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, 2009
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...................... 36
Statement of Operations............ 38
Statements of Changes in Net
Assets........................... 40
Financial Highlights............... 42
Notes to Financial Statements...... 51
Proxy Voting....................... 71
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Diversified Bond Fund (the Fund) Class A shares declined 3.76%
(excluding sales charge) for the 6 months ended Feb. 28, 2009.
> The Fund underperformed its benchmark, the unmanaged Barclays Capital U.S.
Aggregate Bond Index (formerly known as the Lehman Brothers U.S. Aggregate
Bond Index), which gained 1.88% for the semiannual period.
> The Fund outperformed its peer group, as represented by the Lipper
Intermediate Investment Grade Index, which declined 4.63% during the same
period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 months* 1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------
RiverSource Diversified
Bond Fund Class A
(excluding sales charge) -3.76% -6.01% +1.40% +1.87% +3.62%
- -------------------------------------------------------------------------
Barclays Capital U.S.
Aggregate Bond Index
(unmanaged)(1) +1.88% +2.06% +4.95% +4.00% +5.61%
- -------------------------------------------------------------------------
Lipper Intermediate
Investment Grade
Index(2) -4.63% -7.00% +1.05% +1.66% +4.23%
- -------------------------------------------------------------------------
</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 institution or
visiting riversource.com/funds.
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
expenses. See the Average Annual Total Returns table for performance of other
share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
(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 Index includes the 30 largest
investment grade funds tracked by Lipper Inc. The index's returns include
net reinvested dividends.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
10/3/74) -3.76% -6.01% +1.40% +1.87% +3.62% N/A
- -------------------------------------------------------------------------------------
Class B (inception
3/20/95) -4.12% -6.72% +0.64% +1.10% +2.84% N/A
- -------------------------------------------------------------------------------------
Class C (inception
6/26/00) -4.12% -6.72% +0.56% +1.10% N/A +3.22%
- -------------------------------------------------------------------------------------
Class I (inception
3/4/04) -3.36% -5.66% +1.77% N/A N/A +2.31%
- -------------------------------------------------------------------------------------
Class R2 (inception
12/11/06) -3.85% -6.17% N/A N/A N/A -0.19%
- -------------------------------------------------------------------------------------
Class R3 (inception
12/11/06) -3.73% -5.93% N/A N/A N/A +0.08%
- -------------------------------------------------------------------------------------
Class R4 (inception
3/20/95) -3.52% -5.73% +1.54% +2.02% +3.77% N/A
- -------------------------------------------------------------------------------------
Class R5 (inception
12/11/06) -3.40% -5.52% N/A N/A N/A +0.43%
- -------------------------------------------------------------------------------------
Class W (inception
12/1/06) -3.80% -6.10% N/A N/A N/A -0.17%
- -------------------------------------------------------------------------------------
With sales charge
Class A (inception
10/3/74) -8.29% -10.43% -0.23% +0.86% +3.09% N/A
- -------------------------------------------------------------------------------------
Class B (inception
3/20/95) -8.82% -11.22% -0.58% +0.76% +2.84% N/A
- -------------------------------------------------------------------------------------
Class C (inception
6/26/00) -5.06% -7.62% +0.56% +1.10% N/A +3.22%
- -------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
<Table>
<Caption>
AT MARCH 31, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
10/3/74) -0.26% -2.83% +2.40% +2.13% +3.74% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -0.85% -3.78% +1.55% +1.32% +2.94% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) -0.63% -3.76% +1.62% +1.36% N/A +3.42%
- ------------------------------------------------------------------------------------
Class I (inception
3/4/04) -0.29% -2.69% +2.68% +2.49% N/A +2.64%
- ------------------------------------------------------------------------------------
Class R2 (inception
12/11/06) -0.39% -3.21% N/A N/A N/A +0.67%
- ------------------------------------------------------------------------------------
Class R3 (inception
12/11/06) -0.26% -2.97% N/A N/A N/A +0.94%
- ------------------------------------------------------------------------------------
Class R4 (inception
3/20/95) -0.23% -2.96% +2.45% +2.23% +3.87% N/A
- ------------------------------------------------------------------------------------
Class R5 (inception
12/11/06) -0.10% -2.75% N/A N/A N/A +1.21%
- ------------------------------------------------------------------------------------
Class W (inception
12/1/06) -0.30% -3.12% N/A N/A N/A +0.70%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
10/3/74) -5.04% -7.47% +0.72% +1.13% +3.21% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -5.71% -8.41% +0.32% +0.97% +2.94% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) -1.60% -4.69% +1.62% +1.36% N/A +3.42%
- ------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 4.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to
a 1% CDSC if shares are sold within one year after purchase. Sales charges do
not apply to Class 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
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 -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
DURATION
SHORT INT. LONG
X HIGH
X MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix indicates 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) 6.8 years
- --------------------------------------
Effective duration(2) 3.9 years
- --------------------------------------
Weighted average bond
rating(3) AA
- --------------------------------------
</Table>
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total Net
fund fund
expenses expenses(a)
- ----------------------------------------
Class A 0.95% 0.83%
- ----------------------------------------
Class B 1.71% 1.59%
- ----------------------------------------
Class C 1.70% 1.58%
- ----------------------------------------
Class I 0.55% 0.47%
- ----------------------------------------
Class R2 1.34% 1.27%
- ----------------------------------------
Class R3 1.08% 1.02%
- ----------------------------------------
Class R4 0.85% 0.77%
- ----------------------------------------
Class R5 0.59% 0.52%
- ----------------------------------------
Class W 0.99% 0.92%
- ----------------------------------------
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until Aug. 31, 2009, unless
sooner terminated at the discretion of the Fund's Board. Any amounts waived
will not be reimbursed by the Fund. Under this agreement, net fund expenses
(excluding fees and expenses of acquired funds) will not exceed 0.83% for
Class A, 1.59% for Class B, 1.58% for Class C, 0.47% for Class I, 1.27% for
Class R2, 1.02% for Class R3, 0.77% for Class R4, 0.52% for Class R5 and
0.92% for Class W.
(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 -- 2009 SEMIANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
SECTOR DIVERSIFICATION (at Feb. 28, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Asset-Backed 0.9%
- ------------------------------------------------
Commercial Mortgage-Backed 5.0%
- ------------------------------------------------
Consumer Discretionary 1.4%
- ------------------------------------------------
Consumer Staples 1.9%
- ------------------------------------------------
Energy 4.1%
- ------------------------------------------------
Financials 2.5%
- ------------------------------------------------
Foreign Government 0.6%
- ------------------------------------------------
Health Care 0.8%
- ------------------------------------------------
Industrials 1.4%
- ------------------------------------------------
Materials 1.1%
- ------------------------------------------------
Mortgage-Backed 34.7%
- ------------------------------------------------
Telecommunication 8.2%
- ------------------------------------------------
U.S. Government Obligations & Agencies 17.7%
- ------------------------------------------------
Utilities 6.6%
- ------------------------------------------------
Other(1) 13.1%
- ------------------------------------------------
</Table>
(1) Cash & Cash Equivalents. Of the 13.1%, 7.1% is due to security lending
activity and 6.0% is the Fund's cash equivalent position.
QUALITY BREAKDOWN
(at Feb. 28, 2009; % of portfolio assets excluding cash equivalents
and equities)
- ---------------------------------------------------------------------
<Table>
<Caption>
AAA bonds 63.5%
- ------------------------------------------------
AA bonds 1.4%
- ------------------------------------------------
A bonds 10.3%
- ------------------------------------------------
BBB bonds 16.4%
- ------------------------------------------------
Non-investment grade bonds 8.4%
- ------------------------------------------------
</Table>
Bond 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 Fund's investment manager, rates a security
using an internal rating system when Moody's doesn't provide a rating. Ratings
for 0.2% of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 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 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). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
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, 2009.
