UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-2503
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
Date of fiscal year end: 8/31
Date of reporting period: 2/28
Semiannual Report
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE
DIVERSIFIED BOND FUND
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
FEBRUARY 28, 2010
RIVERSOURCE 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.
(SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 2
Fund Expenses Example.............. 7
Portfolio of Investments........... 10
Statement of Assets and
Liabilities...................... 40
Statement of Operations............ 42
Statements of Changes in Net
Assets........................... 44
Financial Highlights............... 46
Notes to Financial Statements...... 55
Proxy Voting....................... 79
</Table>
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RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Diversified Bond Fund (the Fund) Class A shares gained 4.25%
(excluding sales charge) for the 6 months ended Feb. 28, 2010.
> The Fund outperformed its benchmark, the unmanaged Barclays Capital U.S.
Aggregate Bond Index which rose 3.19% for the six-month period.
> The Fund underperformed its peer group, as represented by the Lipper
Intermediate Investment Grade Debt Index, which increased 5.67% during the
same period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
RiverSource Diversified Bond
Fund Class A (excluding
sales charge) +4.25% +15.96% +4.31% +4.31% +5.04%
- -----------------------------------------------------------------------------
Barclays Capital U.S.
Aggregate Bond Index(1)
(unmanaged) +3.19% +9.32% +6.18% +5.36% +6.44%
- -----------------------------------------------------------------------------
Lipper Intermediate
Investment Grade Debt
Index(2) +5.67% +18.46% +4.99% +4.63% +5.91%
- -----------------------------------------------------------------------------
</Table>
* Not annualized.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary,
visiting riversource.com/funds or calling 1(800) 221-2450.
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
fees and expenses. The Fund's returns reflect the effect of fee waivers/expense
reimbursements, if any. Without such waivers/reimbursements, the Fund's returns
would be lower. See the Average Annual Total Returns table for performance of
other share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
(1) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made
up of a representative list of government, corporate, asset-backed and
mortgage-backed securities. The index is frequently used as a general
measure of bond market performance. The index reflects reinvestment of all
distributions and changes in market prices.
(2) The Lipper Intermediate Investment Grade Debt Index includes the 30 largest
investment grade funds tracked by Lipper Inc. The index's returns include
net reinvested dividends.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2010
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
10/3/74) +4.25% +15.96% +4.31% +4.31% +5.04% N/A
- -------------------------------------------------------------------------------------
Class B (inception
3/20/95) +3.87% +15.09% +3.52% +3.52% +4.24% N/A
- -------------------------------------------------------------------------------------
Class C (inception
6/26/00) +3.87% +15.10% +3.53% +3.49% N/A +4.39%
- -------------------------------------------------------------------------------------
Class I (inception
3/4/04) +4.43% +16.35% +4.76% +4.72% N/A +4.53%
- -------------------------------------------------------------------------------------
Class R2 (inception
12/11/06) +4.02% +15.68% +4.09% N/A N/A +4.49%
- -------------------------------------------------------------------------------------
Class R3 (inception
12/11/06) +4.15% +15.97% +4.36% N/A N/A +4.76%
- -------------------------------------------------------------------------------------
Class R4 (inception
3/20/95) +4.28% +16.03% +4.48% +4.44% +5.19% N/A
- -------------------------------------------------------------------------------------
Class R5 (inception
12/11/06) +4.41% +16.33% +4.70% N/A N/A +5.12%
- -------------------------------------------------------------------------------------
Class W (inception
12/1/06) +4.21% +15.86% +4.21% N/A N/A +4.52%
- -------------------------------------------------------------------------------------
With sales charge
Class A (inception
10/3/74) -0.70% +10.45% +2.63% +3.30% +4.53% N/A
- -------------------------------------------------------------------------------------
Class B (inception
3/20/95) -1.13% +10.09% +2.59% +3.18% +4.24% N/A
- -------------------------------------------------------------------------------------
Class C (inception
6/26/00) +2.87% +14.10% +3.53% +3.49% N/A +4.39%
- -------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum initial sales charge of 4.75%.
Class B share performance reflects a contingent deferred sales charge (CDSC)
applied as follows: first year 5%; second year 4%; third and fourth years 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be
subject to a 1% CDSC if shares are sold within one year after purchase. Sales
charges do not apply to Class I, Class R2, Class R3, Class R4, Class R5 and
Class W shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available
to qualifying institutional investors only. Class W shares are offered through
qualifying discretionary accounts.
*Not annualized.
**For classes with less than 10 years performance.
- --------------------------------------------------------------------------------
4 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
DURATION
SHORT INT. LONG
X HIGH
X MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix approximates areas in which the Fund is designed
to generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------
<Table>
Weighted average life(1) 5.36 years
- --------------------------------------
Effective duration(2) 3.66 years
- --------------------------------------
Weighted average bond
rating(3) AA-/AA3
- --------------------------------------
</Table>
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before its
maturity date.
(2) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the levels of
interest rates from two years out to 30 years). Positive duration means that
as rates rise, the price decreases, and negative duration means that as
rates rise, the price increases.
(3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the
underlying bonds in the portfolio.
There are risks associated with an investment in a bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Fund's
prospectus for information on these and other risks associated with the Fund. In
general, bond prices rise when interest rates fall and vice versa. This effect
is more pronounced for longer-term securities. Non-investment grade securities,
commonly called "high-yield" or "junk" bonds, have more volatile prices and
carry more risk to principal and income than investment grade securities.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
PORTFOLIO BREAKDOWN(1) (at Feb. 28, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
Asset-Backed 8.8%
- ------------------------------------------------
Commercial Mortgage-Backed 6.9%
- ------------------------------------------------
Consumer Discretionary 2.5%
- ------------------------------------------------
Consumer Staples 3.0%
- ------------------------------------------------
Energy 2.0%
- ------------------------------------------------
Financials 3.7%
- ------------------------------------------------
Foreign Government 1.3%
- ------------------------------------------------
Health Care 0.7%
- ------------------------------------------------
Industrials 1.2%
- ------------------------------------------------
Materials 1.1%
- ------------------------------------------------
Residential Mortgage-Backed 30.7%
- ------------------------------------------------
Telecommunication 5.7%
- ------------------------------------------------
U.S. Government Obligations & Agencies 15.2%
- ------------------------------------------------
Utilities 9.4%
- ------------------------------------------------
Other(2) 7.8%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan). The Fund's
composition is subject to change.
(2) Cash & Cash Equivalents.
QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1)
(at Feb. 28, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
AAA bonds 57.3%
- ------------------------------------------------
AA bonds 1.4%
- ------------------------------------------------
A bonds 11.5%
- ------------------------------------------------
BBB bonds 18.7%
- ------------------------------------------------
BB bonds 6.5%
- ------------------------------------------------
B bonds 3.0%
- ------------------------------------------------
Non-investment grade bonds 0.8%
- ------------------------------------------------
Non-rated bonds 0.8%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total fixed income securities
(excluding Investments of Cash Collateral Received for Securities on Loan
and Cash & Cash Equivalents).
Ratings apply to the underlying holdings of the Fund and not the Fund itself.
Whenever possible, the Standard and Poor's rating is used to determine the
credit quality of a security. Standard and Poor's rates the creditworthiness of
corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest).
Ratings from AA to CCC may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories. If
Standard and Poor's doesn't rate a security, then Moody's rating is used.
RiverSource Investments, LLC (the Investment Manager) rates a security using an
internal rating system when Moody's doesn't provide a rating. Ratings for 0.3%
of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the ongoing expenses of any funds in which the Fund
invests (also referred to as "acquired funds"), including affiliated and non-
affiliated pooled investment vehicles (including mutual funds and exchange
traded funds). The Fund's indirect expense from investing in the acquired funds
is based on the Fund's pro rata portion of the ongoing expenses charged by
acquired funds using the expense ratio of each of the acquired funds as of the
acquired fund's most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Feb. 28, 2010.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 7
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,042.50 $4.26 .85%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.35 $4.21 .85%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,038.70 $8.05 1.61%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.62 $7.96 1.61%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,038.70 $8.00 1.60%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.67 $7.91 1.60%
- ------------------------------------------------------------------------------------------
Class I
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,044.30 $2.46 .49%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,022.12 $2.43 .49%
- ------------------------------------------------------------------------------------------
Class R2
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,040.20 $6.45 1.29%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.19 $6.38 1.29%
- ------------------------------------------------------------------------------------------
Class R3
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,041.50 $5.21 1.04%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.42 $5.15 1.04%
- ------------------------------------------------------------------------------------------
Class R4
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,042.80 $3.96 .79%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.65 $3.91 .79%
- ------------------------------------------------------------------------------------------
Class R5
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,044.10 $2.71 .54%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.87 $2.68 .54%
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
8 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class W
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,042.10 $4.71 .94%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.91 $4.66 .94%
- ------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2010: +4.25%
for Class A, +3.87% for Class B, +3.87% for Class C, +4.43% for Class I,
+4.02% for Class R2, +4.15% for Class R3, +4.28% for Class R4, +4.41% for
Class R5 and +4.21% for Class W.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 9
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
FEB. 28, 2010 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
BONDS (111.0%)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
FOREIGN AGENCIES (0.2%)(C)
Pemex Project Funding Master Trust
03-01-18 5.75% $1,790,000 $1,812,511
06-15-35 6.63 2,543,000(t) 2,427,444
Petroleos de Venezuela
04-12-17 5.25 4,359,000 2,648,092
---------------
Total 6,888,047
- -------------------------------------------------------------------------------------
SOVEREIGN (0.6%)(c)
Emirate of Abu Dhabi
Sr Unsecured
08-02-12 5.50 200,000(d) 216,575
Republic of Argentina
Sr Unsecured
09-12-13 7.00 2,762,000 2,308,385
12-15-35 0.00 3,350,000(e) 192,960
Republic of El Salvador
06-15-35 7.65 1,313,000(d) 1,332,695
Republic of Indonesia
Sr Unsecured
01-17-18 6.88 1,522,000(d) 1,695,128
10-12-35 8.50 987,000(d) 1,186,868
01-17-38 7.75 850,000(d) 945,625
Republic of Philippines
Sr Unsecured
01-15-16 8.00 425,000 496,719
01-14-31 7.75 1,979,000(t) 2,196,690
Republic of Turkey
09-26-16 7.00 450,000 495,000
04-03-18 6.75 1,429,000 1,529,030
03-17-36 6.88 3,506,000 3,497,234
Republic of Turkey
Sr Unsecured
11-07-19 7.50 1,400,000 1,562,750
Republic of Uruguay
05-17-17 9.25 678,000(t) 839,025
Republic of Venezuela
02-26-16 5.75 1,579,000 1,085,563
Republic of Venezuela
Sr Unsecured
10-08-14 8.50 715,000(t) 600,600
05-07-23 9.00 1,600,000 1,120,000
Republica Orient Uruguay
Sr Unsecured
03-21-36 7.63 1,592,000 1,703,440
Russian Federation
03-31-30 7.50 1,624,320(d,t) 1,840,355
---------------
Total 24,844,642
- -------------------------------------------------------------------------------------
TREASURY (0.8%)(c)
Govt of Indonesia
(Indonesian Rupiah)
07-15-22 10.25 15,000,000,000 1,617,920
Mexican Fixed Rate Bonds
(Mexican Peso)
12-17-15 8.00 432,500,000 35,227,148
---------------
Total 36,845,068
- -------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS & AGENCIES (18.5%)
Federal Farm Credit Bank
04-19-12 1.35 21,685,000 21,712,345
02-07-13 3.40 240,000 253,331
Federal Home Loan Banks
05-20-11 2.63 250,000 256,285
12-30-11 1.25 40,000,000(t) 39,997,200
01-12-12 1.40 18,210,000 18,227,318
01-27-12 1.50 43,260,000(t) 43,323,895
02-01-12 1.25 38,520,000 38,520,000
02-24-12 1.30 16,675,000 16,683,888
02-24-12 1.38 41,800,000 41,822,405
11-17-17 5.00 70,000(t) 77,134
Federal Home Loan Mtge Corp
05-28-10 2.38 1,160,000(t) 1,166,290
04-19-12 1.50 13,325,000 13,341,159
12-28-12 0.50 71,015,000(m) 71,009,532
12-10-15 4.20 75,000,000(t) 75,751,350
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
10 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
U.S. GOVERNMENT OBLIGATIONS & AGENCIES (CONT.)
Federal Natl Mtge Assn
06-09-10 3.26% $200,000 $201,645
03-13-14 2.75 20,850,000(t) 21,402,879
05-15-14 2.50 14,305,000(t) 14,521,778
10-15-15 4.38 36,000,000(t) 38,890,584
U.S. Treasury
11-30-10 1.25 4,490,000(t) 4,522,799
09-15-12 1.38 16,630,000(t) 16,744,331
01-15-13 1.38 16,435,000(t) 16,479,933
02-28-15 2.38 61,970,000(g) 62,231,437
02-28-17 3.00 63,705,000(g) 63,575,615
02-15-20 3.63 98,240,000(t) 98,500,925
11-15-39 4.38 20,277,000 19,763,749
02-15-40 4.63 18,650,000(t) 18,941,406
U.S. Treasury Inflation-Indexed Bond
04-15-10 0.88 11,401,200(n,t) 11,437,649
07-15-16 2.50 11,374,239(n,t) 12,501,191
01-15-18 1.63 9,794,500(n,t) 10,099,892
01-15-20 1.38 22,168,588(n,t) 21,976,943
---------------
Total 813,934,888
- -------------------------------------------------------------------------------------
ASSET-BACKED (10.7%)
Access Group
Series 2005-1 Cl A1
06-22-18 0.33 13,632,373(m) 13,604,082
American Express Credit Account Master Trust
Series 2005-4 Cl A
01-15-15 0.30 6,225,000(m) 6,189,198
American Express Credit Account Master Trust
Series 2006-3 Cl A
03-17-14 0.25 5,575,000(m) 5,554,114
AmeriCredit Automobile Receivables Trust
Series 2006-RM Cl A2 (NPFGC)
08-08-11 5.42 1,305,743(h) 1,320,979
AmeriCredit Automobile Receivables Trust
Series 2007-CM Cl A3B (NPFGC)
05-07-12 0.26 4,441,565(h,m) 4,431,873
AmeriCredit Automobile Receivables Trust
Series 2007-DF Cl A3A (AGM)
07-06-12 5.49 1,980,007(h) 1,994,913
AmeriCredit Automobile Receivables Trust
Series 2010-1 Cl A3
03-17-14 1.66 7,400,000 7,413,238
Bank of America Credit Card Trust
Series 2008-A1 Cl A1
04-15-13 0.81 11,500,000(m) 11,509,485
Bank of America Credit Card Trust
Series 2008-A5 Cl A5
12-16-13 1.43 11,175,000(m) 11,271,160
BMW Vehicle Lease Trust
Series 2009-1 Cl A2
04-15-11 2.04 9,607,560 9,653,150
Capital Auto Receivables Asset Trust
Series 2007-SN2 Cl A4
05-16-11 1.26 24,899,000(d,m) 24,951,741
Capital One Multi-Asset Execution Trust
Series 2007-A6 Cl A6
05-15-13 0.30 5,776,000(m) 5,771,061
Carmax Auto Owner Trust
Series 2009-1 Cl A4
12-16-13 5.81 5,200,000 5,669,495
Caterpillar Financial Asset Trust
Series 2008A Cl A3
04-25-14 4.94 103,229 105,471
Centex Home Equity
Series 2002-D Cl M2
12-25-32 2.28 305,481(m) 55,970
CIT Equipment Collateral
Series 2009-VT1 Cl A2
06-15-11 2.20 23,786,891(d) 23,863,889
Citibank Credit Card Issuance Trust
Series 2008-C6 Cl C6
06-20-14 6.30 7,600,000 8,062,624
CitiFinancial Auto Issuance Trust
Series 2009-1 Cl A2
11-15-12 1.83 40,775,000(d) 40,837,463
Countrywide Asset-Backed Ctfs
Series 2005-10 Cl AF6
02-25-36 4.92 1,862,392 1,320,069
Countrywide Asset-Backed Ctfs
Series 2006-4 Cl 1A1M
07-25-36 0.49 1,427,786(m) 915,037
CPS Auto Trust
Series 2007-A Cl A3 (NPFGC)
09-15-11 5.04 681,257(d,h) 683,906
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
ASSET-BACKED (CONT.)
Crown Castle Towers LLC
Sr Secured
01-15-15 4.52% $13,050,000(d) $13,485,266
DT Auto Owner Trust
Series 2009-1 Cl A1
10-15-15 2.98 22,006,428(d) 22,060,943
Dunkin Securitization
Series 2006-1 Cl A2 (AMBAC)
06-20-31 5.78 9,650,000(d,h) 9,396,784
Equifirst Mtge Loan Trust
Series 2003-1 Cl IF1
12-25-32 3.51 145,441 133,884
First Franklin Mtge Loan Asset Backed Ctfs
Series 2005-FF10 Cl A4
11-25-35 0.55 11,899,693(m) 8,878,105
Ford Credit Floorplan Master Owner Trust
Series 2010-1 Cl A
12-15-14 1.88 7,450,000(d,m) 7,475,954
GTP Towers Issuer LLC
02-15-15 4.44 4,000,000(d) 4,050,516
Hertz Vehicle Financing LLC
Series 2005-1A Cl A4 (NPFGC)
11-25-11 0.48 18,900,000(d,h,m) 18,795,513
Hertz Vehicle Financing LLC
Series 2005-2A Cl A5 (AMBAC)
11-25-11 0.48 10,900,000(d,h,m) 10,839,740
Hertz Vehicle Financing LLC
Series 2005-2A Cl A6 (AMBAC)
11-25-11 5.08 30,600,000(d,h) 31,194,341
Hertz Vehicle Financing LLC
Series 2009-2A Cl A1
03-25-14 4.26 10,750,000(d) 11,004,414
Hertz Vehicle Financing LLC
Series 2009-2A Cl A2
03-25-16 5.29 5,000,000(d) 5,177,779
HSI Asset Securitization Corp Trust
Series 2006-HE2 Cl 2A1
12-25-36 0.28 4,196,600(m) 3,305,270
MBNA Credit Card Master Note Trust
Series 2003-A4 Cl A4
09-17-12 0.45 30,130,000(m) 30,128,554
MBNA Credit Card Master Note Trust
Series 2005-A6 Cl A6
01-15-13 4.50 6,845,000 6,966,098
Morgan Stanley Resecuritization Trust
Series 2010-F Cl A
06-17-13 0.48 9,300,000(d,m) 9,051,513
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-2 Cl AIO
08-25-11 25.03 9,525,000(i) 642,938
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-3 Cl AIO
01-25-12 5.88 15,000,000(i) 1,750,967
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-4 Cl AIO
02-27-12 7.42 11,700,000(i) 1,336,324
Option One Mtge Loan Trust
Series 2007-HL1 Cl 2A1 (XLCA)
02-25-38 0.35 2,946,090(h,m) 2,874,544
Renaissance Home Equity Loan Trust
Series 2005-4 Cl A3
02-25-36 5.57 2,556,583 2,465,434
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M4
06-25-37 6.31 1,575,000(o) 70,055
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M5
06-25-37 6.66 1,030,000(o) 34,270
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M6
06-25-37 7.01 1,505,000(o) 34,460
Residential Asset Securities
Series 2004-KS9 Cl AI4 (FGIC)
02-25-32 5.83 2,425,616(h) 2,208,515
Santander Drive Auto Receivables Trust
Series 2007-1 Cl A4 (FGIC)
09-15-14 0.28 8,783,101(h,m) 8,678,352
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
ASSET-BACKED (CONT.)
