SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.[ ]
[ ] Post-Effective Amendment No. [ ]
(Check Appropriate Box or Boxes)
AXP Fixed Income Series, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
(612) 330-9283
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(Area Code and Telephone Number)
901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
Leslie L. Ogg - 901 Marquette Avenue South,
- -------------------------------------------------------------------------------
(Name and Address of Agent For Service)
Suite 2810, Minneapolis MN 55402-3268
- -------------------------------------------------------------------------------
(Number and Street) (City) (State) (Zip Code)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement.
Title of Securities Being Registered: Common Stock
No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine. It is proposed that this filing will become effective on Nov. 14,
2005.
RIVERSOURCE FUNDS
(formerly known as American Express Funds)
Principal Executive Office
901 Marquette Avenue South, Suite 2810
Minneapolis, MN 55402-3268
NOTICE OF A REGULAR MEETING OF SHAREHOLDERS
TO BE HELD FEB. 15, 2006
AXP(R) INCOME SERIES, INC.
- RiverSource Selective Fund
(formerly AXP Selective Fund)
RiverSource Selective Fund ("Selective" or the "Selling Fund") will hold a
regular shareholders' meeting at 10:00 a.m. on Feb. 15, 2006, at the IDS Center,
80 S. Eighth Street, Minneapolis, MN, on the 50th floor. At the meeting,
shareholders will consider the following proposals:
- - To approve an Agreement and Plan of Reorganization (the "Agreement") between
the Selling Fund and RiverSource Diversified Bond Fund ("Diversified Bond" or
the "Buying Fund") (formerly AXP Diversified Bond Fund). Under this
Agreement, the Selling Fund will transfer all of its assets attributable to
Classes A, B, C, I and Y to the Buying Fund in exchange for corresponding
Class A, B, C, I and Y shares of the Buying Fund. These shares will be
distributed proportionately to you and the other shareholders of the Selling
Fund. The Buying Fund will assume the Selling Fund's liabilities.
- - To elect Board members.
- - To amend the Articles of Incorporation.
- - To approve an Investment Management Services Agreement with RiverSource
Investments, LLC.
- - Other business as may properly come before the meeting, or any adjournment of
the meeting.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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Please take some time to read the proxy statement. It discusses the proposals in
more detail. If you were a shareholder on Dec. 16, 2005, you may vote at the
meeting or any adjournment of the meeting. We hope you can attend the meeting.
For those of you who cannot attend, please vote by mail, telephone or internet.
Just follow the instructions on the enclosed proxy card. If you have questions,
please call your advisor or call client services toll free at (877) 256-6085. It
is important that you vote. The Board of Directors (the "Board") recommends that
you vote FOR the proposals. This proxy statement was first mailed to
shareholders on or about Dec. 16, 2005.
By order of the Board of Directors
Leslie L. Ogg, Secretary
Dec. 16, 2005
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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COMBINED PROXY STATEMENT/PROSPECTUS
DATED DEC. 16, 2005
This document is a proxy statement for Selective and a prospectus for
Diversified Bond (each individually a "Fund" and collectively the "Funds"). It
contains the information you should know before voting on the proposals. Please
read it carefully and keep it for future reference. The address of each of the
Funds is 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The
phone number for each of the Funds is (612) 330-9283.
The following information describes the proposed reorganization of the Selling
Fund into the Buying Fund (the "Reorganization").
HOW THE REORGANIZATION WILL WORK
- - The Selling Fund will transfer all of its assets to the Buying Fund. The
Buying Fund will assume the Selling Fund's liabilities.
- - The Buying Fund will issue shares of Classes A, B, C, I and Y to the Selling
Fund in an amount equal to the value of the assets of Classes A, B, C, I and
Y that it receives from the Selling Fund, less the liabilities it assumes.
These shares will be distributed to the Selling Fund's shareholders in
proportion to their holdings in the Selling Fund. Selling Fund shareholders
will not pay any sales charge in connection with this distribution of shares.
FUND INVESTMENT OBJECTIVES
The investment objective for each of the Funds is as follows:
SELLING FUND: The Fund seeks to provide shareholders with current income and
preservation of capital.
BUYING FUND: The Fund seeks to provide shareholders with a high level of
current income while conserving the value of the investment
for the longest period of time.
Please note that the Fund is not a bank deposit, is not federally insured, is
not endorsed by any bank or government agency and is not guaranteed to achieve
its investment objective.
As with all mutual funds, the Securities and Exchange Commission (the "SEC") has
not approved or disapproved these securities or passed on the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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WHERE TO GET MORE INFORMATION
<Table>
THE BUYING FUND
Most recent prospectus, dated Oct. 28, 2005. Accompanying, and incorporated by reference into, this
proxy statement/prospectus.
Most recent annual report, for the period ended Aug. Incorporated by reference into this proxy
31, 2005. statement/prospectus. For a copy at no charge, call
toll-free (800) 862-7919 or write to the address at the
bottom of this table.
THE SELLING FUND
Most recent prospectus, dated July 29, 2005, amended Incorporated by reference into this proxy
as of Oct. 3, 2005. statement/prospectus. For a copy at no charge, call
toll-free (800) 862-7919 or write to the address at the
bottom of this table.
Most recent annual report, for the period ended May Incorporated by reference into this proxy
31, 2005. statement/prospectus. For a copy at no charge, call
toll-free (800) 862-7919 or write to the address at the
bottom of this table.
THIS PROXY STATEMENT/PROSPECTUS
Statement of Additional Information dated the same Incorporated by reference into this proxy
date as this proxy statement/prospectus. This statement/prospectus. For a copy at no charge, call
document contains information about both the Selling toll-free (877) 256-6085 or write to the address at the
Fund and the Buying Fund. bottom of this table.
To ask questions about this proxy Call toll-free (877) 256-6085 or write to: RiverSource
statement/prospectus. Service Corporation, 70100 Ameriprise Financial Center,
Minneapolis, MN 55474.
</Table>
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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Each of the Funds is subject to the information requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 (the "1940 Act") and
files reports, proxy materials and other information with the SEC. These
reports, proxy materials and other information can be inspected and copied at
the Public Reference Room maintained by the SEC. Copies may be obtained, after
paying a duplicating fee, by electronic request at
http://www.publicinfo@sec.gov, or by writing to the Public Reference Section of
the SEC, Washington, D.C. 20549-0102. In addition, copies of these documents may
be viewed on-line or downloaded from the SEC's Web site at http://www.sec.gov.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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TABLE OF CONTENTS
PAGE
SECTION A -- FUND PROPOSALS
PROPOSAL 1. APPROVE OR REJECT THE AGREEMENT AND PLAN OF
REORGANIZATION 7
SUMMARY 7
How the Reorganization Will Work 7
Comparison of the Selling Fund and the Buying Fund 7
Risk Factors 12
Tax Consequences 13
FEES AND EXPENSES 14
THE REORGANIZATION 18
Terms of the Reorganization 18
Conditions to Closing the Reorganization 18
Termination of the Agreement 19
Tax Status of the Reorganization 19
Reasons for the Proposed Reorganization and Board Deliberations 21
Boards' Determinations 22
Recommendation and Vote Required 23
PROPOSAL 2. ELECT BOARD MEMBERS 23
PROPOSAL 3. APPROVE OR REJECT AN AMENDMENT TO THE ARTICLES
OF INCORPORATION 30
PROPOSAL 4. APPROVE OR REJECT AN INVESTMENT MANAGEMENT SERVICES
AGREEMENT WITH RIVERSOURCE INVESTMENTS, LLC 32
SECTION B -- PROXY VOTING AND SHAREHOLDER MEETING INFORMATION 38
SECTION C -- CAPITALIZATION, OWNERSHIP OF FUND SHARES AND
OTHER FUND INFORMATION 41
EXHIBITS
A. Form of Agreement and Plan of Reorganization A.1
B. Matters Subject to Approval at Regular Meeting of Buying Fund B.1
C. Minnesota Business Corporation Act Sections 302A.471
and 302A.473 C.1
D. Most Recent Buying Fund Prospectus D.1
E. Board Effectiveness Committee Charter E.1
F. Joint Audit Committee Charter F.1
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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SECTION A -- FUND PROPOSALS
PROPOSAL 1. APPROVE OR REJECT THE AGREEMENT AND PLAN OF REORGANIZATION
SUMMARY
This proxy statement/prospectus is being used by the Board of the Selling Fund
to solicit proxies to vote at a meeting of shareholders. Shareholders will
consider a proposal to approve the Agreement providing for the Reorganization of
the Selling Fund into the Buying Fund. A form of the Agreement is included in
Exhibit A.
The following is a summary. More complete information appears later in this
proxy statement/prospectus. You should read the entire proxy
statement/prospectus and the exhibits because they contain details that are not
in the summary.
HOW THE REORGANIZATION WILL WORK
- - The Selling Fund will transfer all of its assets to the Buying Fund. The
Buying Fund will assume the Selling Fund's stated liabilities.
- - The Buying Fund will issue shares of Classes A, B, C, I and Y to the Selling
Fund in an amount equal to the value of the assets of Classes A, B, C, I and
Y that it receives from the Selling Fund, less the liabilities it assumes.
These shares will be distributed to the Selling Fund's shareholders in
proportion to their holdings in the Selling Fund.
- - Neither the Selling Fund nor the shareholders of the Selling Fund will pay
any sales charge in connection with the Reorganization.
- - After the Reorganization is completed, current Selling Fund shareholders will
be shareholders of the Buying Fund. The Selling Fund will be terminated.
COMPARISON OF THE SELLING FUND AND THE BUYING FUND
Both the Selling Fund and the Buying Fund:
- - Are structured as a series of capital stock of an open-end management
investment company organized as a Minnesota corporation.
- - Have RiverSource Investments, LLC (the "investment manager" or "RiverSource
Investments") as an investment adviser.
- - Have the same policies for buying and selling shares and the same exchange
rights.
- - Have the same distribution policies.
- - Have different classes of shares: Classes A, B, C, I and Y.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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COMPARISON OF INVESTMENT OBJECTIVES
The investment objectives for the Funds are as follows:
SELLING FUND: The Fund seeks to provide shareholders with current income and
preservation of capital.
BUYING FUND: The Fund seeks to provide shareholders with a high level of
current income while conserving the value of the investment
for the longest period of time.
COMPARISON OF INVESTMENT STRATEGIES
SELECTIVE:
The Fund's assets are primarily invested in debt obligations. Although the Fund
is not an index fund, under normal market conditions, it will invest primarily
in securities like those included in the Lehman Brothers Aggregate Bond Index
(the "Index"), which are investment grade and denominated in U.S. dollars. The
Index includes securities issued by the U.S. government, corporate bonds, and
mortgage- and asset-backed securities. The Fund will not invest in securities
rated below investment grade, although it may hold securities that have been
downgraded.
In pursuit of the Fund's objective, the investment manager chooses investments
by:
- - Reviewing the stage and direction of economic business cycles. Depending on
the stage of the business cycle, the investment manager will choose debt
obligations from the following market sectors: government securities,
corporate securities, and asset-backed securities.
- - Reviewing credit characteristics and interest rate outlook.
- - Targeting an average portfolio duration within one year of the duration of
the Index which, as of Aug. 31, 2005, was 4.26 years. Duration measures the
sensitivity of bond prices to changes in interest rates. The longer the
duration of a bond, the longer it will take to repay the principal and
interest obligations and the more sensitive it will be to changes in interest
rates. For example, a five year duration means a bond is expected to decrease
in value by 5% if interest rates rise 1% and increase in value by 5% if
interest rates fall 1%.
- - Identifying and buying securities that:
- are medium and high quality (investment grade),
- have maturities that complement the investment manager's expectations for
long-term and short-term interest rates, and
- are expected to outperform other market sectors. In this analysis, the
investment manager will take risk factors into account (for example,
whether money has been set aside to cover the cost of principal and
interest payments).
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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In evaluating whether to sell a security, the investment manager considers,
among other factors, whether:
- - The interest rate or economic outlook changes.
- - A sector or industry is experiencing change.
- - A security's rating is changed or is vulnerable to a change.
- - The security is overvalued relative to alternative investments.
- - The investment manager identifies a more attractive opportunity.
DIVERSIFIED BOND:
Under normal market conditions, the Fund invests at least 80% of its net assets
in bonds and other debt securities. At least 50% of the Fund's net assets will
be invested in securities like those included in the Index, which are investment
grade and denominated in U.S. dollars. The Index includes securities issued by
the U.S. government, corporate bonds, and mortgage- and asset-backed securities.
Although the Fund emphasizes high- and medium-quality debt securities, it will
assume some credit risk to achieve higher yield and/or capital appreciation by
buying lower-quality (junk) bonds. The Fund may invest up to 15% in foreign
investments, which may include investments in emerging markets. The Fund will
provide shareholders with at least 60 days' notice of any change in the 80%
policy.
The selection of debt obligations is the primary decision in building the
investment portfolio. In pursuit of the Fund's objective, the investment manager
chooses investments by:
- - Evaluating the portfolio's total exposure to sectors, industries and
securities relative to the Index.
- - Analyzing factors such as credit quality, interest rate outlook and price to
select the most attractive securities within each sector.
- - Investing in lower-quality (junk) bonds and foreign investments as attractive
opportunities arise.
- - Targeting an average portfolio duration within one year of the duration of
the Index which, as of Aug. 31, 2005, was 4.26 years. Duration measures the
sensitivity of bond prices to changes in interest rates. The longer the
duration of a bond, the longer it will take to repay the principal and
interest obligations and the more sensitive it will be to changes in interest
rates. For example, a five-year duration means a bond is expected to decrease
in value by 5% if interest rates rise 1% and increase in value by 5% if
interest rates fall 1%.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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In evaluating whether to sell a security, the investment manager considers,
among other factors:
- - Identification of more attractive investments based on relative value.
- - The portfolio's total exposure to sectors, industries and securities relative
to the Index.
- - Whether a security's rating has changed or is vulnerable to a change.
- - Whether a sector or industry is experiencing change.
- - Changes in the interest rate or economic outlook.
BOTH FUNDS:
- - UNUSUAL MARKET CONDITIONS. During unusual market conditions, each of the
Funds may temporarily invest more of its assets in money market securities
than during normal market conditions. Although investing in these securities
would serve primarily to avoid losses, this type of investing also could
prevent the Fund from achieving its investment objective. During these times,
the portfolio managers may make frequent securities trades that could result
in increased fees, expenses and taxes, and decreased performance.
- - OTHER INVESTMENT STRATEGIES. In addition to the principal investment
strategies previously described, each Fund may invest in other securities and
may use other investment strategies that are not principal investment
strategies. Additionally, each Fund may use derivatives (financial
instruments where the value depends upon, or is derived from, the value of
something else) such as futures, options and forward contracts, to produce
incremental earnings, to hedge existing positions or to increase flexibility.
Just as with securities in which the Fund invests directly, derivatives are
subject to a number of risks, including market, liquidity, interest rate and
credit risk. In addition, a relatively small price movement in the underlying
security, currency or index may result in a substantial gain or loss for the
Fund using derivatives. Even though the Fund's policies permit the use of
derivatives in this manner, the portfolio managers are not required to use
derivatives.
COMPARISON OF FUNDAMENTAL POLICIES
The Buying Fund will vote on changes to the fundamental policies for the Buying
Fund at a meeting scheduled to be held on the same day as the Selling Fund
shareholder meeting. The proposed changes are shown in Exhibit B. If all of the
proposed changes to the Buying Fund's fundamental policies are approved, the
differences in investment policies will be as follows:
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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Both Funds have substantially similar fundamental investment policies. The
Buying Fund has a policy permitting borrowing money for temporary purposes in an
amount not exceeding one-third of the market value of its total assets. The
Selling Fund has a similar policy that applies to money or property and permits
borrowing only for extraordinary or emergency purposes. The Selling Fund has a
policy prohibiting the issuing of senior securities, except as permitted under
the 1940 Act. Even though this is not stated as a fundamental policy of the
Buying Fund, the Fund is nonetheless subject to that restriction under the
provisions of the 1940 Act.
The Buying Fund has a policy permitting the Fund to lend fund securities and
participate in an interfund lending program up to 33-1/3% of the value of the
fund's total assets. This policy does not prohibit the Buying Fund from
purchasing money market, loan participation or other debt securities, or from
entering into repurchase agreements. The Selling Fund has a policy permitting
the Selling Fund to lend fund securities up to 30% of its net assets. In
addition, the Selling Fund has a policy that it may make cash loans up to 5% of
its total assets. The Selling Fund has a policy prohibiting loans to the
investment manager, its board members and officers and to the board members and
officers of the Selling Fund.
The Buying Fund has a policy that it will not purchase more than 10% of the
outstanding voting securities of an issuer, except up to 25% of its total assets
may be invested without regard to this 10% limitation. The Selling Fund has a
similar policy, but does not have the 25% exception. The Buying Fund has a
policy that it will not invest more than 5% of its total assets in securities of
any one company, government, or political subdivision thereof, except the
limitation will not apply to investments in securities issued by the U.S.
government, its agencies, or instrumentalities, or other investment companies,
and except that up to 25% of its total assets may be invested without regard to
this 5% limitation. The Selling Fund has a similar policy, but does not include
other investment companies in the exception.
If shareholders of the Selling Fund approve the Reorganization, they will be
subject to the fundamental investment policies of the Buying Fund. The
investment manager does not believe that the differences between the fundamental
investment policies will result in any material difference in the way the Funds
are managed.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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RISK FACTORS
The principal risks associated with an investment in the Fund are shown below.
<Table>
<Caption>
RISK SELECTIVE DIVERSIFIED BOND
Active Management Risk x x
Credit Risk x x
Interest Rate Risk x x
Liquidity Risk x
Market Risk x x
Prepayment and Extension Risk x x
</Table>
- - ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance
therefore will reflect in part the ability of the portfolio managers to make
investment decisions that are suited to achieving the Fund's investment
objective. Due to its active management, the Fund could underperform other
mutual funds with similar investment objectives.
- - CREDIT RISK -- SELLING FUND. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable or
unwilling to honor a financial obligation, such as payments due on a bond or
a note. If the Fund purchases unrated securities, or if the rating of a
security is reduced after purchase, the Fund will depend on the investment
manager's analysis of credit risk more heavily than usual.
- - CREDIT RISK -- BUYING FUND. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable or
unwilling to honor a financial obligation, such as payments due on a bond or
a note. If the Fund purchases unrated securities, or if the rating of a
security is reduced after purchase, the Fund will depend on the investment
manager's analysis of credit risk more heavily than usual. Non-investment
grade securities, commonly called "high-yield" or "junk" bonds, may react
more to perceived changes in the ability of the issuing company to pay
interest and principal when due than to changes in interest rates.
Non-investment grade securities have greater price fluctuations and are more
likely to experience a default than investment grade bonds.
- - INTEREST RATE RISK. The risk of losses attributable to changes in interest
rates. Interest rate risk is generally associated with bond prices: when
interest rates rise, bond prices fall. In general, the longer the maturity or
duration of a bond, the greater its sensitivity to changes in interest rates.
- - LIQUIDITY RISK. The risk associated from a lack of marketability of
securities which may make it difficult or impossible to sell at desirable
prices in order to minimize loss. The Fund may have to lower the selling
price, sell other investments, or forego another, more appealing investment
opportunity.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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- - MARKET RISK. The market value of securities may fall or fail to rise. Market
risk may affect a single issuer, sector of the economy, industry, or the
market as a whole. The market value of securities may fluctuate, sometimes
rapidly and unpredictably.
- - PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might
be called, or otherwise converted, prepaid, or redeemed, before maturity.
This risk is primarily associated with asset-backed securities, including
mortgage backed securities. If a security is converted, prepaid, or redeemed,
before maturity, particularly during a time of declining interest rates, the
investment manager may not be able to reinvest in securities providing as
high a level of income, resulting in a reduced yield to the Fund. Conversely,
as interest rates rise, the likelihood of prepayment decreases. The
investment manager may be unable to capitalize on securities with higher
interest rates because the Fund's investments are locked in at a lower rate
for a longer period of time.
PERFORMANCE
Performance information for Class A shares of the Funds is shown below.
TABLE A-1
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPT. 30, 2005(a)
<Table>
<Caption>
FUND 1 YEAR 5 YEARS 10 YEARS
Selective -2.33% 3.37% 4.55%
Diversified Bond -2.00% 4.37% 5.10%
</Table>
(a) Returns include the 4.75% Class A sales charge.
TAX CONSEQUENCES
The Reorganization is expected to be tax-free for federal income tax purposes
and will not take place unless the Selling Fund and the Buying Fund receive a
satisfactory opinion of tax counsel, substantially to that effect. Accordingly,
no gain or loss is expected to be recognized by the Selling Fund or its
shareholders as a direct result of the Reorganization. However, the
Reorganization will end the tax year of the Selling Fund, and so it may
accelerate distributions from the Selling Fund for its short tax year ending on
the date of the Reorganization to shareholders. At any time prior to the
consummation of the Reorganization a shareholder may redeem shares. This would
likely result in recognition of gain or loss to the shareholder for federal
income tax purposes.
The tax basis and holding period of the shareholders' Selling Fund shares is
expected to carry over to the shareholders' new shares in the Buying Fund.
For more information about the federal income tax consequences of the
Reorganization, see the section entitled "Tax Status of the Reorganization."
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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FEES AND EXPENSES
The following table describes the fees and expenses, adjusted to reflect current
fees, that you pay if you buy and hold shares of the Selling Fund or shares of
the Buying Fund. The table also shows pro forma expenses of the Buying Fund
assuming the proposed Reorganization had been effective during the most recent
fiscal year, adjusted to reflect current fees.
TABLE A-2
ACTUAL AND PRO FORMA FUND EXPENSES FOR THE MOST RECENT FISCAL YEAR
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I CLASS Y
Maximum sales charge (load) imposed on
purchases(a) as a percentage of offering price 4.75% none none none none
Maximum deferred sales charge (load)
imposed on sales (as a percentage of
offering price at time of purchase) none(b) 5% 1% none none
</Table>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS:
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I CLASS Y
SELECTIVE FUND(c)
Management fees(d) 0.52% 0.52% 0.52% 0.52% 0.52%
Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% 0.00%
Other expenses(e) 0.27% 0.28% 0.29% 0.13% 0.36%
Total 1.04% 1.80% 1.81% 0.65% 0.88%
Fee waiver/expense reimbursement 0.15% 0.16% 0.17% 0.06% 0.16%
Net expenses(f) 0.89% 1.64% 1.64% 0.59% 0.72%
DIVERSIFIED BOND
Management fees(g) 0.46% 0.46% 0.46% 0.46% 0.46%
Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% 0.00%
Other expenses(e) 0.29% 0.30% 0.31% 0.12% 0.37%
Total 1.00% 1.76% 1.77% 0.58% 0.83%
Fee waiver/expense reimbursement 0.11% 0.11% 0.11% --% 0.10%
Net expenses(f) 0.89% 1.65% 1.66% 0.58% 0.73%
</Table>
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
(CONTINUED)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS:
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I CLASS Y
DIVERSIFIED BOND - PRO FORMA WITH SELECTIVE
Management fees(g) 0.45% 0.45% 0.45% 0.45% 0.45%
Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% 0.00%
Other expenses(e) 0.27% 0.29% 0.29% 0.10% 0.36%
Total 0.97% 1.74% 1.74% 0.55% 0.81%
Fee waiver/expense reimbursement 0.08% 0.09% 0.08% 0.00% 0.08%
Net expenses(h) 0.89% 1.65% 1.66% 0.55% 0.73%
</Table>
NOTES TO ANNUAL FUND OPERATING EXPENSES.
(a) This charge may be reduced depending on the value of your total investments
in RiverSource funds.
(b) For Class A purchases over $1,000,000 on which no sales charge is assessed,
a 1% sales charge may apply if you sell your shares within one year after
purchase.
(c) Selective is a feeder fund that is part of a master/feeder structure. For
Selective, both in this table and the following example, fund operating
expenses, include expenses charged by both the Fund and its master
portfolio.
(d) The management fee ratio is the actual ratio as of May 31, 2005. If this
merger is not approved, there is a separate proposal to modify the
management fee schedule. The estimated management fee ratio under this
proposed schedule based on average net assets as of May 31, 2005 is .48%.
(e) Other expenses include an administrative services fee, a transfer agency
fee, a custody fee and other nonadvisory expenses and, for Class Y shares, a
shareholder service fee. The other expense ratios shown in this chart have
been adjusted to reflect the new administrative services fee that went into
effect in October 2005.
(f) For Selective, the investment manager and its affiliates have contractually
agreed to waive certain fees and to absorb certain expenses until May 31,
2006, 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
expenses will not exceed 0.89% for Class A, 1.64% for Class B, 1.64% for
Class C, 0.59% for Class I and 0.72% for Class Y. For Diversified Bond, the
investment manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until Aug. 31, 2006, unless
sooner terminated at the discretion of the Fund's Board. Any amounts waived
will not be reimbursed by the Fund. Under this agreement, total expenses
will not exceed 0.89% for Class A, 1.65% for Class B, 1.66% for Class C,
0.59% for Class I and 0.73% for Class Y.
(g) The management fee ratio shown reflects what the ratio would be under the
proposed management fee schedule based on average net assets as of Aug. 31,
2005.
(h) If shareholders approve the Reorganization, the investment manager and its
affiliates have contractually agreed to waive certain fees and to absorb
certain expenses until Aug. 31, 2006, unless sooner terminated at the
discretion of the Fund's Board. Under this agreement, total expenses will
not exceed 0.89% for Class A, 1.65% for Class B, 1.66% for Class C, 0.59%
for Class I and 0.73% for Class Y.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
15
<Page>
EXAMPLE: These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
These examples assume that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods
indicated under the current arrangements and if the proposed Reorganization had
been in effect. These examples also assume that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<Table>
<Caption>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
SELECTIVE(d)
Class A(a) $562 $776 $1,009 $1,677
Class B $667(b) $951(b) $1,161(b) $1,907(c)
Class C $267(b) $553 $ 965 $2,118
Class I $ 60 $202 $ 357 $ 808
Class Y $ 74 $265 $ 473 $1,074
DIVERSIFIED BOND(d)
Class A(a) $562 $768 $ 992 $1,636
Class B $668(b) $944(b) $1,145(b) $1,868(c)
Class C $269(b) $547 $ 950 $2,080
Class I $ 59 $186 $ 324 $ 729
Class Y $ 75 $255 $ 451 $1,020
DIVERSIFIED BOND - PRO FORMA WITH SELECTIVE(d)
Class A(a) $562 $762 $ 979 $1,606
Class B $668(b) $940(b) $1,136(b) $1,845(c)
Class C $269(b) $541 $ 937 $2,050
Class I $ 56 $176 $ 308 $ 692
Class Y $ 75 $251 $ 443 $ 998
</Table>
(a) Includes a 4.75% sales charge.
(b) Includes the applicable contingent deferred sales charge.
(c) Based on conversion of Class B shares to Class A shares in the ninth year of
ownership.
(d) Includes new expense waivers in year 1 only.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
16
<Page>
You would pay the following expenses if you did not redeem your shares.
<Table>
<Caption>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
SELECTIVE(c)
Class A(a) $562 $776 $1,009 $1,677
Class B $167 $551 $ 961 $1,907(b)
Class C $167 $553 $ 965 $2,118
Class I $ 60 $202 $ 357 $ 808
Class Y $ 74 $265 $ 473 $1,074
DIVERSIFIED BOND(c)
Class A(a) $562 $768 $ 992 $1,636
Class B $168 $544 $ 945 $1,868(b)
Class C $169 $547 $ 950 $2,080
Class I $ 59 $186 $ 324 $ 729
Class Y $ 75 $255 $ 451 $1,020
DIVERSIFIED BOND - PRO FORMA WITH SELECTIVE(c)
Class A(a) $562 $762 $ 979 $1,606
Class B $168 $540 $ 936 $1,845(b)
Class C $169 $541 $ 937 $2,050
Class I $ 56 $176 $ 308 $ 692
Class Y $ 75 $251 $ 443 $ 998
</Table>
(a) Includes a 4.75% sales charge.
(b) Based on conversion of Class B shares to Class A shares in the ninth year of
ownership.
(c) Includes new expense waivers for year 1 only.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
17
<Page>
THE REORGANIZATION
TERMS OF THE REORGANIZATION
The Board has approved the Agreement, a copy of which is attached as Exhibit A.
The Agreement provides for Reorganization on the following terms:
- - The Reorganization is scheduled to occur on the first day that the New York
Stock Exchange is open for business following shareholder approval and
receipt of any necessary regulatory approvals, but may occur on any later
date agreed to by the Selling Fund and the Buying Fund.
- - The Selling Fund will transfer all of its assets to the Buying Fund and, in
exchange, the Buying Fund will assume the Selling Fund's stated liabilities.
- - The Buying Fund will issue Class A, B, C, I and Y shares to the Selling Fund
in an amount equal to the value of the assets of Classes A, B, C, I and Y
that it receives from the Selling Fund, less the liabilities assumed by the
Buying Fund in the transaction. These shares will immediately be distributed
by the Selling Fund to its shareholders in proportion to their holdings in
the Selling Fund. As a result, shareholders of the Selling Fund will become
Class A, B, C, I or Y shareholders of the Buying Fund.
- - Neither the Selling Fund nor the shareholders of the Selling Fund will pay
any sales charge in connection with the Reorganization.
- - The net asset value of the Selling Fund and the Buying Fund will be computed
as of 3:00 p.m. Central time, on the closing date.
- - After the Reorganization, the Selling Fund will be terminated.
CONDITIONS TO CLOSING THE REORGANIZATION
The completion of the Reorganization is subject to certain conditions described
in the Agreement, including:
- - The Selling Fund will have declared and paid a dividend that will distribute
all of the Fund's taxable income, if any, to the shareholders of the Fund for
the taxable years ending at or prior to the closing.
- - The Funds will have received any approvals, consents or exemptions from the
SEC or any regulatory body necessary to carry out the Reorganization.
- - A registration statement on Form N-14 will have been filed with the SEC and
declared effective.
- - The shareholders of the Selling Fund will have approved the Agreement.
- - The Selling Fund will have received an opinion of tax counsel that the
proposed Reorganization will result in no gain or loss being recognized by
any shareholder.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
18
<Page>
TERMINATION OF THE AGREEMENT
The Agreement and the transactions contemplated by it may be terminated and
abandoned by resolutions of the Board of the Selling Fund or the Buying Fund at
any time prior to closing. In the event of a termination, there will be no
liability for damages on the part of either the Selling Fund or the Buying Fund
or the Board members, officers or shareholders of the Selling Corporation or of
the Buying Corporation.
TAX STATUS OF THE REORGANIZATION
The Reorganization is expected to be tax-free for federal income tax purposes
and will not take place unless the Selling Fund and the Buying Fund receive a
satisfactory opinion of tax counsel (which opinion will be based on certain
factual representations and certain customary assumptions), to the effect that,
although not entirely free from doubt, on the basis of existing provisions of
the Internal Revenue Code of 1986, as amended (the "Code"):
- - The transfer of the Selling Fund's assets to the Buying Fund in exchange for
Class A, B, C, I and Y shares of the Buying Fund and the assumption of the
Selling Fund's liabilities, followed by the distribution of those Class A, B,
C, I and Y shares to the Selling Fund's shareholders and the termination of
the Selling Fund will be a "reorganization" within the meaning of Section
368(a)(1) of the Code, and the Selling Fund and the Buying Fund will each be
a "party to the reorganization" within the meaning of Section 368(b) of the
Code.
- - Under Section 361 of the Code, no gain or loss will be recognized by the
Selling Fund upon the transfer of all of its assets to the Buying Fund or on
the distribution by the Selling Fund of Class A, B, C, I and Y shares of the
Buying Fund to Selling Fund shareholders in liquidation.
- - Under Section 354 of the Code, the shareholders of the Selling Fund will not
recognize gain or loss upon the exchange of their Class A, B, C, I or Y
shares of the Selling Fund solely for Buying Fund Class A, B, C, I or Y
shares as part of the Reorganization.
- - Under Section 358 of the Code, the aggregate basis of the Class A, B, C, I or
Y shares of the Buying Fund that a Selling Fund shareholder receives in the
Reorganization will be the same as the aggregate basis of the Class A, B, C,
I or Y shares of the Selling Fund exchanged therefor.
- - Under Section 1223(1) of the Code, the holding period for the Class A, B, C,
I or Y shares of the Buying Fund that a Selling Fund shareholder receives in
the Reorganization will include the period for which he or she held the Class
A, B, C, I or Y shares of the Selling Fund exchanged therefor, provided that
on the date of the exchange he or she held such Selling Fund shares as
capital assets.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
19
<Page>
- - Under Section 1032 of the Code, no gain or loss will be recognized by the
Buying Fund upon the receipt of the Selling Fund's assets solely in exchange
for the issuance of Buying Fund's Class A, B, C, I and Y shares to the
Selling Fund and the assumption of all of the Selling Fund's liabilities by
the Buying Fund.
- - Under Section 362(b) of the Code, the Buying Fund's tax basis in the assets
that the Buying Fund receives from the Selling Fund will be the same as the
Selling Fund's tax basis in those assets immediately prior to the transfer.
- - Under Section 1223(2) of the Code, the Buying Fund's holding periods in the
assets received from the Selling Fund will include the Selling Fund's holding
periods in such assets.
- - Under Section 381 of the Code, the Buying Fund will succeed to and take into
account the items of the Selling Fund described in Section 381(c) of the
Code, subject to the conditions and limitations specified in Sections 381,
382, 383 and 384 of the Code and Regulations thereunder.
Tax counsel will express no view with respect to the effect of the
Reorganization on any transferred asset as to which any unrealized gain or loss
is required to be recognized at the end of a taxable year (or on the termination
or transfer thereof) under federal income tax principles.
Prior to the closing of the Reorganization, the Selling Fund will, and the
Buying Fund may, declare a distribution to shareholders, which together with all
previous distributions, will have the effect of distributing to shareholders all
of its investment company taxable income (computed without regard to the
deduction for dividends paid) and net realized capital gains (after reduction by
any available capital loss carryforwards), if any, through the closing of the
Reorganization. These distributions will be taxable to shareholders.
A fund's ability to carry forward capital losses and use them to offset future
gains may be limited. First, one fund's "pre-acquisition losses" (including
capital loss carryforwards, net current-year capital losses, and unrealized
losses that exceed certain thresholds) cannot be used to offset unrealized gains
in another fund that are "built in" at the time of the reorganization and that
exceed certain thresholds ("non-de minimis built-in gains") for five tax years.
Second, a portion of a fund's pre-acquisition losses may become unavailable to
offset any gains at all. Third, any remaining pre-acquisition losses will offset
capital gains realized after a reorganization and thus will reduce subsequent
capital gain distributions to a broader group of shareholders than would have
been the case absent such reorganization. Therefore, in certain circumstances,
former shareholders of a fund may pay taxes sooner, or pay more taxes, than they
would have had a reorganization not occurred.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
20
<Page>
The Buying Fund's ability to carry forward the pre-acquisition losses of the
Selling Fund and use them to offset future gains will technically be limited as
a result of the Reorganization due to the effect of loss limitation rules under
applicable tax law. The effect of such limitation will depend on the losses and
gains in each fund at the time of the Reorganization. For example, based on data
as of Aug. 31, 2005, the Selling Fund and the Buying Fund had pre-Reorganization
"net losses" (i.e., capital loss carryforwards as of its last fiscal year end as
adjusted by year-to-date realized gains or losses and all net unrealized gains)
equal to 3.15% and 4.28% of each fund's net assets, respectively. If the
Reorganization had occurred on Aug. 31, 2005, the combined fund would have had
net losses equal to 3.61% of its net assets (due to the Buying Fund's relatively
larger losses).
In addition, for five years after the closing date, the combined fund will not
be allowed to offset any gains "built in" to either fund at the time of the
Reorganization against capital losses (including capital loss carryforwards)
built in to the other fund.
The realized and unrealized gains and losses of each Fund at the time of the
Reorganization will determine the extent to which the combining Funds'
respective losses, both realized and unrealized, will be available to reduce
gains realized by the combined Fund following the Reorganization, and
consequently the extent to which the combined Fund may be required to distribute
gains to its shareholders earlier than would have been the case absent the
Reorganization.
This description of the federal income tax consequences of the Reorganization
does not take into account your particular facts and circumstances. Consult your
own tax adviser about the effect of state, local, foreign, and other tax laws.
REASONS FOR THE PROPOSED REORGANIZATION AND BOARD DELIBERATIONS
The Board believes that the proposed Reorganization will be advantageous to
Selling Fund shareholders for several reasons. The Board considered the
following matters, among others, in approving the Reorganization.
- - TERMS AND CONDITIONS OF THE REORGANIZATION. The Board considered the terms
and conditions of the Reorganization as described in the previous paragraphs.
- - TAX CONSEQUENCES. The Board considered the tax-free nature of the
Reorganization.
- - CONTINUITY OF INVESTMENT. The Board took into account the fact that,
following the Reorganization, shareholders of the Selling Fund will be
invested in a fund holding a similar investment securities portfolio, with
similar investment objectives, policies, and restrictions.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
21
<Page>
- - EXPENSE RATIOS. The Board considered the relative expenses of the Funds.
Following the Reorganization, the expense ratio for the combined Fund,
adjusted to reflect current fees, before giving effect to any fee waivers or
expense caps by the investment manager or its affiliates is expected to be
lower than the expense ratio of the Selling Fund. Thus, Selling Fund
shareholders are expected to experience lower per share fixed costs by
holding shares of the Buying Fund than they would if they continued to hold
shares in the Selling Fund. In addition, the Selling Fund is less than half
the size of the Buying Fund and has been losing assets. The Board considered
that higher aggregate net assets resulting from the Reorganization and the
opportunity for net cash inflows may reduce the risk that, if net assets of
the Selling Fund fail to grow, or diminish, its total expense ratio could
rise as fixed expenses become a larger percentage of net assets.
- - ECONOMIES OF SCALE. The Board considered the advantage of combining Funds
that share similar investment objectives, styles and holdings. The Board
believes that by combining the Funds, the shareholders continue to have
available to them a Fund with a similar investment objective, but can at the
same time take advantage of the economies of scale associated with a larger
fund. A larger fund should have an enhanced ability to effect portfolio
transactions on more favorable terms and should have greater investment
flexibility. Expenses such as audit expenses and accounting expenses that are
charged on a per fund basis will be reduced.
- - COSTS. The Board considered the fact that the investment manager has agreed
to bear all solicitation expenses in order to achieve shareholder approval of
the Reorganization and to bear any other costs of effecting the
Reorganization.
- - DILUTION. The Board considered the fact that the Reorganization will not
dilute the interests of the current shareholders.
- - PERFORMANCE. The Board considered the relative performance records of the
Funds.
- - POTENTIAL BENEFITS TO THE INVESTMENT MANAGER AND ITS AFFILIATES. The Board
also considered the potential benefits from the Reorganization that could be
realized by the investment manager and its affiliates. The Board recognized
that the potential benefits to the investment manager consist principally of
the elimination of expenses incurred in duplicative efforts to administer
separate funds. The Board also noted, however, that shareholders of the
Selling Fund will benefit over time from any decrease in overall operating
expense ratios resulting from the proposed Reorganization.