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 -- 2009 SEMIANNUAL REPORT 7
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2008 FEB. 28, 2009 THE PERIOD(A) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 962.40 $4.06 .83%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.79 $4.18 .83%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 958.80 $7.76 1.59%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.00 $8.00 1.59%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 958.80 $7.72 1.58%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.05 $7.95 1.58%
- ------------------------------------------------------------------------------------------
Class I
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 966.40 $2.30 .47%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,022.59 $2.37 .47%
- ------------------------------------------------------------------------------------------
Class R2
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 961.50 $6.16 1.26%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.65 $6.34 1.26%
- ------------------------------------------------------------------------------------------
Class R3
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 962.70 $4.94 1.01%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.90 $5.09 1.01%
- ------------------------------------------------------------------------------------------
Class R4
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 964.80 $3.77 .77%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.09 $3.88 .77%
- ------------------------------------------------------------------------------------------
Class R5
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 966.00 $2.55 .52%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,022.34 $2.62 .52%
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
8 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2008 FEB. 28, 2009 THE PERIOD(A) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class W
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 962.00 $4.50 .92%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.34 $4.63 .92%
- ------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2009: -3.76%
for Class A, -4.12% for Class B, -4.12% for Class C, -3.36% for Class I,
-3.85% for Class R2, -3.73% for Class R3, -3.52% for Class R4, -3.40%. for
Class R5, and -3.80% for Class W.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 9
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
FEB. 28, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
BONDS (109.7%)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
FOREIGN AGENCIES (0.1%)(C)
Pemex Project Funding Master Trust
03-01-18 5.75% $1,790,000 $1,448,774
06-15-35 6.63 2,543,000(s) 1,795,122
Petroleos de Venezuela
04-12-17 5.25 3,534,000 1,325,250
---------------
Total 4,569,146
- -------------------------------------------------------------------------------------
SOVEREIGN (0.6%)(c)
Govt of Ukraine
Sr Unsecured
11-14-17 6.75 1,670,000(d) 592,434
Republic of Argentina
09-12-13 7.00 2,762,000 911,460
Republic of Argentina
Sr Unsecured
12-15-35 0.00 3,350,000(e) 86,095
Republic of Colombia
01-27-17 7.38 1,495,000 1,491,263
09-18-37 7.38 1,320,000 1,207,800
Republic of El Salvador
06-15-35 7.65 1,313,000(d) 932,230
Republic of Indonesia
Sr Unsecured
01-17-18 6.88 742,000(d) 571,340
10-12-35 8.50 987,000(d) 730,380
01-17-38 7.75 850,000(d) 578,000
Republic of Philippines
01-15-16 8.00 425,000 450,500
01-14-31 7.75 1,979,000 1,919,630
Republic of Turkey
09-26-16 7.00 450,000 418,500
04-03-18 6.75 1,429,000 1,253,948
03-17-36 6.88 3,506,000 2,620,734
Republic of Uruguay
05-17-17 9.25 678,000 727,155
Republic of Venezuela
02-26-16 5.75 714,000 339,150
05-07-23 9.00 1,600,000 788,000
Republic of Venezuela
Sr Unsecured
10-08-14 8.50 715,000 411,125
Republica Orient Uruguay
Sr Unsecured
03-21-36 7.63 1,592,000 1,309,420
Russian Federation
03-31-30 7.50 968,240(d) 852,051
---------------
Total 18,191,215
- -------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS & AGENCIES (22.8%)
Federal Farm Credit Bank
10-17-12 4.50 1,060,000 1,140,900
Federal Home Loan Mtge Corp
03-15-09 5.75 170,000 170,404
05-28-10 2.38 1,160,000(s) 1,174,370
07-17-15 4.38 75,935,000(s) 80,769,781
04-16-37 6.00 46,875,000 47,332,172
Federal Home Loan Mtge Corp
Sub Nts
12-14-18 5.00 31,666,000 29,895,459
Federal Natl Mtge Assn
01-02-14 5.13 46,467,000(s) 47,528,678
04-15-15 5.00 37,060,000 40,827,149
07-15-37 5.63 5,345,000 5,977,929
U.S. Treasury
06-30-10 2.88 6,195,000(s,v) 6,362,699
10-31-10 1.50 37,665,000 38,006,320
02-28-11 0.88 5,485,000(g) 5,469,587
01-31-14 1.75 42,565,000(s) 42,095,934
02-28-14 1.88 63,115,000(g) 62,681,400
02-15-19 2.75 41,760,000(s) 40,716,000
02-15-29 5.25 56,935,000 66,578,366
02-15-38 4.38 33,045,000(s) 36,442,423
05-15-38 4.50 13,740,000(s) 15,599,187
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
10 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
U.S. GOVERNMENT OBLIGATIONS & AGENCIES (CONT.)
U.S. Treasury Inflation-Indexed Bond
01-15-14 2.00% $63,403,498(i,s) $63,062,656
01-15-15 1.63 107,977,380(i,s) 103,653,388
---------------
Total 735,484,802
- -------------------------------------------------------------------------------------
ASSET-BACKED (1.1%)
AmeriCredit Automobile Receivables Trust
Series 2007-DF Cl A3A (FSA)
07-06-12 5.49 7,000,000(h) 6,660,942
Capital Auto Receivables Asset Trust
Series 2006-SN1A Cl D
04-20-11 6.15 4,775,000(d) 4,504,179
Countrywide Asset-backed Ctfs
Series 2005-10 Cl AF6
02-25-36 4.92 1,930,545 1,446,994
Countrywide Asset-backed Ctfs
Series 2006-4 Cl 1A1M
07-25-36 0.73 1,544,127(j) 1,072,381
CPS Auto Trust
Series 2007-A Cl A3 (MBIA)
09-15-11 5.04 4,149,997(d,h) 3,844,036
Dunkin Securitization
Series 2006-1 Cl A2 (AMBAC)
06-20-31 5.78 9,650,000(d,h) 6,923,201
Keycorp Student Loan Trust
Series 2003-A Cl 2A2 (MBIA)
10-25-25 1.47 1,106,078(h,j) 1,060,107
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-2 Cl AIO
08-25-11 0.00 9,525,000(m) 952,500
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-3 Cl AIO
01-25-12 5.88 15,000,000(m) 2,636,715
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-4 Cl AIO
02-27-12 29.68 11,700,000(m) 1,458,405
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2007-2 Cl AIO
07-25-12 50.00 6,800,000(m) 586,160
Renaissance Home Equity Loan Trust
Series 2005-4 Cl A3
02-25-36 5.57 3,340,220 3,171,774
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M4
06-25-37 6.31 1,500,000(r) 132,895
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M5
06-25-37 6.66 980,000(r) 68,940
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M6
06-25-37 7.01 1,435,000(r) 87,766
Residential Asset Securities
Series 2007-KS3 Cl AI2
04-25-37 0.65 1,050,000(j) 511,416
Triad Auto Receivables Owner Trust
Series 2007-B Cl A3A (FSA)
10-12-12 5.24 2,135,000(h) 1,791,202
---------------
Total 36,909,613
- -------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED (6.4%)(f)
Banc of America Commercial Mtge
Series 2007-1 Cl A3
01-15-49 5.45 13,425,000 8,603,876
Bear Stearns Commercial Mtge Securities
Series 2003-T10 Cl A1
03-13-40 4.00 1,600,399 1,502,614
Bear Stearns Commercial Mtge Securities
Series 2004-PWR5 Cl A3
07-11-42 4.57 475,000 415,047
Bear Stearns Commercial Mtge Securities
Series 2007-PW16 Cl A1
06-11-40 5.59 10,138,179 9,807,680
CDC Commercial Mtge Trust
Series 2002-FX1 Cl A2
11-15-30 5.68 12,775,000 12,340,499
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
COMMERCIAL MORTGAGE-BACKED (CONT.)