Soundview Home Equity Loan Trust
Series 2006-OPT3 Cl 2A3
06-25-36 0.40% $12,255,000(m) $9,226,979
Target Credit Card Master Trust
Series 2005-1 Cl A
10-27-14 0.29 57,681,000(m) 57,174,366
Triad Auto Receivables Owner Trust
Series 2007-B Cl A3A (AGM)
10-12-12 5.24 2,135,000(h) 2,181,033
Volkswagen Auto Lease Trust
Series 2009-A Cl A3
04-16-12 3.41 5,875,000 6,041,913
---------------
Total 471,843,742
- -------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED (8.4%)(f)
Banc of America Commercial Mtge
Series 2005-3 Cl A4
07-10-43 4.67 7,925,000 7,845,191
Banc of America Commercial Mtge
Series 2005-6 Cl A4
09-10-47 5.18 11,150,000 11,573,432
Banc of America Large Loan
Series 2001-FMA Cl C
12-13-16 6.76 3,500,000(d) 3,575,697
Bear Stearns Commercial Mtge Securities
Series 2003-T10 Cl A1
03-13-40 4.00 935,543 946,686
Bear Stearns Commercial Mtge Securities
Series 2007-PW18 Cl A1
06-11-50 5.04 3,032,655 3,125,532
CDC Commercial Mtge Trust
Series 2002-FX1 Cl A2
11-15-30 5.68 12,599,957 13,036,144
Citigroup Commercial Mtge Trust
Series 2006-C5 Cl A4
10-15-49 5.43 3,150,000 3,186,962
Citigroup/Deutsche Bank Commercial Mtge Trust
Series 2005-CD1 Cl A4
07-15-44 5.22 6,599,000(m) 6,844,935
Citigroup/Deutsche Bank Commercial Mtge Trust
Series 2005-CD1 Cl ASB
07-15-44 5.22 3,225,000 3,380,224
Commercial Mtge Pass-Through Ctfs
Series 2006-CN2A Cl BFL
02-05-19 0.54 2,700,000(d,m) 2,136,270
Commercial Mtge Pass-Through Ctfs
Series 2007-C9 Cl A4
12-10-49 5.82 14,050,000 13,640,836
Credit Suisse First Boston Mtge Securities
Series 2001-CP4 Cl A4
12-15-35 6.18 7,244,860 7,517,455
Credit Suisse First Boston Mtge Securities
Series 2004-C1 Cl A4
01-15-37 4.75 8,335,000 8,530,655
Credit Suisse First Boston Mtge Securities
Series 2004-C2 Cl A1
05-15-36 3.82 829,862 828,800
Federal Natl Mtge Assn #725217
02-01-14 4.78 978,429 1,044,334
Federal Natl Mtge Assn #735029
09-01-13 5.32 345,759 367,420
GE Capital Commercial Mtge
Series 2001-3 Cl A2
06-10-38 6.07 6,900,000 7,262,848
GE Capital Commercial Mtge
Series 2005-C1 Cl A5
06-10-48 4.77 400,000 400,596
General Electric Capital Assurance
Series 2003-1 Cl A4
05-12-35 5.25 9,137,544(d) 9,540,943
General Electric Capital Assurance
Series 2003-1 Cl A5
05-12-35 5.74 5,050,000(d) 5,271,542
Greenwich Capital Commercial Funding
Series 2003-C1 Cl A3
07-05-35 3.86 5,650,000 5,732,321
Greenwich Capital Commercial Funding
Series 2003-C2 Cl A3
01-05-36 4.53 3,985,000 4,067,770
Greenwich Capital Commercial Funding
Series 2004-GG1 Cl A5
06-10-36 4.88 3,550,000 3,630,706
Greenwich Capital Commercial Funding
Series 2007-GG9 Cl A4
03-10-39 5.44 41,675,000(t) 39,591,553
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
COMMERCIAL MORTGAGE-BACKED (CONT.)
GS Mtge Securities II
Series 2004-GG2 Cl A3
08-10-38 4.60% $4,129,263 $4,184,364
GS Mtge Securities II
Series 2005-GG4 Cl A4A
07-10-39 4.75 13,000,000 13,226,122
GS Mtge Securities II
Series 2007-EOP Cl J
03-06-20 1.08 9,050,000(d,m) 7,395,921
GS Mtge Securities II
Series 2007-GG10 Cl F
08-10-45 5.80 9,800,000 1,190,161
JPMorgan Chase Commercial Mtge Securities
Series 2003-LN1 Cl A1
10-15-37 4.13 2,065,077 2,119,308
JPMorgan Chase Commercial Mtge Securities
Series 2003-ML1A Cl A1
03-12-39 3.97 1,385,890 1,412,232
JPMorgan Chase Commercial Mtge Securities
Series 2003-ML1A Cl A2
03-12-39 4.77 7,419,000 7,657,120
JPMorgan Chase Commercial Mtge Securities
Series 2004-C2 Cl A2
05-15-41 5.11 4,118,420 4,292,174
JPMorgan Chase Commercial Mtge Securities
Series 2004-CBX Cl A3
01-12-37 4.18 2,391,198 2,389,337
JPMorgan Chase Commercial Mtge Securities
Series 2004-LN2 Cl A1
07-15-41 4.48 6,886,032 6,991,996
JPMorgan Chase Commercial Mtge Securities
Series 2005-LDP2 Cl A3
07-15-42 4.70 4,600,000 4,672,117
JPMorgan Chase Commercial Mtge Securities
Series 2005-LDP5 Cl A4
12-15-44 5.18 22,135,000 22,712,723
JPMorgan Chase Commercial Mtge Securities
Series 2006-LDP6 Cl ASB
04-15-43 5.49 12,380,000 12,824,048
JPMorgan Chase Commercial Mtge Securities
Series 2007-CB20 Cl A4
02-12-51 5.79 11,245,000 10,822,458
JPMorgan Chase Commercial Mtge Securities
Series 2007-CB20 Cl E
02-12-51 6.20 4,725,000(d) 930,990
JPMorgan Chase Commercial Mtge Securities
Series 2009-IWST Cl A1
12-05-27 4.31 5,499,066(d) 5,561,760
JPMorgan Chase Commercial Mtge Securities
Series 2009-IWST Cl A2
12-05-27 5.63 8,900,000(d) 9,297,357
LB-UBS Commercial Mtge Trust
Series 2004-C2 Cl A3
03-15-29 3.97 4,700,000 4,614,263
LB-UBS Commercial Mtge Trust
Series 2004-C6 Cl A6
08-15-29 5.02 3,500,000 3,574,434
LB-UBS Commercial Mtge Trust
Series 2005-C5 Cl AAB
09-15-30 4.93 4,500,000 4,658,004
LB-UBS Commercial Mtge Trust
Series 2006-C4 Cl AAB
06-15-32 5.86 5,100,000 5,392,973
LB-UBS Commercial Mtge Trust
Series 2007-C6 Cl A4
07-15-40 5.86 4,475,000 4,166,536
LB-UBS Commercial Mtge Trust
Series 2007-C7 Cl A3
09-15-45 5.87 16,200,000 15,107,123
Merrill Lynch Mtge Trust
Series 2005-CKI1 Cl A1
11-12-37 5.08 328,463 331,925
Merrill Lynch Mtge Trust
Series 2008-C1 Cl A1
02-12-51 4.71 1,920,387 1,936,211
Morgan Stanley Capital I
Series 2004-HQ4 Cl A5
04-14-40 4.59 12,795,000 12,735,529
Morgan Stanley Capital I
Series 2006-T23 Cl AAB
08-12-41 5.80 3,675,000 3,911,136
TIAA Seasoned Commercial Mtge Trust
Series 2007-C4 Cl A2
08-15-39 5.79 3,900,000(m) 4,141,974
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
COMMERCIAL MORTGAGE-BACKED (CONT.)
TIAA Seasoned Commercial Mtge Trust
Series 2007-C4 Cl A3
08-15-39 6.07% $2,850,000 $3,150,014
Wachovia Bank Commercial Mtge Trust
Series 2005-C16 Cl A2
10-15-41 4.38 1,452,090 1,474,382
Wachovia Bank Commercial Mtge Trust
Series 2005-C20 Cl A5
07-15-42 5.09 5,342,000 5,509,664
Wachovia Bank Commercial Mtge Trust
Series 2006-C24 Cl A3
03-15-45 5.56 7,550,000 7,802,959
Wachovia Bank Commercial Mtge Trust
Series 2006-C24 Cl APB
03-15-45 5.58 3,200,000 3,290,210
Wachovia Bank Commercial Mtge Trust
Series 2006-C27 Cl APB
07-15-45 5.73 5,475,000 5,684,172
Wachovia Bank Commercial Mtge Trust
Series 2006-C29 Cl A4
11-15-48 5.31 2,200,000 2,200,057
---------------
Total 370,440,606
- -------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE-BACKED (37.5%)(f,p)
Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2005-9 Cl 1A4
11-25-35 4.91 3,985,000 3,903,387
Banc of America Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-3 Cl 1A1
04-25-34 6.00 7,238,930 6,593,082
Banc of America Funding
Collateralized Mtge Obligation
Series 2009-R14A Cl 1A1
09-26-37 1.33 27,008,605(d,m) 25,995,781
BCAP LLC Trust
Collateralized Mtge Obligation
Series 2009-RR1 Cl 2A2
05-26-35 3.03 13,823,234(d,m) 3,455,809
BCAP LLC Trust
Collateralized Mtge Obligation
Series 2009-RR8 Cl 3A2
03-26-37 5.50 3,042,248(d) 566,332
Bear Stearns Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2005-8 Cl A4
08-25-35 5.10 6,475,000(d,m) 5,589,844
Bear Stearns Alt-A Trust
Collateralized Mtge Obligation
Series 2005-2 Cl 2A2B
04-25-35 3.11 65,934(m) 28,213
Bear Stearns Asset Backed Securities Trust
Series 2006-HE9 Cl 1A1
11-25-36 0.28 5,146,457(m) 4,716,135
Carrington Mtge Loan Trust
Series 2007-FRE1 Cl A1
02-25-37 0.35 16,892,177(m) 15,449,576
ChaseFlex Trust
Collateralized Mtge Obligation
Series 2005-2 Cl 2A2
06-25-35 6.50 1,678,051 1,371,807
Citigroup Mtge Loan Trust
Collateralized Mtge Obligation
Series 2009-4 Cl 11A2
10-25-36 0.68 5,352,488(d,m) 281,006
Citigroup Mtge Loan Trust
Collateralized Mtge Obligation
Series 2009-4 Cl 13A3
10-25-35 3.31 2,046,982(d,m) 307,047
Citigroup Mtge Loan Trust
Collateralized Mtge Obligation
Series 2009-5 Cl 3A2
06-25-36 5.50 4,547,358(d) 773,051
Citigroup Mtge Loan Trust
Collateralized Mtge Obligation
Series 2009-6 Cl 13A1
01-25-37 0.31 9,838,735(d,m) 8,805,667
Citigroup Mtge Loan Trust
Collateralized Mtge Obligation
Series 2010-2 Cl 1A1
05-25-37 0.33 6,661,276(d,g,m) 6,478,091
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2007-8CB Cl A13
05-25-37 25.86% $4,429,347(i) $518,439
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-11T1 Cl A1
07-25-18 4.75 2,363,706 2,373,308
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2007-OH1 Cl A1A
04-25-47 0.32 2,053,701(m) 1,795,487
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2007-OH3 Cl A3
09-25-47 0.73 14,771,442(m) 1,741,596
Countrywide Asset-Backed Ctfs
Series 2005-1 Cl MV1
07-25-35 0.63 7,009,736(m) 6,857,896
Countrywide Home Loans
Collateralized Mtge Obligation
Series 2005-R2 Cl 2A1
06-25-35 7.00 4,985,972(d) 4,626,959
Countrywide Home Loans
Collateralized Mtge Obligation
Series 2006-HYB1 Cl 1A1
03-20-36 5.27 3,242,991(m) 1,880,606
Credit Suisse Mtge Capital Certificates
Collateralized Mtge Obligation
Series 2009-ASG Cl A
11-28-39 1.48 7,917,033(d,m) 7,917,033
Credit Suisse Mtge Capital Certificates
Collateralized Mtge Obligation
Series 2009-12R Cl 13A1
08-27-37 6.00 6,035,140(d) 6,118,123
FADR LLC
Series 2009-2 Cl A
01-28-40 2.48 7,948,925(d,m) 7,734,055
Federal Home Loan Mtge Corp
03-01-25 4.50 200,000(g) 208,156
03-01-25 5.50 200,000(g) 213,219
03-01-40 5.00 17,975,000(g) 18,682,766
03-01-40 5.50 16,900,000(g) 17,869,114
03-01-40 6.00 5,000,000(g) 5,353,516
Federal Home Loan Mtge Corp #170216
03-01-17 8.50 3,966 4,411
Federal Home Loan Mtge Corp #1G2547
12-01-36 6.11 260,857(m) 273,633
Federal Home Loan Mtge Corp #1Q0140
08-01-36 6.16 289,734(m) 300,287
Federal Home Loan Mtge Corp #284190
01-01-17 8.00 196 217
Federal Home Loan Mtge Corp #290970
04-01-17 8.00 3,699 4,095
Federal Home Loan Mtge Corp #295114
06-01-17 8.50 3,038 3,379
Federal Home Loan Mtge Corp #540861
09-01-19 8.50 29,086 33,175
Federal Home Loan Mtge Corp #A00304
04-01-21 9.00 30,382 33,925
Federal Home Loan Mtge Corp #A12692
10-01-32 6.00 66,573 73,134
Federal Home Loan Mtge Corp #A13854
09-01-33 6.00 92,908 101,185
Federal Home Loan Mtge Corp #B10254
10-01-18 5.50 272,804 293,917
Federal Home Loan Mtge Corp #B12280
02-01-19 5.50 166,976 179,898
Federal Home Loan Mtge Corp #C00103
03-01-22 8.50 68,111 78,172
Federal Home Loan Mtge Corp #C00144
08-01-22 8.50 64,235 73,904
Federal Home Loan Mtge Corp #C00356
08-01-24 8.00 249,621 287,392
Federal Home Loan Mtge Corp #C00666
10-01-28 7.00 29,565 32,703
Federal Home Loan Mtge Corp #C53878
12-01-30 5.50 1,189,881 1,264,952
Federal Home Loan Mtge Corp #C59161
10-01-31 6.00 82,007 89,020
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Federal Home Loan Mtge Corp #C62993
01-01-32 6.50% $759,397 $831,045
Federal Home Loan Mtge Corp #C63552
01-01-32 6.50 961,135 1,054,391
Federal Home Loan Mtge Corp #C64703
03-01-32 6.50 666,810 736,316
Federal Home Loan Mtge Corp #C67723
06-01-32 7.00 572,767 640,669
Federal Home Loan Mtge Corp #C77372
03-01-33 6.00 192,275 210,027
Federal Home Loan Mtge Corp #C78031
04-01-33 5.50 6,180,562 6,611,368
Federal Home Loan Mtge Corp #C79930
06-01-33 5.50 4,912,942 5,213,915
Federal Home Loan Mtge Corp #C90767
12-01-23 6.00 4,759,194 5,154,502
Federal Home Loan Mtge Corp #D96300
10-01-23 5.50 3,785,831 4,033,317
Federal Home Loan Mtge Corp #E01127
02-01-17 6.50 600,951 649,422
Federal Home Loan Mtge Corp #E01419
05-01-18 5.50 2,335,295 2,504,924
Federal Home Loan Mtge Corp #E74288
12-01-13 6.00 59,577 64,103
Federal Home Loan Mtge Corp #E79810
11-01-14 7.50 496,666 538,397
Federal Home Loan Mtge Corp #E90216
05-01-17 6.00 641,200 691,324
Federal Home Loan Mtge Corp #E96624
05-01-18 5.00 740,273 788,562
Federal Home Loan Mtge Corp #E98725
08-01-18 5.00 5,973,098 6,348,754
Federal Home Loan Mtge Corp #E99684
10-01-18 5.00 6,324,215 6,746,728
Federal Home Loan Mtge Corp #G00286
02-01-25 8.00 99,067 114,057
Federal Home Loan Mtge Corp #G01108
04-01-30 7.00 1,833,041 2,026,535
Federal Home Loan Mtge Corp #G01410
04-01-32 7.00 206,960 227,906
Federal Home Loan Mtge Corp #G01441
07-01-32 7.00 1,753,244 1,930,685
Federal Home Loan Mtge Corp #G01535
04-01-33 6.00 7,257,844 7,937,554
Federal Home Loan Mtge Corp #G02757
06-01-36 5.00 20,887,834 21,767,174
Federal Home Loan Mtge Corp #G03419
07-01-37 6.00 7,473,952 8,007,972
Federal Home Loan Mtge Corp #G30225
02-01-23 6.00 6,423,992 6,961,791
Federal Home Loan Mtge Corp #H01724
09-01-37 6.00 982,090 1,043,317
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 2795 Cl IY
07-15-17 46.56 141,762(i) 4,388
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 2817 Cl SA
06-15-32 20.00 3,975,766(i) 323,369
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 3155 Cl PS
05-15-36 8.88 18,349,759(i) 2,909,701
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 3430 Cl IA
07-15-12 1.91 45,560,937(i) 612,981
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 3447 Cl AI
03-15-12 32.56 22,826,032(i) 303,326
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 3517 Cl JI
12-15-12 15.52 13,042,654(i) 177,046
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 3630 Cl AI
03-15-17 0.00% $86,660,000(i) $4,278,838
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Series 2576 Cl KJ
02-15-33 5.50 2,866,495 2,913,501
Federal Natl Mtge Assn
03-01-25 4.50 35,500,000(g) 36,953,298
03-01-25 5.00 95,050,000(g) 100,188,592
03-01-40 4.50 38,440,000(g) 38,920,499
03-01-40 5.00 7,980,000(g) 8,276,760
03-01-40 6.00 78,700,000(g) 83,483,464
05-01-40 5.50 175,000,000(g) 183,367,099
05-01-40 6.00 178,075,000(g,v) 188,954,313
05-01-40 6.50 2,500,000(g) 2,675,000
Federal Natl Mtge Assn #125479
04-01-27 7.50 150,354 169,090
Federal Natl Mtge Assn #190899
04-01-23 8.50 196,486 215,591
Federal Natl Mtge Assn #190944
05-01-24 6.00 3,680,776 3,927,070
Federal Natl Mtge Assn #190988
06-01-24 9.00 182,968 200,466
Federal Natl Mtge Assn #231309
09-01-23 6.50 58,137 62,620
Federal Natl Mtge Assn #231310
09-01-23 6.50 336,187 362,113
Federal Natl Mtge Assn #250330
09-01-25 8.00 187,517 215,537
Federal Natl Mtge Assn #250495
03-01-26 7.00 337,999 375,283
Federal Natl Mtge Assn #250765