BOARDS' DETERMINATIONS
After considering the factors described above and other relevant information, at
a meeting held on Sept. 7-8, 2005, the Selling Fund Board members,
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
22
<Page>
including a majority of the independent Board members, found that participation
in the Reorganization is in the best interests of the Selling Fund and that the
interests of existing shareholders of the Fund will not be diluted as a result
of the Reorganization.
The Board of Directors of the Buying Fund approved the Agreement at a meeting
held on Sept. 7-8, 2005. The Board members considered the terms of the
Agreement, the provisions intended to avoid the dilution of shareholder
interests and the anticipated tax consequences of the Reorganization. The Board
found that participation in the Reorganization is in the best interests of the
Buying Fund and that the interests of existing shareholders of the Buying Fund
will not be diluted as a result of the Reorganization.
RECOMMENDATION AND VOTE REQUIRED
The Board recommends that shareholders approve the proposed Agreement. The
Agreement must be approved by a majority of the voting power of all shares
entitled to vote. If the Agreement is not approved, the Board will consider what
further action should be taken.
If shareholders approve the merger, it will take place shortly after the
shareholder meeting. In the interim, however, it will be important for the Fund
to have a properly elected Board and an IMSAgreement that has been approved by
shareholders.
PROPOSAL 2. ELECT BOARD MEMBERS
NOMINEES FOR THE BOARD. Nominees are listed in the following table. Each person
is a nominee for each of the 90 RiverSource Funds. Each nominee was elected a
member of the Board at the last regular shareholders' meeting except for Ms.
Flynn, Ms. Paglia, Mr. Laikind, Ms. Blatz and Ms. Pryor. These nominees were
recommended for the position of Board member by the independent Board members.
Ms. Flynn and Ms. Paglia began serving the fund in 2004. Mr. Laikind and Ms.
Blatz began serving the fund in 2005.
Each Board member will 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 attend as members of the Board, whichever occurs first.
All nominees have agreed to serve. If an unforeseen event prevents a nominee
from serving, your votes will be cast for the election of a substitute selected
by the Board. Information on each nominee follows. Election requires a vote by a
majority of the fund's shares voted at the meeting.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
23
<Page>
TABLE A-3. INDEPENDENT NOMINEES
<Table>
<Caption>
NAME, POSITION HELD WITH
ADDRESS, FUND AND LENGTH PRINCIPAL OCCUPATION
AGE OF SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz
901 S. Marquette Ave.
Minneapolis, MN 55402
Age 51
Arne H. Carlson Board member Chair, Board Services Contracts, Executive,
901 S. Marquette Ave. since 1999 Corporation (provides Investment Review, Board
Minneapolis, MN 55402 administrative services to Effectiveness
Age 71 boards). Former Governor of
Minnesota.
Patricia M. Flynn Board member Trustee Professor of Economics Investment Review, Joint Audit
901 S. Marquette Ave. since 2004 and Management, Bentley
Minneapolis, MN 55402 College; former Dean, McCallum
Age 54 Graduate School of Business,
Bentley College
Anne P. Jones Board member Attorney and consultant Joint Audit, Board
901 S. Marquette Ave. since 1985 Effectiveness, Executive,
Minneapolis, MN 55402 Investment Review
Age 70
</Table>
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
24
<Page>
INDEPENDENT NOMINEES (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD WITH
ADDRESS, FUND AND LENGTH OF PRINCIPAL OCCUPATION
AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind Board member Former Managing Director, American Progressive
901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance
Minneapolis, MN 55402
Age 70
Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Contracts, Investment Review,
901 S. Marquette Ave. since 2002 professor of economics, Inc. (manufactures Executive, Board Effectiveness
Minneapolis, MN 55402 Carleton College irrigation systems)
Age 66
Catherine James Paglia Board member Director, Enterprise Asset Strategic Contracts, Investment Review
901 S. Marquette Ave. since 2004 Management, Inc. Distribution, Inc.
Minneapolis, MN 55402 (private real estate and asset (transportation,
Age 53 management company) distribution and
logistics
consultants)
Vikki L. Pryor
901 S. Marquette Ave.
Minneapolis, MN 55402
Age ___
Alan K. Simpson Board member Former three-term United Investment Review, Board
1201 Sunshine Ave. since 1997 States Senator for Wyoming Effectiveness
Cody, Wyoming 82414
Age 74
</Table>
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
25
<Page>
INDEPENDENT NOMINEES (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD WITH
ADDRESS, FUND AND LENGTH OF PRINCIPAL OCCUPATION
AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member Chief Executive Officer, Hybridon, Inc. Investment Review, Contracts
901 S. Marquette Ave. since 2002 RiboNovix, Inc. since 2003 (biotechnology)
Minneapolis, MN 55402 (biotechnology); President,
Age 61 Forester Biotech
</Table>
TABLE A-4. NOMINEES AFFILIATED WITH RIVERSOURCE INVESTMENTS
<Table>
<Caption>
NAME, POSITION HELD WITH
ADDRESS, FUND AND LENGTH OF PRINCIPAL OCCUPATION
AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
William F. Truscott* Board member since President, U.S. Asset
53600 AXP Financial Center 2001, Vice Management - Chief Investment
Minneapolis, MN 55474 President since Officer of Ameriprise
Age 44 2002 Financial, Inc. and President,
Chairman of the Board and
Chief Investment Officer of
RiverSource Investments since
2001. Former chief investment
officer and managing director,
Zurich Scudder Investments.
</Table>
* Interested person by reason of being an officer, director, securityholder
and/or employee of RiverSource Investments.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
26
<Page>
BOARD COMMITTEES. The Board has several committees that facilitate
the work of the Board. The Executive Committee has authority to act for the full
Board between meetings. The Contracts Committee receives and analyzes reports
covering the level and quality of services provided under contracts with the
fund and advises the Board regarding actions taken on these contracts during the
annual review process. The Investment Review Committee considers investment
management policies and strategies; investment performance; risk management
techniques; and securities trading practices and reports areas of concern to the
Board.
The Board Effectiveness Committee's charter, Exhibit E, requires it to make
recommendations regarding nominees based on criteria approved by the Board. All
members of the Committee are independent. Nominee recommendations are based on a
matrix of skill sets, experience, and geographical location and each nominee
must have a background that demonstrates the ability to furthering the interest
of all shareholders. The Committee will consider recommendations from
shareholders who write to the Boards and provide detailed information about a
candidate. All candidates are processed in the same fashion; first by evaluating
a candidate's detailed information against the criteria; then interviewing those
candidates who best fill vacancies identified by the matrix.
You may write the Board by addressing a letter to Arne H. Carlson, the
independent Chairman of the Board or any other independent member of the Board,
at Board Services Corporation, 901 Marquette Avenue South, Suite 2810,
Minneapolis, MN 55402-3268. However, do not address letters to this address if
you are requesting some action regarding your investments. In order to avoid any
delay in processing a request regarding an investment, please address these
requests to 70100 Ameriprise Financial Center, Minneapolis, MN 55474.
The Joint Audit Committee, made up entirely of independent Board members,
operates under a written charter, Exhibit F. The Joint Audit Committee meets
with the independent auditors, internal auditors and corporate officers to
review and discuss audited financial statements, reports, issues, and compliance
matters. This Committee reports significant issues to the Board and makes
recommendations to the independent Board members regarding the selection of the
independent public accountant. More information regarding this Committee and the
fund's independent auditor is found in Section C.
During the 12-month period ended Sept. 30, 2005, the Board met 8 times,
Executive 2 times, Contracts 7 times, Investment Review 5 times, Board
Effectiveness 6 times and Joint Audit 4 times. All Board members had 100%
attendance except for Mr. Simpson who had 82% attendance due to serious illness
in January 2005.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
27
<Page>
SHAREHOLDER COMMUNICATIONS WITH THE BOARD.
Shareholders may communicate directly with the Board by sending correspondence
to Arne H. Carlson, Chair of the Board, RiverSource Funds, 901 Marquette Avenue
South, Suite 2810, Minneapolis, MN 55402-3268. Correspondence to specific
individual Board members also may be directed to the same address.
Account-specific correspondence should be directed to RiverSource Funds, 70100
Ameriprise Financial Center, Minneapolis, MN 55474.
BOARD MEMBER COMPENSATION. The following table shows the total compensation
received by each Board member from all of the RiverSource Funds. The funds do
not pay retirement benefits to Board members. Under a Deferred Compensation
Plan, independent Board members may defer receipt of their compensation.
Deferred amounts are treated as though equivalent dollar amounts had been
invested in shares of one or more designated RiverSource funds.
TABLE A-5. BOARD MEMBER COMPENSATION(a)
<Table>
<Caption>
AGGREGATE COMPENSATION FROM COMPENSATION FROM
ALL RIVERSOURCE FUNDS FOR THE THE SELLING FUND DURING
NOMINEE YEAR ENDED SEPT. 30, 2005 THE LAST FISCAL YEAR
Flynn $143,675(d) $1,750(b)
Jones 185,892 3,210
Lewis 204,700(e) 3,514(c)
Paglia 157,708 1,809
Simpson 138,842 2,300
Taunton-Rigby 166,842 2,800
</Table>
(a) Board members affiliated with RiverSource Investments or Board Services
Corporation, a company providing administrative services to the funds, are
not paid by the funds. Mr. Carlson's total compensation was $373,750. Board
member compensation is a combination of a base fee and meeting fees. Because
the spin-off of Ameriprise Financial from American Express Company
necessitated 5 additional meetings, Ameriprise Financial reimbursed the
funds $23,500 for each member to cover those additional meetings. Mr.
Laikind, Ms. Blatz and Ms. Pryor were not board members prior to Sept. 30,
2005 and therefore are not included in the table.
(b) Includes portion of compensation deferred in the amount of $646 from the
Fund.
(c) Includes portion of compensation deferred in the amount of $1,340 from the
Fund.
(d) Includes portion of compensation deferred in the amount of $60,371 from the
Fund.
(e) Includes portion of compensation deferred in the amount of $54,839 from the
Fund.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
28
<Page>
The following table shows the dollar range of shares of all the funds owned by
the Board members and the dollar range of shares owned in the Selling Fund.
TABLE A-6. BOARD MEMBER HOLDINGS
Dollar range of equity securities beneficially owned as of Aug. 31, 2005
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF EQUITY DOLLAR RANGE OF
SECURITIES OF ALL RIVERSOURCE FUNDS EQUITY SECURITIES IN
NOMINEE OVERSEEN BY BOARD MEMBER THE SELLING FUND
Carlson over $100,000 None
Flynn $10,001 - $50,000 None
Jones over $100,000 $10,001 - $50,000
Lewis over $100,000 None
Paglia $50,001 - $100,000 None
Simpson $50,001 - $100,000 None
Taunton-Rigby over $100,000 None
Truscott over $100,000 None
</Table>
* The percentage of shares beneficially owned by all Board members and officers
as a group does not exceed 1% of any class of shares of any fund.
FUND OFFICERS. In addition to Mr. Truscott, the fund's other executive officers
are:
LESLIE L. OGG, age 67. Vice president, general counsel and secretary since 1978.
President of Board Services Corporation.
JEFFREY P. FOX, age 50. Treasurer since 2002. Vice President - Investment
Accounting of Ameriprise Financial.
PAULA R. MEYER, age 51. President since 2002. Senior Vice President and General
Manager - Mutual Funds, RiverSource Investments.
Officers serve at the pleasure of the Board. Officers are paid by Ameriprise
Financial, Inc., RiverSource Investments or Board Services Corporation. During
the last fiscal year, no officer earned more than $60,000 from any fund.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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PROPOSAL 3: APPROVE OR REJECT AN AMENDMENT TO THE ARTICLES OF INCORPORATION
The Fund is a Minnesota corporation and operates under an organizational
document called the articles of incorporation. The articles of incorporation set
forth various provisions relating to the authority of the fund to conduct
business and the governance of the fund.
The Board has approved, and recommends that shareholders approve, a proposal to
amend the fund's articles of incorporation (the "Articles"). The fund's
investments and investment policies will not change by virtue of the adoption of
the amendment to the Articles.
A. MINIMUM ACCOUNT VALUE
Generally, shareholders must invest at least $2,000 to open a fund account.
Section 7 of the Articles currently provides that the fund may redeem shares if
an account falls below a value of $1,000. Small accounts can be costly to
maintain and this provision allows the Board to close accounts that no longer
meet the fund's minimum standards. However, the current provision does not allow
the Board to redeem accounts if the value is higher than $1,000. In the future,
there may be circumstances in which a minimum account value higher than $1,000
is in the best interest of the fund and its shareholders. As a consequence, the
Board recommends that the Articles be amended to eliminate the reference to a
specific dollar amount. As proposed, the amended Articles will permit the Board
to establish a minimum account value that will be disclosed in the fund
prospectus. The Board will be able to change the minimum account value without
further action by shareholders.
If the change is approved, the Articles will be amended as follows
([Underline]additions are underlined[/Underline], [Strikethrough]deletions
are lined through[/Strikethrough]):
Article III, Section 7 will be amended to read:
Section 7. The Fund may redeem the shares of a shareholder if the amount
invested is less than [Strikethrough]$1,000[/Strikethrough] [Underline]an
amount determined by the Board of Directors and set forth in the current Fund
prospectus.[/Underline]
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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B. NAME CHANGE.
Historically the name of the fund has reflected the name of the investment
manager. Since 1999, the name of the fund has included the letters AXP, which is
an abbreviated form of the name American Express. In August 2005, American
Express Financial Corporation ("AEFC"), the fund's investment manager changed
its name to Ameriprise Financial, Inc. ("Ameriprise Financial") in anticipation
of its spin off from American Express Company, its parent company. On Oct. 1,
2005, Ameriprise Financial transferred responsibility for the fund's investment
advisory services to its wholly owned subsidiary, RiverSource Investments. The
Board made a corresponding change to the name of the fund by substituting the
name RiverSource for AXP. The name of the corporate entity can be changed only
with approval of the shareholders of all the underlying funds that make up the
corporation. The Board recommends that the name of the corporate entity also be
changed to include the name RiverSource instead of AXP. The changes are shown in
the table below.
This is the first shareholder meeting since the spin off of the investment
manager and the first opportunity for shareholders to consider a name change for
the corporation.
TABLE A-7. PROPOSED NAME OF CORPORATION
<Table>
<Caption>
CURRENT NAME OF CORPORATION PROPOSED NAME OF CORPORATION
AXP Income Series, Inc. RiverSource Income Series, Inc.
</Table>
BOARD RECOMMENDATION AND VOTE REQUIRED. The Board recommends that you vote to
approve the amendments to the Articles. The changes require the approval by a
majority of the shares voted at the meeting. The changes will be effective when
the amendments are filed with the Secretary of State's office. This filing is
expected to occur shortly after the shareholder meeting.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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PROPOSAL 4: APPROVE OR REJECT AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH
RIVERSOURCE INVESTMENTS, LLC
The fund pays fees to RiverSource Investments under an Investment Management
Services Agreement (the "IMS Agreement") for investment management services. The
services include providing the personnel, equipment and office facilities
necessary for the management of the fund's assets. Subject to the direction of
the Board and consistent with the fund's investment policies, the investment
manager decides what securities to buy, hold or sell. The investment manager
also executes buy and sell orders and provides research and statistical data to
support investment management activities. The Fund is part of a master/feeder
structure. In this structure, the fund invests all of its assets in a master
fund (the "portfolio") with the same policies as the fund. For purposes of this
discussion, the portfolio is referred to as a "fund".
SUMMARY OF CHANGES
INVESTMENT MANAGER. On Sept. 30, 2005, Ameriprise Financial became a publicly
traded company and on Oct. 1, 2005 transferred the investment management
functions to RiverSource Investments, a wholly owned subsidiary. While this
change did not cause a termination of the IMS Agreement, the Board determined
that it would be prudent to give shareholders an opportunity to vote on the
arrangement.
TERMS OF THE CURRENT IMS AGREEMENT. The fee the fund pays to RiverSource
Investments for its services under the current IMS Agreement is based on the net
assets of the fund and decreases as the size of the fund increases. The complete
fee schedule for the fund and other funds managed by RiverSource Investments is
found in Section C. The fund also pays its taxes, brokerage commission and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; consultant fees;
Board compensation; corporate filing fees; organizational expenses; expenses
incurred in connection with lending portfolio securities; and other expenses
properly payable by the fund, approved by the Board. Section C includes
information on the date of the current IMS Agreement, the date it was last
approved by shareholders and the reason why it was submitted to shareholders at
that time.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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BASIS FOR RECOMMENDATION OF THE BOARD
Following announcement of the spin-off of Ameriprise Financial from American
Express Company, the Board and Ameriprise Financial agreed to review and revise,
where appropriate, the terms of all contracts, including the IMS Agreement,
pursuant to which Ameriprise Financial or its affiliates provides services to
the funds. Each year, the Board determines whether to continue the IMS Agreement
for each fund and, in doing so, evaluates the quality and level of service
received under the IMS Agreement and the costs associated with those services.
Accordingly, in March and April of each year, Ameriprise (formerly American
Express Financial Corporation) prepares detailed reports for the Board, which
include data prepared by independent organizations, to assist the Board in
making this determination. The Board accords considerable weight to the
deliberations and conclusions of its committees in determining whether to
continue the IMS Agreement.
After thorough review of the reports and data provided at a meeting held in
person on April 14, 2005, the Board, including a majority of its independent
members, determined that the quality and level of advisory services provided
pursuant to the IMS Agreement for each fund were satisfactory and that fees were
fair and reasonable. However, in light of the announced plans of the spin-off,
the Board approved continuation of the IMS Agreement for only an interim period
ending on the earlier of (i) the effective date of the spin-off; or (ii) the
approval of a new investment management services agreement with Ameriprise
Financial by the shareholders of each fund, but in no event for a period longer
than one year. While it was expected that the spin-off would not result in an
"assignment" of an IMS Agreement under the Investment Company Act of 1940 and,
therefore, would not cause the termination of the IMS Agreement according to its
terms, Schulte Roth & Zabel LLP, was retained as independent counsel to the
Board, advised the Board that the legal question of whether the spin-off would
result in an assignment turns on a highly fact-sensitive analysis. Therefore,
the Board determined, as a matter of prudence, to proceed as if each IMS
Agreement would terminate as a result of the spin-off. Accordingly, the Board
determined to renew each IMS Agreement for the interim period only and to
consider a new IMS Agreement for each fund prior to the spin-off.
For the six months following the April 2005 meeting, the Board and its
committees have been evaluating whether to approve a proposed IMS Agreement for
each fund with post-spin Ameriprise Financial. Schulte Roth & Zabel LLP, has
assisted the Board in fulfilling its statutory and other responsibilities
associated with the spin-off and the resulting consideration of new contracts,
including the proposed IMS Agreements. As a key step in this process,
independent counsel sent, on behalf of the independent members of the Board,
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
33
<Page>
a detailed and expansive request for information to American Express Company and
Ameriprise Financial, seeking specified information thought to be relevant to
the Board's consideration of the proposed contracts with post-spin Ameriprise
Financial. The Board and its committees were provided with a wealth of written
and oral information intended to assist them in considering the proposed
contracts, including the proposed IMS Agreements. Furthermore, in connection
with the Board's considerations as to whether post-spin Ameriprise Financial, as
an independent entity, would be capable of continuing to provide a high quality
of services to the funds, the Board's independent members retained their own
financial adviser, Credit Suisse First Boston LLC ("CSFB"). At the Board's
requests, CSFB provided various written materials and oral presentations
analyzing the capital adequacy of Ameriprise Financial. The costs of independent
counsel and CSFB and of additional meetings of the Board were borne by
Ameriprise Financial as part of the commitment of American Express Company to
ensure a complete and thorough review of the proposed spin-off and its effect on
the services provided by Ameriprise Financial and its subsidiaries.
During the course of the six-month period following the April 2005 meeting, the
Board and its committees met at five in-person meetings to consider the
information provided by American Express Company, Ameriprise Financial,
independent counsel and CSFB. At an in-person meeting held on Sept. 8, 2005,
based on all of the information provided as well as the deliberations occurring
at that meeting and the previous meetings held since the announcement of the
spin-off, the Board, including all of its independent members, approved the new
contracts, including each proposed IMS Agreement.
On Oct. 1, 2005, pursuant to an agreement between the fund and Ameriprise
Financial, the IMS Agreement was transferred to Riversource Investments, LLC, a
wholly-owned subsidiary of Ameriprise Financial.
FOR THESE REASONS, THE BOARD, INCLUDING ALL OF ITS INDEPENDENT MEMBERS,
RECOMMENDS THAT YOU APPROVE THE PROPOSED IMS AGREEMENT FOR YOUR FUND(S).
THE BOARD'S SPECIFIC CONSIDERATIONS RELATING TO THE PROPOSED IMS AGREEMENTS. In
carrying out its legal responsibilities associated with the consideration of the
proposed IMS Agreements, the Board evaluated the following four factors: (i) the
nature, extent and quality of services to be provided by RiverSource
Investments; (ii) the investment performance of the fund; (iii) the costs of the
services to be provided and the profits to be realized by Ameriprise Financial;
and (iv) the extent to which economies of scale would be realized as the fund
grows and whether the fee level reflects these economies of scale for the
benefit of fund investors.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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<Page>
NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY POST-SPIN AMERIPRISE
FINANCIAL (AND ITS SUBSIDIARIES). The Board recognized that only a few months
had passed since its April 2005 determination to renew the IMS Agreement for
each fund and that in April 2005, it had concluded that the nature, extent and
quality of services provided by Ameriprise Financial were satisfactory and
consistent with those that would be expected for a fund family of the size of
the funds. However, the Board also recognized that this assessment must be
supplemented with an evaluation of whether the spin-off or other factors would
result in any changes to the advisory services currently provided to the funds.
In this regard, the Board focused its evaluation on the following factors
potentially impacting the nature, extent and quality of advisory services to be
provided by RiverSource Investments: (i) Ameriprise Financial's projected
capital structure and capital adequacy as a stand-alone entity; (ii) its legal
and regulatory risks; (iii) its ability to retain and attract personnel; and
(iv) its ability to successfully rebrand its products and services. Based on
extensive presentations and reports by Ameriprise Financial, CSFB and
independent counsel, the Board concluded that the proposed capital structure
(which includes certain indemnification commitments made by American Express)
should enable RiverSource Investments to continue to provide a high quality and
level of advisory services to the funds. In making this determination, the Board
took into account representations by management of Ameriprise Financial that
projected capital levels would allow Ameriprise Financial to continue to meet
its legal and compliance responsibilities, build its distribution network,
pursue technological upgrades, make capital commitments necessary to retain and
attract key personnel devoted to legal and compliance responsibilities,
portfolio management and distribution, and pursue smaller asset management
acquisitions to help grow its business. The Board accorded significant weight to
CSFB's confirmation as to the reasonableness of the foregoing representations.
The Board also considered the fact that there were no expected departures of key
personnel involved in the portfolio management, operations and marketing of the
funds as a result of the announcement of the spin-off.
The Board concluded that, based on all of the materials and information provided
(and with the assistance of independent counsel), post-spin Ameriprise Financial
would be in a position to continue to provide a high quality and level of
investment management services to the funds.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
35
<Page>
INVESTMENT PERFORMANCE. The Board next focused on investment performance. The
Board reviewed reports documenting the fund's performance over one-, three-
and/or five-year periods, as well as the entire period during which its current
portfolio manager has managed the fund, and compared to relevant Lipper and
market indices. The Board took into account its determination in April 2005 that
investment performance either met expectations or, if not, that appropriate
action (such as changes to portfolio management) had been (or was being) pursued
in order to help the fund achieve its longer-term performance objective.
The Board also considered that it has received monthly performance reports for
the funds. The Board and its committees concluded in September 2005 that there
have been no significant deviations from April's overall performance data.
COST OF SERVICES PROVIDED. The Board evaluated comparative fees and the costs of
services to be provided under the current and proposed IMS Agreements, including
fees charged by RiverSource Investments to its institutional clients and paid to
sub-advisers. The Board studied RiverSource Investments' effort (i.e., its
"pricing philosophy") to set substantially all funds' total expense ratios at or
below the median expense ratio of a group of comparable mutual funds compiled by
Lipper, Inc. The Board observed that the proposed advisory fee changes are
designed to work in tandem with proposed changes to the administrative services
fees. It also noted that RiverSource Investments agreed to voluntarily imposed
expense caps or waivers to achieve this pricing objective whenever the expense
ratio exceeded the median expense ratio by more than three basis points unless
the higher ratio was due to the impact of the performance fee adjustment or was
due to the added costs associated with having subadvisers manage a fund. The
Board considered that, with respect to all funds, other than [Mid Cap Growth,
Small Cap Advantage, Strategic Allocation, Variable Portfolio Diversified Equity
Income and Variable Portfolio Mid Cap Growth], advisory fees under the proposed
IMS Agreements would stay the same or decrease (as indicated in Table B-5,
below) and that, with respect to [Diversified Equity Income, Mid Cap Growth,
Small Cap Advantage, VP Diversified Equity Income and VP Mid Cap Growth], would
increase under each applicable proposed IMS Agreement. The Board accorded
significant weight to the fact that the proposed changes in fee schedules were
intended primarily to achieve a rational pricing model applied consistently
across the various product lines in the fund family, while assuring that overall
fees for each fund are in line with the "pricing philosophy." With respect to
the equity and balanced funds, the Board also took into account the effect of
the proposed performance incentive adjustment on the advisory fee. In this
regard, the Board took into account its past determinations regarding the
appropriateness of (i) the use of the relevant index for each fund for the
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
36
<Page>
comparison of performance; (ii) the methodology for determining when the Board
may change an index used to calculate the performance incentive adjustment;
(iii) the periods used for averaging the funds' assets and computing investment
performance; and (iv) the length of the period over which performance is
computed. Furthermore, the Board considered that with respect to the relevant
sub-advised funds, there was limited opportunity for these funds to achieve
large scale growth and thus provide RiverSource Investments with potential
economies of scale.
The Board next considered the expected profitability to RiverSource Investments
and its affiliates derived from its relationship with the fund, recalling the
April 2005 determination that the profitability level was appropriate. The Board
noted that projected profitability of RiverSource Investments would allow it to
operate effectively and, at the same time, reinvest in its businesses. The Board
also considered that the proposed changes in advisory fees and the mergers of
certain funds would result in revenue gains, while taking into account that
these increases would not materially alter profit margins due to expected
increases in costs associated with the spin-off, particularly rebranding and
separation. CSFB also reported that Ameriprise Financial's projected level of
return on equity was generally reasonable in light of the returns on equity of
its industry competitors. In evaluating profitability, the Board also considered
the benefits Ameriprise Financial obtains through the use of commission dollars
paid on portfolio transactions for the funds and from other business
relationships that result from managing the funds. The Board also considered the
fees charged by Ameriprise Financial to its institutional clients and paid to
sub-advisers, noting the differences in services provided in each case. In light
of these considerations, the Board concluded that projected profitability levels
were appropriate.
ECONOMIES OF SCALE. The Board also considered the "breakpoints" in fees that
would be triggered as fund net asset levels grew and the extent to which
shareholders would benefit from such growth. The Board observed that the revised
fee schedules under the proposed IMS Agreement would continue to provide
breakpoints similar to those in place pursuant to the current IMS Agreement.
Accordingly, the Board concluded that the proposed IMS Agreement provides
adequate opportunity for shareholders to realize benefits as fund assets grew.
OTHER CONSIDERATIONS. In addition, the Board accorded weight to the fact that,
under the proposed IMS Agreement, RiverSource Investments is held to a higher
standard of care than under the current IMS Agreements. The Board also noted
Ameriprise Financial's commitment to a culture that adheres to ethical business
practice, assigns accountability to senior management and seeks to identify
conflicts and propose appropriate action to minimize the risks posed by
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
37
<Page>
the conflicts. Furthermore, the Board recognized that it was not limited to
considering management's proposed contracts. In this regard, the Board evaluated
the circumstances under which it would consider the retention of an investment
adviser different from RiverSource Investments (or its subsidiaries). The Board
concluded, based on its consultation with independent counsel, that pursuing the
retention of a different adviser was not necessary,primarily because, in its
best judgment, RiverSource Investments continues to be basically the same
organization (from a functional and managerial standpoint) as it was prior to
the spin-off. The Board reasoned that shareholders purchased shares of the funds
with an expectation that the current investment advisory organization would be
servicing the funds.
As a result of all of the foregoing, the Board determined that the fees to be
paid under each proposed IMS Agreement were fair and reasonable in light of
services proposed to be provided.
BOARD RECOMMENDATION AND VOTE REQUIRED. For the foregoing reasons, the Board
recommends that shareholders of each fund approve the applicable proposed IMS
Agreement. The proposed IMS Agreement must be approved by the lesser of (a) a
majority of the fund's outstanding shares or (b) 67% of the shares voted at the
meeting, so long as more than 50% of the shares actually vote. If shareholders
approve the proposed IMS Agreement, it will take effect shortly after the
shareholder meeting. If the proposed IMS Agreement is not approved, the Board
will consider appropriate steps to take.
SECTION B -- PROXY VOTING AND SHAREHOLDER MEETING INFORMATION
VOTING. You are entitled to vote based on your total dollar interest in the
Fund. Each dollar is entitled to one vote. For those of you who cannot come to
the meeting, the Board is asking permission to vote for you. The shares will be
voted as you instruct either by mail, telephone or internet. Signed proxy cards
returned without instructions will be voted in favor of all proposals.
The corporation of which the Fund is part issues several series of common stock.
Each series is a separate fund. On the election of directors and the amendment
of the Articles of Incorporation, you vote together with the owners of shares of
all the other funds that are part of the corporation. On the Reorganization and
the IMS Agreement you vote together with the owners of the other shares in your
fund.
In voting for Board members, you may vote all of your shares cumulatively. This
means that you have the right to give each nominee an equal number of votes or
divide the votes among the nominees as you wish. You have as many votes as the
number of dollars you own on the record date, multiplied by the
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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<Page>
number of Board members to be elected. If you elect to withhold authority for
any individual nominee or nominees, you may do so by marking the box labeled
"For All Except," and by striking the name of any excepted nominee, as is
further explained on the card itself. If you do withhold authority, the proxies
will not vote shares equivalent to the proportionate number applicable to the
names for which authority is withheld.
All votes count toward a quorum, regardless of how they are voted (For, Against
or Abstain). Broker non-votes will be counted toward a quorum but not toward the
approval of any proposals. (Broker non-votes are shares for which the underlying
owner has not voted and the broker holding the shares does not have authority to
vote.)
If your shares are held in an IRA account with Ameriprise Trust Company as
custodian, you have the right to instruct the IRA Custodian how to vote those
shares. The IRA Custodian will vote any shares for which it has not received
voting instructions in proportionately the same manner -- either For, Against,
or Abstain -- as other fund shareholders have voted.
MASTER/FEEDER FUNDS. Selective currently is part of a master/feeder structure.
The feeder fund seeks its investment objective by investing its assets in a
master fund with the same policies. The master fund invests in and manages the
securities. Immediately prior to the Reorganization, the Board intends to
withdraw the Fund's assets from the master fund.
REVOKING YOUR PROXY. If you change your mind after you vote and you can attend
the meeting, simply inform the Secretary at the meeting that you will be voting
your shares in person. Also, if you change your mind after you vote, but cannot
attend the meeting, you may change your vote or revoke it by mail, telephone or
internet.
SIMULTANEOUS MEETINGS. The meeting will be held simultaneously with meetings of
other RiverSource mutual funds. Each proposal will be voted on separately by
shareholders of a corporation or by shareholders of a fund or by a class of
shares of the fund where appropriate. If any shareholder objects to the holding
of simultaneous meetings, the shareholder may move for an adjournment of his or
her fund's meeting to a time immediately after the simultaneous meetings so that
a meeting of that fund may be held separately. If a shareholder makes this
motion, the persons named as proxies will take into consideration the reasons
for the objection in deciding whether to vote in favor of the adjournment.
SOLICITATION OF PROXIES. The Board is asking for your vote and for you to vote
as promptly as possible. The investment manager will pay the expenses of the
solicitation. Supplementary solicitations may be made by mail, telephone,
electronic means or personal contact.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
39
<Page>
SHAREHOLDER PROPOSALS. No proposals were received from shareholders. The Funds
are not required to hold regular meetings of shareholders each year. However,
meetings of shareholders are held from time to time and proposals of
shareholders that are intended to be presented at future shareholder meetings
must be submitted in writing to the Funds in reasonable time prior to the
solicitation of proxies for the meeting.
DISSENTERS' RIGHT OF APPRAISAL. Under Sections 302A.471 and 302A.473 of the
Minnesota Business Corporation Act, Selling Fund shareholders are entitled to
assert dissenters' rights in connection with the Reorganization and obtain
payment of the "fair value" of their shares, provided that they comply with the
requirements of Minnesota law. A copy of the relevant provisions is attached as
Exhibit C.
Notwithstanding the provisions of Minnesota law, the SEC has taken the position
that use of state appraisal procedures by a mutual fund would be a violation of
Rule 22c-1, the forward pricing rule, under the 1940 Act. This rule states that
no mutual fund may redeem its shares other than at net asset value next computed
after receipt of a request for redemption. It is the SEC's position that Rule
22c-1 supersedes appraisal provisions in state statutes.
In the interest of ensuring equal valuation for all shareholders, dissenters'
rights will be determined in accordance with the SEC's interpretation. As a
result, if any shareholder elects to exercise dissenters' rights under Minnesota
law, the Selling Fund intends to submit this question to a court of competent
jurisdiction. In that event, a dissenting shareholder would not receive any
payment until the end of the court proceeding.
OTHER BUSINESS. The Board does not know at this time of any other business to
come before the meetings. If something does come up, the proxies will use their
best judgment to vote for you on the matter.
ADJOURNMENT. In the event that not enough votes in favor of the proposals are
received by the time scheduled for the meeting, the persons named as proxies may
move for one or more adjournments of the meeting for a period of not more than
120 days in the aggregate to allow further solicitation of shareholders on the
proposals. Any adjournment requires the affirmative vote of a majority of the
voting power of the shares present at the meeting. The persons named as proxies
will vote in favor of adjournment those shares they are entitled to vote that
have voted in favor of the proposals. They will vote against any adjournment
those shares that have voted against the proposals. The investment manager will
pay the costs of any additional solicitation and of any adjourned meeting. A
shareholder vote may be taken on one or more of the items in this proxy
statement prior to adjournment if sufficient votes have been received.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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SECTION C -- CAPITALIZATION, OWNERSHIP OF FUND SHARES AND OTHER FUND INFORMATION
This section contains the following information about your fund, its investment
manager and the independent auditors:
TABLE CONTENT
(all information is shown for the last fiscal year unless noted
otherwise)
C-1 Actual and pro forma capitalization of the Selling Fund and the
Buying Fund
C-2 Actual and pro forma ownership of fund shares
C-3 Current management fee schedule for the fund and other RiverSource
funds with similar investment objectives
C-4 Payments the fund made to the investment manager and its affiliates
C-5 Brokerage commissions the fund paid to a broker-dealer affiliate
C-6 Information about shareholder approval of current management
agreements
C-7A Audit fees
C-7B Audit-related, tax and other fees
THE FUND'S INVESTMENT MANAGER AND DISTRIBUTOR. RiverSource Investments is the
investment manager for the fund. Ameriprise Financial Services, Inc., a wholly
owned subsidiary of Ameriprise Financial, is the distributor for the fund. The
address for RiverSource Investments and Ameriprise Financial Services, Inc. is
200 Ameriprise Financial Center, Minneapolis, MN 55474.
PRESIDENT AND BOARD OF DIRECTORS OF RIVERSOURCE INVESTMENTS. William F. Truscott
is President of RiverSource Investments. The following individuals are directors
of RiverSource Investments. Each director is an officer of RiverSource
Investments, 200 Ameriprise Financial Center, Minneapolis, MN 55474. Directors:
William F. Truscott, Ward D. Armstrong and Michelle M. Keeley.
CAPITALIZATION
The following table shows the capitalization of the Funds as of Sept. 30, 2005
and on a pro forma basis, assuming the proposed Reorganization had taken place.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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TABLE C-1. ACTUAL AND PRO FORMA CAPITALIZATION OF THE SELLING FUND AND THE
BUYING FUND
<Table>
<Caption>
NET ASSET SHARES
FUND NET ASSETS VALUE PER SHARE OUTSTANDING
SELECTIVE
Class A $ 550,902,844 $8.58 64,241,920
Class B 103,286,565 8.57 12,046,917
Class C 3,874,388 8.57 451,846
Class I 157,739,460 8.58 18,393,234
Class Y 47,038,967 8.57 5,489,949
DIVERSIFIED BOND
Class A $1,742,668,306 $4.83 360,929,225
Class B 476,270,093 4.83 98,619,257
Class C 17,722,563 4.84 3,665,171
Class I 9,836 4.83 2,037
Class Y 144,541,408 4.83 29,933,483
DIVERSIFIED BOND - PRO FORMA WITH SELECTIVE
Class A $2,293,571,150 $4.83 474,987,785
Class B 579,556,658 4.83 120,003,639
Class C 21,596,951 4.84 4,465,664
Class I 157,749,296 4.83 32,660,310
Class Y 191,580,375 4.83 39,672,400
</Table>
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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OWNERSHIP OF FUND SHARES
The following table provides information on shareholders who owned more than 5%
of each Fund's outstanding shares as of Sept. 30, 2005. As of Sept. 30, 2005,
officers and Board members of the Fund as a group owned less than 1% of the
outstanding shares of the Fund.
TABLE C-2. ACTUAL AND PRO FORMA OWNERSHIP OF FUND SHARES
<Table>
<Caption>
PERCENT OF
PERCENT SHARES HELD
OF SHARES FOLLOWING THE
FUND 5% OWNERS HELD REORGANIZATION
SELECTIVE
Class A None -- --
Class B None -- --
Class C None -- --
Class I (1) 100% 100%
Class Y (2) 98% 24%
DIVERSIFIED BOND
Class A (3) 6% 5%
Class B None -- --
Class C None -- --
Class I (4) 100% *
Class Y (5) 97% 73%
</Table>
(1) RiverSource Portfolio Builder Moderate Fund owns 41.04%. RiverSource
Portfolio Builder Moderate Aggressive Fund owns 27.82%. RiverSource
Portfolio Builder Moderate Conservative Fund owns 18.21%. RiverSource
Portfolio Builder Conservative Fund owns 12.93%
(2) Ameriprise Trust Company, Minneapolis, MN owns of record 97.54%.
(3) Charles Schwab & Co Inc., a brokerage firm, owns of record 6.36%.
(4) Ameriprise Financial, Minneapolis, MN owns 100%.
(5) Ameriprise Trust Company, Minneapolis, MN owns of record 96.62%.
* Less than 1%.
The following table shows the management fee schedule for the fund and other
domestic fixed-income funds managed by the investment manager.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
43
<Page>
TABLE C-3. CURRENT MANAGEMENT FEE SCHEDULE FOR THE FUND AND OTHER RIVERSOURCE
FUNDS WITH SIMILAR INVESTMENT OBJECTIVES
<Table>
<Caption>
MANAGEMENT FEE FEE CAP OR WAIVERS(1)
RETAIL FUNDS (ANNUAL RATE; IN BILLIONS) (IF APPLICABLE)
- ----------------------------------------------------------------------------------------------------------------------------------
Core Bond First $1 - .54%; next $1 - .515%; next $1 - .49%; 0.89% until 7/31/06
Limited Duration next $3 - .465%; next $3 - .44%; over $9 - .415%
Diversified Bond First $1 - .52%; next $1 - .495%; next $1 - .47%; 0.89% Diversified Bond until 8/31/06
Selective(2) next $3 - .445%; next $3 - .42%; over $9 - .395% Selective, Short Duration and U.S.