Citigroup Commercial Mtge Trust
Series 2006-C5 Cl A4
10-15-49 5.43% $3,150,000 $2,100,966
Citigroup/Deutsche Bank Commercial Mtge Trust
Series 2005-CD1 Cl ASB
07-15-44 5.23 3,225,000 2,543,080
Commercial Mtge Acceptance
Series 1999-C1 Cl A2
06-15-31 7.03 648,018 646,303
Commercial Mtge Pass-Through Ctfs
Series 2006-CN2A Cl BFL
02-05-19 0.75 2,700,000(d,j) 1,438,418
CS First Boston Mtge Securities
Series 2001-CP4 Cl A4
12-15-35 6.18 7,400,000 7,190,634
CS First Boston Mtge Securities
Series 2003-CPN1 Cl A2
03-15-35 4.60 3,800,000 3,255,737
CS First Boston Mtge Securities
Series 2004-C2 Cl A1
05-15-36 3.82 1,289,603 1,150,379
Federal Natl Mtge Assn #555806
10-01-13 5.10 413,318 429,441
Federal Natl Mtge Assn #725217
02-01-14 4.78 999,994 1,025,558
Federal Natl Mtge Assn #735029
09-01-13 5.32 352,839 365,985
GE Capital Commercial Mtge
Series 2005-C1 Cl A5
06-10-48 4.77 400,000 309,107
General Electric Capital Assurance
Series 2003-1 Cl A3
05-12-35 4.77 1,330,758(d) 1,319,657
General Electric Capital Assurance
Series 2003-1 Cl A4
05-12-35 5.25 3,100,000(d) 2,744,301
Greenwich Capital Commercial Funding
Series 2004-GG1 Cl A5
06-10-36 4.88 3,550,000 3,131,121
GS Mtge Securities II
Series 2006-GG6 Cl A4
04-10-38 5.55 375,000 267,475
GS Mtge Securities II
Series 2007-EOP Cl J
03-06-20 1.29 9,050,000(d,j) 5,575,050
GS Mtge Securities II
Series 2007-GG10 Cl F
08-10-45 5.80 9,800,000 1,388,464
JPMorgan Chase Commercial Mtge Securities
Series 2003-LN1 Cl A1
10-15-37 4.13 2,382,613 2,138,993
JPMorgan Chase Commercial Mtge Securities
Series 2003-ML1A Cl A1
03-12-39 3.97 1,582,539 1,430,348
JPMorgan Chase Commercial Mtge Securities
Series 2003-ML1A Cl A2
03-12-39 4.77 7,419,000 6,355,002
JPMorgan Chase Commercial Mtge Securities
Series 2004-C2 Cl A2
05-15-41 5.10 425,000 353,951
JPMorgan Chase Commercial Mtge Securities
Series 2004-CBX Cl A3
01-12-37 4.18 4,150,000 4,004,309
JPMorgan Chase Commercial Mtge Securities
Series 2004-LN2 Cl A1
07-15-41 4.48 8,309,531 7,587,935
JPMorgan Chase Commercial Mtge Securities
Series 2005-LDP4 Cl AM
10-15-42 5.00 14,900,000 7,159,729
JPMorgan Chase Commercial Mtge Securities
Series 2006-CB17 Cl A1
12-12-43 5.28 6,168,220 5,981,683
JPMorgan Chase Commercial Mtge Securities
Series 2006-LDP6 Cl ASB
04-15-43 5.49 9,225,000 7,111,840
JPMorgan Chase Commercial Mtge Securities
Series 2006-LDP8 Cl A4
05-15-45 5.40 50,000 30,629
JPMorgan Chase Commercial Mtge Securities
Series 2007-CB20 Cl A4
02-12-51 5.79 6,000,000 3,528,692
JPMorgan Chase Commercial Mtge Securities
Series 2007-CB20 Cl AM
02-12-51 5.90 11,225,000 3,807,392
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
COMMERCIAL MORTGAGE-BACKED (CONT.)
JPMorgan Chase Commercial Mtge Securities
Series 2007-CB20 Cl E
02-12-51 6.20% $4,725,000(d) $289,769
LB-UBS Commercial Mtge Trust
Series 2004-C2 Cl A3
03-15-29 3.97 4,700,000 4,178,408
LB-UBS Commercial Mtge Trust
Series 2004-C6 Cl A6
08-15-29 5.02 3,500,000 2,748,277
LB-UBS Commercial Mtge Trust
Series 2006-C4 Cl AAB
06-15-32 5.86 5,100,000 3,881,054
LB-UBS Commercial Mtge Trust
Series 2006-C6 Cl A4
09-15-39 5.37 5,500,000 3,397,770
LB-UBS Commercial Mtge Trust
Series 2008-C1 Cl A1
04-15-41 5.61 1,135,389 968,140
Merrill Lynch Mtge Trust
Series 2005-CKI1 Cl A1
11-12-37 5.08 808,578 796,480
Merrill Lynch Mtge Trust
Series 2008-C1 Cl A1
02-12-51 4.71 2,309,719 2,158,234
Morgan Stanley Capital I
Series 2003-T11 Cl A2
06-13-41 4.34 2,110,948 2,078,386
Morgan Stanley Capital I
Series 2004-HQ4 Cl A5
04-14-40 4.59 5,200,000 4,853,878
Morgan Stanley Capital I
Series 2006-T23 Cl AAB
08-12-41 5.80 3,675,000 2,826,332
Morgan Stanley Capital I
Series 2007-IQ15 Cl A4
06-11-49 5.88 6,200,000 3,855,625
TIAA Seasoned Commercial Mtge Trust
Series 2007-C4 Cl A3
08-15-39 6.09 9,475,000 6,988,416
Wachovia Bank Commercial Mtge Trust
Series 2003-C7 Cl A2
10-15-35 5.08 18,750,000(d) 15,843,623
Wachovia Bank Commercial Mtge Trust
Series 2003-C8 Cl A2
11-15-35 3.89 553,861 552,476
Wachovia Bank Commercial Mtge Trust
Series 2005-C20 Cl A5
07-15-42 5.09 5,017,000 4,189,752
Wachovia Bank Commercial Mtge Trust
Series 2006-C24 Cl A3
03-15-45 5.56 29,675,000 18,000,201
Wachovia Bank Commercial Mtge Trust
Series 2006-C24 Cl APB
03-15-45 5.58 3,200,000 2,506,327
Wachovia Bank Commercial Mtge Trust
Series 2006-C27 Cl APB
07-15-45 5.73 5,475,000 4,260,310
Wachovia Bank Commercial Mtge Trust
Series 2006-C29 Cl A4
11-15-48 5.31 1,425,000 861,938
Wachovia Bank Commercial Mtge Trust
Series 2006-C29 Cl AM
11-15-48 5.34 8,655,000 2,874,307
---------------
Total 205,151,598
- -------------------------------------------------------------------------------------
MORTGAGE-BACKED (44.6%)(f,p)
Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2007-1 Cl 3A21
03-25-37 6.17 5,616,482(k) 3,064,223
American Home Mtge Assets
Collateralized Mtge Obligation
Series 2007-2 Cl A2A
03-25-47 0.64 821,768(k) 163,730
Banc of America Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-11 Cl 1A1
01-25-34 6.00 6,079,977 4,242,902
Banc of America Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-3 Cl 1A1
04-25-34 6.00 7,789,109 6,876,326
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
Banc of America Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-9 Cl 1CB1
01-25-37 6.00% $15,551,892 $8,308,113
Banc of America Funding
Collateralized Mtge Obligation
Series 2006-2 Cl N1
11-25-46 7.25 288,686(d,o) 31,755
Banc of America Funding
Collateralized Mtge Obligation
Series 2007-8 Cl 1A1
10-25-37 6.00 1,911,368 1,001,975
Bear Stearns Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2005-8 Cl A4
08-25-35 5.10 6,475,000(d,k) 3,842,861
ChaseFlex Trust
Collateralized Mtge Obligation
Series 2005-2 Cl 2A2
06-25-35 6.50 1,741,780 1,559,982
Citicorp Mtge Securities
Collateralized Mtge Obligation
Series 2005-5 Cl 3A1
08-25-35 5.00 7,050,854 5,257,569
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2007-8CB Cl A13
05-25-37 7.73 5,334,610(m) 723,026
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-11T1 Cl A1
07-25-18 4.75 3,020,886 2,954,804
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-20CB Cl 1A1
10-25-33 5.50 14,555,981 11,378,684
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-50CB Cl 2A1
11-25-35 6.00 11,165,890 5,685,881
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-6CB Cl 1A1
04-25-35 7.50 4,512,137 2,790,493