12-01-26 8.00 137,779 158,355
Federal Natl Mtge Assn #251116
08-01-27 8.00 181,512 208,742
Federal Natl Mtge Assn #252440
05-01-29 7.00 138,716 154,084
Federal Natl Mtge Assn #252498
06-01-29 7.00 3,813 4,236
Federal Natl Mtge Assn #253883
08-01-16 6.00 1,498,168 1,615,195
Federal Natl Mtge Assn #254236
03-01-17 6.50 902,360 982,831
Federal Natl Mtge Assn #254383
06-01-32 7.50 275,495 310,571
Federal Natl Mtge Assn #254587
12-01-22 5.50 321,193 341,019
Federal Natl Mtge Assn #254802
07-01-18 4.50 1,707,456 1,803,678
Federal Natl Mtge Assn #254916
09-01-23 5.50 6,697,374 7,108,593
Federal Natl Mtge Assn #256901
09-01-37 6.50 272,963 290,120
Federal Natl Mtge Assn #268071
01-01-24 6.50 93,036 100,211
Federal Natl Mtge Assn #303226
02-01-25 8.00 72,547 83,315
Federal Natl Mtge Assn #313049
08-01-11 8.50 12,404 12,616
Federal Natl Mtge Assn #323715
05-01-29 6.00 264,432 284,896
Federal Natl Mtge Assn #323933
09-01-29 7.00 2,507,190 2,784,966
Federal Natl Mtge Assn #408207
01-01-28 6.50 89,646 97,716
Federal Natl Mtge Assn #455791
01-01-29 6.50 251,044 272,551
Federal Natl Mtge Assn #489888
05-01-29 6.50 1,059,336 1,150,089
Federal Natl Mtge Assn #493945
04-01-29 6.50 61,320 65,726
Federal Natl Mtge Assn #496029
01-01-29 6.50 1,282,018 1,381,832
Federal Natl Mtge Assn #518159
09-01-14 7.00 203,732 219,944
Federal Natl Mtge Assn #545008
06-01-31 7.00 1,872,680 2,108,273
Federal Natl Mtge Assn #545342
04-01-13 7.00 71,478 73,992
Federal Natl Mtge Assn #545684
05-01-32 7.50 210,029 236,583
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #545868
08-01-32 7.00% $68,824 $76,965
Federal Natl Mtge Assn #545869
07-01-32 6.50 1,296,387 1,406,293
Federal Natl Mtge Assn #545885
08-01-32 6.50 2,521,498 2,741,348
Federal Natl Mtge Assn #545910
08-01-17 6.00 2,533,447 2,747,131
Federal Natl Mtge Assn #555340
04-01-33 5.50 205,135 219,025
Federal Natl Mtge Assn #555343
08-01-17 6.00 2,506,041 2,705,321
Federal Natl Mtge Assn #555375
04-01-33 6.00 16,691,003 18,178,134
Federal Natl Mtge Assn #555458
05-01-33 5.50 15,304,576 16,155,970
Federal Natl Mtge Assn #555528
04-01-33 6.00 9,871,785 10,617,237
Federal Natl Mtge Assn #555734
07-01-23 5.00 5,697,214 5,964,623
Federal Natl Mtge Assn #555794
09-01-28 7.50 582,513 654,114
Federal Natl Mtge Assn #567840
10-01-30 7.00 961,585 1,068,120
Federal Natl Mtge Assn #582154
05-01-31 6.50 75,897 82,399
Federal Natl Mtge Assn #587859
12-01-16 5.50 2,137,715 2,293,800
Federal Natl Mtge Assn #597374
09-01-31 7.00 560,359 630,856
Federal Natl Mtge Assn #606882
10-01-31 7.00 519,289 576,815
Federal Natl Mtge Assn #611831
02-01-31 7.50 26,252 29,541
Federal Natl Mtge Assn #615135
11-01-16 6.00 161,041 173,621
Federal Natl Mtge Assn #634650
04-01-32 7.50 112,722 127,074
Federal Natl Mtge Assn #638969
03-01-32 5.50 875,143 931,354
Federal Natl Mtge Assn #643362
04-01-17 6.50 289,283 315,080
Federal Natl Mtge Assn #646147
06-01-32 7.00 2,222,663 2,502,242
Federal Natl Mtge Assn #646446
06-01-17 6.50 712,035 775,533
Federal Natl Mtge Assn #649068
06-01-17 6.50 1,149,368 1,252,664
Federal Natl Mtge Assn #649263
08-01-17 6.50 1,243,458 1,356,283
Federal Natl Mtge Assn #650009
09-01-31 7.50 46,531 52,361
Federal Natl Mtge Assn #654208
10-01-32 6.50 1,558,848 1,692,394
Federal Natl Mtge Assn #654682
10-01-32 6.00 617,010 667,615
Federal Natl Mtge Assn #654689
11-01-32 6.00 1,027,297 1,111,416
Federal Natl Mtge Assn #656908
09-01-32 6.50 1,182,866 1,295,527
Federal Natl Mtge Assn #661815
10-01-32 6.00 93,662 101,633
Federal Natl Mtge Assn #662061
09-01-32 6.50 1,889,630 2,051,514
Federal Natl Mtge Assn #667604
10-01-32 5.50 179,490 190,122
Federal Natl Mtge Assn #667787
02-01-18 5.50 938,174 1,009,607
Federal Natl Mtge Assn #670382
09-01-32 6.00 6,843,227 7,359,982
Federal Natl Mtge Assn #670387
08-01-32 7.00 917,569 1,019,246
Federal Natl Mtge Assn #677089
01-01-33 5.50 356,927 378,068
Federal Natl Mtge Assn #678028
09-01-17 6.00 3,411,090 3,682,339
Federal Natl Mtge Assn #678065
02-01-33 6.50 358,647 392,447
Federal Natl Mtge Assn #678937
01-01-18 5.50 1,540,481 1,654,784
Federal Natl Mtge Assn #678941
02-01-18 5.50 2,032,501 2,192,444
Federal Natl Mtge Assn #679095
04-01-18 5.00 3,422,345(u) 3,641,748
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #680961
01-01-33 6.00% $465,241 $504,727
Federal Natl Mtge Assn #681080
02-01-18 5.00 563,522 599,649
Federal Natl Mtge Assn #681166
04-01-32 6.50 279,306 303,234
Federal Natl Mtge Assn #681400
03-01-18 5.50 3,030,079 3,249,480
Federal Natl Mtge Assn #682825
01-01-33 6.00 1,132,344 1,217,852
Federal Natl Mtge Assn #683100
02-01-18 5.50 110,775 119,452
Federal Natl Mtge Assn #683116
02-01-33 6.00 188,089 202,292
Federal Natl Mtge Assn #684586
03-01-33 6.00 2,074,877 2,228,638
Federal Natl Mtge Assn #686172
02-01-33 6.00 1,723,177 1,853,300
Federal Natl Mtge Assn #686528
02-01-33 6.00 2,549,991 2,767,914
Federal Natl Mtge Assn #687051
01-01-33 6.00 6,923,147 7,347,138
Federal Natl Mtge Assn #689026
05-01-33 5.50 917,594 976,361
Federal Natl Mtge Assn #689093
07-01-28 5.50 2,061,588 2,194,004
Federal Natl Mtge Assn #694628
04-01-33 5.50 4,840,148 5,168,529
Federal Natl Mtge Assn #694795
04-01-33 5.50 5,638,026(u) 6,020,387
Federal Natl Mtge Assn #694988
03-01-33 5.50 7,338,950 7,808,540
Federal Natl Mtge Assn #695202
03-01-33 6.50 2,331,633 2,528,468
Federal Natl Mtge Assn #695909
05-01-18 5.50 1,345,941 1,452,389
Federal Natl Mtge Assn #699424
04-01-33 5.50 3,328,090 3,553,746
Federal Natl Mtge Assn #702427
04-01-33 5.50 2,708,262 2,892,049
Federal Natl Mtge Assn #704005
05-01-33 5.50 738,103 781,360
Federal Natl Mtge Assn #705655
05-01-33 5.00 338,869 353,135
Federal Natl Mtge Assn #709093
06-01-33 6.00 98,971 106,321
Federal Natl Mtge Assn #709901
06-01-18 5.00 319,628 340,571
Federal Natl Mtge Assn #710823
05-01-33 5.50 524,371 560,615
Federal Natl Mtge Assn #711503
06-01-33 5.50 78,755 83,568
Federal Natl Mtge Assn #720070
07-01-23 5.50 1,748,657 1,856,025
Federal Natl Mtge Assn #723687
08-01-28 5.50 2,663,052 2,834,100
Federal Natl Mtge Assn #725232
03-01-34 5.00 13,629,645 14,203,429
Federal Natl Mtge Assn #725431
08-01-15 5.50 62,328 66,956
Federal Natl Mtge Assn #725684
05-01-18 6.00 5,776,893 6,280,115
Federal Natl Mtge Assn #725813
12-01-33 6.50 7,350,598 7,971,133
Federal Natl Mtge Assn #726940
08-01-23 5.50 59,864 63,765
Federal Natl Mtge Assn #730153
08-01-33 5.50 730,434 773,241
Federal Natl Mtge Assn #735212
12-01-34 5.00 14,553,135 15,158,974
Federal Natl Mtge Assn #735224
02-01-35 5.50 22,623,063 23,948,885
Federal Natl Mtge Assn #735578
06-01-35 5.00 13,822,350 14,376,169
Federal Natl Mtge Assn #738921
11-01-32 6.50 673,475 734,571
Federal Natl Mtge Assn #743262
10-01-18 5.00 2,122,356(u) 2,259,301
Federal Natl Mtge Assn #743347
10-01-33 6.00 67,571 73,512
Federal Natl Mtge Assn #743579
11-01-33 5.50 193,026 204,338
Federal Natl Mtge Assn #745355
03-01-36 5.00 13,558,303 14,101,543
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #745563
08-01-34 5.50% $1,056,707 $1,118,635
Federal Natl Mtge Assn #747642
11-01-28 5.50 1,834,259 1,952,073
Federal Natl Mtge Assn #753074
12-01-28 5.50 5,208,691 5,543,244
Federal Natl Mtge Assn #753091
12-01-33 5.50 3,248,958 3,439,362
Federal Natl Mtge Assn #757581
01-01-19 5.50 673,440 724,716
Federal Natl Mtge Assn #759342
01-01-34 6.50 1,205,548 1,316,592
Federal Natl Mtge Assn #765759
12-01-18 5.00 2,134,332(u) 2,271,161
Federal Natl Mtge Assn #766641
03-01-34 5.00 4,554,577 4,744,182
Federal Natl Mtge Assn #776962
04-01-29 5.00 13,083,765 13,707,347
Federal Natl Mtge Assn #779676
06-01-34 5.00 1,561,535 1,626,540
Federal Natl Mtge Assn #804442
12-01-34 6.50 997,157 1,077,909
Federal Natl Mtge Assn #831870
11-01-36 6.50 1,136,130 1,216,064
Federal Natl Mtge Assn #844445
12-01-35 5.50 11,122,943 11,743,519
Federal Natl Mtge Assn #845109
05-01-36 6.00 19,539,937 20,789,532
Federal Natl Mtge Assn #881886
04-01-36 5.36 154,722(m) 162,024
Federal Natl Mtge Assn #882063
06-01-36 6.50 2,525,764 2,740,638
Federal Natl Mtge Assn #886291
07-01-36 7.00 5,343,563 5,828,073
Federal Natl Mtge Assn #894547
05-01-35 2.87 5,777,021(m) 5,991,260
Federal Natl Mtge Assn #909214
07-01-38 7.00 1,603,268 1,724,389
Federal Natl Mtge Assn #976421
03-01-23 4.50 5,161,251(u) 5,383,561
Federal Natl Mtge Assn #AC3035
10-01-39 5.00 39,539,432(t) 41,068,054
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2003-63 Cl IP
07-25-33 0.00 10,973,602(i) 1,821,615
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2003-71 Cl IM
12-25-31 5.34 2,144,044(i) 243,695
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2004-84 Cl GI
12-25-22 20.00 490,445(i) 42,302
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2007-22 Cl JS
03-25-37 21.83 14,049,591(i) 1,761,472
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2008-40 Cl AI
08-25-12 1.00 54,368,051(i) 997,572
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 379 Cl 2
05-01-37 12.40 17,300,000(g,i) 3,000,469
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 396 Cl 2
06-01-39 0.00 84,858(i) 20,777
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 397 Cl 2
09-25-39 0.00 9,473,579(i) 2,046,441
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 400 Cl 2
11-25-39 0.00% $17,731,619(g,i) $4,345,632
11-25-39 0.00 45,556,197(i) 11,164,826
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Principal Only
Series 43 Cl 1
09-01-18 2.72 8,775(j) 8,199
Govt Natl Mtge Assn
03-01-40 4.50 86,000,000(g) 87,464,665
Govt Natl Mtge Assn #425004
10-15-33 5.50 2,806,869 2,993,638
Govt Natl Mtge Assn #595256
12-15-32 6.00 4,576,143 4,955,616
Govt Natl Mtge Assn #604580
08-15-33 5.00 2,649,656 2,782,524
Govt Natl Mtge Assn #604708
10-15-33 5.50 6,985,577 7,450,399
Govt Natl Mtge Assn #606844
09-15-33 5.00 6,513,635 6,840,262
Govt Natl Mtge Assn #692146
07-15-39 6.00 4,147,731 4,429,462
Govt Natl Mtge Assn #692174
07-15-39 6.00 1,556,180 1,661,883
Govt Natl Mtge Assn #698409
07-15-39 6.00 2,696,262 2,879,403
Govt Natl Mtge Assn #704592
06-15-39 6.00 1,272,086 1,358,491
Govt Natl Mtge Assn #704632
07-15-39 6.00 1,694,441 1,809,534
Govt Natl Mtge Assn #712627
07-15-39 6.00 522,069 557,530
Govt Natl Mtge Assn #718666
07-15-39 6.00 807,220 862,050
Govt Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2002-70 Cl IC
08-20-32 0.00 4,243,488(i) 542,047
Govt Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2002-80 Cl CI
01-20-32 38.77 311,890(i) 5,734
Govt Natl Mtge Assn
Collateralized Mtge Obligation
Series 2010-16 Cl AB
05-16-33 2.68 14,650,000 14,872,039
GSR Mtge Loan Trust
Collateralized Mtge Obligation
Series 2005-AR4 Cl 4A1
07-25-35 5.35 71(m) 71
Harborview Mtge Loan Trust
Collateralized Mtge Obligation
Series 2005-16 Cl 2A1A
01-19-36 0.47 226,828(m) 123,908
Homestar Mtge Acceptance
Collateralized Mtge Obligation
Series 2004-1 Cl A1
03-25-34 0.55 105,466(m) 83,059
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2005-AR8 Cl AX1
04-25-35 0.00 65,790,558(i) 1
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-AR25 Cl 3A3
09-25-36 20.00 26,631,403(i) 285,867
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Series 2005-AR25 Cl 1A21
12-25-35 5.62 5,146,229(m) 3,910,899
Indymac Index Mtge Loan Trust
Collateralized Mtge Obligation
Series 2006-AR3 Cl 2A1B
03-25-36 5.72 417,670(m) 219,626
Irwin Home Equity
Series 2005-A Cl A3
02-25-34 0.61 69,039(m) 56,281
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Jefferies & Co
Collateralized Mtge Obligation
Series 2009-R10 Cl 1A1
06-26-47 0.37% $322,088(d,m) $298,392
Jefferies & Co
Collateralized Mtge Obligation
Series 2009-R10 Cl 2A1
05-26-48 0.32 32,659(d,m,x) --
Jefferies & Co
Collateralized Mtge Obligation
Series 2010-R1 Cl 2A1
11-26-36 0.41 8,570,945(d,m) 8,089,695
JPMorgan Mtge Trust
Collateralized Mtge Obligation
Series 2005-A3 Cl 3A2
06-25-35 5.03 1,022,083(m) 972,937
JPMorgan Mtge Trust
Collateralized Mtge Obligation
Series 2006-S4 Cl A6
01-25-37 6.00 6,130,754 5,894,058
JPMorgan Reremic
Collateralized Mtge Obligation
Series 2009-5 Cl 4AI
04-26-37 0.35 5,638,220(d,m) 5,183,218
LVII Resecuritization Trust
Collateralized Mtge Obligation
Series 2009-3 Cl A1
11-27-37 5.70 8,388,180(d,m) 8,482,547
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-2 Cl 4A1
02-25-19 5.00 4,268,930 4,072,826
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-4 Cl 2A1
05-25-34 6.00 2,368,216 2,190,201
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-7 Cl 8A1
08-25-19 5.00 3,267,089 3,104,642
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-8 Cl 7A1
09-25-19 5.00 4,780,599 4,541,887
Merrill Lynch First Franklin Mtge Loan Trust
Series 2007-2 Cl A2A
05-25-37 0.34 7,897,530(m) 7,859,977
Morgan Stanley Home Equity Loan Trust
Series 2006-2 Cl A3
02-25-36 0.40 5,839,637(m) 5,248,413
Novastar Home Equity Loan
Series 2007-1 Cl A2A2
03-25-37 5.83 3,912,156(m) 3,692,567
RAAC Series
Series 2007-SP1 Cl A1
03-25-37 0.38 6,423,606(m) 5,935,657
RBSSP Resecuritization Trust
Collateralized Mtge Obligation
Series 2009-9 Cl 10A1
10-26-36 0.33 4,405,102(d,m) 4,303,025
Soundview Home Equity Loan Trust
Series 2006-EQ1 Cl A2
10-25-36 0.34 2,905,820(m) 2,710,674
Structured Adjustable Rate Mtge Loan Trust
Collateralized Mtge Obligation
Series 2006-5 Cl 4A1
06-25-36 5.81 510,278(m) 381,329
Structured Asset Securities
Series 2003-18XS Cl A6
06-25-33 4.04 321,357 304,157
Structured Asset Securities
Series 2006-GEL2 Cl A1
04-25-36 0.34 5,482,985(d,m) 5,336,933
Washington Mutual Mtge Pass-Through Ctfs
Collateralized Mtge Obligation
Series 2004-AR9 Cl A6
08-25-34 2.95 8,094,113(m) 8,023,684
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2004-K Cl 2A3
07-25-34 4.71 173,609(m) 172,451
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
RESIDENTIAL MORTGAGE-BACKED (CONT.)