Short Duration(2) Gov't Mortgage until 5/31/06
U.S. Gov't Mortgage
Global Bond(2) First $.25 - .77%; next $.25 - .745%; 1.25% until 10/31/06
next $.25 - .72%; next $.25 - .695%;
over $1 - .67%
High Yield Bond(2) First $1 - .59%; next $1 - .565%; next $1 - .54%;
next $3 - .515%; next $3 - .49%; over $9 - .465%
Income Opportunities First $1 - .61%; next $1 - .585%; next $1 - .56%; 1.19% until 7/31/06
next $3 - .535%; next $3 - .51%; over $9 - .485%
Inflation Protected Securities First $1 - .44%; next $1 - .415%; next $1 - .39%; 0.84% until 7/31/06
next $3 - .365%; next $3 - .34%; over $9 - .315%
</Table>
(1) For all funds the information is shown for Class A shares. Fees and expenses
in excess of the percentage shown will be waived. Fee caps for other classes
of shares will vary slightly based on the expenses of those classes.
(2) The fund is part of a master/feeder structure. Management fees are paid by
the portfolio on behalf of the fund.
TABLE C-4. FUND PAYMENTS TO THE INVESTMENT MANAGER AND ITS AFFILIATES*
<Table>
<Caption>
FUND ADMIN DIST IMS SERVICE TA
Selective $477,298 $3,204,968 $4,922,235 $64,993 $1,321,600
</Table>
* The Administrative Services Agreement ("Admin") is between the fund and
Ameriprise Financial. The Agreement of Distribution ("Dist") and Shareholder
Service Agreement ("Service") are between the fund and Ameriprise Financial
Services, Inc. The Investment Management Services Agreement ("IMS") is between
the fund and RiverSource Investments. The Transfer Agent ("TA") Agreement is
between the fund and RiverSource Service Corporation. Services under these
agreements will continue to be provided after the IMS Agreement is approved.
TABLE C-5. BROKERAGE COMMISSIONS PAID TO BROKER-DEALER AFFILIATES
<Table>
<Caption>
BROKER/ AMOUNT OF % OF ALL
FUND DEALER COMMISSIONS COMMISSIONS
Selective N/A N/A N/A
</Table>
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
44
<Page>
TABLE C-6. DATES RELATING TO APPROVAL OF MANAGEMENT AGREEMENT
<Table>
<Caption>
DATE LAST REASON
DATE OF APPROVED BY SUBMITTED TO
FUND CONTRACT SHAREHOLDERS SHAREHOLDERS
Selective 6/10/96 9/9/94 1
</Table>
(1) Shareholders approved (1) basing the fee solely on the assets of the fund,
not on the assets of all of the funds in the fund family and (2) eliminating
provisions regarding administration and accounting services. The fund and
the investment manager then entered into a separate Administrative Services
Agreement.
THE FUND'S INDEPENDENT REGISTERED PUBLIC ACCOUNTANT. The 1940 Act provides that
every registered investment company must be audited at least once each year by
independent registered public accountants selected by a majority of the
independent Board members. The Selling Fund's Board has selected KPMG LLP to be
the Fund's independent registered public accountant for the current fiscal year.
KPMG LLP, in accordance with Independence Standards Board Standard No. 1 (ISB
No. 1), has confirmed in writing to the Board's Joint Audit Committee that they
are independent accountants with respect to the Fund.
The independent accountants examine the financial statements for the Fund that
are set forth in the annual report to shareholders and provide other requested
non-audit and tax-related services to the Fund. The Joint Audit Committee
reviewed and discussed the audited financial statements with RiverSource
Investments and reviewed with KPMG LLP the matters required to be discussed by
SAS 61 (for example, methods used to account for significant unusual
transactions).
The Joint Audit Committee does not consider other non-audit services provided by
KPMG LLP to be incompatible with maintaining the independence of KPMG LLP in its
audits of the Fund, taking into account representations from KPMG LLP, in
accordance with ISB No. 1, regarding its independence from the Fund and its
related entities.
Representatives of KPMG LLP are expected to be present at the meeting. They will
be given the opportunity to make a statement to shareholders and are expected to
be available to respond to any questions that may be raised at the meeting.
JOINT AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES. Pursuant to the
pre-approval requirements of the Sarbanes-Oxley Act of 2002, all services to be
performed by KPMG LLP for the Fund; the Fund's investment adviser; and any
entity controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the Fund, must be pre-approved by the
Joint Audit Committee.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
45
<Page>
AUDIT FEES. During the last two fiscal years, the aggregate fees paid to KPMG
LLP for professional services rendered for the audit of the annual financial
statements or services that are normally provided in connection with statutory
and regulatory filings for the fund were as follows:
TABLE C-7A. AUDIT FEES
DURING THE FUND'S LAST TWO FISCAL YEARS
<Table>
<Caption>
FUND LAST FISCAL YEAR PREVIOUS FISCAL YEAT
Selective $44,000 $44,000
</Table>
The following table shows aggregate fees paid by the Fund to KPMG LLP in each of
the last two fiscal years for services that are not included in Table C-7A. All
of the services performed were pre-approved by the Joint Audit Committee.
- - AUDIT-RELATED FEES. Assurance and related services that are reasonably
related to the performance of the audit or review.
- - TAX FEES. Tax compliance, tax advice and tax planning.
- - ALL OTHER FEES. All other services rendered by KMPG LLP.
TABLE C-7B. AUDIT-RELATED, TAX AND OTHER FEES
DURING THE FUND'S LAST TWO FISCAL YEARS
<Table>
<Caption>
AGGREGATE AGGREGATE AGGREGATE
AUDIT-RELATED FEES TAX FEES OTHER FEES
- ------------------------------------------------------------------------------
LAST PREVIOUS LAST PREVIOUS LAST PREVIOUS
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL
FUND YEAR YEAR YEAR YEAR YEAR YEAR
Selective $211 $224 $6,950 $6,650 $461 $0
</Table>
INVESTMENT MANAGER RELATED FEES
Aggregate Non-Audit Fees for Selective, Investment Manager and its Affiliates
For the year ended Sept. 30, 2005, the aggregate non-audit fees billed for
services rendered to the Fund, to the investment manager and to any entity
controlling, controlled by or under common control with the investment manager
that provides ongoing services to the funds was $94,622. For the year ended
Sept. 30, 2004, the aggregate amount was $133,774.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
46
<Page>
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization dated as of ___, 2005 (the
"Agreement") is between AXP Income Series, Inc. (the "Selling Corporation"), a
Minnesota corporation, on behalf of its series, RiverSource Selective Fund (the
"Selling Fund"), and AXP Fixed Income Series, Inc. (the "Buying Corporation), a
Minnesota corporation, on behalf of its series, RiverSource Diversified Bond
Fund (the "Buying Fund), and RiverSource Investments, LLC (solely for the
purposes of Section 3c and 10 of the Agreement).
In consideration of their mutual promises, the parties agree as follows:
1. SHAREHOLDER APPROVAL. The Selling Fund will call a meeting of its
shareholders for the purpose of approving the Agreement and the
transactions it contemplates (the "Reorganization"). The Buying Fund agrees
to furnish data and information, as reasonably requested, for the proxy
statement to be furnished to shareholders of the Selling Fund.
2. REORGANIZATION.
a. Plan of Reorganization. The Reorganization will be a reorganization
within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"). At the Closing, the Selling Corporation
will convey all of the assets of the Selling Fund to the Buying Fund.
The Buying Fund will assume all liabilities of the Selling Fund. At
the Closing, the Buying Corporation will deliver shares of the Buying
Fund, including fractional shares, to the Selling Corporation. The
number of shares will be determined by dividing the value of the net
assets of shares of the Selling Fund, computed as described in
paragraph 3(a), by the net asset value of one share of the Buying
Fund, computed as described in paragraph 3(b). The Selling Fund will
not pay a sales charge on the receipt of Buying Fund shares in
exchange for the assets of the Selling Fund. In addition, the
shareholders of the Selling Fund will not pay a sales charge on
distribution to them of shares of the Buying Fund.
b. Closing and Effective Time of the Reorganization. The Reorganization
and all related acts necessary to complete the Reorganization (the
"Closing") will occur on the first day on which the New York Stock
Exchange (the "NYSE") is open for business following approval of
shareholders of the Selling Fund and receipt of all necessary
regulatory approvals, or such later date as the parties may agree.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.1
<Page>
3. VALUATION OF NET ASSETS.
a. The net asset value of shares of the Selling Fund will be computed as
of the close of regular trading on the NYSE on the day of Closing (the
"Valuation Date") using the valuation procedures in the Buying Fund's
prospectus.
b. The net asset value per share of shares of the Buying Fund will be
determined as of the close of regular trading on the NYSE on the
Valuation Date, using the valuation procedures in the Buying Fund's
prospectus.
c. At the Closing, the Selling Fund will provide the Buying Fund with a
copy of the computation showing the valuation of the net asset value
per share of shares of the Selling Fund on the Valuation Date. The
Buying Fund will provide the Selling Fund with a copy of the
computation showing the determination of the net asset value per share
of shares of the Buying Fund on the Valuation Date. Both computations
will be certified by an officer of RiverSource Investments, LLC, the
investment manager.
4. LIQUIDATION AND DISSOLUTION OF THE SELLING FUND.
a. As soon as practicable after the Valuation Date, the Selling
Corporation will liquidate the Selling Fund and distribute shares of
the Buying Fund to the Selling Fund's shareholders of record. The
Buying Fund will establish shareholder accounts in the names of each
Selling Fund shareholder, representing the respective pro rata number
of full and fractional shares of the Buying Fund due to each
shareholder. All issued and outstanding shares of the Selling Fund
will simultaneously be cancelled on the books of the Selling
Corporation. The Buying Fund or its transfer agent will establish
shareholder accounts in accordance with instructions from the Selling
Corporation.
b. Immediately after the Valuation Date, the share transfer books of the
Selling Corporation relating to the Selling Fund will be closed and no
further transfer of shares will be made.
c. Promptly after the distribution, the Buying Fund or its transfer agent
will notify each shareholder of the Selling Fund of the number of
shares distributed to the shareholder and confirm the registration in
the shareholder's name.
d. As promptly as practicable after the liquidation of the Selling Fund,
and in no event later than twelve months from the date of the Closing,
the Selling Fund will be dissolved.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.2
<Page>
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYING CORPORATION. The
Buying Corporation represents and warrants to the Selling Fund as follows:
a. Organization, Existence, etc. The Buying Corporation is a corporation
duly organized, validly existing and in good standing under the laws
of the state of Minnesota and has the power to carry on its business
as it is now being conducted.
b. Registration as Investment Company. The Buying Fund is a series of the
Buying Corporation, registered under the Investment Company Act of
1940 (the "1940 Act") as an open-end, management investment company.
c. Capitalization. The Buying Corporation has authorized capital of
10,000,000,000 shares of common stock, par value $0.01 per share. All
of the outstanding shares have been duly authorized and are validly
issued, fully paid and non-assessable. Since the Buying Fund is
engaged in the continuous offering and redemption of its shares, the
number of outstanding shares may vary daily.
d. Financial Statements. The audited financial statements as of the end
of the last fiscal year, and the subsequent unaudited semi-annual
financial statements, if any (the "Buying Fund Financial Statements"),
fairly present the financial position of the Buying Fund, and the
results of its operations and changes in its net assets for the
periods shown.
e. Shares to be Issued Upon Reorganization. The shares to be issued in
connection with the Reorganization will be duly authorized and, at the
time of the Closing, will be validly issued, fully paid and
non-assessable.
f. Authority Relative to the Agreement. The Buying Corporation has the
power to enter into and carry out the obligations described in this
Agreement. The Agreement and the transactions contemplated by it have
been duly authorized by the Board of Directors of the Buying
Corporation and no other proceedings by the Buying Corporation or the
Buying Fund are necessary.
g. No Violation. The Buying Corporation is not in violation of its
Articles of Incorporation or By-Laws (the "Articles") or in default in
the performance of any material agreement to which it is a party. The
execution of this Agreement and the completion of the transactions
contemplated by it will not conflict with, or constitute a breach of,
any material contract or other instrument to which the Buying Fund is
subject. The transactions will not result in any violation of the
provisions of the Articles or any law, administrative regulation or
administrative or court decree applicable to the Buying Fund.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.3
<Page>
h. Liabilities. There are no liabilities of the Buying Fund other than:
- liabilities disclosed in the Buying Fund Financial Statements,
- liabilities incurred in the ordinary course of business
subsequent to the date of the latest annual or semi-annual
financial statements, or
- liabilities previously disclosed to the Selling Fund, none of
which has been materially adverse to the business, assets or
results of operation of the Buying Fund.
i. Litigation. There is no litigation, administrative proceeding or
investigation before any court or governmental body currently pending
or, to the knowledge of the Buying Fund, threatened, that would
materially and adversely affect the Buying Fund, its financial
condition or the conduct of its business, or that would prevent or
hinder completion of the transactions contemplated by this Agreement.
The Buying Fund knows of no facts that might form the basis for the
institution of any such litigation, proceeding or investigation and
the Buying Fund is not a party to or subject to the provisions of any
order, decree or judgment.
j. Contracts. Except for contracts and agreements previously disclosed to
the Selling Corporation, the Buying Fund is not a party to or subject
to any material contract, debt instrument, plan, lease, franchise,
license or permit.
k. Taxes. The Buying Fund has qualified as a regulated investment company
under the Internal Revenue Code with respect to each taxable year
since commencement of its operations and will qualify as a regulated
investment company at all times through the Closing. As of the
Closing, the Buying Fund will (i) have filed all federal and other tax
returns and reports that have been required to be filed, (ii) have
paid or provided for payment of all federal and other taxes shown to
be due on such returns or on any assessments received, (iii) have
adequately provided for all tax liabilities on its books, (iv) except
as disclosed to the Selling Fund, not have had any tax deficiency or
liability asserted against it or question with respect thereto raised,
and (v) except as disclosed to the Selling Fund, not be under audit by
the Internal Revenue Service or by any state or local tax authority
for taxes in excess of those already paid.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.4
<Page>
l. Registration Statement. The Buying Fund will file a registration
statement on Form N-14 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of 1933
(the "1933 Act") relating to the shares to be issued in the
Reorganization. At the time the Registration Statement becomes
effective, at the time of the shareholders' meeting and at the
Closing, the Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading. However, none
of the representations and warranties in this subsection apply to
statements in, or omissions from, the Registration Statement made in
reliance on information furnished by the Selling Fund for use in the
Registration Statement.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING CORPORATION. The
Selling Corporation represents and warrants to the Buying Fund as follows:
a. Organization, Existence, etc. The Selling Corporation is a corporation
duly organized, validly existing and in good standing under the laws
of the state of Minnesota and has the power to carry on its business
as it is now being conducted.
b. Registration as Investment Company. The Selling Fund is a series of
the Selling Corporation, registered under the 1940 Act as an open-end,
management investment company.
c. Capitalization. The Selling Corporation has authorized capital of
10,000,000,000 shares of common stock, par value $0.01 per share. All
of the outstanding shares have been duly authorized and are validly
issued, fully paid and non-assessable. Since the Selling Fund is
engaged in the continuous offering and redemption of its shares, the
number of outstanding shares may vary daily.
d. Financial Statements. The audited financial statements as of the end
of the last fiscal year, and the subsequent unaudited semi-annual
financial statements, if any (the "Selling Fund Financial
Statements"), fairly present the financial position of the Selling
Fund, and the results of its operations and changes in its net assets
for the periods shown.
e. Authority Relative to the Agreement. The Selling Corporation has the
power to enter into and to carry out its obligations under this
Agreement. The Agreement and the transactions contemplated by it have
been duly authorized by the Board of Directors of the Selling
Corporation and no other proceedings by the Selling Corporation or the
Selling Fund are necessary.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.5
<Page>
f. No Violation. The Selling Corporation is not in violation of its
Articles or in default in the performance of any material agreement to
which it is a party. The execution of this Agreement and the
completion of the transactions contemplated by it will not conflict
with or constitute a breach of, any material contract to which the
Selling Fund is subject. The transactions will not result in any
violation of the provisions of the Articles or any law, administrative
regulation or administrative or court decree applicable to the Selling
Fund.
g. Liabilities. There are no liabilities of the Selling Fund other than:
- liabilities disclosed in the Selling Fund Financial Statements,
- liabilities incurred in the ordinary course of business
subsequent to the date of the latest annual or semi-annual
financial statements, or
- liabilities previously disclosed to the Buying Fund, none of
which has been materially adverse to the business, assets or
results of operation of the Selling Fund.
h. Litigation. There is no litigation, administrative proceeding or
investigation before any court or governmental body currently pending
or, to the knowledge of the Selling Fund, threatened, that would
materially and adversely affect the Selling Fund, its financial
condition or the conduct of its business, or that would prevent or
hinder completion of the transactions contemplated by this Agreement.
The Selling Fund knows of no facts that might form the basis for the
institution of any such litigation, proceeding or investigation and is
not a party to or subject to the provisions of any order, decree or
judgment.
i. Contracts. Except for contracts and agreements previously disclosed to
the Buying Corporation, the Selling Fund is not a party to or subject
to any material contract, debt instrument, plan, lease, franchise,
license or permit.
j. Taxes. The Selling Fund has qualified as a regulated investment
company under the Internal Revenue Code with respect to each taxable
year since commencement of its operations and will qualify as
regulated investment company at all times through the Closing. As of
the Closing, the Selling Fund will (i) have filed all federal and
other tax returns and reports that have been required to be filed,
(ii) have paid or provided for payment of all federal and other taxes
shown to be due on such returns or on any assessments received, (iii)
have adequately provided for all tax liabilities on its books, (iv)
except as disclosed to the Buying Fund, not have had any tax
deficiency or liability asserted against it or question with respect
thereto raised, and (v) except as disclosed to the Buying Fund, not be
under audit by the Internal Revenue Service or by any state or local
tax authority for taxes in excess of those already paid.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.6
<Page>
k. Fund Securities. All securities listed in the schedule of investments
of the Selling Fund as of the Closing will be owned by the Selling
Fund free and clear of any encumbrances, except as indicated in the
schedule.
l. Registration Statement. The Selling Fund will cooperate with the
Acquiring Fund and will furnish information relating to the Selling
Corporation and the Selling Fund required in the Registration
Statement. At the time the Registration Statement becomes effective,
at the time of the shareholders' meeting and at the Closing, the
Registration Statement, as it relates to the Selling Corporation or
the Selling Fund, will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein not misleading. However, the representations and warranties in
this subsection apply only to statements in or omissions from the
Registration Statement made in reliance upon information furnished by
the Selling Corporation or the Selling Fund for use in the
Registration Statement.
7. CONDITIONS TO OBLIGATIONS OF THE BUYING CORPORATION. The obligations of the
Buying Corporation with respect to the Reorganization are subject to the
satisfaction of the following conditions:
a. Shareholder Approval. This Agreement will have been approved by the
affirmative vote of the holders of the majority of the voting power of
all Selling Fund shares entitled to vote.
b. Representations, Warranties and Agreements. The Selling Corporation
and the Selling Fund will have complied with this Agreement and each
of the representations and warranties in this Agreement will be true
in all material respects as of the Closing. An officer of the Selling
Corporation will provide a certificate to the Buying Fund confirming
that, as of the Closing, the representations and warranties set forth
in Section 6 are true and correct and that there have been no material
adverse changes in the financial condition, results of operations,
business, properties or assets of the Selling Fund since the date of
its last financial statement, except as otherwise indicated in any
financial statements, certified by an officer of the Selling
Corporation, and delivered to the Buying Fund on or prior to the last
business day before the Closing.
c. Regulatory Approvals.
- The Registration Statement referred to in Section 5(l) will be
effective and no stop orders under the 1933 Act will have been
issued.
- All necessary approvals, consents and exemptions from federal and
state regulatory authorities will have been obtained.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.7
<Page>
d. Tax Opinion. The Buying Corporation will have received the opinion of
Ropes & Gray LLP dated as of the Closing, as to the federal income tax
consequences of the Reorganization to the Buying Fund and its
shareholders. For purposes of rendering their opinion, Ropes & Gray
LLP may rely, as to factual matters, upon the statements made in this
Agreement, the proxy statement which will be distributed to the
shareholders of the Selling Fund, and other written representations as
an officer of the Selling Corporation will have verified as of
Closing. The opinion of Ropes & Gray LLP will be to the effect that:
(i) neither the Selling Fund nor the Buying Fund will recognize any
gain or loss upon the transfer of the assets of the Selling Fund to,
and assumption of its liabilities by, the Buying Fund in exchange for
shares of the Buying Fund and upon the distribution of the shares to
the Selling Fund shareholders in exchange for their shares of the
Selling Fund; (ii) the shareholders of the Selling Fund who receive
shares of the Buying Fund in the Reorganization will not recognize any
gain or loss on the exchange of their shares of the Selling Fund for
the shares of the Buying Fund; (iii) the holding period and the basis
of the shares received by the Selling Fund shareholders will be the
same as the holding period and the basis of the shares of the Selling
Fund surrendered in the exchange; (iv) the holding period and the
basis of the assets acquired by the Buying Fund will be the same as
the holding period and the basis of the assets to the Selling Fund
immediately prior to the Reorganization.
e. Opinion of Counsel. The Buying Corporation will have received an
opinion of counsel for the Selling Corporation, dated as of the
Closing, to the effect that: (i) the Selling Corporation is a
corporation duly organized and validly existing under the laws of the
state of Minnesota; (ii) the Selling Fund is a series of the Selling
Corporation, an open-end investment company registered under the 1940
Act; (iii) this Agreement and the Reorganization have been duly
authorized and approved by all requisite action of the Selling
Corporation and the Selling Fund and this Agreement has been duly
executed by, and is a valid and binding obligation of, the Selling
Corporation.
f. Declaration of Dividend. The Selling Fund, prior to the Closing, has
declared a dividend or dividends, which, together with all previous
such dividends, shall have the effect of distributing to the Selling
Fund shareholders (i) all of the excess of (x) the Selling Fund's
investment income excludable from gross income under Section 103 of
the Code over (y) the Selling Fund's deductions disallowed under
Sections 265 and 171 of the Code, (ii) all of the Selling Fund's
investment company
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.8
<Page>
taxable income as defined in Section 852 of the Code (in each case
computed without regard to any deduction for dividends paid) and (iii)
all of the Selling Fund's net capital gain realized (after reduction
for any capital loss carryover), in each case for the current taxable
year (which will end on the Closing date) and any preceding taxable
years for which such a dividend is eligible to be made under Section
855 of the Code.
8. CONDITIONS TO OBLIGATIONS OF THE SELLING CORPORATION. The obligations of
the Selling Corporation with respect to the Reorganization are subject to
the satisfaction of the following conditions:
a. Shareholder Approval. This Agreement will have been approved by the
affirmative vote of the holders of the majority of the voting power of
all Selling Fund shares entitled to vote.
b. Representations, Warranties and Agreements. The Buying Fund will have
complied with this Agreement and each of the representations and
warranties in this Agreement will be true in all material respects as
of the Closing. An officer of the Buying Corporation will provide a
certificate to the Selling Fund confirming that, as of the Closing,
the representations and warranties set forth in Section 5 are true and
correct and that there have been no material adverse changes in the
financial condition, results of operations, business, properties or
assets of the Buying Fund since the date of its last financial
statement, except as otherwise indicated in any financial statements,
certified by an officer of the Buying Corporation, and delivered to
the Selling Fund on or prior to the last business day before the
Closing.
c. Regulatory Approvals.
- The Registration Statement referred to in Section 5(l) will be
effective and no stop orders under the 1933 Act will have been
issued.
- All necessary approvals, consents and exemptions from federal and
state regulatory authorities will have been obtained.
d. Tax Opinion. The Selling Corporation will have received the opinion of
Ropes & Gray LLP dated as of the Closing, as to the federal income tax
consequences of the Reorganization to the Selling Fund and its
shareholders. For purposes of rendering their opinion, Ropes & Gray
LLP may rely, as to factual matters, upon the statements made in this
Agreement, the proxy statement which will be distributed to the
shareholders of the Selling Fund, and other written representations as
an officer of the Buying Corporation will have verified as of Closing.
The opinion of Ropes & Gray LLP will be to the effect that: (i)
neither the Selling Fund nor the Buying Fund will recognize any gain
or loss
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
A.9
<Page>
upon the transfer of the assets of the Selling Fund to, and assumption
of its liabilities by, the Buying Fund in exchange for shares of the
Buying Fund and upon the distribution of the shares to the Selling
Fund shareholders in exchange for their shares of the Selling Fund;
(ii) the shareholders of the Selling Fund who receive shares of the
Buying Fund in the Reorganization will not recognize any gain or loss
on the exchange of their shares of the Selling Fund for the shares of
the Buying Fund; (iii) the holding period and the basis of the shares
received by the Selling Fund shareholders will be the same as the
holding period and the basis of the shares of the Selling Fund
surrendered in the exchange; (iv) the holding period and the basis of
the assets acquired by the Buying Fund will be the same as the holding
period and the basis of the assets to the Selling Fund immediately
prior to the Reorganization; and (v) the Buying Fund will succeed to
and take into account the items of the Selling Fund described in
Section 381(c) of the Code, subject to the conditions and limitations
specified in Sections 381, 382, 383, and 384 of the Code and the
regulations thereunder.
e. Opinion of Counsel. The Selling Corporation will have received the
opinion of counsel for the Buying Corporation, dated as of the
Closing, to the effect that: (i) the Buying Corporation is a
corporation duly organized and validly existing under the laws of the
state of Minnesota; (ii) the Buying Fund is a series of the Buying
Corporation, an open-end investment company registered under the 1940
Act; (iii) this Agreement and the Reorganization have been authorized
and approved by all requisite action of the Buying Corporation and the
Buying Fund and this Agreement has been duly executed by, and is a
valid and binding obligation of, the Buying Corporation; and (iv) the
shares to be issued in the Reorganization are duly authorized and upon
issuance in accordance with this Agreement will be validly issued,
fully paid and non-assessable shares of the Buying Fund.
9. AMENDMENT; TERMINATION; NON-SURVIVAL OF COVENANTS, WARRANTIES AND
REPRESENTATIONS.
a. This Agreement may be amended in writing if authorized by the
respective Boards of Directors. The Agreement may be amended at any
time before or after approval by the shareholders of the Selling Fund,
but after shareholder approval, no amendment shall be made that
substantially changes the terms of paragraphs 2 or 3.
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b. At any time prior to the Closing, any of the parties may waive in
writing (i) any inaccuracies in the representations and warranties
made to it and (ii) compliance with any of the covenants or conditions
made for its benefit. However, neither party may waive the requirement
to obtain shareholder approval or the requirement to obtain a tax
opinion.
c. The Selling Corporation may terminate this Agreement at any time prior
to the Closing by notice to the Buying Corporation if a material
condition to its performance or a material covenant of the Buying
Corporation on behalf of the Buying Fund is not fulfilled on or before
the date specified for its fulfillment or a material breach of this
Agreement is made by the Buying Corporation on behalf of the Buying
Fund and is not cured.
d. The Buying Corporation may terminate this Agreement at any time prior
to the Closing by notice to the Selling Corporation if a material
condition to its performance or a material covenant of the Selling
Corporation on behalf of the Selling Fund is not fulfilled on or
before the date specified for its fulfillment or a material breach of
this Agreement is made by the Selling Corporation on behalf of the
Selling Fund and is not cured.
e. This Agreement may be terminated by any party at any time prior to the
Closing, whether before or after approval by the shareholders of the
Selling Fund, without any liability on the part of either party or its
respective directors, officers, or shareholders, on written notice to
the other party, and shall be terminated without liability as of the
close of business on Dec. 31, 2006, or a later date agreed upon by the
parties, if the Closing is not on or prior to that date.
f. The representations, warranties and covenants contained in this
Agreement, or in any document delivered in connection with this
Agreement, will survive the Reorganization.
10. EXPENSES. RiverSource Investments, LLC will pay the costs of carrying out
the provisions of this Agreement whether or not the Reorganization is
completed.
11. GENERAL.
a. Headings. The headings contained in this Agreement are for reference
purposes only and will not affect the meaning or interpretation of
this Agreement. Nothing in this Agreement is intended to confer upon
any other person any rights or remedies by reason of this Agreement.
b. Governing Law. This Agreement will be governed by the laws of the
state of Minnesota.
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12. INDEMNIFICATION.
Each party will indemnify and hold the other and its officers and directors
(each an "Indemnitee") harmless from and against any liability or other
cost and expense, in connection with the defense or disposition of any
action, suit, or other proceeding, before any court or administrative or
investigative body in which the Indemnitee may be involved as a party, with
respect to actions taken under this Agreement. However, no Indemnitee will
be indemnified against any liability or expense arising by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the Indemnitee's position.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be signed.
AXP Income Series, Inc.
on behalf of RiverSource Selective Fund
By
--------------------------------------------
Leslie L. Ogg
Vice President
AXP Fixed Income Series, Inc.
on behalf of RiverSource Diversified Bond Fund
By
--------------------------------------------
Leslie L. Ogg
Vice President
The undersigned is a party to this Agreement for purposes of Section 3c
and 10 only.
RiverSource Investments, LLC
By
--------------------------------------------
Paula R. Meyer
Senior Vice President and General Manager - Mutual Funds
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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EXHIBIT B
MATTERS SUBJECT TO APPROVAL AT REGULAR MEETING OF BUYING FUND
In addition to voting on proposals to elect Board members, to amend the Articles
of Incorporation and to approve the IMS Agreement, Buying Fund shareholders will
consider the following:
APPROVE OR REJECT CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
The fund has some investment policies that are fundamental. This means the
policies can be changed only with the approval of shareholders. RiverSource
Investments recommended to the Board that certain of those policies be modified
in order to standardize the policies for all funds and to eliminate unnecessary
limitations.
RiverSource Investments believes that increased standardization will help to
promote operational efficiencies and facilitate monitoring of compliance with
fundamental investment policies. Adoption of a new or revised policy is not
intended to change current investment techniques employed for the fund. The
Board recommends the following changes to the fund's fundamental investment
policies:
A. DIVERSIFICATION.
The Board recommends that the fund's fundamental policy with respect to
diversification be revised to give the fund the maximum flexibility permitted by
the 1940 Act. The Board recommends that shareholders vote to replace the fund's
current fundamental investment policy with the following policy (additional or
revised language is [Underline]underlined[/Underline]):
The fund will not invest more than 5% of its total assets in securities of
any company, government, or political subdivision thereof, except the
limitation will not apply to investments in securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities [Underline]or
other investment companies[/Underline], and except that up to 25% of the
fund's total assets may be invested without regard to this 5% limitation.
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The percentage limits in the proposed policy are required under the 1940 Act.
The amended policy makes one change from the current policy: subject to
applicable 1940 Act requirements, it would permit the fund to invest without
limit in the securities of other investment companies. Pursuant to an exemptive
order granted by the Securities and Exchange Commission (the "SEC"), the fund
may invest up to 25% of its total assets in a non-publicly offered money market
fund managed by RiverSource Investments (the "cash pool fund"). The cash pool
fund is not expected to pay investment advisory, management, or transfer agent
fees, although it may do so subject to the conditions of the SEC order and Board
approval. The cash pool fund will incur minimal costs for services, such as
custodian and auditor fees. The investment manager anticipates that making use
of the cash pool fund will benefit the fund by enhancing the efficiency of cash
management and by providing increased short-term investment opportunities. If
the proposal is approved, the cash pool fund is expected to serve as a principal
option for managing the cash positions of the fund. Future amendments to the
fund's fundamental diversification policy would continue to require shareholder
approval.
B. TEN PERCENT LIMITATION IN SINGLE ISSUER.
The Board recommends that the fund's fundamental policy with respect to
investment in a single issuer be revised to permit the fund the maximum
flexibility permitted by the 1940 Act. The Board recommends that shareholders
vote to replace the fund's current fundamental investment policy with the
following policy (additional language is underlined):
The Fund will not purchase more than 10% of the outstanding voting
securities of an issuer, [Underline]except that up to 25% of the
Fund's assets may be invested without regard to this 10%
limitation.[/Underline]
The 10% percent limit in the proposed policy is required under the 1940 Act.
Under the 1940 Act, a fund is permitted to invest up to 25% of its assets
without regard to the 10% limitation. The Board recommends that shareholders
amend the policy so that it reflects the terms of the 1940 Act. The proposal is
not expected to materially affect the operation of the fund. However, the
adoption of the proposed investment policy will standardize investment policies.
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C. LENDING
The Board recommends that the fund's fundamental policies with respect to
lending be replaced with the following policy:
The Fund will not lend securities or participate in an interfund lending
program if the total of all such loans would exceed 33 1/3% of the Fund's
total assets except this fundamental investment policy shall not prohibit
the Fund from purchasing money market, loan participation or other debt
securities, or from entering into repurchases agreements.
Currently each of the funds has two policies with respect to lending. One policy
limits lending of portfolio securities to 30% of net assets and the other policy
limits cash loans to 5% of total assets. In addition, certain funds have a
policy prohibiting loans to the investment manager, or to board members and
officers of the investment manager or the fund. This third policy simply states
a prohibition of the 1940 Act and the fund is not required to declare this
policy as a fundamental policy. It is proposed that all three of these policies
be superseded by the policy stated above.
The proposal is not expected to materially affect the operation of the fund.
However, the proposed policy would clarify that the fund can participate in an
interfund borrowing and lending program with other RiverSource Funds, subject to
the requirements of an SEC exemptive order. A fund may only borow money for
temporary purposes and not make investments. Appropriate safeguards will be
implemented to assure that the fund will not be disadvantaged by making loans to
affiliated funds. The proposed policy also would confirm the fund's ability to
invest in direct debt instruments such as loans and loan participations, which
are interests in amounts owed to another party by a company, government or other
borrower. These types of securities may have additional risks beyond
conventional debt securities because they may provide less legal protection for
the fund, or there may be a requirement that the fund supply additional cash to
a borrower on demand. Finally, the adoption of the proposed investment policy
will advance the goal of standardizing investment policies.
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D. BORROWING
The Board recommends that the fund's fundamental policy with respect to
borrowing be replaced with the following policy:
The fund may not borrow money, except for temporary purposes (not for
leveraging or investment) in an amount not exceeding 33 1/3% of its total
assets (including the amount borrowed) less liabilities (other than
borrowings) immediately after the borrowings.
Funds typically borrow money to meet redemptions in order to avoid forced,
unplanned sales of portfolio securities. This technique allows RiverSource
Investments greater flexibility in managing the fund's cash flow. The current
policy limits borrowing to "emergency or extraordinary purposes". In order to
avoid debate over what constitutes emergency or extraordinary purposes, it is
proposed to revise the policy to reflect that the purposes, whatever the
circumstances, must be temporary. The fund may not use borrowing for leverage or
for investment purposes. In addition, the policy for certain funds includes a
prohibition on borrowing "property". The Board recommends the term be deleted in
order to standardize investment policies.
BOARD RECOMMENDATION AND VOTE REQUIRED. The Board recommends that shareholders
approve the proposed changes. Changes in fundamental policies must be approved
by the lesser of (a) a majority of the fund's outstanding shares or (b) 67% of
the shares voted at the meeting, so long as more than 50% of the shares actually
vote. If the any of the proposed changes is not approved, the fund will continue
to operate under its current policy.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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EXHIBIT C
MINNESOTA BUSINESS CORPORATION ACT SECTIONS 302A.471 AND 302A.473
Minnesota law requires that we provide you with a copy of the state law on
dissenters' rights. Notwithstanding the provisions of the law set out below, the
SEC has taken the position that use of state appraisal procedures by a
registered mutual fund such as the Fund would be a violation of Rule 22c-1, the
forward pricing rule, under the 1940 Act. As a result, if any shareholder elects
to exercise dissenters' rights under Minnesota law, the Fund intends to submit
this question to a court of competent jurisdiction. In that event, a dissenting
shareholder would not receive any payment until the end of the court proceeding.
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS
SUBDIVISION 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares
in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that
it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited
through the authorization or issuance of securities of an existing or
new class or series with similar or different voting rights; except
that an amendment to the articles of an issuing public corporation
that provides that section 302A.671 does not apply to a control share
acquisition does not give rise to the right to obtain payment under
this section;
(b) A sale, lease, transfer, or other disposition of all or substantially all
of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court,
or a disposition for cash on terms requiring that all or substantially all
of the net proceeds of disposition be distributed to the shareholders in
accordance with their respective interests within one year after the date
of disposition;
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(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3, and
except for a plan of merger adopted under section 302A.626;
(d) A plan of exchange, whether under this chapter or under chapter 322B, to
which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, except as provided in subdivision 3;
or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their
shares.
SUBDIVISION 2. BENEFICIAL OWNERS.
(a) A shareholder shall not assert dissenters' rights as to less than all of
the shares registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are beneficially
owned by another person but registered in the name of the shareholder and
discloses the name and address of each beneficial owner on whose behalf the
shareholder dissents. In that event, the rights of the dissenter shall be
determined as if the shares as to which the shareholder has dissented and
the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of
this section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
SUBDIVISION 3. RIGHTS NOT TO APPLY.
(a) Unless the articles, the bylaws, or a resolution approved by the board
otherwise provide, the right to obtain payment under this section does not
apply to a shareholder of (1) the surviving corporation in a merger with
respect to shares of the shareholder that are not entitled to be voted on
the merger or (2) the corporation whose shares will be acquired by the
acquiring corporation in a plan of exchange with respect to shares of the
shareholder that are not entitled to be voted on the plan of exchange and
are not exchanged in the plan of exchange.
(b) If a date is fixed according to section 302A.445, subdivision 1, for the
determination of shareholders entitled to receive notice of and to vote on
an action described in subdivision 1, only shareholders as of the date
fixed, and beneficial owners as of the date fixed who hold through
shareholders, as provided in subdivision 2, may exercise dissenters'
rights.
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SUBDIVISION 4. OTHER RIGHTS. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
SUBDIVISION 1. DEFINITIONS.
(a) For purposes of this section, the terms defined in this subdivision have
the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a corporation
immediately before the effective date of the corporate action referred to
in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date of
the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in
section 549.09 for interest on verdicts and judgments.
SUBDIVISION 2. NOTICE OF ACTION. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
SUBDIVISION 3. NOTICE OF DISSENT. If the proposed action must be approved by the
shareholders, a shareholder who is entitled to dissent under section 302A.471
and who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand the
fair value of the shares owned by the shareholder and must not vote the shares
in favor of the proposed action.
SUBDIVISION 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES.
(a) After the proposed action has been approved by the board and, if necessary,
the shareholders, the corporation shall send to all shareholders who have
complied with subdivision 3 and to all shareholders entitled to dissent if
no shareholder vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
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(3) A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired
the shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description of
the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting shareholder
must demand payment and deposit certificated shares or comply with any
restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all
other rights of a shareholder until the proposed action takes effect.