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-22R Cl 1A2
05-25-36 6.00 6,112,454 5,254,290
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-2CB Cl A11
03-25-36 6.00 7,776,264 3,987,769
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-31CB Cl A16
11-25-36 6.00 8,820,000 5,497,761
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-43CB Cl 1A4
02-25-37 6.00 10,068,221 6,723,341
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-45T1 Cl 2A5
02-25-37 6.00 14,018,211 7,188,721
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2007-25 Cl 1A1
11-25-37 6.50 17,614,243 9,433,940
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2007-OA9 Cl A2
06-25-47 0.82 908,607(j) 203,601
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2007-OH3 Cl A3
09-25-47 0.97 15,650,499(j) 1,690,263
Countrywide Home Loans
Collateralized Mtge Obligation
Series 2005-R2 Cl 2A1
06-25-35 7.00 5,661,441(d) 4,140,371
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
Countrywide Home Loans
Collateralized Mtge Obligation
Series 2006-HYB1 Cl 1A1
03-20-36 5.32% $3,606,348(k) $1,551,091
CS First Boston Mtge Securities
Collateralized Mtge Obligation
Series 2003-29 Cl 8A1
11-25-18 6.00 1,494,950 1,338,448
Deutsche Bank Alternate Mtge Loan Trust
Collateralized Mtge Obligation
Series 2007-AR3 Cl 2A1
06-25-37 0.58 245,317(j) 219,923
Downey Savings & Loan Assn Mtge Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2005-AR5 Cl X1
08-19-45 0.00 24,456,548(b,m,q) --
Federal Home Loan Mtge Corp
03-01-39 4.50 15,000,000(g) 15,014,070
03-01-39 5.00 65,000,000(g) 65,995,279
03-01-39 5.50 26,000,000(g) 26,625,612
03-01-39 6.00 30,000,000(g) 31,054,686
Federal Home Loan Mtge Corp #170216
03-01-17 8.50 5,379 5,796
Federal Home Loan Mtge Corp #1B3592
09-01-37 6.02 5,432,946(k) 5,654,731
Federal Home Loan Mtge Corp #284190
01-01-17 8.00 215 228
Federal Home Loan Mtge Corp #290970
04-01-17 8.00 7,621 8,064
Federal Home Loan Mtge Corp #295114
06-01-17 8.50 3,319 3,576
Federal Home Loan Mtge Corp #540861
09-01-19 8.50 31,006 33,523
Federal Home Loan Mtge Corp #A00304
04-01-21 9.00 36,259 39,963
Federal Home Loan Mtge Corp #A12692
10-01-32 6.00 68,314 71,630
Federal Home Loan Mtge Corp #A13854
09-01-33 6.00 114,257 119,618
Federal Home Loan Mtge Corp #B10254
10-01-18 5.50 326,529 340,236
Federal Home Loan Mtge Corp #B12280
02-01-19 5.50 186,713 194,551
Federal Home Loan Mtge Corp #C00103
03-01-22 8.50 87,648 95,165
Federal Home Loan Mtge Corp #C00144
08-01-22 8.50 79,121 85,914
Federal Home Loan Mtge Corp #C00356
08-01-24 8.00 295,078 313,187
Federal Home Loan Mtge Corp #C00666
10-01-28 7.00 38,125 40,768
Federal Home Loan Mtge Corp #C53878
12-01-30 5.50 1,369,899 1,410,324
Federal Home Loan Mtge Corp #C59161
10-01-31 6.00 104,581 109,023
Federal Home Loan Mtge Corp #C62993
01-01-32 6.50 830,362 875,961
Federal Home Loan Mtge Corp #C63552
01-01-32 6.50 1,386,839 1,471,803
Federal Home Loan Mtge Corp #C64703
03-01-32 6.50 791,315 840,394
Federal Home Loan Mtge Corp #C67723
06-01-32 7.00 644,746 690,529
Federal Home Loan Mtge Corp #C77372
03-01-33 6.00 227,902 238,356
Federal Home Loan Mtge Corp #C78031
04-01-33 5.50 7,641,004 7,891,310
Federal Home Loan Mtge Corp #C79930
06-01-33 5.50 6,528,141 6,712,037
Federal Home Loan Mtge Corp #C90767
12-01-23 6.00 5,942,921 6,179,891
Federal Home Loan Mtge Corp #D96300
10-01-23 5.50 4,319,570 4,436,793
Federal Home Loan Mtge Corp #E01127
02-01-17 6.50 810,728 849,061
Federal Home Loan Mtge Corp #E01419
05-01-18 5.50 3,160,227 3,298,128
Federal Home Loan Mtge Corp #E74288
12-01-13 6.00 84,308 88,385
Federal Home Loan Mtge Corp #E79810
11-01-14 7.50 658,214 696,798
Federal Home Loan Mtge Corp #E90216
05-01-17 6.00 874,056 917,142
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
Federal Home Loan Mtge Corp #E98725
08-01-18 5.00% $7,294,934 $7,564,300
Federal Home Loan Mtge Corp #E99684
10-01-18 5.00 7,739,130 8,027,807
Federal Home Loan Mtge Corp #G00286
02-01-25 8.00 120,140 127,513
Federal Home Loan Mtge Corp #G01108
04-01-30 7.00 2,286,415 2,445,005
Federal Home Loan Mtge Corp #G01410
04-01-32 7.00 243,233 259,752
Federal Home Loan Mtge Corp #G01441
07-01-32 7.00 2,135,666 2,280,707
Federal Home Loan Mtge Corp #G01535
04-01-33 6.00 8,660,830 9,072,925
Federal Home Loan Mtge Corp #G02757
06-01-36 5.00 25,291,895 25,738,737
Federal Home Loan Mtge Corp #G03419
07-01-37 6.00 8,697,328 9,013,771
Federal Home Loan Mtge Corp #G30225
02-01-23 6.00 8,055,219 8,378,555
Federal Home Loan Mtge Corp #H01724
09-01-37 6.00 1,464,651 1,510,650
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 2795 Cl IY
07-15-17 84.62 263,512(m) 8,622
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 2817 Cl SA
06-15-32 77.27 5,918,349(m) 405,965
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Series 1241 Cl K
03-15-22 7.00 160,204 160,022
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Series 2576 Cl KJ
02-15-33 5.50 7,366,110 7,506,145
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Series 2641 Cl KC
01-15-18 6.50 2,828,069 3,026,848
Federal Natl Mtge Assn
03-01-24 4.50 40,500,000(g) 41,208,750
03-01-24 5.00 20,800,000(g) 21,385,000
03-01-39 4.50 170,000,000(g) 170,318,749
03-01-39 5.00 35,975,000(g) 36,593,338
03-01-39 5.50 44,500,000(g) 45,584,688
03-01-39 6.00 29,400,000(g) 30,364,673
03-01-39 7.00 30,000,000(g) 31,668,750
Federal Natl Mtge Assn #125479
04-01-27 7.50 192,239 205,940
Federal Natl Mtge Assn #190899
04-01-23 8.50 262,665 282,734
Federal Natl Mtge Assn #190944
05-01-24 6.00 4,559,117 4,741,000
Federal Natl Mtge Assn #190988
06-01-24 9.00 216,166 235,428
Federal Natl Mtge Assn #231309
09-01-23 6.50 64,865 68,538
Federal Natl Mtge Assn #231310
09-01-23 6.50 351,905 371,831
Federal Natl Mtge Assn #250330
09-01-25 8.00 209,156 222,958
Federal Natl Mtge Assn #250495
03-01-26 7.00 432,434 462,599
Federal Natl Mtge Assn #250765
12-01-26 8.00 165,080 175,964
Federal Natl Mtge Assn #251116
08-01-27 8.00 210,355 224,056
Federal Natl Mtge Assn #252440
05-01-29 7.00 166,613 178,093
Federal Natl Mtge Assn #252498
06-01-29 7.00 4,669 4,991
Federal Natl Mtge Assn #253883
08-01-16 6.00 1,979,485 2,075,573
Federal Natl Mtge Assn #254236
03-01-17 6.50 1,189,502 1,246,465
Federal Natl Mtge Assn #254383
06-01-32 7.50 304,900 325,762
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #254587
12-01-22 5.50% $451,064 $464,588
Federal Natl Mtge Assn #254802