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2005-14 Cl 2A1
12-25-35 5.50% $1,617,345 $1,499,564
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2005-AR5 Cl 1A1
04-25-35 5.10 22,999,298(m) 20,675,926
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2007-8 Cl 2A7
07-25-37 6.00 20,506,741 19,595,723
---------------
Total 1,642,419,247
- -------------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.2%)
L-3 Communications
07-15-13 6.13 2,685,000(t) 2,708,494
L-3 Communications
Series B
10-15-15 6.38 4,350,000 4,420,687
TransDigm
07-15-14 7.75 1,580,000(d,t) 1,572,100
---------------
Total 8,701,281
- -------------------------------------------------------------------------------------
AUTOMOTIVE (--%)
Oshkosh
03-01-17 8.25 1,259,000(d,g) 1,259,000
03-01-20 8.50 916,000(d,g) 916,000
---------------
Total 2,175,000
- -------------------------------------------------------------------------------------
BANKING (3.5%)
Bank of America
Sr Unsecured
05-01-18 5.65 25,955,000 25,931,113
06-01-19 7.63 7,455,000(t) 8,421,057
Citigroup
05-22-19 8.50 3,975,000(t) 4,586,979
Citigroup
Sr Unsecured
05-15-18 6.13 24,465,000(t) 24,547,325
Export-Import Bank of Korea
Sr Unsecured
10-17-12 5.50 165,000(c) 176,979
Goldman Sachs Group
Sr Unsecured
02-15-19 7.50 25,035,000(t) 28,701,870
ICICI Bank
Sr Unsecured
10-03-12 6.63 150,000(c,d,t) 158,525
JPMorgan Chase & Co
Sr Unsecured
04-23-19 6.30 25,725,000(t) 28,504,860
Morgan Stanley
Sr Unsecured
04-01-18 6.63 6,920,000 7,362,762
01-26-20 5.50 16,950,000(t) 16,591,363
Wells Fargo & Co
Sr Unsecured
12-11-17 5.63 7,905,000 8,328,574
---------------
Total 153,311,407
- -------------------------------------------------------------------------------------
BROKERAGE (0.1%)
Lehman Brothers Holdings
Sr Unsecured
05-02-18 6.88 10,102,000(b,o) 2,331,050
- -------------------------------------------------------------------------------------
CHEMICALS (0.8%)
Airgas
10-01-18 7.13 2,695,000(d) 2,971,238
Ashland
06-01-17 9.13 1,450,000(d,t) 1,587,750
Chemtura
06-01-16 6.88 2,710,000(b,o) 3,116,500
Dow Chemical
Sr Unsecured
05-15-19 8.55 18,375,000(t) 22,213,776
INVISTA
Sr Unsecured
05-01-12 9.25 2,066,000(d) 2,081,495
Nalco
Sr Nts
05-15-17 8.25 4,676,000(d,t) 4,956,560
---------------
Total 36,927,319
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
24 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
CONSUMER PRODUCTS (0.1%)
Jarden
05-01-16 8.00% $2,410,000(t) $2,518,450
Visant Holding
Sr Disc Nts
12-01-13 10.25 2,015,000 2,045,225
---------------
Total 4,563,675
- -------------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING (--%)
United Technologies
Sr Unsecured
04-15-40 5.70 1,565,000(t) 1,592,010
- -------------------------------------------------------------------------------------
ELECTRIC (7.9%)
Arizona Public Service
Sr Unsecured
10-15-11 6.38 4,446,000 4,752,614
08-01-16 6.25 4,070,000 4,435,714
CenterPoint Energy Houston Electric LLC
Series U
03-01-14 7.00 10,895,000 12,558,131
Cleveland Electric Illuminating
1st Mtge
11-15-18 8.88 27,439,000 34,766,913
CMS Energy
Sr Unsecured
02-01-20 6.25 5,165,000 5,042,331
Consumers Energy
1st Mtge
03-15-15 5.00 7,070,000 7,574,657
02-15-17 5.15 4,515,000 4,750,552
Consumers Energy
1st Mtge Series J
02-15-14 6.00 3,855,000 4,283,761
Detroit Edison
Sr Secured
10-01-13 6.40 6,325,000 7,170,792
DTE Energy
Sr Unsecured
06-01-11 7.05 935,000 990,727
05-15-14 7.63 19,435,000 22,381,326
Edison Mission Energy
Sr Unsecured
06-15-13 7.50 2,040,000(t) 1,887,000
Florida Power
1st Mtge
06-15-38 6.40 11,130,000(t) 12,250,212
KCP&L Greater Missouri Operations
Sr Unsecured
07-01-12 11.88 1,675,000 1,956,392
Majapahit Holding
10-17-16 7.75 480,000(c,d) 513,600
Metropolitan Edison
Sr Unsecured
03-15-13 4.95 8,320,000 8,806,554
Midwest Generation LLC
Pass-Through Ctfs Series B
01-02-16 8.56 3,114,936 3,185,022
Nevada Power
04-15-12 6.50 1,000,000 1,088,076
08-01-18 6.50 8,110,000 8,911,478
Nevada Power
Series L
01-15-15 5.88 23,608,000(t) 25,827,222
Nevada Power
Series M
03-15-16 5.95 4,625,000(t) 5,054,145
Nevada Power
Series O
05-15-18 6.50 3,685,000 4,041,605
NiSource Finance
11-15-10 7.88 5,300,000 5,532,967
03-01-13 6.15 14,142,000 15,438,312
07-15-14 5.40 4,275,000 4,557,713
09-15-17 5.25 13,645,000 13,787,918
01-15-19 6.80 2,050,000 2,243,079
09-15-20 5.45 10,770,000(t) 10,727,426
NRG Energy
02-01-16 7.38 10,655,000(t) 10,508,494
Ohio Edison
Sr Unsecured
05-01-15 5.45 2,280,000 2,433,428
Ohio Power
Sr Unsecured Series H
01-15-14 4.85 720,000 766,554
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 25
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
ELECTRIC (CONT.)
Ohio Power
Sr Unsecured Series K
06-01-16 6.00% $5,635,000 $6,172,709
Oncor Electric Delivery LLC
Sr Secured
05-01-12 6.38 2,225,000 2,416,675
Pacific Gas & Electric
Sr Unsecured
01-15-40 5.40 5,985,000(t) 5,744,906
PacifiCorp
1st Mtge
09-15-13 5.45 5,095,000 5,614,563
01-15-39 6.00 1,600,000 1,695,710
Portland General Electric
03-15-10 7.88 3,165,000 3,173,685
Potomac Electric Power
1st Mtge
04-15-14 4.65 3,255,000 3,494,991
PPL Electric Utilities
1st Mtge
11-30-13 7.13 7,935,000 9,163,643
Progress Energy
Sr Unsecured
03-01-11 7.10 3,260,000 3,438,994
03-15-14 6.05 5,710,000 6,322,712
12-01-39 6.00 7,205,000 7,146,163
SCANA
Sr Unsecured
05-15-11 6.88 1,655,000 1,760,021
Sierra Pacific Power
Series M
05-15-16 6.00 17,645,000 19,368,668
Tampa Electric
Sr Unsecured
05-15-18 6.10 6,825,000 7,471,833
05-15-37 6.15 320,000 329,415
Toledo Edison
1st Mtge
05-01-20 7.25 1,790,000 2,085,414
Toledo Edison
Sr Secured
05-15-37 6.15 4,850,000 4,894,353
TransAlta
Sr Unsecured
01-15-15 4.75 8,145,000(c) 8,468,765
---------------
Total 346,987,935
- -------------------------------------------------------------------------------------
ENTERTAINMENT (0.4%)
Regal Cinemas
07-15-19 8.63 1,510,000(t) 1,576,063
Speedway Motorsports
06-01-16 8.75 3,520,000(t) 3,704,800
Time Warner
11-15-11 5.50 8,045,000 8,558,270
United Artists Theatre Circuit
Pass-Through Ctfs
07-01-15 9.30 4,373,816(k) 4,521,214
---------------
Total 18,360,347
- -------------------------------------------------------------------------------------
FOOD AND BEVERAGE (3.4%)
Anheuser-Busch InBev Worldwide
01-15-14 7.20 17,840,000(d) 20,474,968
Bacardi
Sr Nts
04-01-14 7.45 8,580,000(c,d) 9,894,885
ConAgra Foods
Sr Unsecured
09-15-11 6.75 1,042,000 1,127,619
Del Monte
Sr Sub Nts
10-15-19 7.50 2,915,000(d,t) 2,958,725
Dr Pepper Snapple Group
12-21-11 1.70 20,575,000 20,641,028
05-01-18 6.82 2,015,000 2,295,764
HJ Heinz Finance
07-15-11 6.63 4,000,000 4,282,616
Kraft Foods
Sr Unsecured
08-11-17 6.50 8,294,000(t) 9,347,670
02-01-18 6.13 34,775,000(t) 38,151,306
02-09-40 6.50 5,400,000 5,635,474
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
26 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
FOOD AND BEVERAGE (CONT.)
SABMiller
Sr Unsecured
07-01-11 6.20% $2,725,000(c,d) $2,891,410
01-15-14 5.70 26,690,000(c,d) 29,204,945
07-15-18 6.50 2,715,000(c,d) 3,021,863
---------------
Total 149,928,273
- -------------------------------------------------------------------------------------
GAMING (0.2%)
Boyd Gaming
Sr Sub Nts
02-01-16 7.13 2,244,000 1,767,150
MGM MIRAGE
Sr Secured
11-15-17 11.13 2,345,000(d) 2,532,600
MGM MIRAGE
Sr Unsecured
03-01-18 11.38 3,725,000(d,t) 3,445,625
---------------
Total 7,745,375
- -------------------------------------------------------------------------------------
GAS PIPELINES (3.5%)
CenterPoint Energy Resources
Sr Unsecured Series B
04-01-13 7.88 7,260,000 8,368,965
Colorado Interstate Gas
Sr Unsecured
11-15-15 6.80 46,641,000 52,619,397
El Paso
Sr Unsecured
12-12-13 12.00 3,075,000 3,574,688
Northern Natural Gas
Sr Unsecured
06-01-11 7.00 515,000(d) 551,332
Northwest Pipeline
Sr Unsecured
06-15-16 7.00 6,639,000 7,610,744
04-15-17 5.95 10,930,000 11,821,167
Southern Natural Gas
Sr Unsecured
04-01-17 5.90 27,796,000(d,t) 29,367,197
Southern Star Central
Sr Nts
03-01-16 6.75 1,460,000 1,445,400
TransCapitalInvest for Transneft
Secured
08-07-18 8.70 650,000(c,d,t) 762,373
Transcontinental Gas Pipe Line LLC
Sr Unsecured
04-15-16 6.40 21,216,000 23,571,888
Transcontinental Gas Pipe Line LLC
Sr Unsecured Series B
08-15-11 7.00 13,780,000 14,807,864
---------------
Total 154,501,015
- -------------------------------------------------------------------------------------
HEALTH CARE (0.7%)
Cardinal Health
Sr Unsecured
06-15-12 5.65 3,860,000 4,130,895
DaVita
03-15-13 6.63 8,915,000 8,937,287
HCA
Sr Secured Pay-in-kind
11-15-16 9.63 5,619,000(w) 6,012,330
Omnicare
12-15-13 6.75 3,240,000 3,195,450
Select Medical
02-01-15 7.63 9,097,000 8,551,180
---------------
Total 30,827,142
- -------------------------------------------------------------------------------------
HOME CONSTRUCTION (0.1%)
K Hovnanian Enterprises
Sr Secured
10-15-16 10.63 4,725,000(t) 4,937,625
- -------------------------------------------------------------------------------------
INDEPENDENT ENERGY (1.9%)
Anadarko Finance
Series B
05-01-11 6.75 2,885,000(c) 3,050,533
Anadarko Petroleum
Sr Unsecured
09-15-16 5.95 3,107,000 3,397,150
Chesapeake Energy
06-15-15 6.38 955,000(t) 923,963
01-15-16 6.63 3,070,000 2,962,550
Denbury Resources
04-01-13 7.50 2,850,000(t) 2,878,500
03-01-16 9.75 2,055,000(t) 2,214,263
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 27
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
INDEPENDENT ENERGY (CONT.)
Devon Financing
09-30-11 6.88% $1,685,000(c) $1,828,670
EnCana
Sr Unsecured
11-01-11 6.30 18,020,000(c) 19,428,388
10-15-13 4.75 1,875,000(c) 2,008,489
Forest Oil
02-15-14 8.50 3,930,000(t) 4,057,725
Kerr-McGee
09-15-11 6.88 6,605,000 7,102,530
Nexen
Sr Unsecured
05-15-37 6.40 6,068,000(c) 6,129,948
Petrohawk Energy
08-01-14 10.50 1,670,000(t) 1,811,950
Quicksilver Resources
08-01-15 8.25 3,358,000(t) 3,391,580
Range Resources
05-15-16 7.50 2,070,000 2,116,575
05-15-19 8.00 7,100,000 7,437,250
Ras Laffan Liquefied Natural Gas II
Sr Secured
09-30-20 5.30 360,000(c,d) 363,467
SandRidge Energy
06-01-18 8.00 1,607,000(d) 1,538,703
Woodside Finance
11-10-14 4.50 9,960,000(c,d,t) 10,287,412
---------------
Total 82,929,646
- -------------------------------------------------------------------------------------
INTEGRATED ENERGY (0.1%)
Petro-Canada
Sr Unsecured
07-15-13 4.00 1,515,000(c) 1,574,912
Suncor Energy
Sr Unsecured
06-01-18 6.10 2,770,000(c) 3,010,006
TNK-BP Finance
03-13-18 7.88 545,000(c,d,t) 568,163
---------------
Total 5,153,081
- -------------------------------------------------------------------------------------
MEDIA CABLE (1.4%)
Cablevision Systems
Sr Nts
09-15-17 8.63 3,820,000(d) 3,934,600
Charter Communications Operating LLC/Capital
Secured
04-30-12 8.00 10,215,000(d) 10,572,525
Comcast
03-15-37 6.45 1,810,000 1,856,892
07-01-39 6.55 12,475,000(t) 13,025,647
03-01-40 6.40 3,435,000(g) 3,495,023
CSC Holdings LLC
Sr Unsecured
02-15-18 7.88 765,000 797,513
02-15-19 8.63 1,085,000(d,t) 1,179,938
DISH DBS
10-01-14 6.63 1,590,000 1,593,975
02-01-16 7.13 5,330,000 5,343,325
09-01-19 7.88 3,040,000 3,131,200
TCM Sub LLC
01-15-15 3.55 15,005,000(d) 15,041,914
---------------
Total 59,972,552
- -------------------------------------------------------------------------------------
MEDIA NON CABLE (1.6%)
Lamar Media
01-01-13 7.25 1,595,000 1,595,000
04-01-14 9.75 2,445,000 2,652,825
Liberty Media LLC
Sr Unsecured
05-15-13 5.70 1,260,000 1,234,800
News America
01-09-38 6.75 8,240,000 8,665,670
Nielsen Finance LLC
08-01-14 10.00 1,790,000(t) 1,857,125
Rainbow Natl Services LLC
09-01-12 8.75 1,850,000(d) 1,887,000
Reed Elsevier Capital
08-01-11 6.75 12,130,000 12,988,583
RR Donnelley & Sons
Sr Unsecured
01-15-17 6.13 36,327,000 36,545,035
Thomson Reuters
07-15-13 5.95 3,320,000(c) 3,698,779
---------------
Total 71,124,817
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
28 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
NON CAPTIVE DIVERSIFIED (0.9%)
CIT Group
Sr Secured
05-01-16 7.00% $6,810,000(t) $6,026,850
General Electric Capital
Sr Unsecured
01-08-20 5.50 23,760,000(t) 23,788,722
01-10-39 6.88 10,825,000 11,306,106
---------------
Total 41,121,678
- -------------------------------------------------------------------------------------
OIL FIELD SERVICES (0.3%)
Expro Finance Luxembourg
Sr Secured
12-15-16 8.50 8,725,000(c,d,t) 8,648,925
Gaz Capital for Gazprom
Sr Unsecured
11-22-16 6.21 1,825,000(c,d) 1,827,738
KazMunaiGaz Finance
07-02-18 9.13 720,000(c,d,t) 827,111
---------------
Total 11,303,774
- -------------------------------------------------------------------------------------
PACKAGING (0.3%)
Ball
03-15-18 6.63 635,000 639,763
Crown Americas LLC/Capital
11-15-15 7.75 4,475,000(t) 4,620,437
Greif
Sr Unsecured
02-01-17 6.75 1,585,000 1,561,225
Owens-Brockway Glass Container
05-15-13 8.25 3,935,000(t) 3,994,025
Reynolds Group Issuer LLC
Sr Secured
10-15-16 7.75 2,153,000(d,t) 2,179,913
---------------
Total 12,995,363
- -------------------------------------------------------------------------------------
PAPER (0.2%)
Cascades
Sr Nts
12-15-17 7.75 5,565,000(c,d,t) 5,606,738
Georgia-Pacific LLC
01-15-17 7.13 1,970,000(d,t) 1,989,700
---------------
Total 7,596,438
- -------------------------------------------------------------------------------------
RAILROADS (0.7%)
Canadian Pacific Railway
Sr Unsecured
05-15-13 5.75 1,750,000(c) 1,902,908
CSX
Sr Unsecured
03-15-11 6.75 275,000 289,989
03-15-12 6.30 3,765,000 4,081,173
03-15-13 5.75 13,400,000 14,605,545
Union Pacific
Sr Unsecured
01-31-13 5.45 9,509,000 10,310,428
---------------
Total 31,190,043
- -------------------------------------------------------------------------------------
RESTAURANTS (0.1%)
Yum! Brands
Sr Unsecured
03-15-18 6.25 3,720,000(t) 4,096,806
- -------------------------------------------------------------------------------------
RETAILERS (0.5%)
CVS Caremark
Sr Unsecured
06-01-17 5.75 17,864,000 19,266,467
09-15-39 6.13 4,690,000 4,770,523
---------------
Total 24,036,990
- -------------------------------------------------------------------------------------
TECHNOLOGY (--%)
Brocade Communications Systems
Sr Secured
01-15-18 6.63 637,000(d,t) 640,185
01-15-20 6.88 557,000(d,t) 565,355
---------------
Total 1,205,540
- -------------------------------------------------------------------------------------
TRANSPORTATION SERVICES (0.5%)
ERAC USA Finance LLC
10-15-12 5.80 2,815,000(d) 3,056,820
10-15-37 7.00 18,662,000(d) 19,402,023
---------------
Total 22,458,843
- -------------------------------------------------------------------------------------
WIRELESS (0.8%)
CC Holdings GS V LLC/Crown Castle GS III
Sr Secured
05-01-17 7.75 4,985,000(d,t) 5,396,263
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 29
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
WIRELESS (CONT.)