SUBDIVISION 5. PAYMENT; RETURN OF SHARES.
(a) After the corporate action takes effect, or after the corporation receives
a valid demand for payment, whichever is later, the corporation shall remit
to each dissenting shareholder who has complied with subdivisions 3 and 4
the amount the corporation estimates to be the fair value of the shares,
plus interest, accompanied by:
(1) The corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date
of the corporate action, together with the latest available interim
financial statements;
(2) An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a) from
a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a
person who was not a beneficial owner on that date. If the dissenter has
complied with subdivisions 3 and 4, the corporation shall forward to the
dissenter the materials described in paragraph (a), a statement of the
reason for withholding the remittance, and an offer to pay to the dissenter
the amount listed in the materials if the dissenter agrees to accept that
amount in full satisfaction. The dissenter may decline the offer and demand
payment under subdivision 6. Failure to do so entitles the dissenter only
to the amount offered. If the dissenter makes demand, subdivision 7 and 8
apply.
(c) If the corporation fails to remit payment within 60 days of the deposit of
certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
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SUBDIVISION 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
SUBDIVISION 7. PETITION; DETERMINATION. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in a court a petition requesting that
the court determine the fair value of the shares, plus interest. The petition
shall be filed in the county in which the registered office of the corporation
is located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedures apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
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SUBDIVISION 8. COSTS; FEES; EXPENSES.
(a) The court shall determine the costs and expenses of a proceeding under
subdivision 7, including the reasonable expenses and compensation of any
appraisers appointed by the court, and shall assess those costs and
expenses against the corporation, except that the court may assess part or
all of those costs and expenses against a dissenter whose action in
demanding payment under subdivision 6 is found to be arbitrary, vexatious,
or not in good faith.
(b) If the court finds that the corporation has failed to comply substantially
with this section, the court may assess all fees and expenses of any
experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily,
vexatiously, or not in good faith in bringing the proceeding, and may be
awarded to a party injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any.
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EXHIBIT D
Prospectus
[RIVERSOURCE(SM) INVESTMENTS LOGO]
RIVERSOURCE(SM)
DIVERSIFIED BOND FUND
PROSPECTUS OCT. 28, 2005
- - RIVERSOURCE DIVERSIFIED BOND FUND (FORMERLY AXP(R) DIVERSIFIED BOND FUND)
SEEKS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF CURRENT INCOME WHILE
CONSERVING THE VALUE OF THE INVESTMENT FOR THE LONGEST PERIOD OF TIME.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
You may qualify for sales charge discounts on purchases of Class A shares.
Please notify your financial advisor or investment professional if you have
other accounts holding shares of RiverSource funds to determine whether you
qualify for a sales charge discount. See "Buying and Selling Shares" for more
information.
NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.1
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TABLE OF CONTENTS
THE FUND D.3
Objective D.3
Principal Investment Strategies D.3
Principal Risks D.4
Past Performance D.5
Fees and Expenses D.8
Other Investment Strategies and Risks D.10
Fund Management and Compensation D.11
BUYING AND SELLING SHARES D.17
Transactions Through Unaffiliated Financial Intermediaries D.17
Valuing Fund Shares D.18
Investment Options D.19
Purchasing Shares D.21
Sales Charges D.24
Exchanging/Selling Shares D.30
DISTRIBUTIONS AND TAXES D.35
Dividends and Capital Gain Distributions D.35
Reinvestments D.35
Taxes D.36
FINANCIAL HIGHLIGHTS D.37
CORPORATE REORGANIZATION
On Sept. 30, 2005, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly
American Express Financial Corporation) was spun off to shareholders of its
parent corporation, American Express Company (American Express), and is now a
separate public company, trading under the ticker symbol AMP. Ameriprise
Financial provides administrative services to the Fund and is the parent company
of the Fund's investment manager, RiverSource Investments, LLC; the Fund's
distributor, Ameriprise Financial Services, Inc. (formerly American Express
Financial Advisors Inc.); and the Fund's transfer agent, RiverSource Service
Corporation (formerly American Express Client Service Corporation). On Oct. 1,
2005, the Fund changed its name, such that it no longer is branded AXP(R). The
Fund now bears the RiverSource(SM) brand. Ameriprise Financial and its
subsidiaries are no longer affiliated with American Express.
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THE FUND
OBJECTIVE
RiverSource Diversified Bond Fund (the Fund) seeks to provide shareholders with
a high level of current income while conserving the value of the investment for
the longest period of time. Because any investment involves risk, achieving this
objective cannot be guaranteed.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 80% of its net assets
in bonds and other debt securities. At least 50% of the Fund's net assets will
be invested in securities like those included in the Lehman Brothers Aggregate
Bond Index (the Index), which are investment grade and denominated in U.S.
dollars. The Index includes securities issued by the U.S. government, corporate
bonds, and mortgage- and asset-backed securities. Although the Fund emphasizes
high- and medium-quality debt securities, it will assume some credit risk to
achieve higher yield and/or capital appreciation by buying lower-quality (junk)
bonds. The Fund may invest up to 15% in foreign investments, which may include
investments in emerging markets. The Fund will provide shareholders with at
least 60 days' notice of any change in the 80% policy.
The selection of debt obligations is the primary decision in building the
investment portfolio. In pursuit of the Fund's objective, the investment manager
(RiverSource Investments, LLC) chooses investments by:
- - Evaluating the portfolio's total exposure to sectors, industries and
securities relative to the Index.
- - Analyzing factors such as credit quality, interest rate outlook and price to
select the most attractive securities within each sector.
- - Investing in lower-quality (junk) bonds and foreign investments as attractive
opportunities arise.
- - Targeting an average portfolio duration within one year of the duration of
the Index which, as of Aug. 31, 2005, was 4.26 years. Duration measures the
sensitivity of bond prices to changes in interest rates. The longer the
duration of a bond, the longer it will take to repay the principal and
interest obligations and the more sensitive it will be to changes in interest
rates. For example, a five-year duration means a bond is expected to decrease
in value by 5% if interest rates rise 1% and increase in value by 5% if
interest rates fall 1%.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.3
<Page>
In evaluating whether to sell a security, the investment manager considers,
among other factors:
- - Identification of more attractive investments based on relative value.
- - The portfolio's total exposure to sectors, industries and securities relative
to the Index.
- - Whether a security's rating has changed or is vulnerable to a change.
- - Whether a sector or industry is experiencing change.
- - Changes in the interest rate or economic outlook.
PRINCIPAL RISKS
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:
ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance
therefore will reflect in part the ability of the portfolio managers to make
investment decisions that are suited to achieving the Fund's investment
objective. Due to its active management, the Fund could underperform other
mutual funds with similar investment objectives.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable or unwilling to honor a
financial obligation, such as payments due on a bond or a note. If the Fund
purchases unrated securities, or if the rating of a security is reduced after
purchase, the Fund will depend on the investment manager's analysis of credit
risk more heavily than usual. Non-investment grade securities, commonly called
"high-yield" or "junk" bonds, may react more to perceived changes in the ability
of the issuing company to pay interest and principal when due than to changes in
interest rates. Non-investment grade securities have greater price fluctuations
and are more likely to experience a default than investment grade bonds.
INTEREST RATE RISK. The risk of losses attributable to changes in interest
rates. Interest rate risk is generally associated with bond prices: when
interest rates rise, bond prices fall. In general, the longer the maturity or
duration of a bond, the greater its sensitivity to changes in interest rates.
LIQUIDITY RISK. The risk associated from a lack of marketability of securities
which may make it difficult or impossible to sell at desirable prices in order
to minimize loss. The Fund may have to lower the selling price, sell other
investments, or forego another, more appealing investment opportunity.
MARKET RISK. The market value of securities may fall or fail to rise. Market
risk may affect a single issuer, sector of the economy, industry, or the market
as a whole. The market value of securities may fluctuate, sometimes rapidly and
unpredictably.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.4
<Page>
PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be
called, or otherwise converted, prepaid, or redeemed, before maturity. This risk
is primarily associated with asset-backed securities, including mortgage backed
securities. If a security is converted, prepaid, or redeemed, before maturity,
particularly during a time of declining interest rates, the investment manager
may not be able to reinvest in securities providing as high a level of income,
resulting in a reduced yield to the Fund. Conversely, as interest rates rise,
the likelihood of prepayment decreases. The investment manager may be unable to
capitalize on securities with higher interest rates because the Fund's
investments are locked in at a lower rate for a longer period of time.
PAST PERFORMANCE
The following bar chart and table provide some illustration of the risks of
investing in the Fund by showing, respectively:
- - how the Fund's performance has varied for each full calendar year shown on
the bar chart, and
- - how the Fund's average annual total returns compare to recognized indexes
shown on the table.
Both the bar chart and the table assume that all distributions have been
reinvested. The performance of different classes varies because of differences
in sales charges and other fees and expenses. How the Fund has performed in the
past (before and after taxes) does not indicate how the Fund will perform in the
future. Performance reflects any fee waivers/expense caps in effect for the
periods reported. In the absence of such fee waivers/expense caps, performance
would have been lower. See "Fee and Expenses" for any current fee
waivers/expense caps.
BAR CHART. Class A share information is shown in the bar chart; the sales charge
for Class A shares is not reflected in the bar chart.
TABLE. The table shows total returns from hypothetical investments in Class A,
Class B, Class C and Class Y shares of the Fund. These returns are compared to
the indexes shown for the same periods. Past performance for Class Y for the
periods prior to March 20, 1995 may be calculated based on the performance of
Class A, adjusted to reflect differences in sales charges, but not differences
in annual Fund operating expenses. For purposes of the performance calculation
in the table we assumed:
- - the maximum sales charge for Class A shares,
- - sales at the end of the period and deduction of the applicable contingent
deferred sales charge (CDSC) for Class B and Class C shares,
- - no sales charge for Class Y shares, and
- - no adjustments for taxes paid by an investor on the reinvested income and
capital gains.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.5
<Page>
AFTER-TAX RETURNS
After-tax returns are shown only for Class A shares. After-tax returns for the
other classes will vary. After-tax returns are calculated using the highest
historical individual federal marginal income tax rate and do not reflect the
impact of state and local taxes. Actual after-tax returns will depend on your
tax situation and most likely will differ from the returns shown in the table.
If you hold your shares in a tax-deferred account, such as a 401(k) plan or an
IRA, the after-tax returns do not apply to you since you will not incur taxes
until you begin to withdraw from your account.
The return after taxes on distributions for a period may be the same as the
return before taxes for the same period if there were no distributions or if the
distributions were small. The return after taxes on distributions and sale of
Fund shares for a period may be greater than the return before taxes for the
same period if there was a tax loss realized on sale of Fund shares. The benefit
of the tax loss (since it can be used to offset other gains) may result in a
higher return.
[CHART]
CLASS A SHARE PERFORMANCE
(BASED ON CALENDAR YEARS)
<Table>
1995 +22.02%
1996 +5.06%
1997 +9.94%
1998 +5.86%
1999 -0.22%
2000 +7.03%
2001 +7.33%
2002 +5.63%
2003 +4.61%
2004 +4.41%
</Table>
During the periods shown in the bar chart, the highest return for a calendar
quarter was +7.79% (quarter ended June 30, 1995) and the lowest return for a
calendar quarter was -2.53% (quarter ended June 30, 2004).
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart; if reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The Fund's Class A year-to-date return at Sept. 30, 2005 was 0.00%.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.6
<Page>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
<Table>
<Caption>
SINCE SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION (B&Y) INCEPTION (C)
RiverSource Diversified Bond:
Class A
Return before taxes -0.55% +4.77% +6.51% N/A N/A
Return after taxes on distributions -1.82% +2.77% +3.98% N/A N/A
Return after taxes on distributions
and sale of fund shares -0.37% +2.81% +3.98% N/A N/A
Class B
Return before taxes -1.39% +4.66% N/A +5.92%(a) N/A
Class C
Return before taxes +2.62% N/A N/A N/A +5.50%(b)
Class Y
Return before taxes +4.58% +5.96% N/A +6.88%(a) N/A
Lehman Brothers Aggregate Bond Index
(reflects no deduction for fees,
expenses or taxes) +4.34% +7.71% +7.72% +7.38%(c) +7.66%(d)
Lipper Intermediate Investment
Grade Index +4.28% +7.33% +7.21% +6.91%(c) +7.40%(d)
</Table>
(a) Inception date is March 20, 1995.
(b) Inception date is June 26, 2000.
(c) Measurement period started April 1, 1995.
(d) Measurement period started July 1, 2000.
The Lehman Brothers 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. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees.
The Lipper Intermediate Investment Grade Index includes the 30 largest
investment grade funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.7
<Page>
FEES AND EXPENSES
Fund investors pay various expenses. The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. Expenses are
based on the Fund's most recent fiscal year, adjusted to reflect current fees.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS Y
Maximum sales charge (load) imposed on purchases(a)
(as a percentage of offering price) 4.75% none none none
Maximum deferred sales charge (load) imposed on sales
(as a percentage of offering price at time of purchase) none(b) 5% 1% none
</Table>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<Table>
<Caption>
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C CLASS Y
Management fees 0.49% 0.49% 0.49% 0.49%
Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00%
Other expenses(c) 0.25% 0.26% 0.26% 0.34%
Total 0.99% 1.75% 1.75% 0.83%
</Table>
(a) This charge may be reduced depending on the value of your total investments
in RiverSource funds. See "Sales Charges."
(b) For Class A purchases over $1,000,000 on which no sales charge is assessed,
a 1% sales charge may apply if you sell your shares within one year after
purchase.
(c) Other expenses include an administrative services fee, a transfer agency
fee, a custody fee and other nonadvisory expenses and, for Class Y shares,
a shareholder service fee.
(d) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until __________, 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 expenses will
not exceed _____% for Class A; _____% for Class B; ______% for Class C and
______% for Class Y.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.8
<Page>
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
These examples assume that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. These
examples also assume that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class A(a) $571 $776 $ 997 $1,635
Class B $578(b) $851(b) $1,050(b) $1,866(c)
Class C $178(b) $551 $ 950 $2,067
Class Y $ 85 $265 $ 461 $1,029
</Table>
(a) Includes a 4.75% sales charge.
(b) Includes the applicable CDSC.
(c) Based on conversion of Class B shares to Class A shares in the ninth year
of ownership.
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class A(a) $571 $776 $997 $1,635
Class B $178 $551 $950 $1,866(b)
Class C $178 $551 $950 $2,067
Class Y $ 85 $265 $461 $1,029
</Table>
(a) Includes a 4.75% sales charge.
(b) Based on conversion of Class B shares to Class A shares in the ninth year
of ownership.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.9
<Page>
OTHER INVESTMENT STRATEGIES AND RISKS
OTHER INVESTMENT STRATEGIES. In addition to the principal investment strategies
previously described, the Fund may invest in other securities and may use other
investment strategies that are not principal investment strategies.
Additionally, the Fund may use derivatives (financial instruments where the
value depends upon, or is derived from, the value of something else) such as
futures, options and forward contracts, to produce incremental earnings, to
hedge existing positions or to increase flexibility. Just as with securities in
which the Fund invests directly, derivatives are subject to a number of risks,
including market, liquidity, interest rate and credit risk. In addition, a
relatively small price movement in the underlying security, currency or index
may result in a substantial gain or loss for the Fund using derivatives. Even
though the Fund's policies permit the use of derivatives in this manner, the
portfolio managers are not required to use derivatives. For more information on
strategies and holdings, and the risks of such strategies, including other
derivative instruments that the Fund may use, see the Fund's Statement of
Additional Information (SAI) and its annual and semiannual reports.
UNUSUAL MARKET CONDITIONS. During unusual market conditions, the Fund may
temporarily invest more of its assets in money market securities than during
normal market conditions. Although investing in these securities would serve
primarily to avoid losses, this type of investing also could prevent the Fund
from achieving its investment objective. During these times, the portfolio
managers may make frequent securities trades that could result in increased
fees, expenses and taxes, and decreased performance.
PORTFOLIO TURNOVER. Trading of securities may produce capital gains, which are
taxable to shareholders when distributed. Active trading may also increase the
amount of commissions or mark-ups paid to broker-dealers that the Fund pays when
it buys and sells securities. The Fund's historical portfolio turnover rate,
which measures how frequently the Fund buys and sells investments, is shown in
the "Financial Highlights."
SECURITIES TRANSACTION COMMISSIONS. Securities transactions involve the payment
by the Fund of brokerage commissions to broker-dealers, on occasion as
compensation for research or brokerage services (commonly referred to as "soft
dollars"), as the portfolio managers buy and sell securities for the Fund in
pursuit of its objective. A description of the policies governing the Fund's
securities transactions and the dollar value of brokerage commissions paid by
the Fund are set forth in the SAI. The brokerage commissions set forth in the
SAI do not include implied commissions or mark-ups (implied commissions) paid by
the Fund for principal transactions (transactions made directly with a dealer or
other counterparty), including most fixed income securities and
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.10
<Page>
certain derivatives. In addition, brokerage commissions do not reflect other
elements of transaction costs, including the extent to which the Fund's purchase
and sale transactions may cause the market to move and change the market price
for an investment.
Although brokerage commissions and implied commissions are not reflected in the
expense table under "Fees and Expenses," they are reflected in the total return
of the Fund.
DIRECTED BROKERAGE. The Fund's Board of Directors (Board) has adopted a policy
prohibiting the investment manager, or any subadviser, from considering sales of
shares of the Fund as a factor in the selection of broker-dealers through which
to execute securities transactions.
Additional information regarding securities transactions can be found in the
SAI.
FUND MANAGEMENT AND COMPENSATION
INVESTMENT MANAGER
RiverSource Investments, LLC (the investment manager or RiverSource
Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is
the investment manager to the RiverSource funds, and is a wholly-owned
subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise
Financial is a financial planning and financial services company that has been
offering solutions for clients' asset accumulation, income management and
protection needs for more than 110 years. In addition to managing investments
for all of the RiverSource funds, RiverSource Investments manages investments
for itself and its affiliates. For institutional clients, RiverSource
Investments and its affiliates provide investment management and related
services, such as separate account asset management, institutional trust and
custody, and employee benefit plan administration, as well as other investment
products. For all of its clients, RiverSource Investments seeks to allocate
investment opportunities in an equitable manner over time. See the SAI for more
information.
The Fund pays RiverSource Investments a fee for managing its assets. Under the
Investment Management Services Agreement (Agreement), the fee for the most
recent fiscal year was __% of the Fund's average daily net assets. Under the
Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory
expenses. A discussion regarding the basis for the Board approving the Agreement
is available in the Fund's most recent shareholder report.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.11
<Page>
PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day
management of the Fund are:
Jamie Jackson, CFA, Portfolio Manager
- - Co-managed the Fund since 2003.
- - Leader of the liquid assets sector team.
- - Joined RiverSource Investments (previously American Express Financial
Corporation (AEFC)) in 2003.
- - Co-head of U.S. Investment Grade Fixed Income, UBS Global Asset Management,
1997 to 2003.
- - Began investment career in 1988.
- - MBA, Marquette University.
Scott Kirby, Portfolio Manager
- - Co-managed the Fund since 2003.
- - Leader of the structured assets sector team.
- - Employed by RiverSource Investments (previously AEFC) from 1979 to 1985 and
from 1987 to the present.
- - Began investment career in 1979.
- - MBA, University of Minnesota.
Tom Murphy, CFA, Portfolio Manager
- - Co-managed the Fund since 2003.
- - Leader of the investment grade corporate bond sector team.
- - Joined RiverSource Investments (previously AEFC) in 2002.
- - Managing Director and Portfolio Manager, BlackRock Financial Management,
2002; various positions, Zurich Scudder, 1992 to 2002.
- - Began investment career in 1986.
- - MBA, University of Michigan.
Nicholas Pifer, CFA, Portfolio Manager
- - Co-managed the Fund since 2003.
- - Leader of the global sector team.
- - Joined RiverSource Investments (previously AEFC) in 2000.
- - Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000.
- - Began investment career in 1990.
- - MA, Johns Hopkins University School of Advanced International Studies.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.12
<Page>
Jennifer Ponce de Leon, Portfolio Manager
- - Co-managed the Fund since 2003.
- - Leader of the high yield sector team.
- - Joined RiverSource Investments (previously AEFC) in 1997.
- - Began investment career in 1989.
- - MBA, De Paul University.
The fixed income department of RiverSource Investments is divided into six
sector teams, each of which includes a portfolio manager or portfolio managers
and several analysts, and each of which specializes in a specific sector of the
fixed income market. The Fund's portfolio managers lead the teams that
specialize in the sectors in which the Fund primarily invests, and collectively
determine allocation of Fund assets among the sectors.
The SAI provides additional information about portfolio manager compensation,
management of other accounts and ownership of shares in the Fund.
ADDITIONAL SERVICES AND COMPENSATION
As described above, RiverSource Investments receives compensation for acting as
the Fund's investment manager. RiverSource Investments and its affiliates also
receive compensation for providing other services to the Fund.
ADMINISTRATION SERVICES. Ameriprise Financial, 200 Ameriprise Financial Center,
Minneapolis, Minnesota 55474, provides or compensates others to provide
administrative services to the RiverSource funds. These services include
administrative, accounting, treasury, and other services. Fees paid by the Fund
for these services are included under "Other expenses" in the expense table
under "Fees and Expenses."
CUSTODY SERVICES. Ameriprise Trust Company, 200 Ameriprise Financial Center,
Minneapolis, Minnesota 55474 (the custodian or Ameriprise Trust Company),
provides custody services to all but a limited number of the RiverSource funds,
including this Fund for which U.S. Bank National Association provides custody
services. In addition, Ameriprise Trust Company is paid for certain transaction
fees and out-of-pocket expenses incurred while providing services to the funds.
Fees paid by the Fund for these services are included under "Other expenses" in
the expense table under "Fees and Expenses."
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.13
<Page>
DISTRIBUTION SERVICES. Ameriprise Financial Services, Inc., 70100 Ameriprise
Financial Center, Minneapolis, Minnesota 55474 (the distributor or Ameriprise
Financial Services), provides underwriting and distribution services to the
RiverSource funds. Under the Distribution Agreement and related distribution and
shareholder servicing plan(s), the distributor receives distribution and
shareholder servicing fees. The distributor pays a portion of these fees to
financial advisors and retains a portion of these fees to support its
distribution and shareholder servicing activity. For third party sales, the
distributor re-allows a portion of these fees to the financial intermediaries
that sell Fund shares and provide services to shareholders, and retains a
portion of these fees to support its distribution and shareholder servicing
activity. Fees paid by the Fund for these services are set forth under
"Distribution (12b-1) fees" in the expense table under "Fees and Expenses." More
information on how these fees are used is set forth under "Investment Options"
and in the SAI. The distributor also administers any sales charges paid by an
investor at the time of purchase or at the time of sale (deferred sales charge).
See "Shareholder Fees (fees paid directly from your investment)" under "Fees and
Expenses" for the scheduled sales charge of each share class. See "Buying and
Selling Shares" for variations in the scheduled sales charges, and for how these
sales charges are used by the distributor. See "Other Investment Strategies and
Risks" for Fund policy regarding directed brokerage.
TRANSFER AGENCY SERVICES. RiverSource Service Corporation, 70100 Ameriprise
Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or
RiverSource Service Corporation), provides or compensates others to provide
transfer agency services to the RiverSource funds. The RiverSource funds pay the
transfer agent a fee, which varies by share class, as set forth in the SAI and
reimburses the transfer agent for its out-of-pocket expenses incurred while
providing these transfer agency services to the funds. Fees paid by the Fund for
these services are included under "Other expenses" in the expense table under
"Fees and Expenses" RiverSource funds are primarily sold through Ameriprise
Financial Services which is allocated a portion of these fees for providing
services to Fund shareholders. RiverSource Service Corporation may also pay a
portion of these fees to other financial intermediaries that provide
sub-recordkeeping and other services to Fund shareholders.
The SAI provides additional information about the services provided and the fee
schedules for the agreements set forth above.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.14
<Page>
PAYMENTS TO FINANCIAL INTERMEDIARIES
RiverSource Investments and its affiliates may make additional cash payments out
of their own resources to financial intermediaries, such as broker-dealers,
banks, qualified plan administrators and recordkeepers, or other institutions,
including inter-company allocation of resources to affiliated broker-dealers
such as Ameriprise Financial Services (financial intermediaries) in connection
with the sale of shares of the Fund and/or the provision of services to the Fund
or its shareholders. These payments may create an incentive for the financial
intermediary, its employees or registered representatives to recommend or sell
shares of the Fund to its customers. These payments and inter-company
allocations are in addition to any 12b-1 distribution and/or shareholder service
fees or other amounts paid by the Fund under distribution or shareholder
servicing plans, or paid by the Fund for shareholder account maintenance,
sub-accounting or recordkeeping services provided directly by the financial
intermediary providing such services. In exchange for these payments and
inter-company allocations, RiverSource Investments and its affiliates may
receive preferred access to registered representatives of a financial
intermediary (for example, the ability to make presentations in branch offices
or at conferences) or preferred access to customers of the financial
intermediary (for example, the ability to advertise or directly interact with
the financial intermediary's customers in order to sell the Fund). These
arrangements are sometimes referred to as "revenue sharing payments." In some
cases, these arrangements may create an incentive for a financial intermediary
or its representatives to recommend or sell shares of a fund and may create a
conflict of interest between a financial intermediary's financial interest and
its duties to its customers. Please contact the financial intermediary through
which you are purchasing shares of the Fund for details about any payments it
may receive in connection with the sale of Fund shares or the provision of
services to the Fund.
These payments and inter-company allocations are usually calculated based on a
percentage of fund sales, and/or as a percentage of fund assets attributable to
a particular financial intermediary. These payments may also be negotiated based
on other criteria or factors including, but not limited to, the financial
intermediary's affiliation with the investment manager, its reputation in the
industry, its ability to attract and retain assets, its access to target
markets, its customer relationships and the scope and quality of services it
provides. The amount of payment or inter-company allocation may vary by
financial intermediary and by type of sale (e.g., purchases of different share
classes or purchases of the Fund through a qualified plan or through a wrap
program), and may be significant.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.15
<Page>
From time to time, RiverSource Investments and its affiliates may make other
payments, including non-cash compensation, to financial intermediaries or their
representatives in the form of gifts of nominal value, occasional meals,
tickets, or other entertainment, support for due diligence trips, training and
educational meetings or conference sponsorships, support for recognition
programs, and other forms of non-cash compensation permissible under regulations
to which these financial intermediaries and their representatives are subject.
ADDITIONAL MANAGEMENT INFORMATION
MANAGER OF MANAGER EXEMPTION. The Fund has received an order from the Securities
and Exchange Commission that permits the investment manager, subject to the
approval of the Board, to appoint a subadviser or change the terms of a
subadvisory agreement for the Fund without first obtaining shareholder approval.
Before the Fund may rely on the order, holders of a majority of the Fund's
outstanding voting securities will need to approve operating the Fund in this
manner. If shareholder approval is received, the Fund may add or change
unaffiliated subadvisers or the fees paid to subadvisers from time to time
without the expense and delays associated with obtaining shareholder approval of
the change. There is no assurance shareholder approval will be received, and no
changes will be made without shareholder approval until that time.
AFFILIATED FUNDS-OF-FUNDS. RiverSource Investments also serves as investment
manager to the RiverSource Portfolio Builder Funds (Portfolio Builder Funds), a
group of six funds-of-funds that provide asset-allocation services to
shareholders by investing in shares of other RiverSource funds, including the
Fund. The Fund may experience relatively large purchases or redemptions from the
Portfolio Builder Funds. Although RiverSource Investments seeks to minimize the
impact of these transactions by structuring them over a reasonable period of
time, the Fund may experience increased expenses as it buys and sells securities
to manage transactions for the Portfolio Builder Funds. In addition, because the
Portfolio Builder Funds may own a substantial portion of the Fund, a redemption
by the Portfolio Builder Funds could cause the Fund's expense ratio to increase
as the Fund's fixed costs would be spread over a smaller asset base. RiverSource
Investments monitors expense levels and is committed to offering funds that are
competitively priced. RiverSource Investments will report to the Fund's Board on
the steps it has taken to manage any potential conflicts.
FUND HOLDINGS DISCLOSURE. The Fund's Board has adopted policies and procedures
that govern the timing and circumstances of disclosure to shareholders and third
parties of information regarding the securities owned by the Fund. A description
of these policies and procedures is included in the Fund's SAI.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.16
<Page>
BUYING AND SELLING SHARES
TRANSACTIONS THROUGH UNAFFILIATED FINANCIAL INTERMEDIARIES
Where authorized by the distributor, shares of the Fund may be available through
certain 401(k) or other qualified plans, banks, broker-dealers or other
institutions (financial intermediaries). These financial intermediaries may
charge you additional fees for the services they provide and they may have
different policies not described in this prospectus. Some policy differences may
include different minimum investment amounts, exchange privileges, fund choices
and cutoff times for investments. Additionally, recordkeeping, transaction
processing and payments of distributions relating to your account may be
performed by the financial intermediaries or their representatives through whom
shares are held. Since the Fund may not have a record of your transactions, you
should always contact the financial intermediary through whom you purchased the
Fund to make changes to or give instructions concerning your account or to
obtain information about your account. The Fund and the distributor are not
responsible for the failure of one of these financial intermediaries to carry
out its obligations to its customers.
AVAILABILITY AND TRANSFERABILITY OF FUND SHARES. Please consult your investment
professional or financial intermediary to determine availability of the Fund.
Currently, RiverSource funds may be purchased or sold through affiliated
broker-dealers of RiverSource Investments, including Ameriprise Financial
Services and Securities America, Inc. (Securities America), and through a
limited number of unaffiliated institutions. If you set up an account at another
financial intermediary, you will not be able to transfer RiverSource fund
holdings to that account unless that institution has obtained a selling
agreement with the distributor of the RiverSource funds. If you set up an
account with an unaffiliated financial intermediary that does not have, and is
unable to obtain, such a selling agreement, you must either maintain your
position with Ameriprise Financial Services or Securities America, find another
financial intermediary with such a selling agreement, or sell your shares,
paying any applicable deferred sales charge. Please be aware that transactions
in taxable accounts would generate a taxable event and may result in an
increased income tax liability.
For more information, please call RiverSource Service Corporation at
(888) 791-3380.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.17
<Page>
The public offering price for Class A shares of the Fund is the net asset value
(NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. Orders in
good form are priced at the NAV next determined after you place your order. Good
form or good order means that your instructions have been received in the form
required by the distributor. This may include, for example, providing the fund
name and account number, the amount of the transaction and all required
signatures. For more information, refer to the sections on "Purchasing Shares"
and "Exchanging/Selling Shares," or contact your financial advisor or investment
professional. If you buy or sell shares through an authorized financial
intermediary, consult that firm to determine its procedures for accepting and
processing orders. The financial intermediary may charge a fee for its services.
VALUING FUND SHARES
The NAV is the value of a single share of the Fund. The NAV is determined by
dividing the value of the Fund's assets, minus any liabilities, by the number of
shares outstanding. The NAV is calculated as of the close of business on the New
York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that
the NYSE is open. The Fund's securities are valued primarily on the basis of
market quotations obtained from outside pricing services approved and monitored
under procedures adopted by the Board. Certain short-term securities with
maturities of 60 days or less are valued at amortized cost.
When reliable market quotations are not readily available, securities are priced
at fair value based on procedures adopted by the Board. These procedures are
also used when the value of a security held by the Fund is materially affected
by events that occur after the close of the primary market on which the security
is traded but prior to the time as of which the Fund's NAV is determined.
Valuing securities at fair value involves reliance on judgment. The fair value
of a security is likely to differ from any available quoted or published price.
To the extent that the Fund has significant holdings of high yield securities
that may trade infrequently, fair valuation may be used more frequently than for
other funds.
Foreign investments are valued in U.S. dollars. Some of the Fund's securities
may be listed on foreign exchanges that trade on weekends or other days when the
Fund does not price its shares. In that event, the NAV of the Fund's shares may
change on days when shareholders will not be able to purchase or sell the Fund's
shares.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.18
<Page>
INVESTMENT OPTIONS
1. CLASS A shares are sold to the public with a sales charge at the time of
purchase and an annual distribution and shareholder servicing (12b-1) fee of
0.25%.
2. CLASS B shares are sold to the public with a contingent deferred sales charge
(CDSC) and an annual distribution and shareholder servicing (12b-1) fee of
1.00%.
3. CLASS C shares are sold to the public without a sales charge at the time of
purchase and with an annual distribution and shareholder servicing (12b-1)
fee of 1.00%. Class C shares redeemed within one year after purchase may be
subject to a CDSC.
4. CLASS Y shares are sold to qualifying institutional investors without a sales
charge or distribution fee, but with a separate shareholder servicing fee of
0.10%. Please see the SAI for information on eligibility requirements to
purchase Class Y shares.
The distribution and shareholder servicing fees for Class A, Class B and Class C
shares are subject to the requirements of Rule 12b-1 under the Investment
Company Act of 1940, as amended, and are used to reimburse the distributor for
certain expenses it incurs in connection with distributing the Fund's shares and
providing services to Fund shareholders. These expenses include payment of
distribution and shareholder servicing fees to financial intermediaries that
sell shares of the Fund. Financial intermediaries receive shareholder servicing
fees equal to 0.25% of the average daily net assets of Class A, Class B and
Class C shares sold and held through them. For Class A and Class B shares, the
distributor begins to pay these fees immediately after purchase. For Class C
shares, the distributor begins to pay these fees one year after purchase.
Financial intermediaries also receive distribution fees equal to 0.75% of the
average daily net assets of Class C shares sold and held through them, which the
distributor begins to pay one year after purchase. For Class B shares, the
Fund's distributor retains the 0.75% distribution fee in order to finance the
payment of sales commissions to financial intermediaries that sell Class B
shares, and to pay for other distribution related expenses. Financial
intermediaries may compensate their financial advisors and investment
professionals with the shareholder servicing and distribution fees paid to them
by the distributor.
The shareholder servicing fees for Class Y shares are used to reimburse the
distributor for providing services and assistance to shareholders regarding
ownership of their shares or their accounts.
The Fund also offers an additional class of shares, Class I, exclusively to
certain institutional investors. Class I shares are made available through a
separate prospectus supplement provided to investors eligible to purchase the
shares.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.19
<Page>
INVESTMENT OPTIONS SUMMARY
The Fund offers different classes of shares. There are differences among the
fees and expenses for each class. Not everyone is eligible to buy every class.
After determining which classes you are eligible to buy, decide which class best
suits your needs. Your financial advisor or investment professional can help you
with this decision.
The following table shows the key features of each class:
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------
AVAILABILITY Available to all Available to all Available to all Limited to
investors. investors. investors. qualifying
institutional
investors.
INITIAL SALES CHARGE Yes. Payable at No. Entire No. Entire No. Entire
time of purchase. purchase price is purchase price is purchase price is
Lower sales charge invested in shares invested in invested in shares
for larger of the Fund. shares of the of the Fund.
investments. Fund.
DEFERRED SALES CHARGE On purchases over Maximum 5% CDSC 1% CDSC may apply None.
$1,000,000, 1% during the first if you sell your
CDSC may apply if year decreasing to shares within one
you sell your 0% after six year after
shares within one years. purchase.
year after
purchase.
12b-1 DISTRIBUTION FEE AND/OR SHAREHOLDER Yes. Yes. Yes. Yes.
SERVICE FEE* 0.25% 1.00% 1.00% 0.10%
CONVERSION TO CLASS A N/A Yes, automatically No. No.
in ninth year of
ownership.
</Table>
* The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act
of 1940, as amended, that allows it to pay distribution and shareholder
servicing-related expenses for the sale of Class A, Class B and Class C
shares. The Fund has also adopted a separate shareholder servicing plan to
pay for servicing-related expenses related to Class Y shares. Because these
fees are paid out of the Fund's assets on an on-going basis, over time,
these fees will increase the cost of your investment and may cost you more
than paying other types of distribution (sales) or servicing charges.
SHOULD YOU PURCHASE CLASS A, CLASS B OR CLASS C SHARES?
If your investments in RiverSource funds total $100,000 or more, Class A shares
may be the better option because the sales charge is reduced for larger
purchases. If you qualify for a waiver of the sales charge, Class A shares will
be the best option.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.20
<Page>
If you invest less than $100,000, consider how long you plan to hold your
shares. Class B shares have a higher annual distribution fee than Class A shares
and a CDSC for six years. Class B shares convert to Class A shares in the ninth
year of ownership. Class B shares purchased through reinvested dividends and
distributions also will convert to Class A shares in the same proportion as the
other Class B shares.
Class C shares also have a higher annual distribution fee than Class A shares.
Class C shares have no sales charge if you hold the shares for longer than one
year. Unlike Class B shares, Class C shares do not convert to Class A. As a
result, you will pay a 1% distribution fee for as long as you hold Class C
shares. If you choose a deferred sales charge option (Class B or Class C), you
should consider the length of time you intend to hold your shares. To help you
determine which investment is best for you, consult your financial advisor or
investment professional.
For more information, see the SAI.
PURCHASING SHARES
Financial intermediaries are required by law to obtain certain personal
information from each person who opens an account in order to verify the
identity of the person. As a result, when you open an account you will be asked
to provide your name, permanent street address, date of birth, and Social
Security or Employer Identification number. You may also be asked for other
identifying documents or information. If you do not provide this information,
the Fund, or the financial intermediary through which you are investing in the
Fund, may not be able to open an account for you. If the Fund or if the
financial intermediary through which you are investing in the Fund is unable to
verify your identity, your account may be closed, or other steps may be taken,
as deemed appropriate.
TO PURCHASE SHARES WITH A FINANCIAL INTERMEDIARY OTHER THAN AMERIPRISE FINANCIAL
SERVICES, PLEASE CONSULT YOUR FINANCIAL INTERMEDIARY. SEE "TRANSACTIONS THROUGH
UNAFFILIATED FINANCIAL INTERMEDIARIES" FOR MORE INFORMATION. THE FOLLOWING
SECTION EXPLAINS POLICIES OF THE RIVERSOURCE FUNDS AND HOW YOU CAN PURCHASE FUND
SHARES FROM AMERIPRISE FINANCIAL SERVICES.
If you do not have an existing RiverSource fund account with Ameriprise
Financial Services, you will need to establish a brokerage account. Your
financial advisor or investment professional will help you fill out and submit
an application. Once your account is set up, you can choose among several
convenient ways to invest.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.21
<Page>
When you purchase, your order will be priced at the next NAV calculated after
your order is accepted by the Fund. If your application does not specify which
class of shares you are purchasing, we will assume you are investing in Class A
shares.
IMPORTANT: When you open an account, you must provide your correct Taxpayer
Identification Number (TIN), which is either your Social Security or Employer
Identification number.
If you do not provide and certify the correct TIN, you could be subject to
backup withholding of 28% of taxable distributions and proceeds from certain
sales and exchanges. You also could be subject to further penalties, such as:
- - a $50 penalty for each failure to supply your correct TIN,
- - a civil penalty of $500 if you make a false statement that results in no
backup withholding, and
- - criminal penalties for falsifying information.
You also could be subject to backup withholding, if the IRS notifies us to do
so, because you failed to report required interest or dividends on your tax
return.