07-01-18 4.50 2,201,853 2,253,688
Federal Natl Mtge Assn #254916
09-01-23 5.50 8,407,926 8,650,832
Federal Natl Mtge Assn #255788
06-01-15 5.50 2,465,473 2,570,028
Federal Natl Mtge Assn #256135
02-01-36 5.50 3,334,922 3,399,810
Federal Natl Mtge Assn #268071
01-01-24 6.50 97,527 103,050
Federal Natl Mtge Assn #303226
02-01-25 8.00 86,825 92,418
Federal Natl Mtge Assn #313049
08-01-11 8.50 219,245 220,733
Federal Natl Mtge Assn #323715
05-01-29 6.00 358,453 373,704
Federal Natl Mtge Assn #323933
09-01-29 7.00 3,179,220 3,398,276
Federal Natl Mtge Assn #408207
01-01-28 6.50 107,552 114,229
Federal Natl Mtge Assn #455791
01-01-29 6.50 403,512(v) 426,299
Federal Natl Mtge Assn #489888
05-01-29 6.50 1,589,889 1,678,682
Federal Natl Mtge Assn #493945
04-01-29 6.50 69,725 73,539
Federal Natl Mtge Assn #496029
01-01-29 6.50 1,578,678 1,667,831
Federal Natl Mtge Assn #518159
09-01-14 7.00 264,559 276,354
Federal Natl Mtge Assn #545008
06-01-31 7.00 2,030,734 2,177,051
Federal Natl Mtge Assn #545342
04-01-13 7.00 201,553 202,248
Federal Natl Mtge Assn #545684
05-01-32 7.50 244,892 261,804
Federal Natl Mtge Assn #545868
08-01-32 7.00 81,566 87,544
Federal Natl Mtge Assn #545869
07-01-32 6.50 1,651,944 1,751,495
Federal Natl Mtge Assn #545885
08-01-32 6.50 3,105,610 3,305,549
Federal Natl Mtge Assn #545910
08-01-17 6.00 3,370,188 3,522,451
Federal Natl Mtge Assn #555340
04-01-33 5.50 234,417 242,665
Federal Natl Mtge Assn #555343
08-01-17 6.00 3,271,105 3,427,845
Federal Natl Mtge Assn #555375
04-01-33 6.00 18,910,821(v) 19,732,513
Federal Natl Mtge Assn #555458
05-01-33 5.50 17,302,012 17,750,826
Federal Natl Mtge Assn #555528
04-01-33 6.00 13,192,150 13,703,935
Federal Natl Mtge Assn #555734
07-01-23 5.00 6,859,768 7,012,073
Federal Natl Mtge Assn #555794
09-01-28 7.50 683,590 732,000
Federal Natl Mtge Assn #567840
10-01-30 7.00 1,068,646 1,142,278
Federal Natl Mtge Assn #582154
05-01-31 6.50 92,202 97,236
Federal Natl Mtge Assn #587859
12-01-16 5.50 3,028,635 3,157,668
Federal Natl Mtge Assn #597374
09-01-31 7.00 638,803 684,832
Federal Natl Mtge Assn #606882
10-01-31 7.00 673,054 719,442
Federal Natl Mtge Assn #611831
02-01-31 7.50 31,524 33,760
Federal Natl Mtge Assn #615135
11-01-16 6.00 217,666 228,232
Federal Natl Mtge Assn #634650
04-01-32 7.50 115,133 123,011
Federal Natl Mtge Assn #638969
03-01-32 5.50 1,243,950 1,287,932
Federal Natl Mtge Assn #643362
04-01-17 6.50 395,421 414,356
Federal Natl Mtge Assn #646147
06-01-32 7.00 2,522,329 2,704,070
Federal Natl Mtge Assn #646446
06-01-17 6.50 851,324 892,092
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #649068
06-01-17 6.50% $1,450,567 $1,535,699
Federal Natl Mtge Assn #649263
08-01-17 6.50 1,455,629 1,540,796
Federal Natl Mtge Assn #650009
09-01-31 7.50 48,883 52,349
Federal Natl Mtge Assn #654208
10-01-32 6.50 1,692,471 1,783,819
Federal Natl Mtge Assn #654682
10-01-32 6.00 1,014,822 1,051,700
Federal Natl Mtge Assn #654689
11-01-32 6.00 1,153,300 1,197,778
Federal Natl Mtge Assn #656908
09-01-32 6.50 1,432,535 1,523,161
Federal Natl Mtge Assn #661815
10-01-32 6.00 117,977 122,936
Federal Natl Mtge Assn #662061
09-01-32 6.50 2,211,410 2,330,767
Federal Natl Mtge Assn #667604
10-01-32 5.50 242,349 249,403
Federal Natl Mtge Assn #667787
02-01-18 5.50 1,177,847 1,225,820
Federal Natl Mtge Assn #670382
09-01-32 6.00 8,642,883 8,978,181
Federal Natl Mtge Assn #670387
08-01-32 7.00 1,044,853 1,116,875
Federal Natl Mtge Assn #677089
01-01-33 5.50 508,631 523,436
Federal Natl Mtge Assn #678028
09-01-17 6.00 4,147,737 4,346,483
Federal Natl Mtge Assn #678065
02-01-33 6.50 366,042 389,245
Federal Natl Mtge Assn #678937
01-01-18 5.50 1,998,770 2,086,970
Federal Natl Mtge Assn #678941
02-01-18 5.50 2,420,000 2,525,592
Federal Natl Mtge Assn #679095
04-01-18 5.00 4,177,861 4,320,605
Federal Natl Mtge Assn #680961
01-01-33 6.00 480,737 500,925
Federal Natl Mtge Assn #681080
02-01-18 5.00 769,240 795,523
Federal Natl Mtge Assn #681166
04-01-32 6.50 310,626 327,586
Federal Natl Mtge Assn #681400
03-01-18 5.50 3,786,857 3,947,874
Federal Natl Mtge Assn #682825
01-01-33 6.00 1,373,917 1,427,218
Federal Natl Mtge Assn #683100
02-01-18 5.50 133,932 139,733
Federal Natl Mtge Assn #683116
02-01-33 6.00 218,451 226,926
Federal Natl Mtge Assn #684586
03-01-33 6.00 2,688,155 2,801,240
Federal Natl Mtge Assn #686172
02-01-33 6.00 2,309,585 2,399,185
Federal Natl Mtge Assn #686528
02-01-33 6.00 2,887,975 3,009,786
Federal Natl Mtge Assn #687051
01-01-33 6.00 8,903,577 9,193,805
Federal Natl Mtge Assn #689026
05-01-33 5.50 1,042,726 1,078,355
Federal Natl Mtge Assn #689093
07-01-28 5.50 2,981,399 3,086,813
Federal Natl Mtge Assn #694628
04-01-33 5.50 5,694,715(v) 5,901,333
Federal Natl Mtge Assn #694795
04-01-33 5.50 6,545,615(v) 6,778,640
Federal Natl Mtge Assn #694988
03-01-33 5.50 9,103,557 9,413,100
Federal Natl Mtge Assn #695202
03-01-33 6.50 3,212,505 3,381,879
Federal Natl Mtge Assn #695909
05-01-18 5.50 1,672,673 1,744,649
Federal Natl Mtge Assn #699424
04-01-33 5.50 3,809,804 3,944,964
Federal Natl Mtge Assn #702427
04-01-33 5.50 3,154,992 3,263,724
Federal Natl Mtge Assn #704005
05-01-33 5.50 871,941 896,776
Federal Natl Mtge Assn #705655
05-01-33 5.00 417,056 425,909
Federal Natl Mtge Assn #709093
06-01-33 6.00 142,783 148,233
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #709901
06-01-18 5.00% $397,588 $413,282
Federal Natl Mtge Assn #710823
05-01-33 5.50 584,715 606,212
Federal Natl Mtge Assn #711503
06-01-33 5.50 100,465 103,638
Federal Natl Mtge Assn #720070
07-01-23 5.50 2,127,198 2,188,653
Federal Natl Mtge Assn #723687
08-01-28 5.50 3,622,787 3,750,878
Federal Natl Mtge Assn #725232
03-01-34 5.00 16,639,331 16,992,545
Federal Natl Mtge Assn #725424
04-01-34 5.50 1,551,737 1,595,934
Federal Natl Mtge Assn #725425
04-01-34 5.50 23,215,472 23,847,905
Federal Natl Mtge Assn #725431
08-01-15 5.50 94,094 98,397
Federal Natl Mtge Assn #725684
05-01-18 6.00 7,358,480 7,700,247
Federal Natl Mtge Assn #725813
12-01-33 6.50 8,314,850 8,753,235
Federal Natl Mtge Assn #726940
08-01-23 5.50 69,305 71,899
Federal Natl Mtge Assn #730153
08-01-33 5.50 983,454 1,011,465
Federal Natl Mtge Assn #735212
12-01-34 5.00 17,639,619 17,997,530
Federal Natl Mtge Assn #735224
02-01-35 5.50 28,971,586 29,796,758
Federal Natl Mtge Assn #735578
06-01-35 5.00 17,365,759 17,707,260
Federal Natl Mtge Assn #735841