Cricket Communications
Sr Secured
05-15-16 7.75% $2,295,000(t) $2,332,294
Nextel Communications
Series D
08-01-15 7.38 2,330,000(t) 2,149,425
Rogers Communications
06-15-13 6.25 2,050,000(c) 2,268,854
SBA Telecommunications
08-15-16 8.00 1,920,000(d,t) 1,996,800
08-15-19 8.25 650,000(d,t) 682,500
Sprint Nextel
Sr Unsecured
08-15-17 8.38 3,750,000(t) 3,628,125
US Cellular
Sr Unsecured
12-15-33 6.70 17,394,000 17,228,408
Vodafone Group
Sr Unsecured
02-27-37 6.15 1,595,000(c,t) 1,637,571
---------------
Total 37,320,240
- -------------------------------------------------------------------------------------
WIRELINES (4.1%)
AT&T
Sr Unsecured
02-15-39 6.55 36,490,000(t) 38,553,180
Embarq
Sr Unsecured
06-01-13 6.74 4,555,000 5,014,941
Qwest Communications Intl
04-01-18 7.13 3,080,000(d,t) 3,080,000
Qwest
Sr Unsecured
10-01-14 7.50 7,220,000(t) 7,689,300
06-15-15 7.63 2,030,000 2,169,563
Telecom Italia Capital
11-15-13 5.25 2,160,000(c) 2,292,235
Telefonica Emisiones SAU
06-20-11 5.98 1,205,000(c) 1,272,264
07-15-19 5.88 2,010,000(c) 2,121,493
TELUS
Sr Unsecured
06-01-11 8.00 37,126,000(c) 40,085,944
Verizon New York
Sr Unsecured Series A
04-01-12 6.88 33,857,000 37,114,721
Verizon New York
Sr Unsecured Series B
04-01-32 7.38 22,154,000 24,187,937
Verizon Pennsylvania
Sr Unsecured Series A
11-15-11 5.65 5,570,000 5,920,690
Windstream
08-01-16 8.63 3,635,000(t) 3,698,613
11-01-17 7.88 6,974,000(t) 6,817,085
---------------
Total 180,017,966
- -------------------------------------------------------------------------------------
TOTAL BONDS
(Cost: $4,787,443,335) $4,882,629,471
- -------------------------------------------------------------------------------------
<Caption>
SENIOR LOANS (1.1%)(l)
COUPON PRINCIPAL
BORROWER RATE AMOUNT VALUE(a)
AUTOMOTIVE (0.1%)
Ford Motor
Tranche B1 Term Loan
12-15-13 3.24-3.26% $6,165,000 $5,778,270
- -------------------------------------------------------------------------------------
FOOD AND BEVERAGE (0.2%)
U.S. Foodservice
Term Loan
TBD TBD 825,000(g,r) 709,888
07-03-14 2.73 8,225,000 7,077,366
---------------
Total 7,787,254
- -------------------------------------------------------------------------------------
HEALTH CARE (0.1%)
HCA
Tranche B1 Term Loan
11-18-13 2.50 4,125,000 3,910,294
- -------------------------------------------------------------------------------------
MEDIA NON CABLE (0.2%)
Nielsen Finance LLC
Tranche A Term Loan
08-09-13 2.23 9,060,000 8,498,642
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
30 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SENIOR LOANS (CONTINUED)
COUPON PRINCIPAL
BORROWER RATE AMOUNT VALUE(a)
OIL FIELD SERVICES (0.2%)
Dresser
Tranche B Term Loan
05-04-14 2.48-2.50% $7,555,000 $7,204,221
- -------------------------------------------------------------------------------------
RETAILERS (0.2%)
Toys "R" Us
Tranche B Term Loan
TBD TBD 3,695,000(g,r) 3,681,143
07-19-12 4.48 5,430,000 5,409,637
---------------
Total 9,090,780
- -------------------------------------------------------------------------------------
WIRELINES (0.1%)
Fairpoint Communications
Tranche B Term Loan
03-31-15 5.00 7,739,444(b) 5,883,758
- -------------------------------------------------------------------------------------
TOTAL SENIOR LOANS
(Cost: $47,248,179) $48,153,219
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (9.5%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.16% 416,950,207(q) $416,950,207
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $416,950,207) $416,950,207
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (14.0%)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
ASSET-BACKED COMMERCIAL PAPER (1.5%)
Antalis S.A.
03-05-10 0.20% $14,999,417 $14,999,418
Cancara Asset Securitisation LLC
03-16-10 0.20 4,999,083 4,999,083
Elysian Funding LLC
04-19-10 0.55 4,993,125 4,993,125
Grampian Funding LLC
03-10-10 0.22 9,998,228 9,998,228
03-16-10 0.22 4,999,144 4,999,144
Rhein-Main Securitisation
03-15-10 0.30 9,992,583 9,992,583
03-25-10 0.25 10,995,493 10,995,493
Scaldis Capital LLC
03-08-10 0.18 4,999,200 4,999,200
---------------
Total 65,976,274
- -------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (12.3%)
Australia and New Zealand Bank Group
04-26-10 0.30 5,000,000 5,000,000
04-27-10 0.29 10,000,000 10,000,000
05-04-10 0.31 10,000,000 10,000,000
05-24-10 0.31 5,000,000 5,000,000
Banco Bilbao Viz Argentaria, London
03-01-10 0.26 5,002,538 5,002,538
Banco Popular Caisse d'Epargne
04-08-10 0.28 5,000,000 5,000,000
Banco Popular Espanol
03-29-10 0.30 19,993,169 19,993,169
03-29-10 0.37 7,495,455 7,495,455
Banco Santander Central Hispano
03-01-10 0.20 15,000,000 15,000,000
03-05-10 0.20 5,000,000 5,000,000
05-05-10 0.30 10,000,000 10,000,000
Bank of Austria
03-04-10 0.24 24,995,334 24,995,334
Bank of Nova Scotia Seoul
05-06-10 0.30 10,000,000 10,000,000
Banque Federative du Credit Mutuel
04-19-10 0.35 4,995,691 4,995,691
05-18-10 0.32 4,996,048 4,996,048
BNP Paribas
03-05-10 0.25 10,000,000 10,000,000
03-16-10 0.25 10,000,000 10,000,000
Caisse des Depots
03-01-10 0.28 14,989,507 14,989,507
03-22-10 0.25 4,996,946 4,996,946
05-19-10 0.24 4,997,035 4,997,035
Caixa Geral de Deposit
04-27-10 0.29 7,994,204 7,994,204
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 31
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
CERTIFICATES OF DEPOSIT (CONT.)
Clydesdale Bank
04-06-10 0.26% $15,000,000 $15,000,000
04-08-10 0.25 5,000,000 5,000,000
Commerzbank
03-01-10 0.20 14,997,667 14,997,667
Credit Agricole
03-01-10 0.15 15,000,000 15,000,000
Credit Industrial et Commercial
04-07-10 0.38 5,000,031 5,000,031
04-13-10 0.34 5,000,000 5,000,000
05-10-10 0.35 10,000,000 10,000,000
CSFB Seoul
05-17-10 0.35 10,000,000 10,000,000
Den Danske Bank
03-01-10 0.20 15,000,000 15,000,000
Dexia Credit Local
03-08-10 0.27 4,998,950 4,998,950
03-12-10 0.28 20,000,000 20,000,000
03-22-10 0.30 10,000,000 10,000,000
DZ Bank
03-01-10 0.22 29,994,868 29,994,868
Jyske Bank
03-10-10 0.44 9,989,012 9,989,012
KBC Bank
03-04-10 0.21 10,000,000 10,000,000
Mitsubishi UFJ Trust and Banking
03-03-10 0.23 8,498,480 8,498,480
Natixis
04-01-10 0.25 10,000,000 10,000,000
04-08-10 0.26 6,997,018 6,997,018
04-26-10 0.24 5,000,000 5,000,000
Nederlandse Waterschapsbank
03-01-10 0.30 19,985,011 19,985,011
Norinchukin Bank
04-08-10 0.25 15,000,000 15,000,000
04-19-10 0.27 10,000,000 10,000,000
NyKredit Bank
03-22-10 0.44 10,000,000 10,000,000
03-29-10 0.43 10,000,000 10,000,000
Pohjola Bank
03-15-10 0.38 9,990,634 9,990,634
San Paolo IMI Bank Ireland
03-08-10 0.20 24,996,112 24,996,112
Societe Generale
03-05-10 0.25 5,000,000 5,000,000
Sumitomo Mitsui Banking
05-04-10 0.27 5,000,000 5,000,000
05-12-10 0.27 5,000,000 5,000,000
05-19-10 0.27 10,000,000 10,000,000
Unicredito Italiano
05-03-10 0.28 10,000,000 10,000,000
---------------
Total 540,903,710
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.2%)(s)
Barclays Capital
dated 02-26-10, matures 03-01-10
repurchase price
$7,722,173 0.11 7,722,102 7,722,102
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL
RECEIVED FOR SECURITIES ON LOAN
(Cost: $614,602,086) 614,602,086
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $5,866,243,807)(y) $5,962,334,983
=====================================================================================
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
32 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
INVESTMENTS IN DERIVATIVES
FUTURES CONTRACTS OUTSTANDING AT FEB. 28, 2010
<Table>
<Caption>
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION
CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
- -------------------------------------------------------------------------------------
U.S. Treasury Note, 2-
year (611) $(133,455,769) April 2010 $(354,148)
U.S. Treasury Note, 5-
year (855) (100,075,082) April 2010 (759,955)
U.S. Treasury Ultra
Bond, 30-year 698 85,897,625 June 2010 902,532
- -------------------------------------------------------------------------------------
Total $(211,571)
- -------------------------------------------------------------------------------------
</Table>
OPEN OPTIONS CONTRACTS WRITTEN AT FEB. 28, 2010
<Table>
<Caption>
NUMBER OF EXERCISE PREMIUM EXPIRATION
ISSUER PUTS/CALLS CONTRACTS PRICE RECEIVED DATE VALUE(A)
- -----------------------------------------------------------------------------------------
Federal Natl Mtge
Assn Call 122,775,000 $106.06 $440,762 May 2010 $440,762
- -----------------------------------------------------------------------------------------
Total $440,762
- -----------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INTEREST RATE SWAPTIONS
FLO-
ATI-
NG
COUN- RATE FUND FIXED
TERP- IND- PAY/RECEIVE EXERCISE EXPIRATION NOTIONAL PREMIUM
DESCRIPTION ARTY EX FLOATING RATE RATE DATE AMOUNT RECEIVED VALUE(A)
- ----------------------------------------------------------------------------------------------------------
Put -- OTC 10- JPMo- 3- Receive 4.76% Nov. 15, 2012 $80,000,000 $5,252,000 $4,921,326
Year Interest rgan Mon-
Rate Swap Chas- th
e, USD
N.A. LIB-
OR
- ----------------------------------------------------------------------------------------------------------
Call -- OTC 10- JPMo- 3- Pay 4.76 Nov. 15, 2012 80,000,000 5,252,000 4,491,486
Year Interest rgan Mon-
Rate Swap Chas- th
e, USD
N.A. LIB-
OR
- ----------------------------------------------------------------------------------------------------------
</Table>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT FEB. 28, 2010
<Table>
<Caption>
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------
March 24, 2010 27,208,000 26,082,513 $225,458 $--
Canadian Dollar U.S. Dollar
- --------------------------------------------------------------------------------------------
March 24, 2010 12,816,000 17,558,561 109,245 --
European Monetary Unit U.S. Dollar
- --------------------------------------------------------------------------------------------
March 24, 2010 3,967,409,000 43,954,685 -- (714,325)
Japanese Yen U.S. Dollar
- --------------------------------------------------------------------------------------------
March 24, 2010 43,429,985 48,444,000 -- (135,581)
U.S. Dollar Australian Dollar
- --------------------------------------------------------------------------------------------
March 24, 2010 17,617,325 11,241,000 -- (477,331)
U.S. Dollar British Pound
- --------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 33
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT FEB. 28, 2010
(CONTINUED)
<Table>
<Caption>
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------
March 24, 2010 26,258,011 154,468,000 $-- $(146,015)
U.S. Dollar Norwegian Krone
- --------------------------------------------------------------------------------------------
Total $334,703 $(1,473,252)
- --------------------------------------------------------------------------------------------
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(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 Feb. 28, 2010, the value of foreign securities, excluding short-
term securities, represented 5.55% 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
may be determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Feb. 28,
2010, the value of these securities amounted to $620,191,338 or 14.10% of
net assets.
(e) This is a variable rate security that entitles holders to receive only
interest payments. Interest is paid annually. The interest payment is based
on the Gross Domestic Product (GDP) level of the previous year for the
respective country. To the extent that the previous year's GDP exceeds the
'base case GDP', an interest payment is made equal to 0.012225 of the
difference.
(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 Feb. 28, 2010, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$921,696,888. See Note 2 to the financial statements.
(h) The following abbreviations are used in the portfolio security descriptions
to identify the insurer of the issue:
<Table>
AGM -- Assured Guaranty Municipal Corporation
AMBAC -- Ambac Assurance Corporation
FGIC -- Financial Guaranty Insurance Company
NPFGC -- National Public Finance Guarantee Corporation
XLCA -- XL Capital Assurance
</Table>
- --------------------------------------------------------------------------------
34 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(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 security 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. The interest rate disclosed represents yield based
upon the estimated timing and amount of future cash flows at Feb. 28, 2010.
(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 Feb. 28, 2010.
(k) Identifies issues considered to be illiquid as to their marketability (see
Note 2 to the financial statements). The aggregate value of such securities
at Feb. 28, 2010 was $4,521,214, representing 0.10% of net assets.
Information concerning such security holdings at Feb. 28, 2010 is as
follows:
<Table>
<Caption>
ACQUISITION
SECURITY DATES COST
---------------------------------------------------------------------------
United Artists Theatre Circuit
Pass-Through Ctfs
9.30% 2015 02-23-96 thru 08-12-96 $4,235,035
</Table>
(l) Senior loans have rates of interest that float periodically based primarily
on the London Interbank Offered Rate ("LIBOR") and other short-term rates.
Remaining maturities of senior loans may be less than the stated maturities
shown as a result of contractual or optional prepayments by the borrower.
Such prepayments cannot be predicted with certainty.
(m) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Feb. 28,
2010.
(n) 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.
(o) This position is in bankruptcy.
(p) Represents comparable securities held to satisfy future delivery
requirements of the following open forward sale commitments at Feb. 28,
2010:
<Table>
<Caption>
PRINCIPAL SETTLEMENT PROCEEDS
SECURITY AMOUNT DATE RECEIVABLE VALUE
---------------------------------------------------------------------------
Federal Natl Mtge
Assn
03-01-25 5.50% $10,000,000 03-16-10 $10,657,812 $10,654,690
03-01-40 5.50 72,000,000 03-11-10 75,751,875 75,825,000
</Table>
(q) Affiliated Money Market Fund -- See Note 9 to the financial statements. The
rate shown is the seven-day current annualized yield at Feb. 28, 2010.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 35
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(r) Represents a senior loan purchased on a when-issued or delayed-delivery
basis. Certain details associated with this purchase are not known prior to
the settlement date of the transaction. In addition, senior loans typically
trade without accrued interest and therefore a weighted average coupon rate
is not available prior to settlement. At settlement, if still unknown, the
borrower or counterparty will provide the Fund with the final weighted
average coupon rate and maturity date.
(s) The table below represents securities received as collateral subject to
repurchase agreements. This collateral, which is generally high quality
short-term obligations, is deposited with the Fund's custodian and,
pursuant to the terms of the repurchase agreement, must have an aggregate
market value greater than or equal to the repurchase price plus accrued
interest at all times. On a daily basis, the market value of securities
held as collateral for repurchase agreements is monitored to ensure the
existence of the proper level of collateral.
<Table>
<Caption>
BARCLAYS CAPITAL (0.11%)
SECURITY DESCRIPTION VALUE(a)
- ------------------------------------------------------------
Fannie Mae Discount Notes $1,928,595
Federal Farm Credit Bank 753,200
Federal Home Loan Mortgage Corp 3,336,922
Federal National Mortgage Association 1,857,836
- ------------------------------------------------------------
Total market value of collateral securities $7,876,553
- ------------------------------------------------------------
</Table>
(t) At Feb. 28, 2010, security was partially or fully on loan. See Note 7 to
the financial statements.
(u) At Feb. 28, 2010, investments in securities included securities valued at
$6,096,938 that were partially pledged as collateral to cover initial
margin deposits on open interest rate futures contracts.
(v) At Feb. 28, 2010, securities valued at $440,762 were held to cover open
call options written. See Note 3 to the financial statements.
(w) Pay-in-kind securities are securities in which the issuer makes interest or
dividend payments in cash or in additional securities. The securities
usually have the same terms as the original holdings.
(x) Negligible market value.
(y) At Feb. 28, 2010, the cost of securities for federal income tax purposes
was approximately $5,866,244,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $149,642,000
Unrealized depreciation (53,551,000)
-----------------------------------------------------------
Net unrealized appreciation $96,091,000
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
36 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date.
Valuation adjustments are not applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as Level 3 investments due to lack
of market transparency and corroboration to support these quoted prices.