HOW TO DETERMINE THE CORRECT TIN
<Table>
<Caption>
FOR THIS TYPE OF ACCOUNT: USE THE SOCIAL SECURITY OR EMPLOYER IDENTIFICATION NUMBER OF:
Individual or joint account The individual or one of the owners listed on the joint
account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors Act)
A revocable living trust The grantor-trustee (the person who puts the money into the trust)
An irrevocable trust, pension trust or estate The legal entity (not the personal representative or trustee, unless
no legal entity is designated in the account title)
Sole proprietorship or single-owner LLC The owner
Partnership or multi-member LLC The partnership
Corporate or LLC electing corporate status on Form 8832 The corporation
Association, club or tax-exempt organization The organization
</Table>
For details on TIN requirements, contact your financial advisor or investment
professional to obtain a copy of Form W-9, "Request for Taxpayer Identification
Number and Certification." You also may obtain the form on the Internet at
www.irs.gov.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.22
<Page>
METHODS OF PURCHASING SHARES
BY MAIL
Once your account has been established, send your check to:
AMERIPRISE FINANCIAL SERVICES
70200 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
MINIMUM AMOUNTS
Initial investment: $2,000*
Additional investments: $500**
Account balances: $300
Qualified account balances: none
If your Fund account balance falls below $300 for any reason, including a market
decline, you will be asked to increase it to $300 or establish a scheduled
investment plan. If you do not do so within 30 days, your shares may be
automatically redeemed and the proceeds mailed to you.
* $1,000 for tax qualified accounts.
** $100 minimum add-on for existing mutual fund accounts outside of a
brokerage account.
BY SCHEDULED INVESTMENT PLAN
MINIMUM AMOUNTS
Initial investment: $2,000*
Additional investments: $100**
Account balances: none (on a scheduled investment plan with
monthly payments)
If your Fund account balance is below $2,000, you must make payments at least
monthly.
* $100 for accounts outside of a brokerage account.
** $50 minimum per payment for qualified accounts outside of a brokerage
account.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.23
<Page>
BY WIRE OR ELECTRONIC FUNDS TRANSFER
Please contact your financial advisor or investment professional for specific
instructions.
Minimum wire purchase amount: $1,000 or new account minimum, as applicable.
BY TELEPHONE
If you have a brokerage account, you may use the money in your account to make
initial and subsequent purchases.
To place your order, call:
(800) 297-7378 for brokerage accounts
(800) 967-4377 for wrap accounts
SALES CHARGES
CLASS A -- INITIAL SALES CHARGE ALTERNATIVE
Your purchase price for Class A shares is generally the NAV plus a front-end
sales charge. Sales charges vary depending on the amount of your purchase. The
distributor receives the sales charge and re-allows a portion of the sales
charge to the financial intermediary through which you purchased the shares. The
distributor retains the balance of the sales charge. Sales charge* for Class A
shares:
<Table>
<Caption>
MAXIMUM
AS A % OF AS A % OF RE-ALLOWANCE AS A
TOTAL MARKET VALUE PURCHASE PRICE** NET AMOUNT INVESTED % OF PURCHASE PRICE
Up to $49,999 4.75% 4.99% 4.00%
$50,000-$99,999 4.25 4.44 3.50
$100,000-$249,999 3.50 3.63 3.00
$250,000-$499,999 2.50 2.56 2.15
$500,000-$999,999 2.00 2.04 1.75
$1,000,000 or more*** 0.00 0.00 0.00
</Table>
* Because of rounding in the calculation of the offering price, the portion
of the sales charge retained by the distributor may vary and the actual
sales charge you pay may be more or less than the sales charge calculated
using these percentages.
** Offering price includes the sales charge.
*** Although there is no sales charge for purchases with a total market value
over $1,000,000, and therefore no re-allowance, the distributor may pay a
sales commission to a financial intermediary making a sale with a total
market value of $1,000,000 to $3,000,000, a sales commission up to 1.00%;
$3,000,000 to $10,000,000, a sales commission up to 0.50%; and $10,000,000
or more, a sales commission up to 0.25%.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.24
<Page>
RIGHTS OF ACCUMULATION
YOU MAY BE ABLE TO REDUCE THE SALES CHARGE ON CLASS A SHARES, BASED ON THE
COMBINED MARKET VALUE OF YOUR ACCOUNTS.
The current market values of the following investments are eligible to be added
together for purposes of determining the sales charge on your purchase:
- - Your current investment in this Fund, and
- - Previous investments you and members of your primary household group have
made in Class A, Class B or Class C shares in this and other RiverSource
funds, provided your investment was subject to a sales charge.
- Your primary household group consists of you, your spouse or domestic
partner, and your unmarried children under age 21 sharing a mailing
address. For purposes of this policy a domestic partner is an individual
who shares your primary residence and with whom you own joint property. If
you or any member of your primary household group elects to separate from
the primary household group (for example, by asking that account
statements be sent to separate addresses), your assets will no longer be
combined for purposes of reducing your sales charge.
The following accounts are eligible to be included in determining the sales
charge on your purchase:
- - Individual or joint accounts held outside of a brokerage account;
- - Individual or joint accounts held through a brokerage account;
- - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are
invested in Class A, Class B or Class C shares that are subject to a sales
charge;
- - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is
parent or guardian of the minor child;
- - Revocable trust accounts for which you or a member of your primary household
group, individually, is the beneficiary;
- - Accounts held in the name of your, your spouse's, or your domestic partner's
sole proprietorship or single owner limited liability company or
S corporation; and
- - Qualified retirement plan assets, provided that you are the sole owner of the
business sponsoring the plan, are the sole participant (other than a spouse)
in the plan, and have no intention of adding participants to the plan.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.25
<Page>
The following accounts are NOT eligible to be included in determining the sales
charge on your purchase:
- - Accounts of pension and retirement plans with multiple participants, such as
401(k) plans (which are combined to reduce the sales charge for the entire
pension or retirement plan and therefore are not used to reduce the sales
charge for your individual accounts);
- - Investments in Class A shares where the sales charge is waived, for example,
purchases through wrap accounts, including Ameriprise Strategic Portfolio
Service ADVANTAGE (SPS);
- - Investments in Class D, Class E, or Class Y shares;
- - Investments in 529 plans, donor advised funds, variable annuities, variable
life insurance products, wrap accounts or managed separate accounts; and
- - Charitable and irrevocable trust accounts.
If you purchase RiverSource fund shares through different channels or different
financial intermediaries, and you want to include those assets toward a reduced
sales charge, you must inform Ameriprise Financial Services, your financial
advisor or investment professional in writing about the other accounts when
placing your purchase order. When placing your purchase order, you must provide
your most recent account statement and contact information regarding the other
accounts. A financial intermediary other than Ameriprise Financial Services may
require additional information.
UNLESS YOU PROVIDE AMERIPRISE FINANCIAL SERVICES, YOUR FINANCIAL ADVISOR OR YOUR
INVESTMENT PROFESSIONAL IN WRITING WITH INFORMATION ABOUT ALL OF THE ACCOUNTS
THAT MAY COUNT TOWARD A SALES CHARGE REDUCTION, THERE CAN BE NO ASSURANCE THAT
YOU WILL RECEIVE ALL OF THE REDUCTIONS FOR WHICH YOU MAY BE ELIGIBLE.
For more information on rights of accumulation, please see the SAI.
LETTER OF INTENT (LOI)
Generally, if you intend to invest $50,000 or more over a period of 13 months,
you may be able to reduce the front-end sales charges for investments in Class A
shares by completing and filing a LOI form. The LOI becomes effective only after
the form is processed in good order by the distributor. An LOI can be backdated
up to a maximum of 90 days. If the LOI is backdated, you may include prior
investments in Class A shares that were charged a front-end sales load toward
the LOI commitment amount. If the LOI is backdated, the 13 month period begins
on the date of the earliest purchase included in the LOI.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.26
<Page>
HOLDINGS MORE THAN 90 DAYS OLD. Purchases made more than 90 days before your LOI
is processed by the distributor will not be counted towards the commitment
amount of the LOI and cannot be used as the starting point for the LOI. While
these purchases cannot be included in an LOI, they may help you obtain a reduced
sales charge on future purchases as described in "Rights of Accumulation."
NOTIFICATION OBLIGATION. If purchasing shares in a brokerage account or through
a financial intermediary, you must request the reduced sales charge when you buy
shares. If you do not complete and file the LOI form, or do not request the
reduced sales charge at the time of purchase, you will not be eligible for the
reduced sales charge.
For more details on LOIs, please contact your financial advisor, investment
professional or see the SAI.
WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES
Sales charges do not apply to:
- - current or retired Board members, officers or employees of the Fund or
Ameriprise Financial or its subsidiaries, their spouses or domestic partners,
children and parents.
- - current or retired Ameriprise Financial Services financial advisors,
employees of financial advisors, their spouses or domestic partners, children
and parents.
- - portfolio managers employed by subadvisers of the RiverSource funds,
including their spouses or domestic partners, children and parents
- - registered representatives and other employees of financial intermediaries
having a sub-distribution agreement with the distributor, including their
spouses, domestic partners, children and parents.
- - qualified employee benefit plans offering participants daily access to
RiverSource funds. Eligibility must be determined in advance. For assistance,
please contact your financial advisor or investment professional.
Participants in certain qualified plans where the initial sales charge is
waived may be subject to a deferred sales charge of up to 4%.
- - shareholders who have at least $1 million in RiverSource funds. If the
investment is sold within one year after purchase, a CDSC of 1% may be
charged.
- - direct rollovers from Ameriprise Retirement Services, provided that the
rollover involves a transfer of Class Y shares in this Fund to Class A shares
in this Fund.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.27
<Page>
- - purchases made:
- with dividend or capital gain distributions from this Fund or from the
same class of another RiverSource fund,
- through or under a wrap fee product or other investment product sponsored
by the distributor or another authorized broker-dealer, investment
advisor, bank or investment professional,
- within a segregated separate account offered by Nationwide Life Insurance
Company or Nationwide Life and Annuity Insurance Company,
- through American Express Personal Trust Services' Asset-Based pricing
alternative, provided by American Express Bank, FSB.
- - shareholders whose original purchase was in a Strategist fund merged into a
RiverSource fund in 2000.
Policies related to reducing or waiving the sales charge may be modified or
withdrawn at any time.
UNLESS YOU PROVIDE AMERIPRISE FINANCIAL SERVICES, YOUR FINANCIAL ADVISOR OR
INVESTMENT PROFESSIONAL WITH INFORMATION IN WRITING ABOUT ALL OF THE FACTORS
THAT MAY COUNT TOWARD A WAIVER OF THE SALES CHARGE, THERE CAN BE NO ASSURANCE
THAT YOU WILL RECEIVE ALL OF THE WAIVERS FOR WHICH YOU MAY BE ELIGIBLE.
You also may view this information about sales charges and breakpoints free of
charge on the Fund's website. Go to www.riversource.com/investments and click on
the hyperlink "Sales Charge Discount Information."
CLASS B AND CLASS C -- CONTINGENT DEFERRED SALES CHARGE (CDSC) ALTERNATIVE
FOR CLASS B, the CDSC is based on the sale amount and the number of years --
including the year of purchase -- between purchase and sale. The following table
shows how CDSC percentages on sales decline:
<Table>
<Caption>
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:*
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
</Table>
* Because of rounding in the calculation, the portion of the CDSC retained by
the distributor may vary and the actual CDSC you pay may be more or less
than the CDSC calculated using these percentages.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.28
<Page>
Although there is no front-end sales charge when you buy Class B shares, the
distributor pays a sales commission of 4% to financial intermediaries that sell
Class B shares. A portion of this commission may, in turn, be paid to your
financial advisor. The distributor receives any CDSC imposed when you sell your
Class B shares.
Purchases made prior to May 21, 2005 age on a calendar year basis. Purchases
made beginning May 21, 2005 age on a daily basis. For example, a purchase made
on Nov. 12, 2004 will complete its first year on Dec. 31, 2004 under calendar
year aging. However, a purchase made on Nov. 12, 2005 will complete its first
year on Nov. 11, 2006 under daily aging.
For Class B shares purchased prior to May 21, 2005, those shares will convert to
Class A shares in the ninth calendar year of ownership. For Class B shares
purchased beginning May 21, 2005, those shares will convert to Class A shares
one month after the completion of the eighth year of ownership.
FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year
after purchase. Although there is no front-end sales charge when you buy Class C
shares, the distributor pays a sales commission of 1% to financial
intermediaries that sell Class C shares. A portion of this commission may, in
turn, be paid to your financial advisor. The distributor receives any CDSC
imposed when you sell your Class C shares.
For both Class B and Class C, if the amount you sell causes the value of your
investment to fall below the cost of the shares you have purchased, the CDSC
will be based on the lower of the cost of those shares purchased or market
value. Because the CDSC is imposed only on sales that reduce your total purchase
payments, you do not have to pay a CDSC on any amount that represents
appreciation in the value of your shares, income earned by your shares, or
capital gains.
In addition, the CDSC on your sale, if any, will be based on your oldest
purchase payment. The CDSC on the next amount sold will be based on the next
oldest purchase payment.
EXAMPLE
Assume you had invested $10,000 in Class B shares and that your investment had
appreciated in value to $12,000 after 3 1/2 years, including reinvested
dividends and capital gain distributions. You could sell up to $2,000 worth of
shares without paying a CDSC ($12,000 current value less $10,000 purchase
amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500
representing part of your original purchase price. The CDSC rate would be 3%
because the sale was made during the fourth year after the purchase.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.29
<Page>
WAIVERS OF THE CDSC FOR CLASS B SHARES
The CDSC will be waived on sales of shares:
- - in the event of the shareholder's death,
- - held in trust for an employee benefit plan, or
- - held in IRAs or certain qualified plans if Ameriprise Trust Company is the
custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate
pension plans, provided that the shareholder is:
- at least 59 1/2 years old AND
- taking a retirement distribution (if the sale is part of a transfer to an
IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will
not be waived) OR
- selling under an approved substantially equal periodic payment
arrangement.
WAIVERS OF THE CDSC FOR CLASS C SHARES
The CDSC will be waived on sales of shares in the event of the shareholder's
death.
EXCHANGING/SELLING SHARES
TO SELL OR EXCHANGE SHARES HELD WITH FINANCIAL INTERMEDIARIES OTHER THAN
AMERIPRISE FINANCIAL SERVICES, PLEASE CONSULT YOUR FINANCIAL INTERMEDIARY. SEE
"TRANSACTIONS THROUGH UNAFFILIATED FINANCIAL INTERMEDIARIES" FOR MORE
INFORMATION. THE FOLLOWING SECTION EXPLAINS POLICIES OF THE RIVERSOURCE FUNDS ON
HOW YOU CAN EXCHANGE OR SELL SHARES HELD WITH AMERIPRISE FINANCIAL SERVICES.
EXCHANGES
You may exchange your Fund shares at no charge for shares of the same class of
any other publicly offered RiverSource fund. Exchanges into RiverSource
Tax-Exempt Money Market Fund may only be made from Class A shares. For complete
information on the other fund, including fees and expenses, read that fund's
prospectus carefully. Your exchange will be priced at the next NAV calculated
after your transaction request is received in good order.
MARKET TIMING IS FREQUENT OR SHORT-TERM TRADING BY CERTAIN SHAREHOLDERS INTENDED
TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND
SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE
BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE
FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING
THE FUND'S TRANSACTION COSTS.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.30
<Page>
FUNDS THAT INVEST IN SECURITIES WHICH TRADE INFREQUENTLY MAY BE VULNERABLE TO
MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES
MARKETS. TO THE EXTENT THAT THE FUND HAS SIGNIFICANT HOLDINGS OF HIGH YIELD
SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR
OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE KINDS
OF SECURITIES IN WHICH THE FUND INVESTS. SEE "VALUING FUND SHARES" FOR A
DISCUSSION OF THE FUND'S POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN
PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING.
THE FUND'S BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER
MARKET TIMING. THE FUND SEEKS TO ENFORCE THIS POLICY AS FOLLOWS:
- - The Fund tries to distinguish market timing from trading that it believes is
not harmful, such as periodic rebalancing for purposes of asset allocation or
dollar cost averaging. Under the Fund's procedures, there is no set number of
transactions in the Fund that constitutes market timing. Even one purchase
and subsequent sale by related accounts may be market timing. Generally, the
Fund seeks to restrict the exchange privilege of an investor who makes more
than three exchanges into or out of the Fund in any 90-day period. Accounts
held by a retirement plan or an institution for the benefit of its
participants or clients, which typically engage in daily transactions, are
not subject to this limit. The Fund seeks the assistance of financial
intermediaries in applying similar restrictions on the sub-accounts of their
participants or clients.
- - If an investor's trading activity is determined to be market timing or
otherwise harmful to existing shareholders, the Fund reserves the right to
modify or discontinue the investor's exchange privilege or reject the
investor's purchases or exchanges, including purchases or exchanges accepted
by a financial intermediary. The Fund may treat accounts it believes to be
under common control as a single account for these purposes, although it may
not be able to identify all such accounts.
- - Although the Fund does not knowingly permit market timing, it cannot
guarantee that it will be able to identify and restrict all short-term
trading activity. The Fund receives purchase and sale orders through
financial intermediaries where market timing activity may not always be
successfully detected.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.31
<Page>
Other exchange policies:
- - Exchanges must be made into the same class of shares of the new fund.
- - If your exchange creates a new account, it must satisfy the minimum
investment amount for new purchases.
- - Once we receive your exchange request, you cannot cancel it.
- - Shares of the new fund may not be used on the same day for another exchange.
- - If your shares are pledged as collateral, the exchange will be delayed until
written approval is received from the secured party.
SELLING SHARES
You may sell your shares at any time. The payment will be mailed within seven
days after your request is received in good order.
When you sell shares, the amount you receive may be more or less than the amount
you invested. Your sale price will be the next NAV calculated after your request
is received in good order, minus any applicable CDSC.
REPURCHASES. You can change your mind after requesting a sale and use all or
part of the proceeds to purchase new shares in the same account from which you
sold. If you reinvest in Class A, you will purchase the new shares at NAV rather
than the offering price on the date of a new purchase. If you reinvest in Class
B or Class C, any CDSC you paid on the amount you are reinvesting also will be
reinvested. To take advantage of this waiver, you must send a written request
within 90 days of the date your sale request was processed and include your
account number. This privilege may be limited or withdrawn at any time and use
of this option may have tax consequences.
The Fund reserves the right to redeem in kind.
For more details and a description of other sales policies, please see the SAI.
If you decide to sell your shares within 30 days of a telephoned-in address
change, a written request is required.
IMPORTANT: Payments sent by a bank authorization, check or money order that are
not guaranteed may take up to ten days to clear. This may cause your scheduled
arrangement or unscheduled request to fail to process if the requested amount
includes unguaranteed funds.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.32
<Page>
WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES
BY REGULAR OR EXPRESS MAIL
AMERIPRISE FINANCIAL SERVICES
70200 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
Include in your letter:
- - your account number
- - the name of the fund(s)
- - the class of shares to be exchanged or sold
- - your Social Security number or Employer Identification number
- - the dollar amount or number of shares you want to exchange or sell
- - specific instructions regarding delivery or exchange destination
- - signature(s) of registered account owner(s) (All signatures may be required.
Contact your financial advisor or Ameriprise Financial Services for more
information.)
- - any paper certificates of shares you hold
Payment will be mailed to the address of record and made payable to the names
listed on the account, unless your request specifies differently and is signed
by all owners.
The express mail delivery charges you pay will vary depending on domestic or
international delivery instructions.
BY TELEPHONE
(800) 297-7378 for brokerage accounts
(800) 967-4377 for wrap accounts
(800) 862-7919 for non-brokerage/wrap accounts
- - Reasonable procedures will be used to confirm authenticity of telephone
exchange or sale requests.
- - Telephone exchange and sale privileges automatically apply to all accounts
except custodial, corporate or qualified retirement accounts. You may request
that these privileges NOT apply by writing the distributor. Each registered
owner must sign the request.
- - Acting on your instructions, your financial advisor may conduct telephone
transactions on your behalf.
- - Telephone privileges may be modified or discontinued at any time.
MINIMUM SALE AMOUNT: $100
MAXIMUM SALE AMOUNT: $100,000
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.33
<Page>
BY WIRE
You can wire money from your account to your bank account. Contact your
financial advisor or Ameriprise Financial Services at the above numbers for
additional information.
- - Minimum amount: $1,000
- - Pre-authorization is required.
- - A service fee may be charged against your account for each wire sent.
BY SCHEDULED PAYOUT PLAN
- - Minimum payment: $100*
- - Contact your financial advisor or Ameriprise Financial Services to set up
regular payments.
- - Purchasing new shares while under a payout plan may be disadvantageous
because of the sales charges.
* Minimum is $50 in a non-brokerage/wrap account.
ELECTRONIC TRANSACTIONS
The ability to initiate transactions via the internet may be unavailable or
delayed at certain times (for example, during periods of unusual market
activity). The Fund and the distributor are not responsible for any losses
associated with unexecuted transactions. In addition, the Fund and the
distributor are not responsible for any losses resulting from unauthorized
transactions if reasonable security measures are followed to validate the
investor's identity. The Fund may modify or discontinue electronic privileges at
any time for any shareholder without prior notice as deemed necessary and in the
best interests of the Fund.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.34
<Page>
DISTRIBUTIONS AND TAXES
As a shareholder you are entitled to your share of the Fund's net income and net
gains. The Fund distributes dividends and capital gains to qualify as a
regulated investment company and to avoid paying corporate income and excise
taxes.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund's net investment income is distributed to you as DIVIDENDS. Dividends
will generally be composed of ordinary dividend income (which may include
interest income, short-term capital gains and non-qualifying dividends). It is
unlikely the Fund will distribute qualifying dividend income, which is eligible
for preferential tax rates under current tax law. Capital gains are realized
when a security is sold for a higher price than was paid for it. Each realized
capital gain or loss is long-term or short-term depending on the length of time
the Fund held the security. Realized capital gains and losses offset each other.
The Fund offsets any net realized capital gains by any available capital loss
carryovers. Net short-term capital gains are included in net investment income.
Net realized long-term capital gains, if any, are distributed by the end of the
calendar year as CAPITAL GAIN DISTRIBUTIONS.
REINVESTMENTS
Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:
- - you request distributions in cash, or
- - you direct the Fund to invest your distributions in the same class of any
publicly offered RiverSource fund for which you have previously opened an
account.
We reinvest the distributions for you at the next calculated NAV after the
distribution is paid.
If you choose cash distributions, you will receive cash only for distributions
declared after your request has been processed.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.35
<Page>
TAXES
Distributions are subject to federal income tax and may be subject to state and
local taxes in the year they are declared. You must report distributions on your
tax returns, even if they are reinvested in additional shares.
If you buy shares shortly before the record date of a distribution, you may pay
taxes on money earned by the Fund before you were a shareholder. You will pay
the full pre-distribution price for the shares, then receive a portion of your
investment back as a distribution, which may be taxable.
For tax purposes, an exchange is considered a sale and purchase, and may result
in a gain or loss. A sale is a taxable transaction. If you sell shares for less
than their cost, the difference is a capital loss. If you sell shares for more
than their cost, the difference is a capital gain. Your gain may be short term
(for shares held for one year or less) or long term (for shares held for more
than one year).
You may not create a tax loss, based on paying a sales charge, by exchanging
shares within 91 days of purchase. If you buy Class A shares and within 91 days
exchange into another fund, you may not include the sales charge in your
calculation of tax gain or loss on the sale of the first fund you purchased. The
sales charge may be included in the calculation of your tax gain or loss on a
subsequent sale of the second fund you purchased. For more information, see the
SAI.
Selling shares held in an IRA or qualified retirement account may subject you to
federal taxes, penalties and reporting requirements. Please consult your tax
advisor.
IMPORTANT: This information is a brief and selective summary of some of the tax
rules that apply to this Fund. Because tax matters are highly individual and
complex, you should consult a qualified tax advisor.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.36
<Page>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU UNDERSTAND THE FUND'S
FINANCIAL PERFORMANCE. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A
SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLES REPRESENT THE RATE THAT AN
INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT IN THE FUND (ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THIS INFORMATION HAS BEEN
AUDITED BY KPMG LLP, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS,
IS INCLUDED IN THE ANNUAL REPORT WHICH, IF NOT INCLUDED WITH THIS PROSPECTUS, IS
AVAILABLE UPON REQUEST.
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001
Net asset value, beginning of period $ 4.87 $ 4.78 $ 4.75 $ 4.86 $ 4.70
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .18 .18 .20 .25 .31
Net gains (losses) (both realized and unrealized) .03 .08 .03 (.10) .17
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .21 .26 .23 .15 .48
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.19) (.17) (.20) (.25) (.32)
Tax return of capital -- -- -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.19) (.17) (.20) (.26) (.32)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.89 $ 4.87 $ 4.78 $ 4.75 $ 4.86
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1,774 $1,933 $2,280 $2,438 $2,390
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .94%(c) .98%(c) .97% .95% .94%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net
assets 3.67% 3.55% 4.16% 5.17% 6.51%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 300% 279% 256% 169% 115%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 4.38% 5.54% 4.91% 3.13% 10.48%
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class A would have been 1.02% and 1.00% for the years ended Aug. 31, 2005
and 2004, respectively.
(d) Total return does not reflect payment of a sales charge.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.37
<Page>
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001
Net asset value, beginning of period $4.88 $4.78 $4.75 $4.86 $4.70
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .15 .14 .16 .21 .27
Net gains (losses) (both realized and unrealized) .01 .09 .03 (.10) .17
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .16 .23 .19 .11 .44
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.15) (.13) (.16) (.21) (.28)
Tax return of capital -- -- -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.15) (.13) (.16) (.22) (.28)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.89 $4.88 $4.78 $4.75 $4.86
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 484 $ 628 $ 902 $1,047 $ 954
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.70%(c) 1.73%(c) 1.73% 1.71% 1.70%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net
assets 2.92% 2.78% 3.40% 4.40% 5.74%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 300% 279% 256% 169% 115%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 3.39% 4.95% 4.12% 2.35% 9.65%
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nea.rest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class B would have been 1.78% and 1.75% for the years ended Aug. 31, 2005
and 2004, respectively.
(d) Total return does not reflect payment of a sales charge.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.38
<Page>
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001
Net asset value, beginning of period $4.88 $4.78 $4.75 $4.86 $4.71
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .15 .14 .16 .21 .27
Net gains (losses) (both realized and unrealized) .02 .09 .03 (.10) .16
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .17 .23 .19 .11 .43
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.15) (.13) (.16) (.21) (.28)
Tax return of capital -- -- -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.15) (.13) (.16) (.22) (.28)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.90 $4.88 $4.78 $4.75 $4.86
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 18 $ 21 $ 27 $ 24 $ 10
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.70%(c) 1.73%(c) 1.74% 1.72% 1.70%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net
assets 2.93% 2.79% 3.34% 4.33% 5.62%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 300% 279% 256% 169% 115%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 3.60% 4.95% 4.11% 2.35% 9.43%
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class C would have been 1.79% and 1.75% for the years ended Aug. 31, 2005
and 2004, respectively.
(d) Total return does not reflect payment of a sales charge.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.39
<Page>
CLASS Y
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001
Net asset value, beginning of period $4.88 $4.78 $4.75 $4.86 $4.70
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .19 .18 .21 .25 .32
Net gains (losses) (both realized and unrealized) .02 .10 .03 (.10) .17
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .21 .28 .24 .15 .49
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.20) (.18) (.21) (.25) (.33)
Tax return of capital -- -- -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.18) (.21) (.26) (.33)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.89 $4.88 $4.78 $4.75 $4.86
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 202 $ 203 $ 268 $ 297 $ 533
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .78%(c) .81%(c) .81% .78% .78%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net
assets 3.85% 3.70% 4.34% 5.30% 6.66%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 300% 279% 256% 169% 115%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 4.34% 5.92% 5.08% 3.29% 10.65%
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class Y would have been 0.85% and 0.83% for the years ended Aug. 31, 2005
and 2004, respectively.
(d) Total return does not reflect payment of a sales charge.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.40
<Page>
This Fund, along with the other RiverSource funds, is distributed by Ameriprise
Financial Services, Inc. and can be purchased from Ameriprise Financial Services
or from a limited number of other authorized financial intermediaries. The Fund
can be found under the "RiverSource" banner in most mutual fund quotations.
Additional information about the Fund and its investments is available in the
Fund's SAI, and annual and semiannual reports to shareholders. In the Fund's
annual report, you will find a discussion of market conditions and investment
strategies that significantly affected the Fund's performance during its most
recent fiscal year. The SAI is incorporated by reference in this prospectus. For
a free copy of the SAI, the annual report, or the semiannual report, or to
request other information about the Fund or make a shareholder inquiry, contact
your financial advisor, investment professional or Ameriprise Financial
Services.
Ameriprise Financial Services
70100 Ameriprise Financial Center
Minneapolis, MN 55474
(800) 862-7919
TTY: (800) 846-4852
RiverSource Investments Website address:
riversource.com/investments
You may review and copy information about the Fund, including the SAI, at the
Securities and Exchange Commission's (Commission) Public Reference Room in
Washington, D.C. (for information about the public reference room call
1-202-942-8090). Reports and other information about the Fund are available on
the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of
this information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: publicinfo@sec.gov, or by writing to
the Public Reference Section of the Commission, Washington, D.C. 20549-0102.
Investment Company Act File #811-2503
TICKER SYMBOL
Class A: INBNX Class B: ININX
Class C: AXBCX Class I: --
Class Y: --
[RIVERSOURCE(SM) INVESTMENTS LOGO]
RIVERSOURCE INVESTMENTS
200 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
S-6495-99 Y (10/05)
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
D.41
<Page>
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<Page>
EXHIBIT E
BOARD EFFECTIVENESS COMMITTEE CHARTER
RESOLVED, That the Board Effectiveness Committee be composed of the independent
members appointed annually by the Board and the Chair of the Board;
RESOLVED, That one member shall be appointed to Chair the Committee and the
Committee shall meet upon call of the Chair;
RESOLVED, That the Committee will make recommendations to the Board on:
- - The responsibilities and duties of the Board;
- - The criteria to be used to determine the size and structure of the Boards and
the background and characteristics of independent Board members;
- - The persons to serve as Board members based on approved criteria whenever
necessary to fill a vacancy or in conjunction with a regular meeting of
shareholders in which nominees are required to be submitted for a vote of
shareholders;
- - The annual evaluation of the Board's performance and the attendance of
members; and
- - The compensation to be paid to independent members; and further
RESOLVED, That the Committee shall be assigned such further areas of
responsibility as appropriate to assist the Board in meeting its fiduciary
duties in an efficient and effective manner.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
E.1
<Page>
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<Page>
EXHIBIT F
JOINT AUDIT COMMITTEE CHARTER
MEMBERSHIP AND QUALIFICATIONS
The Joint Audit Committee shall consist of at least three members appointed by
the Board. The Board may replace members of the Committee for any reason.
No member shall be an "interested person" as that term is defined in Section
2(a)(19) of the Investment Company Act, nor shall any member receive any
compensations from the Fund except compensations for service as a member of the
Board and Board committees.
At least one member of the Committee shall be an "audit committee financial
expert." An "audit committee financial expert" means a person who has the
following attributes:
- - An understanding of generally accepted accounting principles and financial
statements;
- - The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
- - Experience preparing, auditing, analyzing, or evaluating financial statements
that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements,
or experience actively supervising one or more persons engaged in such
activities;
- - An understanding of internal controls and procedures for financial
reporting; and
- - An understanding of audit committee functions.
A person shall have acquired such attributes through:
- - Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience
in one or more positions that involve the performance of similar functions;
- - Experience actively supervising a principal financial officer, principal
accounting officer, controller, public accountant, auditor, or person
performing similar functions;
- - Experience overseeing or assessing the performance of companies or public
accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
- - Other relevant experience.
The Board shall determine "audit committee financial experts" annually.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
F.1
<Page>
PURPOSES OF THE COMMITTEE
The Committee is to assist independent members of the Boards in fulfilling their
oversight responsibilities to the shareholders, potential shareholders and
investment community relating to the reliability of financial reporting, the
effectiveness and efficiency of operations, the work done by external auditors,
the adequacy of internal controls, and the compliance with applicable laws and
regulations by:
- - Overseeing the accounting and financial reporting processes of the Fund and
its internal control over financial reporting and, as the Committee deems
appropriate, to inquire into the internal control over financial reporting of
certain third-party service providers;
- - Overseeing, or, as appropriate, assisting Board oversight of, the quality and
integrity of the Fund's financial statements and the independent audit
thereof;
- - Overseeing, or, as appropriate, assisting Board oversight of, the Fund's
compliance with legal and regulatory requirements that relate to the Fund's
accounting and financial reporting, internal control over financial reporting
and independent audits; and
- - Approving prior to appointment the engagement of the Fund's independent
auditor (Auditor) and, in connection therewith, to review and evaluate the
qualifications, independence and performance of the Fund's Auditor.
The Auditor for the Fund shall report directly to the Committee.
DUTIES AND POWERS
To carry out its purposes, the Committee shall have the following duties and
powers:
- - Recommend the Auditor that the Committee believes is qualified to examine and
report on the financial statements to the independent members of the Board
within 90 days before or after the fiscal year end of the Fund;
- - Meet with representatives of the Auditor to:
- Review and evaluate matters potentially affecting its independence and
capabilities by:
- Approving prior to appointment the professional services the Auditor
requests to perform for American Express Financial Corporation and any
of its subsidiaries that provide services to the Fund;
- Considering the controls applied by the Auditor and measures taken by
American Express Financial Corporation to assure that all items
requiring pre-approval are identified and referred to the Committee in
a timely fashion; and
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
F.2
<Page>
- Evaluating the auditor's independence by receiving a report on business
relationships at each meeting setting forth the work it has been
engaged to do for American Express Company or its subsidiaries.
- Consider the scope of the annual audit and any special audits and review
and approve the estimated fees to be charged;
- Consider the information and comments from the Auditor with respect to the
Fund's accounting and financial reporting policies, procedures and
internal controls over financial reporting; the responses to the comments
by American Express Financial Corporation; and possible improvements that
can be made in the quality of the Fund's accounting and financial
reporting;
- - Meet with representatives of American Express Enterprise Risk and Assurance
Services to:
- Discuss its responsibility to the Fund with respect to its review of
operations of American Express Financial Corporation and affiliates to the
extent they pertain to the registered investment companies;
- Consider its authority, including the support it receives from American
Express Financial Corporation's senior management and American Express
Company's General Auditor;
- Discuss whether it complies with the Institute of Internal Auditors'
"Standard for the Professional Practice of Internal Auditing;"
- Review its budget, staffing and proposed audit plans each year; and
- Review reports issued by American Express Enterprise Risk and Assurance
Services that pertain to American Express Financial Corporation's
operations related to the registered investment companies.
- - Encourage open lines of communications among the Committee, the Auditor, and
American Express Enterprise Risk and Assurance Services to:
- Consider information and comments from the Auditor with respect to the
Fund's financial statements, including any adjustments to such statements
recommended by the Auditor and to review the opinion of the Auditor;
- Resolve any disagreements between American Express Financial Corporation
and the Auditor;
- Review, in connection with required certifications of Form N-CSR, any
significant deficiencies in the design or operations of internal control
over financial reporting or material weaknesses therein and any reported
evidence of fraud involving any person who has a significant role in the
Fund's internal control over financial reporting;
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
F.3
<Page>
- Establish procedures for the receipt, retention and treatment of
complaints received by the Fund relating to accounting, internal
accounting controls, or auditing matters, and the confidential, anonymous
submission by employees of American Express Financial Corporation of
concerns about accounting or auditing matters, and address reports from
attorneys or auditors of possible violations of federal or state laws or
fiduciary duty;
- Investigate or initiate an investigation of reports of improprieties or
suspected improprieties in connection with the Fund's accounting or
financial reporting;
- - Consider the adequacy and effectiveness of internal controls, including the
controls over computerized information systems, through discussions with the
Auditor, American Express Enterprise Risk and Assurance Services and
appropriate American Express Financial Corporation managers who provide
reports to the Committee and elicit their recommendations for improving or
identifying particular areas where new or more detailed controls or
procedures are desirable giving particular emphasis to the adequacy of
internal controls for exposing any payments, transactions, or procedures that
might be deemed illegal or otherwise improper;
- - Request to be informed about all new or changed accounting principles and
disclosure practices on a timely basis and inquire regarding the judgment and
reasoning regarding the appropriateness, not just the acceptability, of the
changes or proposed changes;
- - Report the work of the Committee to the Board as frequently as the Committee
deems appropriate;
- - Review and assess the adequacy of the Committee's charter at least annually
and recommend any changes to the Board;
- - Meet at least once a year in a private meeting with each of the three
following groups: the Auditor, the American Express Financial Corporation's
management personnel responsible for the financial statements and
recordkeeping of the Fund, the Senior Vice President - Enterprise Risk and
Assurance Services for American Express Financial Corporation, and the
General Auditor and Chief Operational Risk Officer for American Express
Company;
- - Consider such other matters as any Board or Committee deems appropriate and
perform such additional tasks as directed by resolution of any Board;
- - Conduct its own investigations into issues related to its responsibilities
and is authorized to employ such professional and technical assistance as it
deems necessary.
The Committee shall have the resources and authority appropriate to discharge
its responsibilities, including appropriate funding, as determined by the
Committee, for payment of compensation to the Auditor for the purpose of
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
F.4
<Page>
conducting the audit and rendering their audit report, the authority to retain
and compensate special counsel and other experts or consultants as the Committee
deems necessary, and the authority to obtain specialized training for Committee
members, at the expense of the Fund, as appropriate.
The Committee may delegate any portion of its authority, including the authority
to grant pre-approvals of audit and permitted non-audit services to one or more
members. Any decisions of the member to grant pre-approvals shall be presented
to the Committee at its next regularly scheduled meeting.
ROLE AND RESPONSIBILITIES
The function of the Committee is oversight; it is American Express Financial
Corporation's responsibility to maintain appropriate systems for accounting and
internal control over financial reporting, and the Auditor's responsibility to
plan and carry out a proper audit. Specifically, American Express Financial
Corporation is responsible for: (1) the preparation, presentation and integrity
of the Fund's financial statements; (2) the maintenance of appropriate
accounting and financial reporting principles and policies; and (3) the
maintenance of internal control over financial reporting and other procedures
designed to assure compliance with accounting standards and related laws and
regulations. The Auditor is responsible for planning and carrying out an audit
consistent with applicable legal and professional standards and the terms of
their engagement letter. Nothing in the Charter shall be construed to reduce the
responsibilities or liabilities of the Fund's service providers, including the
Auditor.
Although the Committee is expected to take a detached and questioning approach
to the matters that come before it, the review of a Fund's financial statements
by the Committee is not an audit, nor does the Committee's review substitute for
the responsibilities of American Express Financial Corporation's for preparing,
or the Auditor for auditing, the financial statements. Members of the Committee
are not employees of the Fund and, in serving on this Committee, are not, and do
not hold themselves out to be, acting as accountants or auditors. As such, it is
not the duty or responsibility of the Committee or its members to conduct "field
work" or other types of auditing or accounting reviews or procedures.