11-01-19 4.50 1,468,839 1,500,664
Federal Natl Mtge Assn #738921
11-01-32 6.50 766,506 814,699
Federal Natl Mtge Assn #743262
10-01-18 5.00 2,605,710 2,703,922
Federal Natl Mtge Assn #743347
10-01-33 6.00 82,902 86,469
Federal Natl Mtge Assn #743579
11-01-33 5.50 259,616 267,010
Federal Natl Mtge Assn #745355
03-01-36 5.00 16,685,338(v) 17,013,458
Federal Natl Mtge Assn #745563
08-01-34 5.50 1,284,190 1,320,767
Federal Natl Mtge Assn #747642
11-01-28 5.50 2,323,429 2,405,579
Federal Natl Mtge Assn #753074
12-01-28 5.50 6,451,454 6,679,559
Federal Natl Mtge Assn #753091
12-01-33 5.50 3,745,612 3,852,295
Federal Natl Mtge Assn #757581
01-01-19 5.50 800,966 833,589
Federal Natl Mtge Assn #759342
01-01-34 6.50 1,292,204 1,366,875
Federal Natl Mtge Assn #765759
12-01-18 5.00 2,535,049 2,621,663
Federal Natl Mtge Assn #766641
03-01-34 5.00 5,903,170 6,022,946
Federal Natl Mtge Assn #776962
04-01-29 5.00 15,231,209 15,648,776
Federal Natl Mtge Assn #779676
06-01-34 5.00 1,992,024 2,032,443
Federal Natl Mtge Assn #804442
12-01-34 6.50 1,121,372 1,178,392
Federal Natl Mtge Assn #831870
11-01-36 6.50 1,435,481 1,503,314
Federal Natl Mtge Assn #844445
12-01-35 5.50 13,563,611 13,924,500
Federal Natl Mtge Assn #845109
05-01-36 6.00 23,985,089 24,818,143
Federal Natl Mtge Assn #878661
02-01-36 5.50 1,567,425 1,596,128
Federal Natl Mtge Assn #881629
02-01-36 5.50 1,039,752 1,058,793
Federal Natl Mtge Assn #882063
06-01-36 6.50 3,006,165 3,173,929
Federal Natl Mtge Assn #886291
07-01-36 7.00 6,140,338 6,518,205
Federal Natl Mtge Assn #909214
07-01-38 7.00 1,757,923 1,858,019
Federal Natl Mtge Assn #915770
03-01-37 6.50 2,798,240 2,930,312
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #928860
11-01-37 8.00% $1,206,262 $1,276,886
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2003-63 Cl IP
07-25-33 25.56 13,294,868(m) 1,654,899
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2003-71 Cl IM
12-25-31 33.07 2,539,745(m) 224,534
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2004-84 Cl GI
12-25-22 59.90 699,272(m) 37,751
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Principal Only Series 43 Cl 1
09-01-18 2.72 9,874(n) 9,240
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Series 2003-133 Cl GB
12-25-26 8.00 2,654,174 2,805,044
Govt Natl Mtge Assn
03-01-39 5.50 19,000,000(g) 19,475,095
03-01-39 6.00 50,000,000(g) 51,671,899
Govt Natl Mtge Assn #345538
02-15-24 8.00 91,808 99,064
Govt Natl Mtge Assn #398831
08-15-26 8.00 119,597 129,194
Govt Natl Mtge Assn #423782
05-15-26 7.50 300,757 324,352
Govt Natl Mtge Assn #425004
10-15-33 5.50 3,242,584 3,343,298
Govt Natl Mtge Assn #426170
06-15-26 8.00 103,347 111,640
Govt Natl Mtge Assn #567717
06-15-32 7.50 15,127 16,345
Govt Natl Mtge Assn #595256
12-15-32 6.00 5,291,135 5,505,512
Govt Natl Mtge Assn #604580
08-15-33 5.00 3,161,997 3,239,673
Govt Natl Mtge Assn #604708
10-15-33 5.50 8,165,718 8,419,343
Govt Natl Mtge Assn #606844
09-15-33 5.00 7,798,669 7,990,245
Govt Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2002-70 Cl IC
08-20-32 47.25 6,016,572(m) 448,582
Govt Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2002-80 Cl CI
01-20-32 452.28 806,214(m) 11,657
Harborview Mtge Loan Trust
Collateralized Mtge Obligation
Series 2005-16 Cl 3A1B
01-19-36 0.81 262,493(k) 48,666
Harborview Mtge Loan Trust
Collateralized Mtge Obligation
Series 2006-8 Cl 2A1B
08-21-36 0.72 899,464(k) 225,045
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2005-AR8 Cl AX1
04-25-35 0.80 65,790,560(b,m) 1
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-AR25 Cl 3A3
09-25-36 6.72 29,573,246(m) 302,818
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Series 2005-AR25 Cl 1A21
12-25-35 5.78 5,691,211(k) 2,896,974
Lehman XS Trust
Collateralized Mtge Obligation
Series 2007-5H Cl 1A1
05-25-37 6.50 18,379,591 8,190,405
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MORTGAGE-BACKED (CONT.)
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-2 Cl 4A1
02-25-19 5.00% $4,912,293 $4,313,607
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-4 Cl 2A1
05-25-34 6.00 2,798,399 2,471,877
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-7 Cl 8A1
08-25-19 5.00 3,961,675 3,665,713
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2004-8 Cl 7A1
09-25-19 5.00 5,469,938 4,892,928
MASTR Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-3 Cl 1A2
04-25-35 5.50 950,000 741,072
Merrill Lynch Alternative Note Asset
Collateralized Mtge Obligation
Series 2007-OAR2 Cl A1
04-25-37 0.65 937,136(j) 371,880
Residential Accredit Loans
Collateralized Mtge Obligation
Series 2006-QS3 Cl 1A10
03-25-36 6.00 4,878,249 2,861,921
Residential Funding Mtge Securities I
Collateralized Mtge Obligation
Series 2005-S6 Cl A8
08-25-35 5.25 19,610,507 14,682,220
Structured Adjustable Rate Mtge Loan Trust
Collateralized Mtge Obligation
Series 2006-5 Cl 4A1
06-25-36 5.91 635,027(k) 322,817
Structured Asset Securities
Collateralized Mtge Obligation
Series 2003-33H Cl 1A1
10-25-33 5.50 11,569,068 9,911,438
Washington Mutual Mtge Pass-Through Ctfs
Collateralized Mtge Obligation
Series 2005-AR14 Cl 2A1
12-25-35 5.28 5,030,953(k) 3,383,582
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2005-10 Cl A1
10-25-35 5.00 24,746,056 18,452,245
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2005-14 Cl 2A1
12-25-35 5.50 1,878,576 1,468,518
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2005-5 Cl 2A1
05-25-35 5.50 9,943,952 7,203,151
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2006-AR6 Cl 5A1
03-25-36 5.11 10,408,662(k) 6,411,180
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2007-15 Cl A1
11-25-37 6.00 13,860,300 9,691,381
---------------
Total 1,439,552,318
- -------------------------------------------------------------------------------------
AEROSPACE & DEFENSE (--%)
Moog
Sr Sub Nts
06-15-18 7.25 915,000(d) 823,500
- -------------------------------------------------------------------------------------
BANKING (1.7%)
Banco Nacional de Desenvolvimento Economico e Social
Sr Unsecured
06-16-18 6.37 975,000(c,d) 903,094
Bank of America
Sr Unsecured
05-01-18 5.65 17,400,000(s) 14,795,914
Citigroup
Sr Unsecured
02-14-11 5.13 4,235,000 3,925,379
Goldman Sachs Group
Sr Unsecured
02-15-19 7.50 6,365,000(s) 6,297,268
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
BANKING (CONT.)