Additionally, valuation models may be used as the pricing source for any
remaining investments classified as Level 3. These models rely on one or more
significant unobservable inputs and/or significant assumptions by the Fund
Administrator. Inputs used in a valuation model
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 37
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
may include, but are not limited to, financial statement analysis, discount
rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2010:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2010
--------------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- -----------------------------------------------------------------------------------------------
Bonds
Foreign Government
Obligations &
Agencies $-- $68,577,757 $-- $68,577,757
U.S. Government
Obligations &
Agencies 300,760,196 513,174,692 -- 813,934,888
Asset-Backed
Securities -- 470,285,767 1,557,975 471,843,742
Commercial Mortgage-
Backed Securities -- 370,440,606 -- 370,440,606
Residential Mortgage-
Backed Securities -- 1,556,451,219 85,968,028 1,642,419,247
Corporate Debt
Securities
Entertainment -- -- 4,521,214 4,521,214
All other
Industries(a) -- 1,510,892,017 -- 1,510,892,017
- -----------------------------------------------------------------------------------------------
Total Bonds 300,760,196 4,489,822,058 92,047,217 4,882,629,471
- -----------------------------------------------------------------------------------------------
Other
Senior Loans -- 48,153,219 -- 48,153,219
Affiliated Money
Market Fund(b) 416,950,207 -- -- 416,950,207
Investments of Cash
Collateral Received
for Securities on
Loan(c) -- 614,602,086 -- 614,602,086
- -----------------------------------------------------------------------------------------------
Total Other 416,950,207 662,755,305 -- 1,079,705,512
- -----------------------------------------------------------------------------------------------
Investments in
Securities 717,710,403 5,152,577,363 92,047,217 5,962,334,983
Other Financial
Instruments(d) (211,571) 8,715,025 -- 8,503,454
- -----------------------------------------------------------------------------------------------
Total $717,498,832 $5,161,292,388 $92,047,217 $5,970,838,437
- -----------------------------------------------------------------------------------------------
</Table>
(a) Industry classifications are identified in the Portfolio of Investments.
(b) Money market fund that is a sweep investment for cash balances in the Fund
at Feb. 28, 2010.
(c) Asset categories for Investments of Cash Collateral are identified in the
Portfolio of Investments.
(d) Other Financial Instruments are derivative instruments, which are valued at
the unrealized appreciation (depreciation) on the instrument. Derivative
descriptions are located in the Investments in Derivatives section of the
Portfolio of Investments.
- --------------------------------------------------------------------------------
38 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
The following table is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value.
<Table>
<Caption>
RESIDENTIAL
ASSET- MORTGAGE- CORPORATE
COMMON BACKED BACKED DEBT
STOCKS SECURITIES SECURITIES SECURITIES TOTAL
- ------------------------------------------------------------------------------------------------
Balance as of Aug. 31, 2009 $7 $24,504,189 $36,754,571 $4,779,457 $66,038,224
Accrued
discounts/premiums -- (174,496) 514,170 9,194 348,868
Realized gain (loss) -- 980,821 626,550 1,092 1,608,463
Change in unrealized
appreciation
(depreciation)* (7) (375,349) 3,970,994 22,815 3,618,453
Net purchases (sales) -- (16,753,939) 50,526,578 (291,344) 33,481,295
Transfers in and/or out
of Level 3 -- (6,623,251) (6,424,835) -- (13,048,086)
- ------------------------------------------------------------------------------------------------
Balance as of Feb. 28, 2010 $-- $1,557,975 $85,968,028 $4,521,214 $92,047,217
- ------------------------------------------------------------------------------------------------
</Table>
* Change in unrealized appreciation (depreciation) relating to securities held
at Feb. 28, 2010 was $3,039,763, which is comprised of Asset-Backed
Securities of $103,533, Residential Mortgage-Backed Securities of $2,913,415
and Corporate Debt Securities of $22,815.
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1(800) SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 39
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
FEB. 28, 2010 (UNAUDITED)
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $4,834,691,514) $4,930,782,690
Affiliated money market fund (identified cost $416,950,207) 416,950,207
Investments of cash collateral received for securities on loan
(identified cost $614,602,086) 614,602,086
- ----------------------------------------------------------------------------------------
Total investments in securities (identified cost $5,866,243,807) 5,962,334,983
Foreign currency holdings (identified cost $1,359,293) 1,370,167
Capital shares receivable 14,735,829
Dividends and accrued interest receivable 34,550,607
Receivable for investment securities sold 1,066,407,254
Variation margin receivable on futures contracts 344,587
Unrealized appreciation on forward foreign currency contracts 334,703
- ----------------------------------------------------------------------------------------
Total assets 7,080,078,130
- ----------------------------------------------------------------------------------------
LIABILITIES
Options contracts written, at value (premiums received $10,944,762) 9,853,574
Forward sale commitments, at value (proceeds receivable $86,409,687) 86,479,690
Disbursements in excess of cash 515,625
Dividends payable to shareholders 2,682,247
Capital shares payable 13,414,601
Payable for investment securities purchased 1,031,019,556
Payable for securities purchased on a forward-commitment basis 921,696,888
Payable upon return of securities loaned 614,602,086
Unrealized depreciation on forward foreign currency contracts 1,473,252
Accrued investment management services fees 52,839
Accrued distribution fees 682,772
Accrued transfer agency fees 14,089
Accrued administrative services fees 7,043
Accrued plan administration services fees 13,127
Other accrued expenses 326,183
- ----------------------------------------------------------------------------------------
Total liabilities 2,682,833,572
- ----------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $4,397,244,558
- ----------------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 9,022,294
Additional paid-in capital 4,458,065,592
Excess of distributions over net investment income (2,947,736)
Accumulated net realized gain (loss) (162,673,654)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 95,778,062
- ----------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $4,397,244,558
- ----------------------------------------------------------------------------------------
*Value of securities on loan $ 657,293,304
- ----------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
40 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $2,828,505,925 580,527,618 $4.87(1)
Class B $ 178,322,927 36,602,962 $4.87
Class C $ 58,653,535 12,035,814 $4.87
Class I $ 890,173,844 182,452,805 $4.88
Class R2 $ 304,076 62,315 $4.88
Class R3 $ 10,168 2,085 $4.88
Class R4 $ 66,988,009 13,764,691 $4.87
Class R5 $ 225,751 46,403 $4.87
Class W $ 374,060,323 76,734,696 $4.87
- --------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $5.11. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 4.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 41
STATEMENT OF OPERATIONS --------------------------------------------------------
SIX MONTHS ENDED FEB. 28, 2010 (UNAUDITED)
<Table>
<Caption>
INVESTMENT INCOME
Income:
Interest $ 88,224,602
Income distributions from affiliated money market fund 340,929
Income from securities lending -- net 662,595
Less foreign taxes withheld (32,438)
- -------------------------------------------------------------------------------
Total income 89,195,688
- -------------------------------------------------------------------------------
Expenses:
Investment management services fees 9,153,911
Distribution fees
Class A 3,222,414
Class B 913,119
Class C 279,452
Class R2 679
Class R3 12
Class W 549,070
Transfer agency fees
Class A 1,825,731
Class B 139,713
Class C 40,662
Class R2 68
Class R3 2
Class R4 16,730
Class R5 66
Class W 439,256
Administrative services fees 1,223,200
Plan administration services fees
Class R2 340
Class R3 12
Class R4 83,649
Compensation of board members 65,282
Custodian fees 66,740
Printing and postage 133,800
Registration fees 91,450
Professional fees 21,979
Other 150,267
- -------------------------------------------------------------------------------
Total expenses 18,417,604
Expenses waived/reimbursed by the Investment Manager and its
affiliates (1,169,459)
- -------------------------------------------------------------------------------
Total net expenses 17,248,145
- -------------------------------------------------------------------------------
Investment income (loss) -- net 71,947,543
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
42 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $107,313,383
Foreign currency transactions 1,708,039
Futures contracts (3,279,968)
Options contracts written 302,623
Swap transactions 4,054
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments 106,048,131
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies (2,992,502)
- -------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 103,055,629
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $175,003,172
- -------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 43
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 71,947,543 $ 155,151,616
Net realized gain (loss) on investments 106,048,131 (168,476,255)
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities in
foreign currencies (2,992,502) 266,074,461
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 175,003,172 252,749,822
- ---------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (43,918,119) (90,380,371)
Class B (2,428,739) (9,169,639)
Class C (745,016) (1,472,729)
Class I (15,762,440) (31,440,870)
Class R2 (4,039) (1,352)
Class R3 (158) (427)
Class R4 (1,159,804) (3,205,438)
Class R5 (4,982) (1,163)
Class W (7,324,635) (26,235,706)
- ---------------------------------------------------------------------------------------------------
Total distributions (71,347,932) (161,907,695)
- ---------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
44 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009
(UNAUDITED)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 591,977,244 $ 798,738,888
Class B shares 13,426,820 69,159,291
Class C shares 10,241,371 25,116,806
Class I shares 125,650,046 283,744,737
Class R2 shares 73,503 121,281
Class R3 shares 91 --
Class R4 shares 11,580,813 26,687,126
Class R5 shares 20,999 --
Class W shares 26,458,779 198,551,036
Fund merger (Note 10)
Class A shares -- 5,580,981
Class B shares -- 1,349,679
Class C shares -- 3,053,759
Class R2 shares -- 152,202
Class R5 shares -- 285,712
Reinvestment of distributions at net asset value
Class A shares 38,523,933 75,554,842
Class B shares 2,222,890 8,300,291
Class C shares 611,828 1,237,207
Class I shares 15,739,059 31,051,811
Class R2 shares 3,395 512
Class R4 shares 1,167,436 3,175,416
Class R5 shares 4,746 --
Class W shares 7,473,965 26,019,994
Conversions from Class B to Class A
Class A shares 215,786 56,523,003
Class B shares (215,786) (56,523,003)
Payments for redemptions
Class A shares (268,331,594) (515,636,632)
Class B shares (33,221,132) (89,958,627)
Class C shares (6,234,342) (10,142,901)
Class I shares (59,070,560) (237,020,240)
Class R2 shares (67,693) --
Class R4 shares (20,083,871) (33,900,640)
Class R5 shares (103,650) --
Class W shares (250,182,093) (306,545,978)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 207,881,983 364,676,553
- ---------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 311,537,223 455,518,680
Net assets at beginning of period 4,085,707,335 3,630,188,655
- ---------------------------------------------------------------------------------------------------
Net assets at end of period $4,397,244,558 $4,085,707,335
- ---------------------------------------------------------------------------------------------------
Excess of distributions over net investment income $ (2,947,736) $ (3,547,347)
- ---------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 45
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
The following tables are intended to help you understand the Fund's financial
performance. Certain information reflects financial results for a single share
of a class held for the periods shown. For periods ended 2007 and after, per
share net investment income (loss) amounts are calculated based on average
shares outstanding during the period. Total returns assume reinvestment of all
dividends and distributions. Total returns do not reflect payment of sales
charges, if any, and are not annualized for periods of less than one year.
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS A FEB. 28, 2010 ------------------------------------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005
Net asset value, beginning of period $4.75 $4.65 $4.81 $4.77 $4.89 $4.87
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .20 .22 .21 .19 .18
Net gains (losses) (both realized and
unrealized) .12 .11 (.17) .05 (.11) .03
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .20 .31 .05 .26 .08 .21
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.21) (.21) (.21) (.20) (.19)
Tax return of capital -- -- -- (.01) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.21) (.21) (.22) (.20) (.19)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.87 $4.75 $4.65 $4.81 $4.77 $4.89
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.25% 7.05% .93% 5.54% 1.64% 4.38%
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement .92%(b) .94% .95% .97% .99% 1.02%
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) .85%(b) .83% .89% .89% .89% .94%
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.44%(b) 4.44% 4.68% 4.43% 4.09% 3.67%
- -------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $2,829 $2,403 $1,920 $1,937 $2,013 $1,774
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295% 281% 300%
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS B FEB. 28, 2010 -------------------------------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005
Net asset value, beginning of period $4.75 $4.65 $4.81 $4.77 $4.89 $4.88
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06 .17 .19 .18 .16 .15
Net gains (losses) (both realized and
unrealized) .12 .10 (.18) .04 (.12) .01
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .18 .27 .01 .22 .04 .16
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.17) (.17) (.18) (.16) (.15)
Tax return of capital -- -- -- (.00)(e) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) (.17) (.17) (.18) (.16) (.15)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.87 $4.75 $4.65 $4.81 $4.77 $4.89
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.87% 6.24% .16% 4.74% .88% 3.39%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement 1.68%(b) 1.70% 1.71% 1.73% 1.76% 1.78%
- --------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) 1.61%(b) 1.59% 1.65% 1.65% 1.65% 1.70%
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.69%(b) 3.71% 3.91% 3.66% 3.31% 2.92%
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $178 $191 $254 $304 $402 $484
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 47
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS C FEB. 28, 2010 -------------------------------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005
Net asset value, beginning of period $4.75 $4.65 $4.81 $4.77 $4.90 $4.88
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06 .17 .19 .18 .16 .15
Net gains (losses) (both realized and
unrealized) .12 .10 (.18) .04 (.13) .02
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .18 .27 .01 .22 .03 .17
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.17) (.17) (.18) (.16) (.15)
Tax return of capital -- -- -- (.00)(e) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) (.17) (.17) (.18) (.16) (.15)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.87 $4.75 $4.65 $4.81 $4.77 $4.90
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.87% 6.25% .16% 4.73% .66% 3.60%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement 1.67%(b) 1.69% 1.70% 1.73% 1.76% 1.79%
- --------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) 1.60%(b) 1.58% 1.65% 1.65% 1.66% 1.70%
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.70%(b) 3.68% 3.93% 3.67% 3.31% 2.93%
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $59 $53 $32 $17 $17 $18
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
48 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS I FEB. 28, 2010 -------------------------------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005
Net asset value, beginning of period $4.76 $4.65 $4.82 $4.78 $4.89 $4.88
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .22 .24 .23 .21 .20
Net gains (losses) (both realized and
unrealized) .12 .11 (.18) .04 (.11) .02
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .21 .33 .06 .27 .10 .22
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.22) (.23) (.22) (.21) (.21)
Tax return of capital -- -- -- (.01) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.22) (.23) (.23) (.21) (.21)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.88 $4.76 $4.65 $4.82 $4.78 $4.89
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.43% 7.67% 1.07% 5.90% 2.19% 4.53%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement .53%(b) .54% .55% .56% .55% .60%
- --------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) .49%(b) .47% .53% .54% .54% .60%
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.81%(b) 4.80% 5.09% 4.80% 4.59% 4.01%
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $890 $787 $693 $386 $276 $--
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 49
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS R2 FEB. 28, 2010 -----------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007(f)
Net asset value, beginning of period $4.76 $4.65 $4.80 $4.81
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .17 .21 .14
Net gains (losses) (both realized
and unrealized) .12 .13 (.16) (.02)
- ------------------------------------------------------------------------------------------------------
Total from investment operations .19 .30 .05 .12
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.19) (.20) (.13)
Tax return of capital -- -- -- (.00)(e)
- ------------------------------------------------------------------------------------------------------
Total distributions (.07) (.19) (.20) (.13)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.88 $4.76 $4.65 $4.80
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.02% 6.92% .84% 2.70%
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement 1.33%(b) 1.35% 1.34% 1.32%(b)
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) 1.29%(b) 1.21% 1.08% 1.32%(b)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.00%(b) 3.67% 4.53% 4.06%(b)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
50 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS R3 FEB. 28, 2010 -----------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007(f)
Net asset value, beginning of period $4.76 $4.65 $4.80 $4.81
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .20 .23 .15
Net gains (losses) (both realized
and unrealized) .12 .11 (.17) (.02)
- ------------------------------------------------------------------------------------------------------
Total from investment operations .20 .31 .06 .13
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.20) (.21) (.14)
Tax return of capital -- -- -- (.00)(e)
- ------------------------------------------------------------------------------------------------------
Total distributions (.08) (.20) (.21) (.14)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.88 $4.76 $4.65 $4.80
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.15% 7.19% 1.11% 2.90%
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement 1.09%(b) 1.08% 1.08% 1.06%(b)
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) 1.04%(b) .91% .83% 1.06%(b)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.26%(b) 4.40% 4.79% 4.33%(b)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 51
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS R4 FEB. 28, 2010 -------------------------------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005
Net asset value, beginning of period $4.75 $4.64 $4.80 $4.77 $4.89 $4.88
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .20 .23 .22 .20 .19
Net gains (losses) (both realized and
unrealized) .12 .12 (.17) .04 (.12) .02
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .20 .32 .06 .26 .08 .21
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.21) (.22) (.22) (.20) (.20)
Tax return of capital -- -- -- (.01) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.21) (.22) (.23) (.20) (.20)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.87 $4.75 $4.64 $4.80 $4.77 $4.89
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.28% 7.35% 1.03% 5.49% 1.81% 4.34%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement .83%(b) .84% .85% .83% .82% .86%
- --------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) .79%(b) .77% .76% .73% .73% .78%
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.50%(b) 4.53% 4.81% 4.53% 4.24% 3.85%
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $67 $73 $75 $78 $173 $202
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
52 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS R5 FEB. 28, 2010 -----------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007(f)
Net asset value, beginning of period $4.75 $4.64 $4.80 $4.81
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .23 .24 .17
Net gains (losses) (both realized
and unrealized) .12 .10 (.18) (.02)
- ------------------------------------------------------------------------------------------------------
Total from investment operations .21 .33 .06 .15
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.22) (.22) (.16)
Tax return of capital -- -- -- (.00)(e)
- ------------------------------------------------------------------------------------------------------
Total distributions (.09) (.22) (.22) (.16)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.87 $4.75 $4.64 $4.80
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.41% 7.62% 1.22% 3.25%
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement .58%(b) .59% .59% .59%(b)
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) .54%(b) .52% .58% .57%(b)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.75%(b) 5.01% 5.02% 4.81%(b)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 53
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED AUG. 31,
CLASS W FEB. 28, 2010 -----------------------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007(g)
Net asset value, beginning of period $4.75 $4.65 $4.81 $4.82
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .20 .22 .15
Net gains (losses) (both realized
and unrealized) .12 .10 (.17) --
- ------------------------------------------------------------------------------------------------------
Total from investment operations .20 .30 .05 .15
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.20) (.21) (.16)
Tax return of capital -- -- -- (.00)(e)
- ------------------------------------------------------------------------------------------------------
Total distributions (.08) (.20) (.21) (.16)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.87 $4.75 $4.65 $4.81
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.21% 6.95% .82% 2.71%
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a)
Gross expenses prior to expense
waiver/reimbursement .98%(b) .99% .99% .98%(b)
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c) .94%(b) .92% .98% .97%(b)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.36%(b) 4.37% 4.56% 4.32%(b)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $374 $578 $655 $223
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate(d) 249% 371% 226% 295%
- ------------------------------------------------------------------------------------------------------
</Table>
NOTES TO FINANCIAL HIGHLIGHTS
(a) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
reported expense ratios.
(b) Annualized.
(c) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(d) Includes mortgage dollar rolls. If mortgage dollar roll transactions were
excluded, the portfolio turnover would have been 122% for the six months
ended Feb. 28, 2010 and 184% and 122% for the years ended Aug. 31, 2009 and
2008, respectively.