In discharging their duties, the members of the Committee are entitled to rely
on information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by: (1) one or more officers
of the Fund whom the director reasonably believes to be reliable and competent
in the matters presented; (2) legal counsel, public accountants, or other
persons as to matters the director reasonably believes are within the person's
professional or expert competence; or (3) a Board committee of which the
director is not a member.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
F.5
<Page>
OPERATIONS
The Board shall adopt and approve this Charter and may amend it on the Board's
own motion. The Committee shall review this Charter at least annually and
recommend to the full Board any changes the Committee deems appropriate.
The Committee may select one of its members to be the chair and may select a
vice chair. A majority of the members of the Committee shall constitute a quorum
for the transaction of business at any meeting of the Committee. The action of a
majority of the members of the Audit Committee present at a meeting at which a
quorum is present shall be the action of the Committee.
The Committee shall meet on a regular basis and at least four times annually and
is empowered to hold special meetings as circumstances require. The Chairperson
or a majority of the members shall be authorized to call a meeting of the
Committee or meetings may be fixed in advance by the Committee.
The agenda shall be prepared under the direction and control of the Chairperson.
The Committee shall ordinarily meet in person; however, members may attend
telephonically, and the Committee may act by written consent, to the extent
permitted by law and by the Fund's bylaws.
The Committee shall have the authority to meet privately and to admit
non-members individually. The Committee may also request to meet with internal
legal counsel and compliance personnel of American Express Financial Corporation
and with entities that provide significant accounting or administrative services
to the Fund to discuss matters relating to the Fund's accounting and compliance
as well as other Fund-related matters.
The Committee shall prepare and retain minutes of its meetings and appropriate
documentation of decisions made outside of meetings by delegated authority.
The Committee shall evaluate its performance at least annually.
RIVERSOURCE SELECTIVE FUND -- PROXY STATEMENT
F.6
<Page>
S-6387 A (12/05)
ezVote(SM)Consolidated Proxy Card
PROXY TABULATOR
P.O. BOX 9132 This form is your EzVote Consolidated Proxy.
HINGHAM, MA 02043-9132 It reflects all of your accounts registered to
the same Social Security or Tax I.D. number at
this address. By voting and signing the
Consolidated Proxy Card, you are voting all of
these accounts in the same manner as indicated
on the reverse side of the form.
999 999 999 999 99 <-
RIVERSOURCE FUNDS
(formerly known as AMERICAN EXPRESS FUNDS)
AXP INCOME SERIES, INC. PROXY FOR THE REGULAR MEETING OF SHAREHOLDERS
RIVERSOURCE SELECTIVE FUND FEBRUARY 15, 2006
Your fund will hold a shareholders' meeting at 901 Marquette Avenue South, Suite
2810, Minneapolis, MN, at _____ [a.m./p.m.] on February 15, 2006. You are
entitled to vote at the meeting if you were a shareholder on December 16, 2005.
Please read the proxy statement and vote immediately by mail, telephone or
internet, even if you plan to attend the meeting. Just follow the instructions
on this proxy card. The Board of Directors recommends that you vote FOR each
proposal.
The undersigned hereby appoints Arne H. Carlson and Leslie L. Ogg or any one of
them, as proxies, with full power of substitution, to represent and to vote all
of the shares of the undersigned at the regular meeting to be held on February
15, 2006, and any adjournment thereof.
Date __________________
Signature(s) (Joint owners) (Sign in the Box)
Note: Please sign this proxy exactly as your
name or names appears on this card. Joint owners
should each sign personally. Trustees and other
fiduciaries should indicate the capacity in
which they sign, and where more than one name
appears, a majority must sign. If a corporation,
this signature should be that of an authorized
officer who should state his or her title.
AMEX Selective EZ - DH
IF VOTING THE CONSOLIDATED PROXY CARD DO NOT SIGN, DATE OR RETURN THE INDIVIDUAL
BALLOTS
THREE EASY WAYS TO VOTE
To vote by Telephone To vote by Internet To vote by Mail
1) Read the proxy statement and have the 1) Read the proxy statement and have 1) Read the Proxy Statement.
Consolidated Proxy Card at hand. Consolidated Proxy Card at hand. 2) Check the appropriate boxes on the
2) Call 1-888-221-0697. 2) Go to www.proxyweb.com reverse side.
3) Follow the recorded instructions. 3) Follow the on-line directions. 3) Sign and date the proxy card.
4) Return the proxy card in the envelope
provided.
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL YOUR CARD.
LABEL BELOW FOR MIS USE ONLY! INDIVIDUAL BALLOTS
M1197 On the reverse side of this form (and on accompanying pages,
AMERICAN EXPRESS - AMERIPRISE if necessary) you will find individual ballots, one for each of
AXP INCOME SERIES, INC your accounts. If you would wish to vote each of these accounts
RIVERSOURCE SELECTIVE FUND separately, sign in the signature box below, mark each individual
ORIGINAL EZVOTE 10-06-05 KD ballot to indicate your vote, detach the form at the perforation
DOREEN (AMEX-RIVERSOURCE SELECTIVE EZVOTE 2006 DH) above and return the individual ballots portion only.
NOTE: If you choose to vote each account separately, do
not return the Consolidated Proxy Card above.
Date _____________________________
MIS EDITS: # OF CHANGES ___/___ PRF 1 ___ PRF 2 ___
-------------------------------------------------------
Signature(s) (Joint owners) (Sign in the Box)
OK TO PRINT AS IS*_______ *By signing this form you are Note: Please sign this proxy exactly as your
authorizing MIS to print this form in its current state. name or names appears on this card. Joint owners
should each sign personally. Trustees and other
fiduciaries should indicate the capacity in
which they sign, and where more than one name
appears, a majority must sign. If a corporation,
this signature should be that of an authorized
- --------------------------------------------------------- officer who should state his or her title.
SIGNATURE OF PERSON AUTHORIZING PRINTING DATE
AMEX Selective IND - DH
ezVote(SM)Consolidated Proxy Card
Please fill in box(es) as shown using black or
blue ink or number 2 pencil. [X]
PLEASE DO NOT USE FINE POINT PENS.
If you do not mark a proposal, your proxy will be voted FOR the proposal.
FOR AGAINST ABSTAIN
1. Approve the Agreement and Plan of Reorganization. [ ] [ ] [ ] 1.
2. ELECTION OF BOARD MEMBERS.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
(01) Arne H. Carlson (05) Catherine James Paglia
(02) Patricia M. Flynn (06) Alan K. Simpson [ ] [ ] [ ] 2.
(03) Anne P. Jones (07) Alison Taunton-Rigby
(04) Stephen R. Lewis, Jr. (08) William F. Truscott
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "FOR ALL EXCEPT" box and write the nominee's number on the line below.)
FOR AGAINST ABSTAIN
3. Approve an Amendment to the Articles of
Incorporation. [ ] [ ] [ ] 3.
4. Approve an Investment Management Services Agreement
with RiverSource Investments, LLC. [ ] [ ] [ ] 4.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
AMEX Selective EZ - DH
IF VOTING THE CONSOLIDATED PROXY CARD DO NOT SIGN, DATE OR RETURN
THE INDIVIDUAL BALLOTS
INDIVIDUAL BALLOTS
NOTE: IF YOU HAVE USED THE CONSOLIDATED BALLOT ABOVE, DO NOT VOTE THE INDIVIDUAL
BALLOTS BELOW.
000 0000000000 000 0 000 0000000000 000 0
JOHN Q. PUBLIC JOHN Q. PUBLIC
123 MAIN STREET 123 MAIN STREET
ANYTOWN, MA 02030 999 999 999 999 99 ANYTOWN, MA 02030 999 999 999 999 99
FUND NAME PRINTS HERE FUND NAME PRINTS HERE
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Approve the Agreement 1. Approve the Agreement
and Plan of and Plan of
Reorganization. [ ] [ ] [ ] Reorganization. [ ] [ ] [ ]
2. ELECTION OF BOARD 2. ELECTION OF BOARD
MEMBERS. FOR WITHHOLD FOR ALL MEMBERS. FOR WITHHOLD FOR ALL
(See Nominee list on ALL ALL EXCEPT* (See Nominee list on ALL ALL EXCEPT*
consolidated ballot.) consolidated ballot.)
*EXCEPT____________________ [ ] [ ] [ ] *EXCEPT____________________ [ ] [ ] [ ]
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
3. Amend the Articles of 3. Amend the Articles of
Incorporation. [ ] [ ] [ ] Incorporation. [ ] [ ] [ ]
4. Approve Service 4. Approve Service
Agreement. [ ] [ ] [ ] Agreement. [ ] [ ] [ ]
LABEL BELOW FOR MIS USE ONLY!
M1197
AMERICAN EXPRESS - AMERIPRISE
AXP INCOME SERIES, INC
RIVERSOURCE SELECTIVE FUND
ORIGINAL EZVOTE 10-06-05 KD
DOREEN (AMEX-RIVERSOURCE SELECTIVE EZVOTE 2006 DH)
AMEX Selective IND - DH
AXP(R) INCOME SERIES, INC.
- RiverSource(SM) Selective Fund
(formerly AXP Selective Fund)
PROXY STATEMENT
Dec. 16, 2005
HERE IS A BRIEF OVERVIEW OF THE CHANGES BEING RECOMMENDED FOR YOUR RIVERSOURCE
MUTUAL FUND. WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY
STATEMENT.
Q: WHAT ORGANIZATION CHANGES HAVE RECENTLY TAKEN PLACE?
On Sept. 30, Ameriprise Financial, Inc. (formerly American Express Financial
Corporation) became an independent company from American Express. An affiliate
of Ameriprise Financial, RiverSource Investments now serves as investment
manager to your fund. As a result, your fund's name and the names of service
providers to your fund have changed. Your statements should now reflect this new
name and the funds are now listed under RiverSource in the newspaper.
Q: WHY AM I BEING ASKED TO VOTE?
Mutual funds are required to get shareholders' votes for certain kinds of
changes, like the ones included in this proxy statement. You have a right to
vote on these changes either by mailing your proxy card, calling a toll-free
number, responding by internet or attending the shareholder meeting.
Q: IS MY VOTE IMPORTANT?
Absolutely! While the Board of Directors ("Board") for RiverSource Funds has
reviewed these changes and recommends you approve them, you have the right to
voice your opinion. Until the Fund is sure that a quorum has been reached (50%
of existing shares), it will continue to contact shareholders asking them to
vote. These efforts cost money -- so please, vote immediately.
Q: WHAT AM I BEING ASKED TO VOTE ON?
Shareholders are being asked to vote on:
- - The merger ("Reorganization") of RiverSource Selective Fund and RiverSource
Diversified Bond Fund.
- - Election of Board members.
<Page>
- - An amendment to the Fund's Articles of Incorporation to permit the Board to
establish the minimum account value and to change the name of the corporation
to "RiverSource" consistent with the names of the funds.
- - An Investment Management Services Agreement (IMS Agreement) with RiverSource
Investments, LLC.
We encourage you to read the full text of the proxy statement to obtain a more
detailed understanding of the issues.
Q: IF APPROVED, WHEN WILL THE MERGER HAPPEN?
If shareholders approve the merger, it will take place shortly after the
shareholder meeting. In the interim, however, it will be important for the Fund
to have a properly elected Board and an IMS Agreement that has been approved by
shareholders.
Q: WHAT DO BOARD MEMBERS DO?
Board members represent the interests of the shareholders and oversee the
management of the Fund.
Q: WHAT CHANGES ARE PROPOSED TO THE INVESTMENT MANAGEMENT SERVICES AGREEMENT?
In September, the Fund's investment manager, Ameriprise Financial, Inc.
(formerly known as American Express Financial Corporation) was spun off from its
parent company, American Express Company. The investment management functions
were then moved to RiverSource Investments, LLC, a wholly owned subsidiary of
Ameriprise Financial. While this change did not cause a termination of the IMS
Agreement, the Board determined that it would be prudent to give shareholders an
opportunity to vote on the arrangement.
Q: HOW DOES THE BOARD RECOMMEND THAT I VOTE?
After careful consideration, the Board recommends that you vote FOR each
proposal.
Q: HOW DO I VOTE?
You can vote in one of four ways:
- - By mail with the enclosed proxy card
- - By telephone
- - By web site
- - In person at the meeting
Please refer to the enclosed voting instruction card for the telephone number
and internet address.
Q: WHOM SHOULD I CALL IF I HAVE QUESTIONS?
If you have questions about any of the issues described in the proxy statement
or about voting procedures, please call your financial advisor or call client
services toll free at (877) 256-6085.
<Page>
Statement of Additional Information
Dec. 16, 2005
AXP(R) Fixed Income Series, Inc.
RiverSource(SM) Diversified Bond Fund
This Statement of Additional Information ("SAI") consists of this cover page and
incorporates by reference the following described documents, each of which has
been previously filed and accompanies this SAI.
1. RiverSource Diversified Bond Fund's most recent SAI, dated Oct. 3, 2005.
2. RiverSource Diversified Bond Fund's most recent annual report, for the
period ended Aug. 31, 2005.
3. RiverSource Selective Fund's most recent SAI, dated July 29, 2005.
4. RiverSource Selective Fund's most recent annual report, for the period
ended May 31, 2005.
This SAI is not a prospectus. It should be read in conjunction with the proxy
statement/prospectus, dated the same date as this SAI, which may be obtained by
calling (877) 256-6085 or writing RiverSource Service Corporation, 70100
Ameriprise Financial Center, Minneapolis, MN 55474.
RiverSource Diversified Bond Fund
RiverSource Selective Fund
Introduction to Proposed Fund Merger
Aug. 31, 2005
The accompanying unaudited pro forma combining statement of assets and
liabilities and the statement of operations reflect the accounts of the two
funds at and for the 12-month period ending Aug. 31, 2005. These statements have
been derived from financial statements prepared for RiverSource Diversified Bond
Fund and RiverSource Selective Fund as of Aug. 31, 2005. RiverSource Diversified
Bond Fund invests primarily in bonds and other debt securities including
securities issued by the U.S. government, corporate bonds and mortgage and
asset-backed securities. RiverSource Selective Fund invests all of its assets in
Quality Income Portfolio, a series of Income Trust, an open-end investment
company that has the same objectives as the Fund. The Portfolio invests
primarily in bonds, which are investment grade and denominated in U.S. dollars.
Under the proposed Agreement and Plan of Reorganization, Class A shares of the
RiverSource Selective Fund would be exchanged for Class A shares of the
RiverSource Diversified Bond Fund. Class B shares of the RiverSource Selective
Fund would be exchanged for Class B shares of the RiverSource Diversified Bond
Fund. Class C shares of the RiverSource Selective Fund would be exchanged for
Class C shares of the RiverSource Diversified Bond Fund. Class I shares of the
RiverSource Selective Fund would be exchanged for Class I shares of the
RiverSource Diversified Bond Fund. Class Y shares of the RiverSource Selective
Fund would be exchanged for Class Y shares of the RiverSource Diversified Bond
Fund.
The pro forma combining statements have been prepared to give effect to the
proposed transaction on the historical operations of the accounting survivor,
RiverSource Diversified Bond Fund, as if the transaction had occurred at the
beginning of the fiscal year ending Aug. 31, 2005.
2 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
RiverSource Diversified Bond Fund
RiverSource Selective Fund Pro forma combining
Pro forma combining
Statement of assets and liabilities
RiverSource RiverSource
Diversified Selective Pro forma Pro forma
Aug. 31, 2005 (Unaudited) Bond Fund Fund Adjustments Combined
Assets
Investments in securities, at cost (Note 2) $2,548,650,816 $ -- $ 914,853,014(a) $3,463,503,830
-------------- ----------- ------------- --------------
Investments in securities, at value* (Note 2) $2,556,951,047 $ -- $ 919,957,764(a) $3,476,908,811
Investment in Portfolio (Note 2) -- 879,765,683 (879,765,683)(a) --
Cash in bank on demand deposit -- -- -- --
Capital shares receivable 479,976 29,875 -- 509,851
Dividends and accrued interest receivable (Note 2) 15,852,024 -- 5,780,725(a) 21,632,749
Receivable for investment securities sold (Note 2) 206,792,872 -- 87,940,716(a) 294,733,588
Receivable from RiverSource Investments, LLC (Note 2) -- -- 89,190(g) 89,190
Unrealized appreciation on swap transactions, at value
(Note 2) 878,275 -- 331,006(a) 1,209,281
-------------- ----------- ------------- --------------
Total assets 2,780,954,194 879,795,558 134,333,718 3,795,083,470
-------------- ----------- ------------- --------------
Liabilities
Disbursements in excess of cash on demand deposit (Note 2) 887,631 -- 173,197(a) 1,060,828
Dividends payable to shareholders 451,716 168,153 -- 619,869
Capital shares payable 164,578 76,626 -- 241,204
Payable for investment securities purchased (Note 2) 140,630,243 -- 73,567,586(a) 214,197,829
Payable upon return of securities loaned (Note 2) 18,330,000 -- 9,234,879(a) 27,564,879
Accrued investment management services fee (Note 2) 33,907 -- (1,984,712)(a),(b) (1,950,805)
Accrued distribution fee 538,031 160,952 -- 698,983
Accrued service fee 553 129 -- 682
Accrued transfer agency fee 2,626 1,669 -- 4,295
Accrued administrative services fee (Note 2) 3,122 1,202 487,541(c) 491,865
Other accrued expenses (Note 2) 324,785 54,264 (123,647)(a),(d),(e),(f) 255,402
Forward Sale Commitments, at value (
proceeds receivable $139,123,964
for RiverSource Diversified Bond Fund and proceeds
receivable $50,768,433 for RiverSource
Selective Fund) (Note 2) 140,462,038 -- 51,226,682(a) 191,688,720
-------------- ----------- ------------- --------------
Total liabilities 301,829,230 462,995 132,581,526 434,873,751
-------------- ----------- ------------- --------------
Net assets applicable to outstanding capital stock $2,479,124,964 $879,332,563 $ 1,752,192 $3,360,209,719
============== ============ ============= ==============
Represented by
Capital stock -- $.01 par value (Note 3) $ 5,068,498 $ 1,012,382 $ 789,410 $ 6,870,290
Additional paid-in capital (Note 3) 2,579,293,685 904,470,148 (789,410) 3,482,974,423
Undistributed (excess of distributions over)
net investment income (Note 2) 5,270,078 (135,196) 1,752,192 6,887,074
Accumulated net realized gain (loss) (117,341,155) (30,555,103) -- (147,896,258)
Unrealized appreciation (depreciation)
on investments and on translation of assets
and liabilities in foreign currencies 6,833,858 4,540,332 -- 11,374,190
-------------- ----------- ------------- --------------
Total -- representing net assets applicable
to outstanding capital stock $2,479,124,964 $879,332,563 $ 1,752,192 $3,360,209,719
============== ============ ============= ==============
Net assets applicable to outstanding shares: Class A $1,774,392,052 $568,270,394 $ 1,222,226 $2,343,884,672
Class B $ 484,320,317 $107,242,362 $ 308,633 $ 591,871,312
Class C $ 18,092,300 $ 4,006,610 $ 11,530 $ 22,110,440
Class I $ 9,963 $152,498,448 $ 79,567 $ 152,587,978
Class Y $ 202,310,332 $ 47,314,749 $ 130,236 $ 249,755,317
Shares outstanding (Note 3): Class A shares 362,799,390 65,421,428 -- 479,260,048
Class B shares 99,003,330 12,348,634 -- 120,997,399
Class C shares 3,693,765 461,303 -- 4,513,794
Class I shares 2,037 17,555,166 -- 31,204,085
Class Y shares 41,351,259 5,451,649 -- 51,053,710
Net asset value per share of
outstanding capital stock: Class A $4.89 $ 8.69 $ -- $ 4.89
Class B $4.89 $ 8.68 $ -- $ 4.89
Class C $4.90 $ 8.69 $ -- $ 4.90
Class I $4.89 $ 8.69 $ -- $ 4.89
Class Y $4.89 $ 8.68 $ -- $ 4.89
-------------- ----------- ------------- --------------
* Including securities on loan, at value (Note 2) $ 18,115,920 $ -- $ 9,234,879(a) $ 27,350,799
-------------- ----------- ------------- --------------
See accompanying notes to pro forma financial statements.
3 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
RiverSource Diversified Bond Fund
RiverSource Selective Fund
Pro forma combining
Statement of operations
RiverSource RiverSource
Diversified Selective Pro forma Pro forma
Year ended Aug. 31, 2005 (Unaudited) Bond Fund Fund Adjustments Combined
Investment income
Income:
Interest $120,064,422 $41,006,745 $ -- $161,071,167
Fee income from securities lending 361,192 166,712 -- 527,904
------------ ----------- ----------- ------------
Total income 120,425,614 41,173,457 -- 161,599,071
------------ ----------- ----------- ------------
Expenses:
Expenses allocated from Portfolio (Note 2) -- 5,011,437 (5,011,437)(a) --
Investment management services fee (Note 2) 13,003,467 -- 2,793,477(a),(b) 15,796,944
Distribution fee
Class A 4,534,413 1,550,727 -- 6,085,140
Class B 5,752,444 1,360,696 -- 7,113,140
Class C 193,278 46,375 -- 239,653
Transfer agency fee 4,365,376 1,131,176 -- 5,496,552
Incremental transfer agency fee
Class A 239,386 77,977 -- 317,363
Class B 149,792 35,628 -- 185,420
Class C 5,897 1,444 -- 7,341
Service fee -- Class Y 198,919 54,909 -- 253,828
Administrative services fees and expenses (Note 2) 1,259,427 464,620 487,541(c) 2,211,588
Custodian fees (Note 2) 207,936 -- 42,064(a),(d) 250,000
Compensation of board members (Note 2) 22,793 9,573 (7,366)(a),(e) 25,000
Printing and postage 619,638 141,850 -- 761,488
Registration fees 109,340 53,990 -- 163,330
Audit fees (Note 2) 45,000 11,000 (11,000)(a),(f) 45,000
Other (Note 2) 105,201 22,515 48,491(a) 176,207
------------ ----------- ----------- ------------
Total expenses 30,812,307 9,973,917 (1,658,230) 39,127,994
Expenses waived/reimbursed by RiverSource
Investments, LLC (Note 2) (2,024,845) (758,444) (89,190)(g) (2,872,479)
------------ ----------- ----------- ------------
28,787,462 9,215,473 (1,747,420) 36,255,515
Earnings credits on cash balances (117,177) (36,841) (4,772)(a) (158,790)
------------ ----------- ----------- ------------
Total net expenses 28,670,285 9,178,632 (1,752,192) 36,096,725
------------ ----------- ----------- ------------
Investment income (loss) -- net 91,755,329 31,994,825 1,752,192 125,502,346
------------ ----------- ----------- ------------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 29,398,036 5,990,494 -- 35,388,530
Foreign currency transactions (215,482) (21,848) -- (237,330)
Futures contracts 208,446 (3,822,594) -- (3,614,148)
Swap transactions (467,823) (180,348) -- (648,171)
------------ ----------- ----------- ------------
Net realized gain (loss) on investments 28,923,177 1,965,704 -- 30,888,881
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities
in foreign currencies (14,927,428) (714,370) -- (15,641,798)
------------ ----------- ----------- ------------
Net gain (loss) on investments and foreign currencies 13,995,749 1,251,334 -- 15,247,083
------------ ----------- ----------- ------------
Net increase (decrease) in net assets resulting from operations $105,751,078 $33,246,159 $ 1,752,192 $140,749,429
============ =========== =========== ============
See accompanying notes to pro forma financial statements.
4 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
RiverSource Diversified Bond Fund
RiverSource Selective Fund
Notes to Pro Forma Financial Statements
(Unaudited as to Aug. 31, 2005)
1. BASIS OF COMBINATION
The unaudited pro forma combining statement of assets and liabilities and the
statement of operations reflect the accounts of the two funds at and for the
12-month period ending Aug. 31, 2005. These statements have been derived from
financial statements prepared for the RiverSource Diversified Bond Fund and
RiverSource Selective Fund as of Aug. 31, 2005.
Each Fund is registered under the Investment Company Act of 1940 (as amended) as
a diversified, open-end management investment company. The primary investments
of each Fund are as follows:
RiverSource Diversified Bond Fund invests primarily in bonds and other debt
securities including securities issued by the U.S. government, corporate bonds
and mortgage and asset-backed securities.
RiverSource Selective Fund invests all of its assets in Quality Income
Portfolio, a series of Income Trust, an open-end investment company that has the
same objectives as the Fund. The Portfolio invests primarily in bonds, which are
investment grade and denominated in U.S. dollars.
The pro forma statements give effect to the proposed transfer of the assets and
liabilities of RiverSource Selective Fund in exchange for Class A, B, C, I and Y
shares of RiverSource Diversified Bond Fund under U.S. generally accepted
accounting principles. The pro forma statements also reflect changes needed
regarding the change in structure of RiverSource Selective Fund. Finally, the
pro forma statements reflect estimates for the combined RiverSource Diversified
Bond Fund based on the increased asset level of the merger and associated
economies of scale, adjusted to reflect current fees.
The pro forma combining statements should be read in conjunction with the
historical financial statements of the funds incorporated by reference in the
Statement of Additional Information.
The pro forma statement of operations give effect to the proposed transaction on
the historical operations of the accounting survivor, RiverSource Diversified
Bond Fund, as if the transaction had occurred at the beginning of the year
presented.
2. PRO FORMA ADJUSTMENTS
(a) To reflect adjustments needed regarding the change in structure of
RiverSource Selective Fund from a feeder fund presentation into a reporting
format comparable with the accounting survivor.
(b) To reflect the decrease in investment management services fee due to the
Reorganization and to include the impact of the proposed new investment
management services agreement.
(c) To reflect the decrease in administrative services fees due to the
Reorganization and to include the increase due to the revised
administrative services agreement.
(d) To reflect the decrease in custodian fees due to the Reorganization.
(e) To adjust for the change in the compensation of board members due to the
Reorganization.
(f) To reflect the reduction in audit fees due to the Reorganization.
(g) To adjust the expense reimbursement to include the impact of the agreement
by RiverSource Investments, LLC and its affiliates to waive certain fees
and to absorb certain expenses following the merger.
3. CAPITAL SHARES
The pro forma net asset value per share assumes the issuance of additional Class
A, Class B, Class C, Class I and Class Y shares of RiverSource Diversified Bond
Fund if the reorganization were to have taken place on Aug. 31, 2005. The pro
forma number of Class A shares outstanding of 479,260,048 consists of
116,460,658 shares assumed to be issued to Class A shareholders of the
RiverSource Selective Fund, plus 362,799,390 Class A shares of the RiverSource
Diversified Bond Fund outstanding as of Aug. 31, 2005. The pro forma number of
Class B shares outstanding of 120,997,399 consists of 21,994,069 shares assumed
to be issued to Class B shareholders of the RiverSource Selective Fund, plus
99,003,330 Class B shares of the RiverSource Diversified Bond Fund outstanding
as of Aug. 31, 2005. The pro forma number of Class C shares outstanding of
4,513,794 consists of 820,029 shares assumed to be issued to Class C
shareholders of the RiverSource Selective Fund, plus 3,693,765 Class C shares of
the RiverSource Diversified Bond Fund outstanding as of Aug. 31, 2005. The pro
forma number of Class I shares outstanding of
5 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
31,204,085 consists of 31,202,048 shares assumed to be issued to Class I
shareholders of the RiverSource Selective Fund, plus 2,037 Class I shares of the
RiverSource Diversified Bond Fund outstanding as of Aug. 31, 2005. The pro forma
number of Class Y shares outstanding of 51,053,710 consists of 9,702,451 shares
assumed to be issued to Class Y shareholders of the RiverSource Selective Fund,
plus 41,351,259 Class Y shares of the RiverSource Diversified Bond Fund
outstanding as of Aug. 31, 2005.
Combined Investments in Securities
RiverSource Diversified Bond Fund
Aug. 31, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Bonds (99.3%)
Issuer Coupon rate Principal Principal Principal Value(a) Value(a) Value(a)
amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Sovereign (1.9%)
Bundesrepublik Deutschland
(European Monetary Unit)
01/04/07 6.00% $18,818,000 $6,747,000 $25,565,000(c) $24,359,708 $8,733,922 $33,093,630
United Kingdom Treasury
(British Pound)
12/07/06 7.50 8,906,000 3,223,000 12,129,000(c) 16,710,308 6,047,308 22,757,616
United Mexican States
09/27/34 6.75 4,880,000 1,730,000 6,610,000(c) 5,289,920 1,875,320 7,165,240
Total 46,359,936 16,656,550 63,016,486
U.S. Government Obligations & Agencies (22.0%)
Federal Farm Credit Bank
10/10/08 4.25 9,800,000 3,485,000 13,285,000 9,856,046 3,504,931 13,360,977
Federal Home Loan Bank
08/11/06 3.25 -- 7,050,000 7,050,000 -- 6,998,817 6,998,817
04/18/08 4.13 5,615,000 2,585,000 8,200,000 5,626,926 2,590,491 8,217,417
Federal Home Loan Mtge Corp
09/15/06 3.63 -- 7,265,000 7,265,000 -- 7,239,580 7,239,580
06/15/08 3.88 51,935,000 18,350,000 70,285,000 51,671,170 18,256,782 69,927,952
10/15/08 5.13 33,750,000 21,335,000 55,085,000 34,775,089 21,983,008 56,758,097
03/18/09 3.76 6,890,000 2,810,000 9,700,000 6,807,065 2,776,176 9,583,241
07/15/09 4.25 -- 10,000,000 10,000,000 -- 10,043,590 10,043,590
07/12/10 4.13 42,370,000 16,052,000 58,422,000 42,293,692 16,023,090 58,316,782
Federal Natl Mtge Assn
04/13/06 2.15 33,200,000 -- 33,200,000 32,835,265 -- 32,835,265
08/15/08 3.25 86,170,000 -- 86,170,000 84,227,728 -- 84,227,728
Overseas Private Investment
U.S. Govt Guaranty Series 1996A
09/15/08 6.99 -- 3,888,889 3,888,889 -- 4,077,072 4,077,072
U.S. Treasury
12/31/05 1.88 -- 3,000,000 3,000,000(p) -- 2,982,306 2,982,306
08/15/07 3.25 -- 14,000,000 14,000,000 -- 13,847,428 13,847,428
02/15/08 3.38 -- 1,500,000 1,500,000 -- 1,483,593 1,483,593
05/15/15 4.13 18,590,000 13,880,000 32,470,000(r) 18,709,813 13,969,457 32,679,270
08/15/15 4.25 32,765,000 11,970,000 44,735,000 33,384,455 12,196,305 45,580,760
08/15/23 6.25 90,504,000 19,435,000 109,939,000(p) 112,147,217 24,082,705 136,229,922
02/15/26 6.00 56,232,000 32,524,000 88,756,000(p) 68,958,876 39,885,091 108,843,967
U.S. Treasury Inflation-Indexed Bond
01/15/15 1.63 25,602,511 9,259,074 34,861,585(h) 25,572,008 9,248,043 34,820,051
Total 526,865,350 211,188,465 738,053,815
See accompanying notes to combined investments in securities.
6 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon rate Principal Principal Principal Value(a) Value(a) Value(a)
amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Asset-Backed (4.1%)
AAA Trust
Series 2005-2 Cl A1
11/26/35 3.74% $-- $5,351,412 $5,351,412(d,m) $-- $5,345,875 $5,345,875
Aesop Funding II LLC
Series 2002-1A Cl A1 (AMBAC)
10/20/06 3.85 2,363,333 -- 2,363,333(d,l) 2,363,187 -- 2,363,187
Series 2004-2A Cl A1 (FGIC)
04/20/08 2.76 2,000,000 825,000 2,825,000(d,l) 1,959,323 808,221 2,767,544
AmeriCredit Automobile Receivables Trust
Series 2002-C Cl A4 (FSA)
02/12/09 3.55 2,660,000 -- 2,660,000(l) 2,647,671 -- 2,647,671
Series 2004-CA Cl A3 (AMBAC)
03/06/09 3.00 5,500,000 2,000,000 7,500,000(l) 5,438,983 1,977,812 7,416,795
Series 2005-BM Cl A3 (MBIA)
02/06/10 4.05 8,750,000 3,000,000 11,750,000(l) 8,710,354 2,986,407 11,696,761
ARG Funding
Series 2005-1A Cl A3 (MBIA)
04/20/10 4.29 6,300,000 2,250,000 8,550,000(d,l) 6,257,918 2,234,971 8,492,889
Capital Auto Receivables Asset Trust
Series 2004-1
09/15/10 2.84 3,000,000 1,200,000 4,200,000 2,924,645 1,169,858 4,094,503
Series 2005-1 Cl A4
07/15/09 4.05 7,100,000 2,800,000 9,900,000 7,110,792 2,804,256 9,915,048
Capital One Auto Finance Trust
Series 2005-BSS Cl A3
11/15/09 4.08 4,700,000 1,600,000 6,300,000 4,668,510 1,589,280 6,257,790
Carmax Auto Owner Trust
Series 2005-1 Cl A4
03/15/10 4.35 2,400,000 900,000 3,300,000 2,406,635 902,488 3,309,123
Honda Auto Receivables Owner Trust
Series 2005-1 Cl A3
10/21/08 3.53 4,500,000 1,400,000 5,900,000 4,453,740 1,385,608 5,839,348
Long Beach Auto Receivables Trust
Series 2004-C Cl A3 (FSA)
09/15/09 3.40 4,000,000 1,400,000 5,400,000(l) 3,958,280 1,385,398 5,343,678
Metris Master Trust
Series 2001-2 Cl C
11/20/09 5.51 3,425,000 -- 3,425,000(d,m) 3,425,000 -- 3,425,000
Series 2004-2 Cl D
10/20/10 6.86 1,200,000 -- 1,200,000(d,m) 1,218,000 -- 1,218,000
Series 2004-2 Cl M
10/20/10 4.00 2,700,000 1,000,000 3,700,000(m) 2,702,565 1,000,950 3,703,515
Series 2005-1A Cl D
03/21/11 5.51 1,375,000 -- 1,375,000(d,m) 1,374,995 -- 1,374,995
Morgan Stanley Auto Loan Trust
Series 2004-HB2 Cl A3
03/16/09 2.94 4,300,000 1,500,000 5,800,000 4,236,506 1,477,851 5,714,357
Nissan Auto Lease Trust
Series 2004-A Cl A3
08/15/07 2.90 3,000,000 1,450,000 4,450,000 2,968,921 1,434,979 4,403,900
Nissan Auto Receivables Owner Trust
Series 2005-A Cl A3
10/15/08 3.54 5,475,000 1,900,000 7,375,000 5,418,443 1,880,373 7,298,816
Popular ABS Mtge Pass-Through Trust
Series 2005-A Cl AF2
06/25/35 4.49 2,660,000 955,000 3,615,000 2,647,942 950,671 3,598,613
See accompanying notes to combined investments in securities.
7 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Asset-Backed (cont.)
Residential Asset Securities
Series 2002-KS1 Cl AI4 (AMBAC)
11/25/29 5.86% $1,178,876 $440,114 $1,618,990(l) $1,176,306 $439,154 $1,615,460
Triad Auto Receivables Owner Trust
Series 2005-A Cl A3 (AMBAC)
03/12/10 4.05 7,600,000 2,700,000 10,300,000(l) 7,561,696 2,686,392 10,248,088
WFS Financial Owner Trust
Series 2004-1 Cl D
08/22/11 3.17 -- 1,092,057 1,092,057 -- 1,076,829 1,076,829
Series 2004-3 Cl A3
03/17/09 3.30 5,000,000 5,000,000 10,000,000 4,952,182 4,952,181 9,904,363
World Omni Auto Receivables Trust
Series 2005-A Cl A3
06/12/09 3.54 7,500,000 2,750,000 10,250,000 7,423,950 2,722,115 10,146,065
Total 98,006,544 41,211,669 139,218,213
Commercial Mortgage-Backed(f) (11.5%)
Banc of America Commercial Mtge
Series 2005-1 Cl A4
11/10/42 5.03 3,600,000 1,250,000 4,850,000 3,699,823 1,284,661 4,984,484
Bank of America-First Union
NB Commercial Mtge
Series 2001-3 Cl A1
04/11/37 4.89 3,308,970 1,203,262 4,512,232 3,344,098 1,216,036 4,560,134
Bear Stearns Commercial Mtge Securities
Series 2003-T10 Cl A1
03/13/40 4.00 -- 2,975,134 2,975,134 -- 2,913,222 2,913,222
Series 2004-T16 Cl A3
02/13/46 4.03 3,240,000 600,000 3,840,000 3,194,726 591,616 3,786,342
Series 2005-PWR8 Cl A1
06/11/41 4.21 7,410,978 2,448,130 9,859,108 7,392,006 2,441,862 9,833,868
California State Teachers'
Retirement System Trust
Series 2002-C6 Cl A3
11/20/14 4.46 6,645,827 5,340,397 11,986,224(d) 6,660,137 5,351,895 12,012,032
CDC Commercial Mtge Trust
Series 2002-FX1 Cl A2
11/15/30 5.68 4,500,000 1,750,000 6,250,000 4,747,593 1,846,286 6,593,879
Citigroup Commercial Mtge Trust
Series 2005-EMG Cl A1
09/20/51 4.15 12,141,109 4,202,692 16,343,801(d) 12,098,072 4,187,794 16,285,866
Commercial Mtge Pass-Through Ctfs
Series 2004-CNL Cl A1
09/15/14 3.79 6,000,000 3,280,000 9,280,000(d,m) 5,973,120 3,265,306 9,238,426
CS First Boston Mtge Securities
Series 2002-CKS4 Cl A1
11/15/36 4.49 4,931,045 1,890,234 6,821,279 4,938,080 1,892,931 6,831,011
Series 2004-C1 Cl A2
01/15/37 3.52 3,000,000 1,550,000 4,550,000 2,933,706 1,515,748 4,449,454
Federal Natl Mtge Assn #385683
02/01/13 4.83 6,321,619 -- 6,321,619 6,438,261 -- 6,438,261
Federal Natl Mtge Assn #385717
11/01/12 4.84 1,172,908 1,824,523 2,997,431 1,192,226 1,854,573 3,046,799
Federal Natl Mtge Assn #386599
11/01/10 4.47 1,645,633 556,474 2,202,107 1,638,888 554,193 2,193,081
Federal Natl Mtge Assn #555264
02/01/13 5.02 5,743,751 -- 5,743,751 5,915,413 -- 5,915,413
Federal Natl Mtge Assn #555806
10/01/13 5.11 537,301 -- 537,301 557,756 -- 557,756
See accompanying notes to combined investments in securities.
8 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Commercial Mortgage-Backed(f) (cont.)