JPMorgan Chase & Co
Sr Unsecured
01-15-18 6.00% $5,090,000 $4,920,070
Manufacturers & Traders Trust
Sub Nts
12-01-21 5.63 15,595,000 10,760,837
Wells Fargo & Co
Sr Unsecured
12-11-17 5.63 13,050,000(s) 12,386,786
---------------
Total 53,989,348
- -------------------------------------------------------------------------------------
BROKERAGE (--%)
Lehman Brothers Holdings
Sr Unsecured
05-02-18 6.88 755,000(b,g,r) 98,150
05-02-18 6.88 9,285,000(b,r) 1,207,050
---------------
Total 1,305,200
- -------------------------------------------------------------------------------------
CHEMICALS (0.4%)
Airgas
10-01-18 7.13 2,695,000(d) 2,560,250
Chemtura
06-01-16 6.88 2,710,000(b) 1,219,500
INVISTA
Sr Unsecured
05-01-12 9.25 9,676,000(d) 8,853,540
NALCO
11-15-11 7.75 1,415,000 1,400,850
---------------
Total 14,034,140
- -------------------------------------------------------------------------------------
CONSUMER CYCLICAL SERVICES (--%)
West Corp
10-15-14 9.50 875,000 612,500
- -------------------------------------------------------------------------------------
CONSUMER PRODUCTS (0.3%)
Clorox
Sr Unsecured
10-15-12 5.45 4,620,000 4,705,343
Jarden
05-01-17 7.50 4,550,000 3,503,500
Visant
10-01-12 7.63 370,000 345,025
---------------
Total 8,553,868
- -------------------------------------------------------------------------------------
ELECTRIC (5.7%)
Alabama Power
Sr Unsecured
03-01-39 6.00 2,570,000(g) 2,551,239
Aquila
Sr Unsecured
07-01-12 11.88 1,675,000 1,767,125
CenterPoint Energy
Houston Electric LLC
Series U
03-01-14 7.00 8,230,000 8,512,001
Cleveland Electric Illuminating
1st Mtge
11-15-18 8.88 13,575,000 14,997,198
Consumers Energy
1st Mtge
09-15-18 5.65 2,030,000 1,930,475
Detroit Edison
10-01-13 6.40 6,325,000 6,581,681
Dominion Resources
Sr Nts
01-15-19 8.88 5,105,000 5,839,558
Duke Energy Carolinas LLC
1st Refunding Mtge
10-01-15 5.30 3,130,000 3,181,413
Duke Energy Carolinas LLC
Sr Unsecured
02-01-14 6.30 6,370,000(s) 6,617,812
Duke Energy Carolinas LLC
Sr Unsecured Series D
03-01-10 7.38 9,880,000 10,215,841
Duke Energy Indiana
1st Mtge
08-15-38 6.35 750,000 809,676
Edison Mission Energy
Sr Unsecured
06-15-13 7.50 2,040,000 1,871,700
06-15-16 7.75 1,235,000(s) 1,123,850
Exelon
Sr Unsecured
06-15-10 4.45 11,905,000 11,789,414
FirstEnergy
Sr Unsecured Series B
11-15-11 6.45 5,945,000 5,999,823
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
ELECTRIC (CONT.)
Florida Power
1st Mtge
06-15-38 6.40% $1,260,000 $1,324,486
Indiana Michigan Power
Sr Nts
03-15-19 7.00 6,570,000 6,412,183
Indiana Michigan Power
Sr Unsecured
03-15-37 6.05 13,020,000 10,907,609
Jersey Central Power & Light
Sr Unsecured
02-01-19 7.35 1,785,000 1,791,915
Majapahit Holding
10-17-16 7.75 480,000(c,d) 326,400
Midwest Generation LLC
Pass-Through Ctfs Series B
01-02-16 8.56 163,621 161,576
Nevada Power
08-01-18 6.50 8,395,000 8,001,598
Nevada Power
Series M
03-15-16 5.95 4,535,000 4,192,712
NiSource Finance
03-01-13 6.15 3,890,000 3,328,054
03-15-18 6.40 1,890,000 1,483,769
01-15-19 6.80 5,580,000 4,375,741
09-15-20 5.45 1,985,000 1,359,249
Northern States Power
Sr Unsecured
08-01-09 6.88 8,930,000 9,032,686
NRG Energy
02-01-16 7.38 9,935,000 9,165,038
PacifiCorp
1st Mtge
09-15-13 5.45 5,095,000 5,317,606
07-15-38 6.35 1,675,000 1,700,882
Portland General Electric
03-15-10 7.88 3,165,000 3,195,767
Potomac Electric Power
1st Mtge
12-15-38 7.90 4,390,000 4,950,811
Potomac Electric Power
Sr Secured
06-01-35 5.40 3,160,000 2,660,395
PPL Electric Utilities
1st Mtge
11-30-13 7.13 7,935,000 8,981,898
Sierra Pacific Power
Series M
05-15-16 6.00 13,555,000 12,549,449
---------------
Total 185,008,630
- -------------------------------------------------------------------------------------
ENTERTAINMENT (0.1%)
United Artists Theatre Circuit
Pass-Through Ctfs
07-01-15 9.30 4,943,559(o) 4,836,778
- -------------------------------------------------------------------------------------
FOOD AND BEVERAGE (1.9%)
ConAgra Foods
Sr Unsecured
09-15-11 6.75 3,895,000 4,099,530
08-01-27 6.70 6,687,000 6,712,297
Cott Beverages USA
12-15-11 8.00 2,563,000 1,384,020
Dr Pepper Snapple Group
05-01-18 6.82 18,820,000 17,521,476
Molson Coors Capital Finance
09-22-10 4.85 13,415,000(c) 13,498,589
SABMiller
01-15-14 5.70 20,215,000(c,d) 19,374,035
---------------
Total 62,589,947
- -------------------------------------------------------------------------------------
GAMING (0.2%)
Boyd Gaming
Sr Sub Nts
02-01-16 7.13 6,454,000 3,291,540
MGM MIRAGE
02-27-14 5.88 1,779,000(s) 720,495
07-15-15 6.63 1,686,000 657,540
Shingle Springs Tribal Gaming Authority
Sr Nts
06-15-15 9.38 2,505,000(d) 1,415,325
---------------
Total 6,084,900
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
GAS DISTRIBUTORS (0.2%)
Southern California Gas
1st Mtge
03-15-14 5.50% $4,940,000 $5,231,638
- -------------------------------------------------------------------------------------
GAS PIPELINES (2.3%)
CenterPoint Energy Resources
Sr Unsecured
02-15-11 7.75 8,660,000 8,777,681
Colorado Interstate Gas
Sr Unsecured
11-15-15 6.80 14,603,000 13,392,075
El Paso
Sr Unsecured
12-12-13 12.00 3,075,000 3,259,500
06-15-14 6.88 965,000 852,886
02-15-16 8.25 1,080,000 993,600
Kinder Morgan Energy Partners LP
Sr Unsecured
03-15-11 6.75 2,345,000 2,399,472
Northern Natural Gas
Sr Unsecured
02-15-37 5.80 2,975,000(d) 2,528,226
Northwest Pipeline
Sr Unsecured
06-15-16 7.00 5,870,000 5,805,759
04-15-17 5.95 9,860,000 9,087,207
Southern Natural Gas
Sr Unsecured
04-01-17 5.90 9,256,000(d) 7,897,164
Southern Star Central
Sr Nts
03-01-16 6.75 1,460,000 1,175,300
Transcontinental Gas Pipe Line
Sr Unsecured