(e) Rounds to zero.
(f) For the period from Dec. 11, 2006 (when shares became publicly available) to
Aug. 31, 2007.
(g) For the period from Dec. 1, 2006 (when shares became publicly available) to
Aug. 31, 2007.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
54 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
(UNAUDITED AS OF FEB. 28, 2010)
1. ORGANIZATION
RiverSource Diversified Bond Fund (the Fund) is a series of RiverSource
Diversified Income Series, Inc. (the Corporation) and is registered under the
Investment Company Act of 1940, as amended (the 1940 Act) as a diversified,
open-end management investment company. The Corporation has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Corporation's Board of Directors (the Board). The
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.
The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class
R4, Class R5 and Class W shares.
- - Class A shares are offered with a front-end sales charge, which may be waived
under certain circumstances.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares one month after the completion of
the eighth year of ownership if originally purchased in a RiverSource fund on
or after May 21, 2005 or originally purchased in a Seligman fund on or after
June 13, 2009. Class B shares originally purchased in a RiverSource fund
prior to May 21, 2005 will convert to Class A shares in the ninth calendar
year of ownership. Class B shares originally purchased in a Seligman fund
prior to June 13, 2009 will convert to Class A shares in the month prior to
the ninth year of ownership.
- - Class C shares may be subject to a CDSC.
- - Class I, Class R2, Class R3, Class R4 and Class R5 shares are offered without
a front-end sales charge or CDSC to qualifying institutional investors.
- - Class W shares are offered without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At Feb. 28, 2010, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager) and affiliated funds-of-funds in the RiverSource Family of
Funds owned 100% of Class I shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 55
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ADOPTION OF NEW ACCOUNTING STANDARD
In June 2009, the Financial Accounting Standards Board (FASB) established the
FASB Accounting Standards Codification(TM) (Codification) as the single source
of authoritative accounting principles recognized by the FASB in the preparation
of financial statements in conformity with U.S. generally accepted accounting
principles (GAAP). The Codification supersedes existing non-grandfathered, non-
SEC accounting and reporting standards. The Codification did not change GAAP
but, rather, organized it into a hierarchy where all guidance within the
Codification carries an equal level of authority. The Codification became
effective for financial statements issued for interim and annual periods ending
after Sept. 15, 2009. The Codification did not have an effect on the Fund's
financial statements.
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of business of the New York Stock
Exchange (NYSE). Securities traded on national securities exchanges or included
in national market systems are valued at the last quoted sales price from the
primary exchange. Debt securities are generally traded in the over-the-counter
market and are valued by an independent pricing service using an evaluated bid.
When market quotes are not readily available, the pricing service, in
determining fair values of debt securities, takes into consideration such
factors as current quotations by broker/dealers, coupon, maturity, quality, type
of issue, trading characteristics, and other yield and risk factors it deems
relevant in determining valuations. Foreign securities are valued based on
quotations from the principal market in which such securities are normally
traded. The procedures adopted by the Board generally contemplate the use of
fair valuation in the event that price quotations or valuations are not readily
available, price quotations or valuations from other sources are not reflective
of market value and thus deemed unreliable, or a significant event has occurred
in relation to a security or class of securities (such as foreign securities)
that is not reflected in price quotations or valuations from other sources. A
fair value price is a good faith estimate of the value of a security at a given
point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on
- --------------------------------------------------------------------------------
56 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the
Investment Manager, as administrator to the Fund, will fair value foreign
securities pursuant to procedures adopted by the Board, including utilizing a
third party pricing service to determine these fair values. These procedures
take into account multiple factors, including movements in the U.S. securities
markets, to determine a good faith estimate that reasonably reflects the current
market conditions as of the close of the NYSE. The fair value of a security is
likely to be different from the quoted or published price, if available. Swap
transactions are valued through an authorized pricing service, broker, or an
internal model.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates. Typically, those maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at amortized cost
using the market value on the 61st day before maturity. Short-term securities
maturing in 60 days or less at acquisition date are valued at amortized cost.
Amortized cost is an approximation of market value. Investments in money market
funds are valued at net asset value.
FOREIGN CURRENCY TRANSLATIONS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Feb. 28, 2010 foreign currency holdings were entirely
comprised of Mexican pesos.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. Generally, securities received as
collateral subject to repurchase agreements are deposited with the Fund's
custodian and, pursuant to the terms of the repurchase agreement, must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. On a daily basis, the market value of securities
held as
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 57
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
collateral for repurchase agreements is monitored to ensure the existence of the
proper level of collateral.
ILLIQUID SECURITIES
At Feb. 28, 2010, investments in securities included issues that are illiquid
which the Fund currently limits to 15% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at Feb. 28, 2010 was
$4,521,214 representing 0.10% of net assets. Certain illiquid securities may be
valued, in good faith, by management at fair value according to procedures
approved by the Board. According to Board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 15%
limitation specified above. Assets are liquid if they can be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the asset is valued by the Fund.
SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS
Delivery and payment for securities that have been purchased by the Fund on a
forward-commitment basis, including when-issued securities and other forward-
commitments, can take place one month or more after the transaction date. During
this period, such securities are subject to market fluctuations, and they may
affect the Fund's net assets the same as owned securities. The Fund designates
cash or liquid securities at least equal to the amount of its forward-
commitments. At Feb. 28, 2010, the Fund has outstanding when-issued securities
of $910,554,342 and other forward-commitments of $11,142,546.
The Fund also enters into transactions to sell purchase commitments to third
parties at current market values and concurrently acquires other purchase
commitments for similar securities at later dates. As an inducement for the Fund
to "roll over" its purchase commitments, the Fund receives negotiated amounts in
the form of reductions of the purchase price of the commitment. The Fund records
the incremental difference between the forward purchase and sale of each forward
roll as realized gain or loss. Losses may arise due to changes in the value of
the securities or if a counterparty does not perform under the terms of the
agreement. If a counterparty files for bankruptcy or becomes insolvent, the
Fund's right to repurchase or sell securities may be limited.
FORWARD SALE COMMITMENTS
The Fund may enter into forward sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of forward sale commitments are not received until the
contractual settlement date. During the time a forward sale commitment is
outstanding, equivalent deliverable securities, or an offsetting forward
purchase
- --------------------------------------------------------------------------------
58 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
commitment deliverable on or before the sale commitment date, are used to
satisfy the commitment.
Unsettled forward sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Valuation of securities" above. The forward sale commitment is "marked-to-
market" daily and the change in market value is recorded by the Fund as an
unrealized gain or loss. If the forward sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund realizes a gain or
loss. If the Fund delivers securities under the commitment, the Fund realizes a
gain or a loss from the sale of the securities based upon the market price
established at the date the commitment was entered into. Forward sale
commitments outstanding at period end are listed in the Notes to Portfolio of
Investments.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of the future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income (which includes net short-term capital gains) to
shareholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all tax returns filed for the last three years.
RECENT ACCOUNTING PRONOUNCEMENT
On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the
amendment), Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements, which provides guidance on how
investment assets and liabilities are to be valued and disclosed. Specifically,
the amendment requires reporting entities to disclose the input and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements for Level 2 or Level 3 positions. The amendment also
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 59
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
requires that transfers between all levels (including Level 1 and Level 2) be
disclosed on a gross basis (i.e., transfers out must be disclosed separately
from transfers in), and the reason(s) for the transfer. Additionally purchases,
sales, issuances and settlements must be disclosed on a gross basis in the Level
3 rollforward. The effective date of the amendment is for interim and annual
periods beginning after Dec. 15, 2009, however, the requirement to provide the
Level 3 activity for purchases, sales, issuances and settlements on a gross
basis will be effective for interim and annual periods beginning after Dec. 15,
2010. At this time the Fund is evaluating the implications of the amendment and
the impact to the financial statements.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared daily and payable monthly, when
available, are reinvested in additional shares of the Fund at net asset value or
payable in cash. Capital gains, when available, are distributed along with the
last income dividend of the calendar year. On Aug. 24, 2009, an additional
dividend was paid before the merger (see Note 10) to ensure that current
shareholders of RiverSource Diversified Bond Fund would not experience a
dilution in their share of the Fund's income or capital gains.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income, if any, is recognized on the ex-dividend date or upon
receipt of ex-dividend notification in the case of certain foreign securities.
Interest income, including amortization of premium, market discount and original
issue discount using the effective interest method, is accrued daily.
3. INVESTMENTS IN DERIVATIVES
The Fund may invest in certain derivative instruments, which are transactions
whose values depend on or are derived from (in whole or in part) the value of
one or more other assets, such as securities, currencies, commodities or
indices. Such derivative instruments may be used to maintain cash reserves while
maintaining exposure to certain other assets, to offset anticipated declines in
values of investments, to facilitate trading, to reduce transaction costs, and
to pursue higher investment returns. The Fund may also use derivative
instruments to mitigate certain investment risks, such as foreign currency
exchange rate risk, interest rate risk, and credit risk. Investments in
derivative instruments may expose the Fund to certain additional risks,
including those detailed below.
FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign currency contracts in connection with
settling purchases or sales of securities, to hedge the currency exposure
- --------------------------------------------------------------------------------
60 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
associated with some or all of the Fund's securities or as part of its
investment strategy. A forward foreign currency contract is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of a forward foreign currency contract fluctuates with changes in
foreign currency exchange rates. Forward foreign currency contracts are marked
to market daily based upon foreign currency exchange rates from an independent
pricing service and the change in value is recorded as unrealized appreciation
or depreciation. The Fund will record a realized gain or loss when the forward
foreign currency contract is closed.
The risks of forward foreign currency contracts include movement in the values
of the foreign currencies relative to the U.S. dollar (or other foreign
currencies) and the possibility that the counterparty will not complete its
contractual obligation, which may be in excess of the amount, reflected in the
Statement of Assets and Liabilities.
FUTURES TRANSACTIONS
The Fund may buy and sell financial futures contracts traded on any U.S. or
foreign exchange to produce incremental earnings, hedge existing positions or
protect against market changes in the value of equities, interest rates or
foreign currencies. The Fund may also buy and write put and call options on
these futures contracts. A futures contract represents a commitment for the
future purchase or sale of an asset at a specified price on a specified date.
Futures and options on futures are valued daily based upon the last sale price
at the close of the market on the principal exchange on which they are traded.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Upon entering into futures contracts, the Fund bears the risk of interest rates,
exchange rates or securities prices moving unexpectedly, in which case, the Fund
may not achieve the anticipated benefits of the futures contracts and may
realize a loss. Additional risks include counterparty credit risk, the
possibility of an illiquid market, and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
OPTION TRANSACTIONS
The Fund may buy and write options traded on any U.S. or foreign exchange, or in
the over-the-counter (OTC) market to produce incremental earnings, protect
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 61
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
gains, and facilitate buying and selling of securities for investments. The Fund
may also buy and sell put and call options and write covered call options on
portfolio securities. Options are contracts which entitle the holder to purchase
or sell securities or other financial instruments at a specified price, or in
the case of index options, to receive or pay the difference between the index
value and the strike price of the index option. Completion of transactions for
options traded in the OTC market depends upon the performance of the other
party. Cash collateral may be collected or posted by the Fund to secure certain
OTC options trades. Cash collateral held or posted by the Fund for such option
trades must be returned to the counterparty or the Fund upon closure, exercise
or expiration of the contract.
Option contracts purchased are recorded as investments and options contracts
written are recorded as liabilities of the Fund. Option contracts are valued
daily at the closing prices on their primary exchanges and unrealized
appreciation or depreciation is recorded. Option contracts, including OTC option
contracts, with no readily available market value are valued using quotations
obtained from independent brokers as of the close of the NYSE. The Fund will
realize a gain or loss when the option transaction expires or is exercised. When
options on debt securities or futures are exercised, the Fund will realize a
gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
The risk in buying an option is that the Fund pays a premium whether or not the
option is exercised. The Fund also has the additional risk of being unable to
enter into a closing transaction if a liquid secondary market does not exist.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The Fund's maximum payout in the case of
written put option contracts represents the maximum potential amount of future
payments (undiscounted) that the Fund could be required to make as a guarantor
for written put options. For OTC options contracts, the transaction is also
subject to counterparty credit risk. The maximum payout amount may be offset by
the subsequent sale, if any, of assets obtained upon the exercise of the put
options by holders of the option contracts or proceeds received upon entering
into the contracts. As of Feb. 28, 2010, the maximum payout amount for written
put options is not readily determinable since any future payments the Fund could
be required to make if the option is exercised are dependent upon future
interest rates which are currently not known.
- --------------------------------------------------------------------------------
62 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAP TRANSACTIONS
The Fund may enter into credit default swap transactions to increase or decrease
its credit exposure to an issuer of debt securities, a specific debt security,
or an index of issuers or debt securities. Additionally, credit default swaps
may be used to hedge the Fund's exposure on a debt security that it owns or in
lieu of selling such debt security.
As the purchaser of a credit default swap contract, the Fund purchases
protection by paying a periodic interest rate on the notional amount to the
counterparty. The interest amount is accrued daily as a component of unrealized
appreciation (depreciation) and is recorded as a realized loss upon payment. If
the credit event specified in the contract occurs, the Fund will be required to
deliver either the reference obligation or an equivalent cash amount to the
protection seller and in exchange, the Fund will receive the notional amount
from the seller. The difference between the value of the obligation delivered
and the notional amount received will be recorded as a realized gain (loss). At
Feb. 28, 2010, the Fund had no outstanding credit default swap contracts in
which the Fund was the purchaser of protection.
As the seller of a credit default swap contract, the Fund sells protection to a
buyer and will generally receive a periodic interest rate on the notional
amount. The interest amount is accrued daily as a component of unrealized
appreciation (depreciation) and is recorded as a realized gain upon receipt of
the payment. If the credit event specified in the contract occurs, the Fund will
receive the reference obligation or an equivalent cash amount in exchange for
the payment of the notional amount to the protection buyer. The difference
between the value of the obligation or cash received and the notional amount
paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of
protection under a credit default swap contract is equal to the notional amount
of the reference obligation. Notional amounts of all credit default swap
contracts outstanding for which the Fund is the seller of protection, if any,
are disclosed in the Credit Default Swap Contracts Outstanding schedule
following the Portfolio of Investments. These potential amounts may be partially
offset by any recovery values of the respective reference obligations or
premiums received upon entering into the agreement.
As a protection seller, the Fund bears the risk of loss from the credit events
specified in the contract. Although specified events are contract specific,
credit events are generally defined as bankruptcy, failure to pay,
restructuring, obligation acceleration, obligation default, or
repudiation/moratorium. For credit default swap contracts on credit indices,
quoted market prices and resulting
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 63
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
market values serve as an indicator of the current status of the
payment/performance risk. Increasing market values, in absolute terms when
compared to the notional amount of the swap, represent a deterioration of the
reference entity's credit soundness and a greater likelihood or risk of default
or other credit event occurring as defined under the terms of the contract.
Market values for credit default swap contracts in which the Fund is the seller
of protection, if any, are disclosed in the Credit Default Swap Contracts
Outstanding schedule following the Portfolio of Investments. At Feb. 28, 2010,
the Fund had no outstanding credit default swap contracts in which the Fund was
the seller of protection.
The notional amounts and market values of credit default swap contracts are not
recorded in the financial statements. Any premium paid or received by the Fund
upon entering into a credit default swap contract is recorded as an asset or
liability and amortized daily as a component of realized gain (loss) in the
Statement of Operations. Credit default swap contracts are valued daily, and the
change in value is recorded as unrealized appreciation (depreciation) until the
termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can involve greater risks than if a fund had
invested in the reference obligation directly since, in addition to general
market risks, credit default swaps are subject to counterparty credit risk,
leverage risk, hedging risk, correlation risk and liquidity risk. The Fund will
enter into credit default swap transactions only with counterparties that meet
certain standards of creditworthiness.
EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS
The following tables are intended to provide additional information about the
effect of derivatives on the financial statements of the Fund including: the
fair value of derivatives by risk category and the location of those fair values
in the Statement of Assets and Liabilities; the impact of derivative
transactions on the Fund's operations over the period including realized gains
or losses and unrealized gains or losses. The derivative schedules following the
Portfolio of Investments present additional information regarding derivative
instruments outstanding at the end of the period, if any.
- --------------------------------------------------------------------------------
64 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT FEB. 28, 2010
<Table>
<Caption>
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------ -------------------------------------
STATEMENT OF STATEMENT OF
ASSETS ASSETS
RISK EXPOSURE AND LIABILITIES AND LIABILITIES
CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE
- -----------------------------------------------------------------------------------------
Foreign exchange Unrealized Unrealized
contracts appreciation on depreciation on
forward foreign forward foreign
currency contracts $334,703 currency contracts $ 1,473,252
- -----------------------------------------------------------------------------------------
Interest rate Net
contracts assets -- unreali-
zed depreciation
N/A N/A on investments 211,571*
- -----------------------------------------------------------------------------------------
Interest rate Options contracts
contracts N/A N/A written, at value 9,853,574
- -----------------------------------------------------------------------------------------
Total $334,703 $11,538,397
- -----------------------------------------------------------------------------------------
</Table>
* Includes cumulative appreciation (depreciation) of futures contracts as
reported in the Futures Contracts Outstanding table following the Portfolio
of Investments. Only the current day's variation margin is reported in
receivables or payables in the Statement of Assets and Liabilities.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED FEB. 28, 2010
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
- -----------------------------------------------------------------------------------
FORWARD
FOREIGN
RISK EXPOSURE CURRENCY
CATEGORY CONTRACTS FUTURES OPTIONS SWAPS TOTAL
- -----------------------------------------------------------------------------
Credit contracts $ -- $ -- $ -- $4,054 $ 4,054
- -----------------------------------------------------------------------------
Foreign exchange
contracts 2,167,069 -- -- -- $ 2,167,069
- -----------------------------------------------------------------------------
Interest rate
contracts -- (3,279,968) 302,623 -- $(2,977,345)
- -----------------------------------------------------------------------------
Total $2,167,069 $(3,279,968) $302,623 $4,054 $ (806,222)
- -----------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 65
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME
- -------------------------------------------------------------------------------------
FORWARD
FOREIGN
RISK EXPOSURE CURRENCY
CATEGORY CONTRACTS FUTURES OPTIONS SWAPS TOTAL
- -------------------------------------------------------------------------------
Credit contracts $ -- $ -- $ -- $(10,722) $ (10,722)
- -------------------------------------------------------------------------------
Foreign exchange
contracts (1,318,542) -- -- -- $(1,318,542)
- -------------------------------------------------------------------------------
Interest rate
contracts -- (1,190,156) 1,091,188 -- $ (98,968)
- -------------------------------------------------------------------------------
Total $(1,318,542) $(1,190,156) $1,091,188 $(10,722) $(1,428,232)
- -------------------------------------------------------------------------------
</Table>
VOLUME OF DERIVATIVES
FORWARD FOREIGN CURRENCY CONTRACTS
The gross notional amount of forward foreign currency contracts was $174.9
million at Feb. 28, 2010. The monthly average gross notional amount for these
contracts was $116.2 million for the six months ended Feb. 28, 2010. The fair
value of these contracts at Feb. 28, 2010 is set forth in the table above.