GE Capital Commercial Mtge
Series 2004-C2 Cl A2
03/10/40 4.12% $3,000,000 $3,250,000 $6,250,000 $2,958,600 $3,205,150 $6,163,750
Series 2005-C3 Cl A1
07/10/45 4.59 4,590,000 1,630,000 6,220,000 4,624,331 1,642,192 6,266,523
Series 2005-C3 Cl A2
07/10/45 4.85 3,460,000 1,230,000 4,690,000 3,517,649 1,250,494 4,768,143
General Electric Capital Assurance
Series 2003-1 Cl A3
05/12/35 4.77 7,650,000 2,700,000 10,350,000(d) 7,725,504 2,726,648 10,452,152
General Electric Capital Commercial Mtge
Series 2001-3 Cl A1
06/10/38 5.56 3,516,761 1,394,578 4,911,339 3,612,410 1,432,507 5,044,917
GMAC Commercial Mtge Securities
Series 1999-C1 Cl B
05/15/33 6.30 5,800,000 2,200,000 8,000,000 6,143,449 2,330,274 8,473,723
Series 2004-C3 Cl A4
12/10/41 4.55 4,700,000 1,700,000 6,400,000 4,690,168 1,696,444 6,386,612
Series 2005-C1 Cl A1
05/10/43 4.21 3,632,143 1,276,158 4,908,301 3,620,863 1,272,195 4,893,058
Greenwich Capital Commercial Funding
Series 2004-GG1 Cl A5
06/10/36 4.88 2,400,000 1,000,000 3,400,000 2,443,639 1,018,183 3,461,822
Series 2005-GG3 Cl A1
08/10/42 3.92 3,387,067 1,190,050 4,577,117 3,363,019 1,181,601 4,544,620
Series 2005-GG3 Cl A3
08/10/42 4.57 7,225,000 2,650,000 9,875,000 7,229,214 2,651,546 9,880,760
GS Mtge Securities II
Series 2004-GG2 Cl A4
08/10/38 4.96 4,300,000 1,600,000 5,900,000 4,383,521 1,631,077 6,014,598
Series 2005-GG4 Cl A1
07/10/39 4.37 5,797,892 2,081,294 7,879,186 5,801,369 2,082,543 7,883,912
JPMorgan Chase Commercial Mtge Securities
Series 2002-CIB5 Cl A1
10/12/37 4.37 3,784,852 1,320,297 5,105,149 3,786,302 1,320,803 5,107,105
Series 2003-CB6 Cl A1
07/12/37 4.39 7,651,905 -- 7,651,905 7,613,646 -- 7,613,646
Series 2003-CB6 Cl A2
07/12/37 5.26 4,200,000 1,500,000 5,700,000 4,376,803 1,563,144 5,939,947
Series 2003-LN1 Cl A1
10/15/37 4.13 3,457,029 1,273,642 4,730,671 3,406,364 1,254,976 4,661,340
Series 2003-ML1A Cl A1
03/12/39 3.97 3,029,203 1,101,528 4,130,731 2,979,707 1,083,530 4,063,237
Series 2004-CBX Cl A3
01/12/37 4.18 3,000,000 1,000,000 4,000,000 2,967,024 989,008 3,956,032
Series 2004-CBX Cl A5
01/12/37 4.65 5,000,000 1,500,000 6,500,000 5,021,358 1,506,407 6,527,765
Series 2005-CB11 Cl A3
08/12/37 5.20 4,700,000 1,557,000 6,257,000 4,863,327 1,611,107 6,474,434
Series 2005-LDP2 Cl A1
07/15/42 4.33 5,721,867 2,054,004 7,775,871 5,737,144 2,059,488 7,796,632
LB-UBS Commercial Mtge Trust
Series 2002-C2 Cl A3
06/15/26 5.39 7,360,000 2,790,000 10,150,000 7,640,829 2,896,456 10,537,285
Series 2002-C4 Cl A4
09/15/26 4.56 5,200,000 1,800,000 7,000,000 5,206,430 1,802,226 7,008,656
See accompanying notes to combined investments in securities.
9 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Commercial Mortgage-Backed(f) (cont.)
LB-UBS Commercial Mtge Trust (cont.)
Series 2002-C4 Cl A5
09/15/31 4.85% $6,000,000 $-- $6,000,000 $6,100,501 $-- $6,100,501
Series 2003-C8 Cl A2
11/15/27 4.21 7,500,000 5,130,000 12,630,000 7,452,300 5,097,373 12,549,673
Series 2003-C8 Cl A3
11/15/27 4.83 5,250,000 1,150,000 6,400,000 5,322,765 1,165,939 6,488,704
Series 2004-C2 Cl A3
03/15/29 3.97 3,275,000 1,200,000 4,475,000 3,165,026 1,159,704 4,324,730
Series 2004-C4 Cl A3
06/15/29 5.16 3,000,000 1,000,000 4,000,000(m) 3,099,411 1,033,137 4,132,548
Series 2004-C6 Cl A2
08/15/29 4.19 5,250,000 1,995,000 7,245,000 5,208,945 1,979,399 7,188,344
Series 2004-C6 Cl A4
08/15/29 4.58 4,425,000 1,550,000 5,975,000 4,440,719 1,555,506 5,996,225
Series 2004-C7 Cl A2
10/15/29 3.99 5,400,000 1,000,000 6,400,000 5,304,420 982,300 6,286,720
Series 2004-C8 Cl A2
12/15/29 4.20 5,800,000 2,300,000 8,100,000 5,748,496 2,279,576 8,028,072
Series 2005-C3 Cl A1
07/15/30 4.39 3,902,242 1,317,007 5,219,249 3,910,475 1,319,785 5,230,260
Series 2005-C5 Cl A2
09/15/40 4.89 4,600,000 1,500,000 6,100,000 4,667,988 1,522,170 6,190,158
Merrill Lynch Mtge Trust
Series 2005-MCP1 Cl A1
06/12/43 4.22 4,569,849 1,759,514 6,329,363 4,557,707 1,754,839 6,312,546
Morgan Stanley Capital I
Series 2003-IQ4 Cl A1
05/15/40 3.27 5,400,919 4,136,100 9,537,019 5,165,854 3,956,083 9,121,937
Series 2004-HQ4 Cl A5
04/14/40 4.59 3,600,000 1,350,000 4,950,000 3,597,948 1,349,231 4,947,179
Series 2004-IQ8 Cl A2
06/15/40 3.96 4,884,318 2,100,782 6,985,100 4,840,891 2,082,104 6,922,995
Morgan Stanley, Dean Witter Capital I
Series 2002-TOP7 Cl A2
01/15/39 5.98 10,900,000 4,335,000 15,235,000 11,768,644 4,680,465 16,449,109
Prudential Commercial Mtge Trust
Series 2003-PWR1 Cl A1
02/11/36 3.67 4,340,476 1,519,167 5,859,643 4,241,613 1,484,565 5,726,178
Wachovia Bank Commercial Mtge Trust
Series 2005-C16 Cl A2
10/15/41 4.38 2,000,000 1,500,000 3,500,000 1,992,985 1,494,739 3,487,724
Series 2005-C16 Cl A3
10/15/41 4.62 5,500,000 1,962,000 7,462,000 5,515,590 1,967,561 7,483,151
Total 280,538,853 105,988,598 386,527,451
See accompanying notes to combined investments in securities.
10 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed(f,n) (38.4%)
Adjustable Rate Mtge Trust
Series 2004-2 Cl 6A1
02/25/35 5.27% $5,603,629 $1,895,652 $7,499,281(k) $5,666,421 $1,916,893 $7,583,314
Series 2005-3 Cl 7A1
07/25/35 5.10 6,139,038 -- 6,139,038(k) 6,178,417 -- 6,178,417
Banc of America Mtge Securities
Series 2004-E Cl B1
06/25/34 4.04 2,942,734 -- 2,942,734(k) 2,902,977 -- 2,902,977
Series 2004-F Cl B1
07/25/34 4.14 5,294,199 1,831,047 7,125,246(k) 5,252,851 1,816,746 7,069,597
Bank of America Alternative Loan Trust
Series 2003-11 Cl 1A1
01/25/34 6.00 7,291,347 2,310,130 9,601,477 7,393,134 2,342,379 9,735,513
Series 2003-11 Cl 4A1
01/25/19 4.75 3,708,501 1,333,412 5,041,913 3,698,494 1,329,814 5,028,308
Series 2004-3 Cl 1A1
04/25/34 6.00 11,556,909 -- 11,556,909 11,845,831 -- 11,845,831
Bear Stearns Adjustable Rate Mtge Trust
Series 2004-10 Cl 13A1
01/25/35 5.03 7,520,943 2,705,375 10,226,318(k) 7,536,103 2,710,828 10,246,931
Series 2004-12 Cl 3A1
02/25/35 5.19 -- 2,039,266 2,039,266(k) -- 2,048,810 2,048,810
Chaseflex Trust
Series 2005-2 Cl 2A2
06/25/35 6.50 -- 3,172,946 3,172,946 -- 3,265,162 3,265,162
Countrywide Alternative Loan Trust
Series 2003-11T1 Cl A1
07/25/18 4.75 4,435,623 1,506,363 5,941,986 4,410,359 1,497,784 5,908,143
Series 2005-6CB Cl 1A1
04/25/35 7.50 5,997,930 2,134,777 8,132,707 6,286,825 2,237,601 8,524,426
Countrywide Home Loans
Series 2004-12 Cl 1M
08/25/34 4.63 3,544,824 1,173,287 4,718,111(k) 3,485,568 1,153,674 4,639,242
Series 2005-R2 Cl 2A1
06/25/35 7.00 8,176,043 2,975,699 11,151,742(d) 8,669,161 3,155,171 11,824,332
CS First Boston Mtge Securities
Series 2003-29 Cl 8A1
11/25/18 6.00 3,715,185 -- 3,715,185 3,786,886 -- 3,786,886
Series 2004-AR5 Cl CB1
06/25/34 4.42 3,367,444 1,189,559 4,557,003(k) 3,314,749 1,170,945 4,485,694
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
01/15/18 6.50 3,873,181 1,373,219 5,246,400 4,125,454 1,462,661 5,588,115
03/15/22 7.00 1,660,835 -- 1,660,835 1,658,043 -- 1,658,043
02/15/27 5.00 10,070,000 4,000,000 14,070,000 10,191,724 4,048,351 14,240,075
10/15/27 5.00 21,553,000 7,425,000 28,978,000 21,792,004 7,507,337 29,299,341
06/15/28 5.00 13,925,000 4,625,000 18,550,000 14,095,999 4,681,795 18,777,794
12/15/28 5.50 6,005,000 2,175,000 8,180,000 6,166,619 2,233,538 8,400,157
02/15/33 5.50 9,099,150 3,474,221 12,573,371 9,433,938 3,602,049 13,035,987
Collateralized Mtge Obligation
Interest Only
02/15/14 7.40 3,690,563 1,342,023 5,032,586(i) 229,036 83,286 312,322
08/01/20 8.00 10,223,903 3,688,527 13,912,430(i) 1,763,521 636,234 2,399,755
10/15/22 14.56 10,672,675 -- 10,672,675(i) 610,196 -- 610,196
Collateralized Mtge Obligation
Principal Only
08/01/20 4.60 10,223,903 3,688,527 13,912,430(j) 8,399,754 3,030,420 11,430,174
See accompanying notes to combined investments in securities.
11 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Federal Home Loan Mtge Corp #170216
03/01/17 8.50% $-- $12,207 $12,207 $-- $13,226 $13,226
Federal Home Loan Mtge Corp #275036
07/01/16 8.00 -- 140 140 -- 150 150
Federal Home Loan Mtge Corp #284190
01/01/17 8.00 -- 1,026 1,026 -- 1,102 1,102
Federal Home Loan Mtge Corp #290970
04/01/17 8.00 15,808 -- 15,808 16,875 -- 16,875
Federal Home Loan Mtge Corp #295114
06/01/17 8.50 -- 4,116 4,116 -- 4,460 4,460
Federal Home Loan Mtge Corp #540861
09/01/19 8.50 -- 36,300 36,300 -- 39,435 39,435
Federal Home Loan Mtge Corp #A00304
04/01/21 9.00 -- 96,128 96,128 -- 104,649 104,649
Federal Home Loan Mtge Corp #B11835
01/01/19 5.50 -- 728,843 728,843 -- 745,070 745,070
Federal Home Loan Mtge Corp #C00103
03/01/22 8.50 -- 204,867 204,867 -- 223,374 223,374
Federal Home Loan Mtge Corp #C00144
08/01/22 8.50 -- 201,197 201,197 -- 219,460 219,460
Federal Home Loan Mtge Corp #C00356
08/01/24 8.00 624,134 -- 624,134 669,664 -- 669,664
Federal Home Loan Mtge Corp #C00666
10/01/28 7.00 80,935 -- 80,935 84,827 -- 84,827
Federal Home Loan Mtge Corp #C53878
12/01/30 5.50 2,337,257 -- 2,337,257 2,366,188 -- 2,366,188
Federal Home Loan Mtge Corp #C62993
01/01/32 6.50 -- 1,692,998 1,692,998 -- 1,754,021 1,754,021
Federal Home Loan Mtge Corp #C63552
01/01/32 6.50 -- 2,255,948 2,255,948 -- 2,354,136 2,354,136
Federal Home Loan Mtge Corp #C64703
03/01/32 6.50 -- 1,483,530 1,483,530 -- 1,545,043 1,545,043
Federal Home Loan Mtge Corp #C67723
06/01/32 7.00 -- 1,341,628 1,341,628 -- 1,411,450 1,411,450
Federal Home Loan Mtge Corp #C78031
04/01/33 5.50 11,745,658 -- 11,745,658 11,922,489 -- 11,922,489
Federal Home Loan Mtge Corp #C79930
06/01/33 5.50 8,300,923 3,354,263 11,655,186 8,400,785 3,394,616 11,795,401
Federal Home Loan Mtge Corp #C90767
12/01/23 6.00 11,556,730 -- 11,556,730 11,904,523 -- 11,904,523
Federal Home Loan Mtge Corp #D96300
10/01/23 5.50 6,534,781 -- 6,534,781 6,651,761 -- 6,651,761
Federal Home Loan Mtge Corp #E01127
02/01/17 6.50 1,941,898 -- 1,941,898 2,010,138 -- 2,010,138
Federal Home Loan Mtge Corp #E01419
05/01/18 5.50 4,549,999 1,846,684 6,396,683 4,651,301 1,887,799 6,539,100
Federal Home Loan Mtge Corp #E79810
11/01/14 7.50 -- 1,621,619 1,621,619 -- 1,722,025 1,722,025
Federal Home Loan Mtge Corp #E90216
05/01/17 6.00 2,069,339 -- 2,069,339 2,135,147 -- 2,135,147
Federal Home Loan Mtge Corp #E96516
05/01/13 4.50 3,126,398 1,930,506 5,056,904 3,122,161 1,927,890 5,050,051
Federal Home Loan Mtge Corp #E98725
08/01/18 5.00 14,419,765 -- 14,419,765 14,549,256 -- 14,549,256
Federal Home Loan Mtge Corp #E99101
09/01/18 5.00 -- 3,552,539 3,552,539 -- 3,585,240 3,585,240
Federal Home Loan Mtge Corp #E99593
10/01/18 5.00 -- 1,276,726 1,276,726 -- 1,288,393 1,288,393
See accompanying notes to combined investments in securities.
12 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Federal Home Loan Mtge Corp #E99684
10/01/18 5.00% $9,250,763 $4,302,520 $13,553,283 $9,335,142 $4,341,765 $13,676,907
Federal Home Loan Mtge Corp #G00286
02/01/25 8.00 -- 265,254 265,254 -- 284,605 284,605
Federal Home Loan Mtge Corp #G01108
04/01/30 7.00 5,093,691 -- 5,093,691(g) 5,332,408 -- 5,332,408
Federal Home Loan Mtge Corp #G01441
07/01/32 7.00 -- 4,586,308 4,586,308 -- 4,798,866 4,798,866
Federal Home Loan Mtge Corp #G01535
04/01/33 6.00 8,624,579 5,643,194 14,267,773 8,916,929 5,834,484 14,751,413
Federal Home Loan Mtge Corp #G11302
07/01/17 7.00 -- 5,388,733 5,388,733 -- 5,636,285 5,636,285
Federal Home Loan Mtge Corp #G30225
02/01/23 6.00 15,199,368 -- 15,199,368 15,661,912 -- 15,661,912
Federal Natl Mtge Assn
09/01/20 4.50 4,550,000 -- 4,550,000(g) 4,511,607 -- 4,511,607
09/01/20 5.50 -- 4,500,000 4,500,000(g) -- 4,595,625 4,595,625
09/01/20 6.00 24,000,000 4,000,000 28,000,000(g) 24,765,000 4,127,500 28,892,500
12/01/33 5.50 5,958,396 -- 5,958,396 6,025,189 -- 6,025,189
12/01/33 6.50 16,903,129 -- 16,903,129 17,491,196 -- 17,491,196
07/01/34 6.50 9,483,434 -- 9,483,434 9,801,139 -- 9,801,139
Collateralized Mtge Obligation
12/25/26 8.00 4,115,274 1,448,474 5,563,748 4,372,293 1,538,938 5,911,231
Collateralized Mtge Obligation
Interest Only
12/25/12 13.29 3,083,805 1,121,384 4,205,189(i) 128,336 46,668 175,004
12/25/22 8.27 -- 1,114,247 1,114,247(i) -- 143,786 143,786
12/25/31 1.19 2,997,188 1,332,083 4,329,271(i) 490,517 218,008 708,525
Collateralized Mtge Obligation
Principal Only
09/01/18 5.16 -- 24,587 24,587(j) -- 22,015 22,015
Federal Natl Mtge Assn #125479
04/01/27 7.50 -- 408,758 408,758 -- 434,275 434,275
Federal Natl Mtge Assn #190899
04/01/23 8.50 691,252 -- 691,252 745,517 -- 745,517
Federal Natl Mtge Assn #190944
05/01/24 6.00 8,425,530 -- 8,425,530 8,659,748 -- 8,659,748
Federal Natl Mtge Assn #190988
06/01/24 9.00 592,157 -- 592,157 640,068 -- 640,068
Federal Natl Mtge Assn #231309
09/01/23 6.50 167,530 -- 167,530 174,136 -- 174,136
Federal Natl Mtge Assn #231310
09/01/23 6.50 530,658 -- 530,658 551,582 -- 551,582
Federal Natl Mtge Assn #250330
09/01/25 8.00 445,666 -- 445,666 477,876 -- 477,876
Federal Natl Mtge Assn #250495
03/01/26 7.00 1,019,300 -- 1,019,300 1,072,872 -- 1,072,872
Federal Natl Mtge Assn #250765
12/01/26 8.00 -- 389,659 389,659 -- 417,730 417,730
Federal Natl Mtge Assn #251116
08/01/27 8.00 -- 440,530 440,530 -- 472,257 472,257
Federal Natl Mtge Assn #252498
06/01/29 7.00 8,820 -- 8,820 9,257 -- 9,257
Federal Natl Mtge Assn #252982
01/01/30 8.00 -- 322,384 322,384 -- 344,948 344,948
Federal Natl Mtge Assn #253883
08/01/16 6.00 4,640,029 -- 4,640,029 4,792,353 -- 4,792,353
See accompanying notes to combined investments in securities.
13 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Federal Natl Mtge Assn #254236
03/01/17 6.50% $-- $2,781,796 $2,781,796 $-- $2,883,759 $2,883,759
Federal Natl Mtge Assn #254383
06/01/32 7.50 -- 639,725 639,725 -- 678,268 678,268
Federal Natl Mtge Assn #254608
12/01/17 6.50 1,339,393 -- 1,339,393 1,388,487 -- 1,388,487
Federal Natl Mtge Assn #254802
07/01/18 4.50 3,971,772 -- 3,971,772 3,944,369 -- 3,944,369
Federal Natl Mtge Assn #254916
09/01/23 5.50 10,454,827 3,416,610 13,871,437 10,639,996 3,477,123 14,117,119
Federal Natl Mtge Assn #255788
06/01/15 5.50 -- 4,469,242 4,469,242 -- 4,576,764 4,576,764
Federal Natl Mtge Assn #268071
01/01/24 6.50 163,729 -- 163,729 170,185 -- 170,185
Federal Natl Mtge Assn #303226
02/01/25 8.00 201,866 -- 201,866 216,503 -- 216,503
Federal Natl Mtge Assn #313049
08/01/11 8.50 1,847,533 -- 1,847,533 1,953,848 -- 1,953,848
Federal Natl Mtge Assn #323654
04/01/14 6.50 1,105,313 -- 1,105,313 1,146,548 -- 1,146,548
Federal Natl Mtge Assn #323933
09/01/29 7.00 6,009,746 -- 6,009,746 6,307,656 -- 6,307,656
Federal Natl Mtge Assn #323980
04/01/14 6.00 -- 2,359,829 2,359,829 -- 2,436,995 2,436,995
Federal Natl Mtge Assn #408207
01/01/28 6.50 -- 239,049 239,049 -- 249,535 249,535
Federal Natl Mtge Assn #455791
01/01/29 6.50 674,373 -- 674,373 700,032 -- 700,032
Federal Natl Mtge Assn #489888
05/01/29 6.50 3,487,023 -- 3,487,023 3,617,671 -- 3,617,671
Federal Natl Mtge Assn #496029
01/01/29 6.50 4,246,764 -- 4,246,764 4,408,597 -- 4,408,597
Federal Natl Mtge Assn #50700
03/01/08 7.00 1,499,358 -- 1,499,358 1,546,308 -- 1,546,308
Federal Natl Mtge Assn #545008
06/01/31 7.00 -- 3,672,660 3,672,660 -- 3,879,746 3,879,746
Federal Natl Mtge Assn #545342
04/01/13 7.00 4,627,493 -- 4,627,493 4,772,395 -- 4,772,395
Federal Natl Mtge Assn #545684
05/01/32 7.50 -- 519,878 519,878 -- 551,283 551,283
Federal Natl Mtge Assn #545869
07/01/32 6.50 2,312,018 924,807 3,236,825 2,403,683 961,473 3,365,156
Federal Natl Mtge Assn #545885
08/01/32 6.50 -- 5,691,728 5,691,728 -- 5,905,168 5,905,168
Federal Natl Mtge Assn #545910
08/01/17 6.00 7,295,950 -- 7,295,950 7,554,568 -- 7,554,568
Federal Natl Mtge Assn #555343
08/01/17 6.00 1,825,352 5,467,991 7,293,343 1,885,417 5,647,921 7,533,338
Federal Natl Mtge Assn #555375
04/01/33 6.00 25,228,537 9,204,453 34,432,990 26,013,313 9,490,772 35,504,085
Federal Natl Mtge Assn #555458
05/01/33 5.50 22,096,938 5,340,093 27,437,031 22,366,300 5,405,189 27,771,489
Federal Natl Mtge Assn #555734
07/01/23 5.00 7,351,062 2,800,048 10,151,110 7,363,536 2,804,799 10,168,335
Federal Natl Mtge Assn #555740
08/01/18 4.50 8,178,587 5,347,420 13,526,007 8,119,484 5,328,632 13,448,116
Federal Natl Mtge Assn #555794
09/01/28 7.50 1,301,201 -- 1,301,201 1,383,293 -- 1,383,293
See accompanying notes to combined investments in securities.
14 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Federal Natl Mtge Assn #567840
10/01/30 7.00% $2,157,244 $-- $2,157,244 $2,264,181 $-- $2,264,181
Federal Natl Mtge Assn #587859
12/01/16 5.50 7,033,699 -- 7,033,699 7,189,301 -- 7,189,301
Federal Natl Mtge Assn #597374
09/01/31 7.00 1,003,150 -- 1,003,150 1,061,237 -- 1,061,237
Federal Natl Mtge Assn #631027
03/01/32 7.50 -- 497,494 497,494 -- 527,500 527,500
Federal Natl Mtge Assn #634650
04/01/32 7.50 -- 367,634 367,634 -- 389,784 389,784
Federal Natl Mtge Assn #638969
03/01/32 5.50 1,951,630 -- 1,951,630 1,975,290 -- 1,975,290
Federal Natl Mtge Assn #640961
06/01/32 7.50 -- 505,155 505,155 -- 535,591 535,591
Federal Natl Mtge Assn #643362
04/01/17 6.50 -- 1,155,745 1,155,745 -- 1,198,107 1,198,107
Federal Natl Mtge Assn #646147
06/01/32 7.00 3,519,163 -- 3,519,163 3,704,808 -- 3,704,808
Federal Natl Mtge Assn #646446
06/01/17 6.50 1,556,345 -- 1,556,345 1,613,391 -- 1,613,391
Federal Natl Mtge Assn #649068
06/01/17 6.50 2,780,638 -- 2,780,638 2,892,464 -- 2,892,464
Federal Natl Mtge Assn #649263
08/01/17 6.50 2,834,879 -- 2,834,879 2,948,868 -- 2,948,868
Federal Natl Mtge Assn #654208
10/01/32 6.50 2,862,683 -- 2,862,683 2,964,719 -- 2,964,719
Federal Natl Mtge Assn #654682
10/01/32 6.00 1,981,337 -- 1,981,337 2,036,797 -- 2,036,797
Federal Natl Mtge Assn #654689
11/01/32 6.00 1,966,180 -- 1,966,180 2,021,184 -- 2,021,184
Federal Natl Mtge Assn #656908
09/01/32 6.50 2,800,382 -- 2,800,382 2,917,397 -- 2,917,397
Federal Natl Mtge Assn #662061
09/01/32 6.50 -- 2,351,821 2,351,821 -- 2,435,647 2,435,647
Federal Natl Mtge Assn #662809
09/01/17 6.50 3,244,057 -- 3,244,057 3,362,963 -- 3,362,963
Federal Natl Mtge Assn #667787
02/01/18 5.50 2,591,140 -- 2,591,140 2,648,678 -- 2,648,678
Federal Natl Mtge Assn #670382
09/01/32 6.00 15,960,099 -- 15,960,099 16,351,933 -- 16,351,933
Federal Natl Mtge Assn #670387
08/01/32 7.00 1,554,656 612,939 2,167,595 1,631,151 643,098 2,274,249
Federal Natl Mtge Assn #678028
09/01/17 6.00 1,359,078 6,242,279 7,601,357 1,403,800 6,447,687 7,851,487
Federal Natl Mtge Assn #678065
02/01/33 6.50 664,741 -- 664,741 693,492 -- 693,492
Federal Natl Mtge Assn #678937
01/01/18 5.50 4,146,084 -- 4,146,084 4,245,988 -- 4,245,988
Federal Natl Mtge Assn #678941
02/01/18 5.50 5,003,683 -- 5,003,683 5,124,238 -- 5,124,238
Federal Natl Mtge Assn #678944
01/01/18 5.50 2,401,887 -- 2,401,887 2,459,769 -- 2,459,769
Federal Natl Mtge Assn #679095
04/01/18 5.00 7,305,388 -- 7,305,388 7,362,964 -- 7,362,964
Federal Natl Mtge Assn #680961
01/01/33 6.00 -- 1,102,449 1,102,449 -- 1,130,889 1,130,889
See accompanying notes to combined investments in securities.
15 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Federal Natl Mtge Assn #681400
03/01/18 5.50% $7,352,297 $-- $7,352,297 $7,522,689 $-- $7,522,689
Federal Natl Mtge Assn #682825
01/01/33 6.00 -- 2,924,936 2,924,936 -- 2,996,745 2,996,745
Federal Natl Mtge Assn #683274
02/01/18 5.50 3,212,613 -- 3,212,613 3,287,078 -- 3,287,078
Federal Natl Mtge Assn #684586
03/01/33 6.00 5,096,687 -- 5,096,687 5,235,207 -- 5,235,207
Federal Natl Mtge Assn #686172
02/01/33 6.00 -- 3,493,909 3,493,909 -- 3,579,687 3,579,687
Federal Natl Mtge Assn #686528
02/01/33 6.00 -- 4,958,756 4,958,756 -- 5,094,283 5,094,283
Federal Natl Mtge Assn #687051
01/01/33 6.00 13,160,407 -- 13,160,407 13,473,208 -- 13,473,208
Federal Natl Mtge Assn #687302
11/01/32 7.00 1,455,078 -- 1,455,078 1,526,178 -- 1,526,178
Federal Natl Mtge Assn #689093
07/01/28 5.50 2,839,252 1,698,724 4,537,976 2,873,672 1,719,318 4,592,990
Federal Natl Mtge Assn #694628
04/01/33 5.50 5,834,454 3,070,965 8,905,419 5,917,620 3,114,739 9,032,359
Federal Natl Mtge Assn #694795
04/01/33 5.50 7,515,706 3,076,560 10,592,266 7,629,798 3,123,264 10,753,062
Federal Natl Mtge Assn #694988
03/01/33 5.50 15,430,151 -- 15,430,151 15,620,402 -- 15,620,402
Federal Natl Mtge Assn #695202
03/01/33 6.50 6,246,202 -- 6,246,202 6,463,510 -- 6,463,510
Federal Natl Mtge Assn #695220
04/01/33 5.50 -- 2,123,883 2,123,883 -- 2,147,692 2,147,692
Federal Natl Mtge Assn #695385
03/01/18 5.50 9,243,583 -- 9,243,583 9,488,435 -- 9,488,435
Federal Natl Mtge Assn #695909
05/01/18 5.50 3,288,547 -- 3,288,547 3,367,835 -- 3,367,835
Federal Natl Mtge Assn #697843
04/01/18 5.00 -- 2,933,681 2,933,681 -- 2,959,013 2,959,013
Federal Natl Mtge Assn #699424
04/01/33 5.50 -- 5,943,139 5,943,139 -- 6,033,437 6,033,437
Federal Natl Mtge Assn #702427
04/01/33 5.50 -- 5,707,738 5,707,738 -- 5,794,462 5,794,462
Federal Natl Mtge Assn #704049
05/01/18 5.50 -- 4,220,532 4,220,532 -- 4,320,305 4,320,305
Federal Natl Mtge Assn #709901
06/01/18 5.00 7,588,174 -- 7,588,174 7,653,818 -- 7,653,818
Federal Natl Mtge Assn #710823
05/01/33 5.50 879,427 -- 879,427 891,965 -- 891,965
Federal Natl Mtge Assn #712109
04/01/18 5.00 -- 2,526,487 2,526,487 -- 2,554,477 2,554,477
Federal Natl Mtge Assn #720006
07/01/33 5.50 8,817,572 3,181,349 11,998,921 8,916,417 3,217,012 12,133,429
Federal Natl Mtge Assn #720070
07/01/23 5.50 -- 3,286,705 3,286,705 -- 3,344,917 3,344,917
Federal Natl Mtge Assn #720378
06/01/18 4.50 6,275,690 1,624,296 7,899,986 6,232,392 1,613,090 7,845,482
Federal Natl Mtge Assn #723687
08/01/28 5.50 5,180,382 -- 5,180,382 5,243,184 -- 5,243,184
Federal Natl Mtge Assn #725232
03/01/34 5.00 21,324,820 7,754,480 29,079,300 21,240,157 7,723,693 28,963,850
See accompanying notes to combined investments in securities.
16 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Federal Natl Mtge Assn #725684
05/01/18 6.00% $10,990,068 $4,026,267 $15,016,335 $11,351,538 $4,158,693 $15,510,231
Federal Natl Mtge Assn #725719
07/01/33 4.85 6,242,791 2,139,755 8,382,546(k) 6,207,707 2,127,730 8,335,437
Federal Natl Mtge Assn #725737
08/01/34 4.53 6,327,018 -- 6,327,018(k) 6,330,940 -- 6,330,940
Federal Natl Mtge Assn #726362
06/01/18 5.00 -- 1,880,739 1,880,739(k) -- 1,898,296 1,898,296
Federal Natl Mtge Assn #730153
08/01/33 5.50 875,217 729,348 1,604,565 885,029 737,524 1,622,553
Federal Natl Mtge Assn #735160
12/01/34 4.40 2,586,904 1,006,018 3,592,922(k) 2,581,575 1,003,946 3,585,521
Federal Natl Mtge Assn #738921
11/01/32 6.50 -- 1,285,427 1,285,427 -- 1,337,607 1,337,607
Federal Natl Mtge Assn #743262
10/01/18 5.00 4,693,966 -- 4,693,966 4,730,506 -- 4,730,506
Federal Natl Mtge Assn #747642
11/01/28 5.50 -- 3,224,163 3,224,163 -- 3,263,249 3,263,249
Federal Natl Mtge Assn #747784
10/01/18 4.50 -- 3,001,000 3,001,000 -- 2,980,295 2,980,295
Federal Natl Mtge Assn #747786
10/01/18 6.00 2,452,852 -- 2,452,852 2,533,798 -- 2,533,798
Federal Natl Mtge Assn #753074
12/01/28 5.50 9,902,895 -- 9,902,895 10,022,948 -- 10,022,948
Federal Natl Mtge Assn #753919
12/01/33 4.95 7,758,768 -- 7,758,768(k) 7,789,310 -- 7,789,310
Federal Natl Mtge Assn #759342
01/01/34 6.50 1,248,772 1,395,276 2,644,048 1,297,598 1,449,830 2,747,428
Federal Natl Mtge Assn #765183
01/01/19 5.50 -- 897,129 897,129 -- 917,571 917,571
Federal Natl Mtge Assn #765759
12/01/18 5.00 6,108,349 -- 6,108,349 6,156,491 -- 6,156,491
Federal Natl Mtge Assn #765761
02/01/19 5.00 -- 2,430,810 2,430,810 -- 2,449,968 2,449,968
Federal Natl Mtge Assn #766641
03/01/34 5.00 5,900,296 3,233,039 9,133,335(g) 5,868,236 3,215,472 9,083,708
Federal Natl Mtge Assn #776962
04/01/29 5.00 17,655,239 3,429,858 21,085,097 17,544,567 3,408,358 20,952,925
Federal Natl Mtge Assn #779327
06/01/34 4.56 -- 5,545,801 5,545,801(k) -- 5,544,406 5,544,406
Federal Natl Mtge Assn #790759
09/01/34 4.84 1,759,706 3,695,383 5,455,089(k) 1,766,256 3,709,137 5,475,393
Federal Natl Mtge Assn #804442
12/01/34 6.50 -- 3,048,351 3,048,351 -- 3,150,474 3,150,474
Federal Natl Mtge Assn #811925
04/01/35 4.92 6,121,823 2,203,763 8,325,586(k) 6,163,315 2,218,700 8,382,015
Federal Natl Mtge Assn #837258
09/01/35 4.92 3,360,503 -- 3,360,503(g,k) 3,378,213 -- 3,378,213
First Horizon Alternative Mtge Securities
Series 2004-AA4 Cl A1
10/25/34 5.41 5,233,780 1,768,908 7,002,688(m) 5,338,613 1,804,340 7,142,953
Series 2005-AA2 Cl 2A1
04/25/35 5.43 6,015,205 2,459,749 8,474,954(m) 6,111,388 2,499,081 8,610,469
Series 2005-AA3 Cl 3A1
05/25/35 5.41 6,223,717 2,211,357 8,435,074(m) 6,291,244 2,235,350 8,526,594
Series 2005-AA4 Cl B1
06/25/35 5.39 -- 724,639 724,639 -- 736,748 736,748
See accompanying notes to combined investments in securities.
17 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Govt Natl Mtge Assn
09/01/35 5.00% $13,650,000 $5,000,000 $18,650,000(g) $13,692,656 $5,015,625 $18,708,281
Collateralized Mtge Obligation
Interest Only
Series 2002-70 Cl IC
08/20/32 0.00 10,214,633 3,783,001 13,997,634(i) 1,337,623 495,390 1,833,013
Collateralized Mtge Obligation
Interest Only
Series 2002-80 Cl CI
01/20/32 0.00 2,303,524 863,822 3,167,346(i) 246,989 92,621 339,610
Govt Natl Mtge Assn #345538
02/15/24 8.00 217,162 -- 217,162 233,213 -- 233,213
Govt Natl Mtge Assn #398831
08/15/26 8.00 244,458 -- 244,458 262,806 -- 262,806
Govt Natl Mtge Assn #423782
05/15/26 7.50 -- 631,900 631,900 -- 674,051 674,051
Govt Natl Mtge Assn #425004
10/15/33 5.50 4,552,190 -- 4,552,190 4,644,658 -- 4,644,658
Govt Natl Mtge Assn #426170
06/15/26 8.00 220,818 -- 220,818 237,392 -- 237,392
Govt Natl Mtge Assn #595256
12/15/32 6.00 -- 9,258,691 9,258,691 -- 9,555,361 9,555,361
Govt Natl Mtge Assn #604708
10/15/33 5.50 9,918,654 3,837,144 13,755,798 10,120,131 3,915,087 14,035,218
Harborview Mtge Loan Trust
Series 2004-3 Cl B1
05/19/34 4.39 4,328,576 -- 4,328,576(k) 4,273,123 -- 4,273,123
IndyMac Index Mtge Loan Trust
Series 2005-AR3 Cl 3A1
04/25/35 5.34 3,671,672 1,293,471 4,965,143(k) 3,710,669 1,307,208 5,017,877
Series 2005-AR8 Cl AX1
Collateralized Mtge Obligation
Interest Only
04/25/35 4.50 192,739,443 68,938,140 261,677,583(i,k) 2,379,128 850,955 3,230,083
Master Adjustable Rate Mtge Trust
Series 2004-5 Cl B1
07/25/34 4.40 4,154,484 1,456,588 5,611,072(k) 4,100,060 1,437,506 5,537,566
Master Alternative Loans Trust
Series 2004-2 Cl 4A1
02/25/19 5.00 6,477,592 2,313,426 8,791,018 6,514,029 2,326,439 8,840,468
Series 2004-4 Cl 2A1
05/25/34 6.00 1,556,968 3,538,564 5,095,532 1,589,773 3,613,121 5,202,894
Series 2004-7 Cl 8A1
08/25/19 5.00 4,969,254 1,703,999 6,673,253 4,972,384 1,705,073 6,677,457
Series 2004-8 Cl 7A1
09/25/19 5.00 6,808,338 2,343,854 9,152,192 6,814,057 2,345,823 9,159,880
Structured Adjustable Rate Mtge Loan Trust
Series 2004-3AC Cl B1
03/25/34 4.93 5,562,433 -- 5,562,433(k) 5,545,078 -- 5,545,078
Series 2004-5 Cl B1
05/25/34 4.61 4,235,971 1,345,544 5,581,515(k) 4,173,872 1,325,818 5,499,690
Structured Asset Securities
Series 2003-33H Cl 1A1
10/25/33 5.50 14,679,726 5,035,180 19,714,906 14,763,922 5,064,060 19,827,982
Washington Mutual
Series 2003-AR10 Cl A7
10/25/33 4.07 6,650,000 2,375,000 9,025,000(k) 6,666,218 2,380,792 9,047,010
See accompanying notes to combined investments in securities.
18 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Mortgage-Backed (f,n) (cont.)
Washington Mutual (cont.)
