ameriprise Financial Officer since 2006* RiverSource Investments, LLC since 2006; Center Director -- Mutual Funds, Voyageur Asset Management, Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset Age 48 Management, 2000-2003 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE INCOME BUILDER SERIES -- 2009 ANNUAL REPORT 67 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance U.S. Asset Management Chief Compliance Officer, 100 Park Avenue Officer since 2009* RiverSource Investments, LLC since 2006; New York, NY 10010 Director -- Mutual Funds, Voyageur Asset Management, Age 56 2003-2006; Director of Finance, Voyageur Asset Management, 2000-2003 - -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Chief Compliance Officer, RiverSource Investments, LLC 2934 Ameriprise Financial Prevention Officer (J. & W. Seligman & Co. Incorporated prior to Nov. Center since 2004 2008), for each of the investment companies of the Minneapolis, MN 55474 Seligman group of funds since 2004 and all RiverSource Age 44 funds since 2009; Money Laundering Prevention Officer and Identity Theft Prevention Officer, RiverSource Investments, LLC since 2008; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the investment companies of the Seligman group of funds, 2004-2008 - -------------------------------------------------------------------------------------------------------- * Effective February 2009, Ms. Lammers no longer serves as the Chief Compliance Officer for the funds and Ms. Hoagland now serves in that capacity.
PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 68 RIVERSOURCE INCOME BUILDER SERIES -- 2009 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 Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (C) 2009 RiverSource Investments, LLC. S-6394 F (4/09) 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 Fund - Related Fees (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: 2009 - $49,755 2008 - $46,950 (b) Audit - Related Fees. The fees for the year ended Jan. 31, to Ernst & Young LLP for additional professional services rendered in connection with the registrant's security count pursuant to Rule 17f-2 and the semiannual financial statement review for RiverSource Income Series, Inc. were as follows: 2009 - $2,625 2008 - $2,385 (c) Tax Fees. The fees for the year ended Jan. 31, to Ernst & Young LLP for tax compliance related services for RiverSource Income Series, Inc. were as follows: 2009 - $8,586 2008 - $8,100 (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: 2009 - $0 2008 - $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 2009 and 2008 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: 2009 - $618,531 2008 - $723,935 (h) 100% of the services performed in item (g) above during 2009 and 2008 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. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) 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 1, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date April 1, 2009 By /s/ Jeffrey P. Fox ----------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date April 1, 2009 EX-99.CODE ETH 2 c49565exv99wcodeeth.txt CODE OF ETHICS 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; (As Proposed to be 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) Larry Vogel Treasurer (Seligman Brand Registered Investment Companies, Including Separate Series Thereof) EX-99.CERT 3 c49565exv99wcert.txt CERTIFICATION 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 24, 2009 /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 24, 2009 /s/ Jeffrey P. Fox - ------------------------------------------------ Name: Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906 CERT 4 c49565exv99w906cert.txt 906 CERTIFICATION 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 24, 2009 /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date: March 24, 2009 /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-----