FUTURES
The gross notional amount of long and short futures contracts was $85.9 million
and $233.5 million, respectively at Feb. 28, 2010. The monthly average gross
notional amounts for long and short contracts were $266.4 million and $267.9
million, respectively, for the six months ended Feb. 28, 2010. The fair value of
such contracts at Feb. 28, 2010 is set forth in the table above.
SWAPS
At Feb. 28, 2010, the Fund had no outstanding swap contracts. The monthly
average gross notional amount for these contracts was $1.7 million for the six
months ended Feb. 28, 2010.
OPTIONS
The gross notional amount of contracts outstanding was $290.3 million at Feb.
28, 2010. The monthly average gross notional amount for contracts was $110.0
million for the six months ended Feb. 28, 2010. The fair value of such contracts
at Feb. 28, 2010 is set forth in the table above.
4. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
- --------------------------------------------------------------------------------
66 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
is an annual fee that is equal to a percentage of the Fund's average daily net
assets that declines from 0.48% to 0.29% as the Fund's net assets increase. The
management fee for the six months ended Feb. 28, 2010 was 0.44% of the Fund's
average daily net assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial
an annual fee for administration and accounting services equal to a percentage
of the Fund's average daily net assets that declines from 0.07% to 0.04% as the
Fund's net assets increase. The fee for the six months ended Feb. 28, 2010 was
0.06% of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the six months ended Feb.
28, 2010, other expenses paid to this company were $17,752.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the Fund under the 1940 Act may defer receipt of their
compensation. Deferred amounts are treated as though equivalent dollar amounts
had been invested in shares of the Fund or other funds in the RiverSource Family
of Funds. The Fund's liability for these amounts is adjusted for market value
changes and remains in the funds until distributed in accordance with the Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains Fund shareholder accounts and records and provides Fund
shareholder services. The Fund pays the Transfer Agent an annual account-based
fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for
Class C for this service. The Transfer Agent also charges an annual fee of $3
per account serviced directly by the Fund or its designated agent for Class A,
Class B and Class C shares. The Fund also pays the Transfer Agent an annual
asset-based fee at a rate of 0.05% of the Fund's average daily net assets
attributable to Class R2, Class R3, Class R4 and Class R5 shares and an annual
asset-based fee at a rate of 0.20% of the Fund's average daily net assets
attributable to Class W shares. The Transfer Agent charges an annual fee of $5
per inactive account, charged on a pro rata basis for the 12 month period from
the date the account becomes inactive. These fees are included in the transfer
agency fees in the Statement of Operations.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 67
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
In connection with the acquisition of the Seligman Core Fixed Income Fund (see
Note 11), the Fund assumed the obligations of the Seligman Core Fixed Income
Fund, which, together with certain other associated investment companies
(together, the Guarantors), has severally, but not jointly, guaranteed the
performance and observance of all terms and conditions of a lease entered into
by Seligman Data Corp. (SDC), the former transfer agent of the Seligman Core
Fixed Income Fund, including the payment of rent by SDC (the Guaranty). The
lease and the Guaranty expire in January 2019. As of Feb. 28, 2010, the Fund's
total potential future obligation over the life of the Guaranty is $27,163. The
Seligman Core Fixed Income Fund expensed $13,717 related to the Guaranty prior
to acquisition by the Fund. This amount is included within other accrued
expenses in the Fund's Statement of Assets and Liabilities.
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R2, Class R3 and Class R4 shares for the provision of
various administrative, recordkeeping, communication and educational services.
DISTRIBUTION FEES
The Fund has an agreement with RiverSource Fund Distributors, Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate of up to 0.25% of the Fund's average daily net assets attributable
to Class A, Class R3 and Class W shares, a fee at an annual rate of up to 0.50%
of the Fund's average daily net assets attributable to Class R2 shares and a fee
at an annual rate of up to 1.00% of the Fund's average daily net assets
attributable to Class B and Class C shares. For Class B and Class C shares, of
the 1.00% fee, up to 0.75% is reimbursed for distribution expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed (unreimbursed expense) was approximately $7,988,000 and $309,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of Jan. 31, 2010, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges, including front-end and CDSCs, received by the Distributor for
distributing Fund shares were $866,070 for Class A, $44,323 for Class B and
$3,069 for Class C for the six months ended Feb. 28, 2010.
- --------------------------------------------------------------------------------
68 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the six months ended Feb. 28, 2010, the Investment Manager and its
affiliates waived/reimbursed certain fees and expenses such that net expenses
(excluding fees and expenses of acquired funds*) were as follows:
<Table>
Class A.............................................. 0.85%
Class B.............................................. 1.61
Class C.............................................. 1.60
Class I.............................................. 0.49
Class R2............................................. 1.29
Class R3............................................. 1.04
Class R4............................................. 0.79
Class R5............................................. 0.54
Class W.............................................. 0.94
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class A........................................... $407,869
Class B........................................... 30,139
Class C........................................... 9,922
</Table>
The management fees waived/reimbursed at the Fund level were $721,529.
The Investment Manager and its affiliates have contractually agreed to waive
certain fees and expenses until Oct. 31, 2010, unless sooner terminated at the
sole discretion of the Board, such that net expenses (excluding fees and
expenses of acquired funds*) will not exceed the following percentage of the
class' average daily net assets:
<Table>
Class A.............................................. 0.85%
Class B.............................................. 1.61
Class C.............................................. 1.60
Class I.............................................. 0.49
Class R2............................................. 1.29
Class R3............................................. 1.04
Class R4............................................. 0.79
Class R5............................................. 0.54
Class W.............................................. 0.94
</Table>
* In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the funds in
which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 69
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations, but including mortgage dollar rolls) aggregated $12,507,457,085 and
$12,143,197,123, respectively, for the six months ended Feb. 28, 2010. Realized
gains and losses are determined on an identified cost basis.
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009
- ----------------------------------------------------------------------
CLASS A
Sold 122,560,694 177,639,922
Fund merger -- 1,176,850
Converted from Class B* 44,593 12,026,422
Reinvested distributions 7,969,385 16,887,199
Redeemed (55,562,179) (115,359,046)
- ----------------------------------------------------------------------
Net increase (decrease) 75,012,493 92,371,347
- ----------------------------------------------------------------------
CLASS B
Sold 2,783,421 15,511,457
Fund merger -- 284,690
Reinvested distributions 459,971 1,862,327
Converted to Class A* (44,593) (12,026,422)
Redeemed (6,882,827) (20,110,399)
- ----------------------------------------------------------------------
Net increase (decrease) (3,684,028) (14,478,347)
- ----------------------------------------------------------------------
CLASS C
Sold 2,124,914 5,598,507
Fund merger -- 643,818
Reinvested distributions 126,479 276,438
Redeemed (1,290,221) (2,261,573)
- ----------------------------------------------------------------------
Net increase (decrease) 961,172 4,257,190
- ----------------------------------------------------------------------
CLASS I
Sold 26,061,125 62,793,894
Reinvested distributions 3,250,642 6,933,962
Redeemed (12,243,748) (53,308,213)
- ----------------------------------------------------------------------
Net increase (decrease) 17,068,019 16,419,643
- ----------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
70 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009
- ----------------------------------------------------------------------
CLASS R2
Sold 15,190 26,201
Fund merger -- 32,051
Reinvested distributions 701 109
Redeemed (14,004) --
- ----------------------------------------------------------------------
Net increase (decrease) 1,887 58,361
- ----------------------------------------------------------------------
CLASS R3
Sold 18 --
- ----------------------------------------------------------------------
Net increase (decrease) 18 --
- ----------------------------------------------------------------------
CLASS R4
Sold 2,403,204 5,947,185
Reinvested distributions 241,736 712,141
Redeemed (4,166,817) (7,634,086)
- ----------------------------------------------------------------------
Net increase (decrease) (1,521,877) (974,760)
- ----------------------------------------------------------------------
CLASS R5
Sold 4,383 --
Fund merger -- 60,341
Reinvested distributions 983 --
Redeemed (21,371) --
- ----------------------------------------------------------------------
Net increase (decrease) (16,005) 60,341
- ----------------------------------------------------------------------
CLASS W
Sold 5,475,054 44,273,622
Reinvested distributions 1,546,353 5,831,507
Redeemed (51,945,073) (69,416,918)
- ----------------------------------------------------------------------
Net increase (decrease) (44,923,666) (19,311,789)
- ----------------------------------------------------------------------
</Table>
* Automatic conversion of Class B shares to Class A shares based on the
original purchase date.
7. LENDING OF PORTFOLIO SECURITIES
The Fund has entered into a Master Securities Lending Agreement (the Agreement)
with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement
authorizes JPMorgan as lending agent to lend securities to authorized borrowers
in order to generate additional income on behalf of the Fund. Pursuant to the
Agreement, the securities loaned are secured by cash or U.S. government
securities equal to at least 100% of the market value of the loaned securities.
Any additional collateral required to maintain those levels due to market
fluctuations of the loaned securities is delivered the following business day.
Cash collateral received is invested by the lending agent on behalf of the Fund
into
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 71
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
authorized investments pursuant to the Agreement. The investments made with the
cash collateral are listed in the Portfolio of Investments. The values of such
investments and any uninvested cash collateral balance are disclosed in the
Statement of Assets and Liabilities along with the related obligation to return
the collateral upon the return of the securities loaned. At Feb. 28, 2010,
securities valued at $657,293,304 were on loan, secured by U.S. government
securities valued at $59,370,217 and by cash collateral of $614,602,086 invested
in short-term securities or in cash equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Income of
$662,595 earned from securities lending for the six months ended Feb. 28, 2010
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
8. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written during the six
months ended Feb. 28, 2010, are as follows:
<Table>
<Caption>
CALLS PUTS
----------------------- ----------------------
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- --------------------------------------------------------------------------
Balance Aug. 31, 2009 -- $ -- -- $ --
Opened 202,775,600 5,888,236 80,001,019 5,588,774
Closed (600) (195,474) (1,019) (336,774)
- --------------------------------------------------------------------------
Balance Feb. 28, 2010 202,775,000 $5,692,762 80,000,000 $5,252,000
- --------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
72 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
9. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the funds in the
RiverSource Family of Funds and other institutional clients of RiverSource
Investments. The cost of the Fund's purchases and proceeds from sales of shares
of RiverSource Short-Term Cash Fund aggregated $1,692,289,083 and
$2,047,352,891, respectively, for the six months ended Feb. 28, 2010. The income
distributions received with respect to the Fund's investment in RiverSource
Short-Term Cash Fund can be found in the Statement of Operations and the Fund's
invested balance in RiverSource Short-Term Cash Fund at Feb. 28, 2010, can be
found in the Portfolio of Investments.
10. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on Oct.
15, 2009, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other funds in the
RiverSource Family of Funds, severally and not jointly, permits collective
borrowings up to $300 million. The borrowers shall have the right, upon written
notice to the Administrative Agent to request an increase of up to $200 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $500 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each Fund based on
its borrowings at a rate equal to the sum of the federal funds rate plus (i)
1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the
amount of such excess. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.10% per annum, in addition to an upfront fee equal to its pro rata share of
0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit
facility agreement, which was a collective agreement between the Fund and
certain other funds in the RiverSource Family of Funds, severally and not
jointly, permitted collective borrowings up to $475 million. Interest was
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.75%. The Fund also paid a commitment fee equal to its pro rata
share of the amount of the credit facility at a rate of 0.06% per annum, in
addition to an upfront fee equal to its
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 73
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
pro rata share of 0.02% of the amount of the credit facility. The Fund had no
borrowings during the six months ended Feb. 28, 2010.
11. FUND MERGERS
At the close of business on Aug. 28, 2009, RiverSource Diversified Bond Fund
acquired the assets and assumed the identified liabilities of Seligman Core
Fixed Income Fund. The reorganization was completed after shareholders approved
the plan on June 2, 2009.
The aggregate net assets of RiverSource Diversified Bond Fund immediately before
the acquisition were $4,064,386,305 and the combined net assets immediately
after the acquisition were $4,074,808,638.
The merger was accomplished by a tax-free exchange of 1,510,167 shares of
Seligman Core Fixed Income Fund valued at $10,422,333.
In exchange for the Seligman Core Fixed Income Fund shares and net assets,
RiverSource Diversified Bond Fund issued the following number of shares:
<Table>
<Caption>
SHARES
- -------------------------------------------------------------
Class A........................................... 1,176,850
Class B........................................... 284,690
Class C........................................... 643,818
Class R2*......................................... 32,051
Class R5*......................................... 60,341
</Table>
* Effective Aug. 29, 2009, Class R and Class I shares were redesignated as
Class R2 and Class R5 shares, respectively.
The components of Seligman Core Fixed Income Fund's net assets after adjustments
for any permanent book-to-tax differences at the merger date were as follows:
<Table>
<Caption>
EXCESS OF
DISTRIBUTIONS
ACCUMULATED OVER NET
TOTAL CAPITAL UNREALIZED NET INVESTMENT
NET ASSETS STOCK DEPRECIATION REALIZED LOSS INCOME
- -------------------------------------------------------------------------------------------
Seligman Core Fixed
Income Fund........ $10,422,333 $12,500,877 $(451,697) $(1,618,941) $(7,906)
</Table>
12. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures and options
contracts, foreign currency contracts, recognition of unrealized appreciation
- --------------------------------------------------------------------------------
74 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
(depreciation) for certain derivative investments, post-October losses, market
discount and losses deferred due to wash sales. The character of distributions
made during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains (losses)
were recorded by the Fund.
For federal income tax purposes, the Fund had a capital loss carry-over of
$72,303,513 at Aug. 31, 2009 that if not offset by capital gains will expire as
follows:
<Table>
<Caption>
2010 2012 2013 2014 2017
$49,658,521 $5,227,159 $3,354,885 $10,357,129 $3,705,819
</Table>
Because the measurement periods for a regulated investment company's income are
different for excise tax purposes versus income tax purposes, special rules are
in place to protect the amount of earnings and profits needed to support excise
tax distributions. As a result, the Fund is permitted to treat net capital
losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss)
as occurring on the first day of the following tax year. At Aug. 31, 2009, the
Fund had a post-October loss of $176,242,993 that is treated for income tax
purposes as occurring on Sept. 1, 2009.
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires. There is no assurance that the Fund will be able to utilize all of its
capital loss carry-over before it expires.
13. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statement of Assets and Liabilities
through the date of issuance of the Fund's financial statements. There were no
events or transactions that occurred during the period that materially impacted
the amounts or disclosures in the Fund's financial statements.
14. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc. was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company (now known as
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 75
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
RiverSource) mutual funds and they purport to bring the action derivatively on
behalf of those funds under the Investment Company Act of 1940. The plaintiffs
allege that fees allegedly paid to the defendants by the funds for investment
advisory and administrative services are excessive. The plaintiffs seek remedies
including restitution and rescission of investment advisory and distribution
agreements. The plaintiffs voluntarily agreed to transfer this case to the
United States District Court for the District of Minnesota (the District Court).
In response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court,
asking the U.S. Supreme Court to stay the District Court proceedings while the
U.S. Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise
Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In
late 2003, Seligman conducted an extensive internal review concerning mutual
fund trading practices. Seligman's review, which covered the period 2001-2003,
noted one arrangement that permitted frequent trading in
- --------------------------------------------------------------------------------
76 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
certain open-end registered investment companies managed by Seligman (the
Seligman Funds); this arrangement was in the process of being closed down by
Seligman before September 2003. Seligman identified three other arrangements
that permitted frequent trading, all of which had been terminated by September
2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these
four arrangements to its clients and to shareholders of the Seligman Funds.
Seligman also provided information concerning mutual fund trading practices to
the SEC and the Office of the Attorney General of the State of New York (NYAG).
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund
Distributors), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman
Parties), alleging, in substance, that the Seligman Parties permitted various
persons to engage in frequent trading and, as a result, the prospectus
disclosure used by the registered investment companies then managed by Seligman
was and had been misleading. The NYAG included other related claims and also
claimed that the fees charged by Seligman to the Seligman Funds were excessive.
On March 13, 2009, without admitting or denying any violations of law or
wrongdoing, the Seligman Parties entered into a stipulation of settlement with
the NYAG and settled the claims made by the NYAG. Under the terms of the
settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement
resolved all outstanding matters between the Seligman Parties and the NYAG. In
addition to the foregoing matter, the New York staff of the SEC indicated in
September 2005 that it was considering recommending to the Commissioners of the
SEC the instituting of a formal action against Seligman and Seligman Advisors,
Inc. relating to frequent trading in the Seligman Funds. Seligman responded to
the staff in October 2005 that it believed that any action would be both
inappropriate and unnecessary, especially in light of the fact that Seligman had
previously resolved the underlying issue with the Independent Directors of the
Seligman Funds and made recompense to the affected Seligman Funds. There have
been no further developments with the SEC on this matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 77
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
to perform under their contracts with the Funds. Ameriprise Financial is
required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities
and Exchange Commission on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained
by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
78 RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT
PROXY VOTING ------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your
financial intermediary; visiting riversource.com/funds; or searching the website
of the Securities and Exchange Commission (SEC) at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities is filed with the SEC by August 31 for the most recent 12-month
period ending June 30 of that year, and is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2010 SEMIANNUAL REPORT 79
RIVERSOURCE DIVERSIFIED BOND FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource(R) mutual funds are
distributed by RiverSource Fund Distributors, Inc., Member
FINRA, and managed by RiverSource Investments, LLC.
RiverSource is part of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C)2010 RiverSource Investments, LLC. S-6490 AA (4/10)
</Table>
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual
reports.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. Investments.
(a) The complete schedule of investments is included in Item 1 of this Form
N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not
applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's Principal Financial Officer and Principal Executive Officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable for semi-annual reports.
(a)(2) Separate certification for the Registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached as EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached
as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) RiverSource Diversified Income Series, Inc.
By /s/ Patrick T. Bannigan
----------------------------------
Patrick T. Bannigan
President and Principal Executive
Officer
Date May 3, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
----------------------------------
Patrick T. Bannigan
President and Principal Executive
Officer
Date May 3, 2010
By /s/ Jeffrey P. Fox
----------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial
Officer
Date May 3, 2010