Series 2004-CB2 Cl 6A
07/25/19 4.50% $4,278,238 $1,637,286 $5,915,524 $4,175,688 $1,598,040 $5,773,728
Series 2004-CB4 Cl 22A
12/25/19 6.00 5,135,060 -- 5,135,060 5,296,976 -- 5,296,976
Series 2005-AR11 Cl A1B1
08/25/45 3.93 12,675,000 4,550,000 17,225,000(k) 12,675,000 4,550,000 17,225,000
Wells Fargo Mtge Backed Securities Trust
Series 2005
10/25/35 5.00 12,000,000 4,300,000 16,300,000(g) 12,061,875 4,322,172 16,384,047
Series 2005-5 Cl 2A1
05/25/35 5.50 10,678,903 3,883,237 14,562,140 10,828,805 3,937,747 14,766,552
Series 2005-AR1 Cl 1A1
02/25/35 4.56 9,806,695 3,467,941 13,274,636(k) 9,764,134 3,452,891 13,217,025
Total 944,124,154 345,145,191 1,289,269,345
Aerospace & Defense (0.1%)
L-3 Communications
06/15/12 7.63 2,000,000 -- 2,000,000 2,120,000 -- 2,120,000
07/15/13 6.13 190,000 -- 190,000 191,900 -- 191,900
Moog
Sr Sub Nts
01/15/15 6.25 165,000 -- 165,000 165,000 -- 165,000
Total 2,476,900 -- 2,476,900
Automotive (0.2%)
DaimlerChrysler NA Holding
11/15/13 6.50 2,125,000 755,000 2,880,000 2,285,544 812,040 3,097,584
Ford Motor
02/01/29 6.38 2,300,000 -- 2,300,000 1,681,261 -- 1,681,261
Lear
Series B
08/01/14 5.75 -- 1,030,000 1,030,000 -- 915,413 915,413
Total 3,966,805 1,727,453 5,694,258
Banking (4.4%)
Bank of America
Sr Unsecured
08/01/10 4.50 11,120,000 7,910,000 19,030,000 11,157,819 7,936,902 19,094,721
Banknorth Group
Sr Nts
05/01/08 3.75 3,960,000 3,370,000 7,330,000(p) 3,916,876 3,333,301 7,250,177
Citigroup
08/03/10 4.63 32,600,000 11,500,000 44,100,000 32,873,285 11,596,404 44,469,689
Sr Nts
05/29/15 4.70 2,665,000 1,005,000 3,670,000 2,661,911 1,003,835 3,665,746
HSBC Bank USA
Sub Nts
08/15/35 5.63 5,500,000 2,000,000 7,500,000 5,674,202 2,063,346 7,737,548
KFW Intl Finance
10/17/05 2.50 18,400,000 6,275,000 24,675,000(c) 18,370,852 6,265,060 24,635,912
M&I Marshall & Ilsley Bank
Sub Nts
06/16/15 4.85 2,575,000 1,075,000 3,650,000 2,592,958 1,082,497 3,675,455
Wells Fargo Bank NA
Sub Nts
02/01/11 6.45 24,007,000 8,604,000 32,611,000 26,369,865 9,450,840 35,820,705
Total 103,617,768 42,732,185 146,349,953
See accompanying notes to combined investments in securities.
19 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Building Materials (--%)
Norcraft Companies LP/Finance
Sr Sub Nts
11/01/11 9.00% $570,000 $-- $570,000 $598,500 $-- $598,500
Chemicals (0.1%)
Airgas
10/01/11 9.13 1,500,000 -- 1,500,000 1,612,500 -- 1,612,500
Compass Minerals Group
08/15/11 10.00 1,000,000 -- 1,000,000 1,095,000 -- 1,095,000
Georgia Gulf
Sr Nts
12/15/13 7.13 1,525,000 -- 1,525,000 1,582,188 -- 1,582,188
MacDermid
07/15/11 9.13 575,000 -- 575,000 618,125 -- 618,125
Total 4,907,813 -- 4,907,813
Diversified Manufacturing (0.7%)
Tyco Intl Group
02/15/11 6.75 15,205,000 5,405,000 20,610,000(c) 16,744,172 5,952,137 22,696,309
Electric (2.9%)
CMS Energy
Sr Nts
01/15/09 7.50 1,275,000 -- 1,275,000 1,345,125 -- 1,345,125
Consumers Energy
1st Mtge
09/15/35 5.80 5,340,000 2,000,000 7,340,000 5,566,800 2,084,944 7,651,744
Dayton Power & Light
1st Mtge
10/01/13 5.13 3,305,000 1,185,000 4,490,000 3,403,459 1,220,302 4,623,761
Dominion Resources
06/15/35 5.95 5,620,000 2,025,000 7,645,000(p) 5,870,191 2,115,149 7,985,340
DPL
Sr Nts
09/01/11 6.88 2,755,000 -- 2,755,000 3,016,725 -- 3,016,725
Exelon
06/15/35 5.63 4,320,000 1,555,000 5,875,000 4,348,287 1,565,182 5,913,469
IPALCO Enterprises
Secured
11/14/08 8.38 400,000 -- 400,000 429,000 -- 429,000
11/14/11 8.63 3,680,000 -- 3,680,000 4,140,000 -- 4,140,000
NorthWestern Energy
Secured
11/01/14 5.88 645,000 -- 645,000(d) 666,045 -- 666,045
Ohio Edison
06/15/09 5.65 4,005,000 -- 4,005,000(d) 4,123,548 -- 4,123,548
Sr Nts
05/01/15 5.45 1,195,000 -- 1,195,000 1,235,972 -- 1,235,972
Ohio Power
Sr Nts Series H
01/15/14 4.85 7,395,000 2,545,000 9,940,000 7,451,498 2,564,444 10,015,942
Pacific Gas & Electric
03/01/34 6.05 4,580,000 1,605,000 6,185,000 5,018,718 1,758,743 6,777,461
Pacificorp
1st Mtge
06/15/35 5.25 2,825,000 1,015,000 3,840,000 2,842,190 1,021,176 3,863,366
See accompanying notes to combined investments in securities.
20 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Electric (cont.)
Potomac Edison
1st Mtge
11/15/14 5.35% $3,195,000 $-- $3,195,000(d) $3,310,308 $-- $3,310,308
08/15/15 5.13 2,275,000 1,895,000 4,170,000(d) 2,326,160 1,937,615 4,263,775
Southern California Edison
1st Mtge
07/15/35 5.35 5,710,000 2,055,000 7,765,000 5,830,875 2,098,502 7,929,377
Tenaska Alabama Partners LP
Secured
06/30/21 7.00 360,000 -- 360,000(d) 375,548 -- 375,548
Utilicorp Canada Finance
06/15/11 7.75 1,915,000 -- 1,915,000(c) 2,001,175 -- 2,001,175
Westar Energy
1st Mtge
07/01/14 6.00 11,450,000 4,150,000 15,600,000 12,464,563 4,517,724 16,982,287
Total 75,766,187 20,883,781 96,649,968
Entertainment (0.4%)
Time Warner
05/15/29 6.63 4,940,000 1,755,000 6,695,000 5,374,068 1,909,208 7,283,276
United Artists Theatre
07/01/15 9.30 7,739,913 -- 7,739,913 7,662,514 -- 7,662,514
Total 13,036,582 1,909,208 14,945,790
Food and Beverage (0.3%)
Burns Philp Capital Property
Sr Sub Nts
02/15/11 10.75 940,000 -- 940,000(c) 1,048,100 -- 1,048,100
Cott Beverages
12/15/11 8.00 1,135,000 -- 1,135,000 1,197,425 -- 1,197,425
Kraft Foods
06/01/12 6.25 4,991,000 1,810,000 6,801,000(p) 5,477,343 1,986,374 7,463,717
Total 7,722,868 1,986,374 9,709,242
Gaming (0.3%)
Boyd Gaming
Sr Sub Nts
12/15/12 7.75 375,000 -- 375,000 399,375 -- 399,375
04/15/14 6.75 455,000 -- 455,000 464,669 -- 464,669
Caesars Entertainment
Sr Nts
04/15/13 7.00 2,535,000 -- 2,535,000 2,833,569 -- 2,833,569
MGM MIRAGE
10/01/09 6.00 670,000 -- 670,000 670,000 -- 670,000
Sr Nts
02/27/14 5.88 720,000 -- 720,000 694,800 -- 694,800
07/15/15 6.63 2,165,000 -- 2,165,000(d,g) 2,186,650 -- 2,186,650
Mohegan Tribal Gaming Authority
Sr Nts
02/15/13 6.13 540,000 -- 540,000 546,750 -- 546,750
Sr Sub Nts
04/01/12 8.00 750,000 -- 750,000 798,750 -- 798,750
Station Casinos
Sr Nts
04/01/12 6.00 1,000,000 -- 1,000,000 1,007,500 -- 1,007,500
Sr Sub Nts
03/01/16 6.88 1,515,000 -- 1,515,000(d,g) 1,556,663 -- 1,556,663
Total 11,158,726 -- 11,158,726
See accompanying notes to combined investments in securities.
21 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Gas Pipelines (0.2%)
ANR Pipeline
03/15/10 8.88% $875,000 $-- $875,000 $954,587 $-- $954,587
Colorado Interstate Gas
Sr Nts
03/15/15 5.95 470,000 -- 470,000(d) 466,475 -- 466,475
El Paso Natural Gas
Sr Nts Series A
08/01/10 7.63 735,000 -- 735,000 786,823 -- 786,823
Southern Natural Gas
03/15/10 8.88 875,000 -- 875,000 954,587 -- 954,587
Southern Star Central
Secured
08/01/10 8.50 645,000 -- 645,000 696,600 -- 696,600
Transcontinental Gas Pipe Line
Series B
08/15/11 7.00 1,915,000 -- 1,915,000 2,058,624 -- 2,058,624
Total 5,917,696 -- 5,917,696
Health Care (0.6%)
Cardinal Health
06/15/15 4.00 15,779,000 5,625,000 21,404,000 14,604,269 5,206,224 19,810,493
HCA
Sr Nts
03/15/14 5.75 1,000,000 -- 1,000,000 988,267 -- 988,267
Triad Hospitals
Sr Nts
05/15/12 7.00 1,000,000 -- 1,000,000 1,035,000 -- 1,035,000
Total 16,627,536 5,206,224 21,833,760
Home Construction (0.2%)
DR Horton
12/01/07 7.50 1,000,000 -- 1,000,000 1,054,672 -- 1,054,672
01/15/09 5.00 990,000 -- 990,000 986,494 -- 986,494
Sr Nts
02/15/15 5.25 4,290,000 -- 4,290,000 4,121,039 -- 4,121,039
Meritage Homes
03/15/15 6.25 445,000 -- 445,000 416,631 -- 416,631
Standard-Pacific
Sr Nts
08/15/15 7.00 930,000 -- 930,000 916,050 -- 916,050
Total 7,494,886 -- 7,494,886
Independent Energy (0.2%)
Chesapeake Energy
01/15/15 7.75 1,275,000 -- 1,275,000 1,370,625 -- 1,370,625
Sr Nts
06/15/14 7.50 152,000 -- 152,000 164,160 -- 164,160
Sr Unsecured
08/15/17 6.50 1,860,000 -- 1,860,000(d) 1,897,200 -- 1,897,200
Encore Acquisition
Sr Sub Nts
04/15/14 6.25 590,000 -- 590,000 587,050 -- 587,050
Newfield Exploration
Sr Nts
03/01/11 7.63 2,500,000 -- 2,500,000 2,725,000 -- 2,725,000
Sr Sub Nts
08/15/12 8.38 380,000 -- 380,000 413,250 -- 413,250
See accompanying notes to combined investments in securities.
22 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Independent Energy (cont.)
Plains Exploration & Production
Sr Nts
06/15/14 7.13% $790,000 $-- $790,000 $841,350 $-- $841,350
Total 7,998,635 -- 7,998,635
Life Insurance (2.1%)
ASIF Global Financing XIX
Secured
01/17/13 4.90 5,748,000 2,045,000 7,793,000(d) 5,826,575 2,072,955 7,899,530
ING Security Life Institutional Funding
01/15/10 4.25 11,475,000 4,080,000 15,555,000(d) 11,397,326 4,052,382 15,449,708
Metlife
Sr Nts
06/15/35 5.70 9,600,000 3,475,000 13,075,000 9,974,506 3,610,563 13,585,069
Metropolitan Life Global Funding I
Sr Nts
08/19/10 4.63 3,360,000 1,015,000 4,375,000(d) 3,386,154 1,022,901 4,409,055
Pricoa Global Funding I
06/25/12 4.63 16,125,000 5,660,000 21,785,000(d) 16,154,880 5,670,488 21,825,368
Prudential Financial
06/13/35 5.40 4,720,000 1,675,000 6,395,000 4,698,788 1,667,473 6,366,261
Total 51,438,229 18,096,762 69,534,991
Lodging (0.1%)
Hilton Hotels
12/01/12 7.63 1,250,000 -- 1,250,000 1,434,175 -- 1,434,175
ITT
11/15/15 7.38 635,000 -- 635,000 695,325 -- 695,325
Total 2,129,500 -- 2,129,500
Media Cable (0.2%)
Comcast
03/15/11 5.50 3,635,000 1,395,000 5,030,000 3,758,408 1,442,360 5,200,768
DIRECTV Holdings LLC/Finance
Sr Nts
03/15/13 8.38 406,000 -- 406,000 445,585 -- 445,585
Videotron Ltee
01/15/14 6.88 530,000 -- 530,000(c) 544,575 -- 544,575
Total 4,748,568 1,442,360 6,190,928
Media Non Cable (0.6%)
Corus Entertainment
Sr Sub Nts
03/01/12 8.75 395,000 -- 395,000(c) 424,625 -- 424,625
Dex Media West LLC/Finance
Sr Nts Series B
08/15/10 8.50 1,340,000 -- 1,340,000 1,448,875 -- 1,448,875
Emmis Operating
Sr Sub Nts
05/15/12 6.88 400,000 -- 400,000 400,000 -- 400,000
Lamar Media
01/01/13 7.25 375,000 -- 375,000 394,688 -- 394,688
Sr Sub Nts
08/15/15 6.63 805,000 -- 805,000(d) 821,100 -- 821,100
News America
12/15/34 6.20 9,392,000 3,410,000 12,802,000 9,731,812 3,533,377 13,265,189
Quebecor Media
Sr Nts
07/15/11 11.13 640,000 -- 640,000(c) 704,000 -- 704,000
See accompanying notes to combined investments in securities.
23 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Media Non Cable (cont.)
Radio One
Series B
07/01/11 8.88% $1,000,000 $-- $1,000,000 $1,068,750 $-- $1,068,750
Sun Media
02/15/13 7.63 745,000 -- 745,000(c) 786,906 -- 786,906
Susquehanna Media
Sr Sub Nts
04/15/13 7.38 900,000 -- 900,000 943,875 -- 943,875
Total 16,724,631 3,533,377 20,258,008
Metals (0.1%)
Peabody Energy
Series B
03/15/13 6.88 1,640,000 -- 1,640,000 1,707,650 -- 1,707,650
Oil Field Services (0.2%)
Halliburton
10/15/10 5.50 3,450,000 1,225,000 4,675,000 3,608,327 1,281,218 4,889,545
Key Energy Services
Series C
03/01/08 8.38 1,250,000 -- 1,250,000 1,293,750 -- 1,293,750
Offshore Logistics
06/15/13 6.13 195,000 -- 195,000 190,125 -- 190,125
Pride Intl
Sr Nts
07/15/14 7.38 495,000 -- 495,000 537,075 -- 537,075
Total 5,629,277 1,281,218 6,910,495
Other Financial Institutions (0.9%)
HSBC Finance
06/30/15 5.00 15,705,000 5,585,000 21,290,000 15,786,776 5,614,081 21,400,857
Residential Capital
06/30/10 6.38 6,745,000 2,400,000 9,145,000(d) 6,885,431 2,449,968 9,335,399
Total 22,672,207 8,064,049 30,736,256
Packaging (0.1%)
Owens-Illinois Glass Container
05/15/11 7.75 1,100,000 -- 1,100,000 1,166,000 -- 1,166,000
Silgan Holdings
Sr Sub Nts
11/15/13 6.75 615,000 -- 615,000 628,069 -- 628,069
Total 1,794,069 -- 1,794,069
Paper (0.1%)
Crown Paper
Sr Sub Nts
09/01/05 11.00 6,950,000 -- 6,950,000(b,o,q) -- -- --
Louisiana-Pacific
Sr Nts
08/15/10 8.88 2,260,000 -- 2,260,000 2,554,354 -- 2,554,354
Total 2,554,354 -- 2,554,354
Pharmaceuticals (0.1%)
Merck & Co
03/01/15 4.75 1,450,000 515,000 1,965,000 1,437,452 510,543 1,947,995
Property & Casualty (0.1%)
Willis Group North America
07/15/15 5.63 3,370,000 1,220,000 4,590,000 3,421,831 1,238,764 4,660,595
See accompanying notes to combined investments in securities.
24 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Bonds (continued)
Issuer Coupon Principal Principal Principal Value(a) Value(a) Value(a)
rate amount amount amount
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Railroads (0.4%)
Union Pacific
04/15/12 6.50% $7,390,000 $215,000 $7,605,000 $8,151,495 $237,154 $8,388,649
05/01/14 5.38 2,995,000 3,145,000 6,140,000 3,118,403 3,274,584 6,392,987
Total 11,269,898 3,511,738 14,781,636
REITS (0.6%)
Archstone-Smith Operating Trust
05/01/15 5.25 7,660,000 2,735,000 10,395,000 7,781,533 2,778,393 10,559,926
ERP Operating LP
04/01/13 5.20 2,815,000 1,010,000 3,825,000 2,871,337 1,030,213 3,901,550
Simon Property Group LP
06/15/15 5.10 4,975,000 1,765,000 6,740,000(d) 4,956,543 1,758,452 6,714,995
Total 15,609,413 5,567,058 21,176,471
Retailers (0.3%)
United Auto Group
03/15/12 9.63 455,000 -- 455,000 488,556 -- 488,556
Wal-Mart Stores
09/01/35 5.25 5,570,000 1,990,000 7,560,000(g) 5,620,487 2,008,037 7,628,524
Series C
06/29/11 8.88 3,500,000 -- 3,500,000 3,533,355 -- 3,533,355
Total 9,642,398 2,008,037 11,650,435
Transportation Services (0.2%)
ERAC USA Finance
05/01/15 5.60 5,075,000 1,750,000 6,825,000(d) 5,241,490 1,807,411 7,048,901
Greater Beijing First Expressways
Sr Nts
06/15/07 9.50 3,640,000 -- 3,640,000(b,c,o,q) -- -- --
Total 5,241,490 1,807,411 7,048,901
Wireless (0.3%)
Nextel Communications
Sr Nts Series E
10/31/13 6.88 1,875,000 -- 1,875,000 2,008,262 -- 2,008,262
US Cellular
Sr Nts
12/15/33 6.70 5,835,000 2,090,000 7,925,000 6,254,583 2,240,288 8,494,871
Total 8,262,845 2,240,288 10,503,133
Wirelines (4.4%)
BellSouth
Sr Unsecured
11/15/34 6.00 2,775,000 985,000 3,760,000 2,929,690 1,039,908 3,969,598
Qwest
03/15/12 8.88 1,075,000 -- 1,075,000 1,174,438 -- 1,174,438
Sprint Capital
01/30/11 7.63 26,465,000 9,470,000 35,935,000 30,247,456 10,823,481 41,070,937
11/15/28 6.88 892,000 295,000 1,187,000 1,022,183 338,054 1,360,237
Telecom Italia Capital
09/30/34 6.00 6,265,000 2,225,000 8,490,000(c,d) 6,431,687 2,284,198 8,715,885
TELUS
06/01/11 8.00 20,552,500 7,367,500 27,920,000(c) 23,906,730 8,569,898 32,476,628
Verizon Pennsylvania
Series A
11/15/11 5.65 41,125,000 14,615,000 55,740,000 43,003,178 15,282,467 58,285,645
Total 108,715,362 38,338,006 147,053,368
Total Bonds
(Cost: $3,318,118,367) $2,446,929,085 $888,227,446 $3,335,156,531
See accompanying notes to combined investments in securities.
25 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Other (0.1%)
Issuer Shares Shares Shares Value(a) Value(a) Value(a)
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
Wayland Investment LLC 6,000,000 -- 6,000,000(b,e,o) $3,053,100 $-- $3,053,100
Total Other
(Cost: $6,671,880) $3,053,100 $-- $3,053,100
Short-Term Securities (4.1%) (s)
Issuer Effective Amount Amount Value (a) Value (a) Value (a)
yield payable payable
at maturity at maturity
RiverSource Quality RiverSource Quality
Diversified Income Pro Forma Diversified Income Pro Forma
Bond Fund Portfolio Combined Bond Fund Portfolio Combined
U.S. Government Agency (0.7%)
Federal Home Loan Mtge Corp Disc Nt
09/20/05 3.43% $25,000,000 $-- $25,000,000 $24,952,500 $-- $24,952,500
Commercial Paper (3.4%)
Citibank Credit Card Dakota Nts
09/01/05 3.57 -- 11,900,000 11,900,000(t) -- 11,898,820 11,898,820
Jupiter Securitization
09/29/05 3.60 10,000,000 -- 10,000,000(t) 9,971,080 -- 9,971,080
Kitty Hawk Funding
09/07/05 3.51 9,310,000 -- 9,310,000(t) 9,303,646 -- 9,303,646
Morgan Stanley & Co
09/01/05 3.57 2,900,000 -- 2,900,000 2,899,712 -- 2,899,712
Park Avenue Receivables
09/22/05 3.55 15,000,000 -- 15,000,000(t) 14,967,550 -- 14,967,550
Rabobank USA Finance
09/02/05 3.49 -- 5,000,000 5,000,000 -- 4,999,031 4,999,031
Thames Asset Global Securitization
09/21/05 3.55 25,000,000 15,000,000 40,000,000(t) 24,948,374 14,969,024 39,917,398
Thunder Bay Funding LLC
10/07/05 3.61 20,000,000 -- 20,000,000(t) 19,926,000 -- 19,926,000
Total 82,016,362 31,866,875 113,883,237
Total Short-Term Securities
(Cost: $138,849,380) $106,968,862 $31,866,875 $138,835,737
Total Investments in Securities (prior to pro forma adjustments)
(Cost: $3,463,639,627)(u) $2,556,951,047 $920,094,321 $3,477,045,368
Pro forma Adjustments(v) -- (136,557) (136,557)
Total Investments in Securities (after pro forma adjustments)
(Cost: $3,463,503,830)(v) $2,556,951,047 $919,957,764 $3,476,908,811
See accompanying notes to combined investments in securities.
26 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Notes to Combined Investments in Securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements in the annual report.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in U.S. dollar currency unless otherwise
noted. At Aug. 31, 2005, the value of foreign securities represented 4.7%
of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Fund's Board of Directors. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
Aug. 31, 2005, the value of these securities amounted to $185,866,451 or
5.5% or net assets.
(e) The share amount for Limited Liability Companies (LLC) or Limited
Partnerships (LP) represents capital contributions.
(f) Mortgage-backed securities represent direct or indirect participations in,
or are secured by and payable from, mortgage loans secured by real
property, and include single- and multi-class pass-through securities and
collateralized mortgage obligations. These securities may be issued or
guaranteed by U.S. government agencies or instrumentalities, or by private
issuers, generally originators and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment
bankers and special purpose entities. The maturity dates shown represent
the original maturity of the underlying obligation. Actual maturity may
vary based upon prepayment activity on these obligations. Unless otherwise
noted, the coupon rates presented are fixed rates.
(g) At Aug. 31, 2005, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$96,072,655.
(h) U.S. Treasury inflation-indexed bonds are securities in which the
principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal
amount.
(i) Interest only represents securities that entitle holders to receive only
interest payments on the underlying mortgages. The yield to maturity of an
interest only is extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of principal
repayments may have an adverse (positive) effect on yield to maturity. The
principal amount shown is the notional amount of the underlying mortgages.
Interest rate disclosed represents yield based upon the estimated timing
and amount of future cash flows at Aug. 31, 2005.
(j) Principal only represents securities that entitle holders to receive only
principal payments on the underlying mortgages. The yield to maturity of a
principal only is sensitive to the rate of principal payments on the
underlying mortgage assets. A slow (rapid) rate of principal repayments
may have an adverse (positive) effect on yield to maturity. Interest rate
disclosed represents yield based upon the estimated timing of future cash
flows at Aug. 31, 2005.
(k) Adjustable rate mortgage; interest rate varies to reflect current market
conditions; rate shown is the effective rate on Aug. 31, 2005.
(l) The following abbreviations are used in the portfolio security
descriptions to identify the insurer of the issue:
AMBAC -- Ambac Assurance Corporation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
MBIA -- MBIA Insurance Corporation
(m) Interest rate varies either based on a predetermined schedule or to
reflect current market conditions; rate shown is the effective rate on
Aug. 31, 2005.
(n) Comparable securities are held to satisfy future delivery requirements of
the following open forward sale commitments at Aug. 31, 2005:
Security Principal Principal Settlement Proceeds Proceeds
amount amount date receivable receivable
RiverSource RiverSource
Diversified Quality Diversified Quality
Bond Income Pro forma Bond Income Pro forma
Fund Portfolio Combined Fund Portfolio Combined
Federal Home Loan Mtge Corp
09-01-35 6.50% $-- $3,000,000 $3,000,000 9-14-05 $-- $3,093,281 $3,093,281
Federal Natl Mtge Assn
09-01-20 4.50 -- 3,425,000 3,425,000 9-19-05 -- 3,357,035 3,357,035
09-01-20 5.00 13,150,000 2,500,000 15,650,000 9-19-05 13,139,726 2,498,047 15,637,774
09-01-20 5.50 7,000,000 -- 7,000,000 9-19-05 7,111,563 -- 7,111,563
09-01-35 5.00 21,300,000 8,000,000 29,300,000 9-14-05 20,837,391 7,826,250 28,663,641
09-01-35 5.50 72,550,000 22,000,000 94,550,000 9-14-05 72,436,641 21,967,500 94,404,141
09-01-35 6.00 5,000,000 3,000,000 8,000,000 9-14-05 5,091,406 3,054,844 8,146,250
09-01-35 6.50 19,870,000 8,700,000 28,570,000 9-14-05 20,507,237 8,979,012 29,486,249
Value Value
RiverSource
Diversified Quality
Bond Income Pro forma
Fund Portfolio Combined
$-- $3,098,436 $3,098,436
-- 3,396,100 3,396,100
13,240,406 2,517,188 15,757,594
7,148,750 -- 7,148,750
21,153,563 7,945,000 29,098,563
73,275,500 22,220,000 95,495,500
5,115,625 3,069,375 8,185,000
20,528,194 8,988,187 29,516,381
27 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
Notes to Combined Investments in Securities (continued)
(o) Identifies issues considered to be illiquid as to their marketability.
These securities are valued at fair value according to methods selected in
good faith by the Fund's Board of Directors. Information concerning such
security holdings at Aug. 31, 2005, is as follows:
Security Acquisition Cost
dates
Crown Paper
11.00% Sr Sub Nts 2005 02-10-00 thru 02-14-00 $4,216,724
Greater Beijing First Expressways
9.50% Sr Nts 2007 9/16/98 --
Wayland Investment LLC 5/19/00 6,671,880
(p) Partially pledged as initial deposit on the following open interest rate
futures contracts:
Type of security Notional amount
Purchase contracts
U.S. Long Bond, Dec. 2005, 20-year $49,900,000
Sale contracts
U.S. Treasury Note, Sept. 2005, 5-year 27,800,000
U.S. Treasury Note, Sept. 2005, 10-year 17,000,000
U.S. Treasury Note, Dec. 2005, 5-year 92,700,000
U.S. Treasury Note, Dec. 2005, 10-year 182,700,000
(q) Negligible market value.
(r) At Aug. 31, 2005, security was partially or fully on loan..
(s) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.8% of net assets. 3.3% of net
assets is the Fund's cash equivalent position.
(t) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid
under guidelines established by the Fund's Board of Directors. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At Aug. 31, 2005, the value of
these securities amounted to $105,984,494 or 3.2% of net assets.
(u) At Aug. 31, 2005, the approximate cost of securities for federal income
tax purposes and the approximate aggregate gross unrealized appreciation
and depreciation based on that cost was:
RiverSource Quality
Diversified Income Pro forma Pro forma
Bond Fund Portfolio Adjustments Combined
Cost of securities for federal income tax purposes: $2,548,651,000 $914,989,000 $ (136,000) $3,463,504,000
Unrealized appreciation $ 29,867,000 $ 9,885,000$ -- $ 39,752,000
Unrealized depreciation (21,567,000) (4,780,000) (2,032,000) (28,379,000)
----------- ---------- ---------- -----------
Net unrealized appreciation/depreciation $ 8,300,000 $ 5,105,000 $(2,032,000) $ 11,373,000
-------------- ------------ ----------- --------------
(v) To reflect the portion of the Quality Income Portfolio net assets not
owned by RiverSource Selective Fund. (Cost decreased $135,797).
28 -- AXP Fixed Income Series, Inc. -- RiverSource Diversified Bond Fund
S-6387-20 A (12/05)
PART C. OTHER INFORMATION
Item 15. Indemnification
The Articles of Incorporation of the registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expenses, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
Item 16. Exhibits
(1)(a) Articles of Incorporation, as amended Oct. 17, 1988, filed
electronically as Exhibit 1 to Registrant's Post-Effective Amendment
No. 28 to Registration Statement No. 2-51586, are incorporated by
reference.
(1)(b) Articles of Amendment, dated June 16, 1999, filed electronically as
Exhibit (a)(2) to Registrant's Post-Effective Amendment No. 53 to
Registration Statement No. 2-51586 filed on or about Oct. 25, 2001 is
incorporated by reference.
(1)(c) Articles of Amendment, dated Nov. 14, 2002, filed electronically as
Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 55 to
Registration Statement No. 2-51586 is incorporated by reference.
(2) By-laws, as amended Jan. 11, 2001, filed electronically as Exhibit (b)
to Registrant's Post-Effective Amendment No. 53 to Registration
Statement No. 2-51586 filed on or about Oct. 25, 2001 is incorporated
by reference.
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization is included herein as
Exhibit A to Part A of this Regsitration Statement.
(5) Not applicable.
(6)(a) Investment Management Services Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 5 to Registrant's Post-Effective Amendment
No. 47 to Registration Statement No. 2-51586 is incorporated by
reference.
(6)(b) Amendment to Investment Management Services Agreement between AXP
Growth Series, Inc. and American Express Financial Corporation, dated
June 3, 2002, filed electronically on or about June 12, 2002 as Exhibit
(d)(7) to AXP Growth Series, Inc. Post-Effective Amendment No. 71 to
Registration Statement No. 2-38355, is incorporated by reference.
Registrant's Amendment to Investment Management Services Agreement
differs from the one incorporated by reference only by the fact that
Registrant is one executing party.
(7) Distribution Agreement between AXP Utilities Income Fund, Inc. and
American Express Financial Advisors Inc., dated July 8, 1999, is
incorporated by reference to Exhibit (e) to AXP Utilities Income Fund,
Inc. Post-Effective Amendment No. 22 to Registration Statement No.
33-20872 filed on or about Aug. 27, 1999. Registrant's Distribution
Agreement differs from the one incorporated by reference only by the
fact that Registrant is one executing party.
(8) All employees are eligible to participate in a profit sharing plan.
Entry into the plan is Jan. 1 or July 1. The Registrant contributes
each year an amount up to 15 percent of their annual salaries, the
maximum deductible amount permitted under Section 404(a) of the
Internal Revenue Code.
(9) Custodian Agreement between Registrant and First National Bank of
Minneapolis, dated July 23, 1986, filed electronically as Exhibit 8 to
Registrant's Post-Effective Amendment No. 46 to Registration Statement
No. 2-51586 is incorporated by reference.
(10)(a) Plan and Agreement of Distribution for Class A and Class B shares,
dated July 1, 1999, between AXP Discovery Fund, Inc. and American
Express Financial Advisors Inc. is incorporated by reference to Exhibit
(m) to AXP Discovery Fund, Inc. Post-Effective Amendment No. 36 to
Registration Statement No. 2-72174 filed on or about July 30, 1999.
Registrant's Plan and Agreement of Distribution differs from the one
incorporated by reference only by the fact that Registrant is one
executing party.
(10)(b) Amendment to Plan and Agreement of Distribution (Class A and B), dated
April 14, 2005, between the Registrant and American Express Financial
Advisors Inc., filed electronically on or about July 28, 2005 as
Exhibit (m)(3) to AXP Government Income Series, Inc.'s Post-Effective
Amendment No. 41 to Registration Statement No. 2-96512 is incorporated
by reference.
(10)(c) Plan and Agreement of Distribution for Class C shares, dated March 9,
2000, between Registrant and American Express Financial Advisors Inc.
filed electronically as Exhibit (m)(2) to Registrant's Post-Effective
Amendment No. 51 to Registration Statement No. 2-51586 filed on or
about June 14, 2000 is incorporated by reference.
(10)(d) Amendment to Plan and Agreement of Distribution (Class C), dated April
14, 2005, between the Registrant and American Express Financial
Advisors Inc., filed electronically on or about July 28, 2005 as
Exhibit (m)(6) to AXP Government Income Series, Inc.'s Post-Effective
Amendment No. 41 to Registration Statement No. 2-96512 is incorporated
by reference.
(10)(e) Amended 18f-3 Plan, dated as of May 26, 2004, filed electronically on
or about July 29, 2004 as Exhibit (n) to AXP Discovery Series, Inc.
Post-Effective Amendment No. 49 to Registration Statement No. 2-72174
is incorporated by reference.
(11) Opinion and consent of counsel as to the legality of the securities
being registered is filed electronically herewith.
(12) Tax opinion to be filed by amendment.
(13)(a) Administrative Services Agreement between Registrant and American
Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 9(e) to Registrant's Post-Effective Amendment
No. 47 to Registration Statement No. 2-51586 is incorporated by
reference.
(13)(b) Amendment to Administrative Services Agreement between AXP Growth
Series, Inc. and American Express Financial Corporation, dated June 3,
2002, filed electronically on or about June 12, 2002 as Exhibit (h)(7)
to AXP Growth Series, Inc. Post-Effective Amendment No. 71 to
Registration Statement No. 2-38355, is incorporated by reference.
Registrant's Amendment to Administrative Services Agreement differs
from the one incorporated by reference only by the fact that Registrant
is one executing party.
(13)(c) Class Y Shareholder Service Agreement between IDS Precious Metals Fund,
Inc. and American Express Financial Advisors Inc., dated May 9, 1997,
filed electronically on or about May 27, 1997 as Exhibit 9(e) to IDS
Precious Metals Fund Inc. Post-Effective Amendment No. 30 to
Registration Statement No. 2-93745, is incorporated by reference.
Registrant's Class Y Shareholder Service Agreement differs from the one
incorporated by reference only by the fact that Registrant is one
executing party.
(13)(d) Transfer Agency Agreement between Registrant and American Express
Client Service Corporation, dated May 1, 2003, filed electronically as
Exhibit (h)(8) to Registrant's Post-Effective Amendment No. 55 to
Registration Statement No. 2-51586 is incorporated by reference.
(13)(e) Amended Class I Transfer Agency Agreement between the American Express
Funds and American Express Client Service Corporation, dated November
13, 2003 (amended June 1, 2004), filed electronically on or about Sept.
27, 2004 as Exhibit (h)(10) to AXP Dimensions Series, Inc.
Post-Effective Amendment No. 70 to Registration Statement No. 2-28529
is incorporated by reference.
(13)(f) License Agreement, dated June 17, 1999, between American Express Funds
and American Express Company filed electronically on or about Sept.
23, 1999 as Exhibit (h)(4) to AXP Stock Fund, Inc.'s Post-Effective
Amendment No. 98 to Registration Statement No. 2-11358, is
incorporated by reference.
(13)(g) Addendum to Schedule A and Schedule B of the License Agreement between
the American Express Funds and American Express Company, dated June 23,
2004, filed electronically on or about June 28, 2004 as Exhibit (h)(2)
to AXP Variable Portfolio - Select Series, Inc. Pre-Effective Amendment
No. 1 to Registration Statement No. 333-113780 is incorporated by
reference.
(13)(h) Master Fee Waiver Agreement, dated Oct. 1, 2005, between Ameriprise
Financial, Inc., RiverSource Investments, LLC, Ameriprise Financial
Services, Inc. and RiverSource Funds filed electronically on or about
Sept. 30, 2005 as Exhibit (h)(9) to AXP Discovery Series, Inc.
Post-Effective Amendment No. 52 to Registration Statement No. 2-72174
is incorporated by reference.
(14) Consent of Independent Registered Public Accounting Firm to be filed
by amendment.
(15) Financial Statements: Not applicable.
(16)(a) Directors' Power of Attorney to sign this Registration Statement and
its amendments, dated Nov. 11, 2004, is filed electronically herewith
as Exhibit (q)(1).
(17)(a) Code of Ethics adopted under Rule 17j-1 for Registrant filed
electronically on or about March 28, 2005 as Exhibit (p)(1) to AXP
Selected Series, Inc.'s Post-Effective Amendment No. 42 to Registration
Statement No. 2-93745 is incorporated by reference.
(17)(b) Code of Ethics adopted under Rule 17j-1 for Registrant's investment
adviser and principal underwriter, dated January 2005, filed
electronically on or about January 27, 2005 as Exhibit (p)(2) to AXP
Equity Series, Inc. Post-Effective Amendment No. 99 to Registration
Statement No. 2-13188 is incorporated by reference.
(17)(c) Preliminary prospectus, dated Oct. 28, 2005, for RiverSource
Diversified Bond Fund is filed electronically herewith.
(17)(d) Statement of Additional Information, dated Oct. 3, 2005, for
RiverSource Diversified Bond Fund and RiverSource Selective Fund is
filed electronically herewith.
(17)(e) Annual Report for the period ended Aug. 31, 2005 for RiverSource
Diversified Bond Fund to be filed by amendment.
(17)(f) Semiannual Report for the period ended Feb. 28, 2005 for RiverSource
Diversified Bond Fund to be filed by amendment.
(17)(g) Prospectus, dated July 29, 2005, amended as of Oct. 3, 2005, for
RiverSource Selective Fund is filed electronically herewith.
(17)(h) Annual Report for the period ended May 31, 2005 for RiverSource
Selective Fund to be filed by amendment.
Item 17. Undertakings.
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
(3) The Registrant undertakes to file by Post-Effective Amendment an
Opinion of Counsel supporting the tax consequences of the proposed
reorganization within a reasonable time after receipt of such opinion.
SIGNATURES
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed on behalf of the Registrant, in the city of
Minneapolis, and State of Minnesota on the 13th day of October, 2005.
AXP FIXED INCOME SERIES, INC.
By /s/ Paula R. Meyer
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Paula R. Meyer, President
By /s/ Jeffrey P. Fox
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Jeffrey P. Fox, Treasurer
As required by the Securities Act of 1933, this Registration Statement has been
signed below by the following persons in the capacities indicated on the 13th
day of October, 2005.
Signature Capacity
/s/ Arne H. Carlson* Chair of the Board
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Arne H. Carlson
/s/ Philip J. Carroll, Jr.* Director
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Philip J. Carroll, Jr.
/s/ Patricia M. Flynn* Director
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Patricia M. Flynn
/s/ Anne P. Jones* Director
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Anne P. Jones
/s/ Stephen R. Lewis, Jr.* Director
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Stephen R. Lewis, Jr.
/s/ Catherine James Paglia* Director
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Catherine James Paglia
/s/ Alan K. Simpson* Director
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Alan K. Simpson
/s/ Alison Taunton-Rigby* Director
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Alison Taunton-Rigby
/s/ William F. Truscott* Director
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William F. Truscott
* Signed pursuant to Directors' Power of Attorney, dated Nov. 11, 2004, filed
electronically herewith as Exhibit (q)(1), by:
/s/ Leslie L. Ogg
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Leslie L. Ogg