04-15-16 6.40 11,329,000 10,864,715
Transcontinental Gas Pipe Line
Sr Unsecured Series B
08-15-11 7.00 8,665,000 8,782,957
---------------
Total 75,816,542
- -------------------------------------------------------------------------------------
HEALTH CARE (0.8%)
Cardinal Health
Sr Unsecured
06-15-12 5.65 3,860,000 3,771,294
Community Health Systems
07-15-15 8.88 9,190,000(s) 8,696,038
DaVita
03-15-13 6.63 3,500,000 3,412,500
HCA
Sr Secured
02-15-17 9.88 4,525,000(d) 4,321,375
HCA
Sr Secured Pay-in-kind
11-15-16 9.63 4,615,000(l) 3,853,525
Omnicare
12-15-13 6.75 2,370,000 2,204,100
12-15-15 6.88 355,000 330,150
Select Medical
02-01-15 7.63 1,175,000 722,625
---------------
Total 27,311,607
- -------------------------------------------------------------------------------------
HEALTH CARE INSURANCE (0.1%)
Coventry Health Care
Sr Unsecured
08-15-14 6.30 3,370,000 2,453,583
03-15-17 5.95 1,685,000 1,101,575
---------------
Total 3,555,158
- -------------------------------------------------------------------------------------
INDEPENDENT ENERGY (4.1%)
Anadarko Petroleum
Sr Unsecured
09-15-09 2.40 2,175,000(j) 2,151,754
09-15-16 5.95 13,215,000 11,763,147
Canadian Natural Resources
Sr Unsecured
02-01-39 6.75 8,795,000(c) 7,020,387
Chesapeake Energy
01-15-16 6.63 5,260,000(s) 4,300,050
01-15-16 6.88 4,570,000 3,758,825
Denbury Resources
Sr Sub Nts
03-01-16 9.75 2,055,000 1,931,700
EnCana Holdings Finance
05-01-14 5.80 9,010,000(c) 8,745,584
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
24 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
INDEPENDENT ENERGY (CONT.)
EnCana
Sr Unsecured
11-01-11 6.30% $17,330,000(c) $17,931,698
10-15-13 4.75 6,305,000(c) 5,934,277
08-15-37 6.63 2,465,000(c) 2,054,647
Forest Oil
Sr Nts
02-15-14 8.50 3,930,000(d) 3,576,300
Nexen
Sr Unsecured
11-20-13 5.05 3,275,000(c) 3,019,060
05-15-37 6.40 10,743,000(c) 7,581,528
PetroHawk Energy
Sr Nts
08-01-14 10.50 3,125,000(d) 3,078,125
Quicksilver Resources
08-01-15 8.25 6,120,000 4,957,200
SandRidge Energy
06-01-18 8.00 5,740,000(d) 4,505,900
XTO Energy
Sr Unsecured
06-15-13 4.63 755,000 722,009
02-01-14 4.90 21,995,000 20,857,881
01-31-15 5.00 6,965,000 6,465,714
06-30-15 5.30 11,615,000 11,050,279
---------------
Total 131,406,065
- -------------------------------------------------------------------------------------
INTEGRATED ENERGY (0.8%)
Marathon Oil
Sr Nts
02-15-19 7.50 2,920,000 2,836,503
Marathon Oil
Sr Unsecured
03-15-18 5.90 11,760,000 10,475,409
Petro-Canada
Sr Unsecured
05-15-38 6.80 11,560,000(c) 8,512,876
Suncor Energy
Sr Unsecured
06-01-39 6.85 3,320,000(c) 2,400,955
TNK-BP Finance
03-13-18 7.88 545,000(c,d) 321,550
---------------
Total 24,547,293
- -------------------------------------------------------------------------------------
LIFE INSURANCE (1.2%)
MetLife
02-15-19 7.72 5,335,000 5,147,656
Metropolitan Life Global Funding I
Sr Secured
04-10-13 5.13 15,785,000(d) 14,886,794
Pricoa Global Funding I
Sr Secured
10-18-12 5.40 11,265,000(d) 10,228,726
Principal Life Income Funding Trusts
Sr Secured
12-14-12 5.30 8,140,000 7,566,350
---------------
Total 37,829,526
- -------------------------------------------------------------------------------------
MEDIA CABLE (1.1%)
Charter Communications Operating LLC/Capital
Secured
04-30-12 8.00 3,150,000(d) 2,803,500
Comcast
03-15-11 5.50 13,135,000 13,315,170
03-15-37 6.45 7,140,000(s) 6,130,918
CSC Holdings
Sr Unsecured
04-15-14 8.50 3,145,000(d) 3,042,788
02-15-19 8.63 1,085,000(d) 1,022,613
CSC Holdings
Sr Unsecured Series B
07-15-09 8.13 2,670,000 2,716,725
DIRECTV Holdings LLC/Financing
05-15-16 7.63 3,505,000 3,364,800
Videotron
04-15-18 9.13 465,000(c,d) 458,606
04-15-18 9.13 1,530,000(c,d) 1,537,650
Virgin Media Finance
04-15-14 8.75 1,405,000(c) 1,262,744
---------------
Total 35,655,514
- -------------------------------------------------------------------------------------
MEDIA NON CABLE (3.3%)
British Sky Broadcasting Group
02-15-18 6.10 14,415,000(c,d) 12,905,533
EchoStar DBS
10-01-13 7.00 4,415,000 4,116,988
10-01-14 6.63 3,653,000 3,287,700
02-01-16 7.13 2,945,000 2,657,863
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 25
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
MEDIA NON CABLE (CONT.)
Intelsat Subsidiary Holding
Sr Unsecured
01-15-15 8.88% $615,000(c,d) $570,413
Lamar Media
08-15-15 6.63 7,578,000 4,887,810
Liberty Media LLC
Sr Unsecured
05-15-13 5.70 8,595,000 6,500,201
News America
12-15-35 6.40 4,188,000 3,289,310
11-15-37 6.65 3,610,000 2,918,440
01-09-38 6.75 2,970,000 2,991,544
Nielsen Finance LLC
08-01-14 10.00 3,485,000 2,875,125
Rainbow Natl Services LLC
09-01-12 8.75 1,850,000(d) 1,852,313
Reed Elsevier Capital
08-01-11 6.75 7,680,000 7,462,208
RR Donnelley & Sons
Sr Unsecured
01-15-17 6.13 20,400,000 14,918,009
Thomson Reuters
08-15-09 4.25 6,430,000(c) 6,463,905
07-15-13 5.95 3,320,000(c) 3,278,935
10-01-14 5.70 16,400,000(c) 16,248,266
07-15-18 6.50 9,720,000(c) 9,108,593
---------------
Total 106,333,156
- -------------------------------------------------------------------------------------
METALS (0.3%)
Freeport-McMoRan Copper & Gold
Sr Unsecured
04-01-17 8.38 9,820,000 8,469,750
- -------------------------------------------------------------------------------------
NON CAPTIVE DIVERSIFIED (0.3%)
General Electric Capital
Sr Unsecured
01-10-39 6.88 10,610,000 8,586,047
- -------------------------------------------------------------------------------------
OIL FIELD SERVICES (0.3%)
Gaz Capital
Secured
11-22-16 6.21 1,255,000(c,d) 831,438
KazMunaiGaz Finance
07-02-18 9.13 720,000(c,d) 473,162
Weatherford Intl
03-01-19 9.63 6,825,000(c) 6,971,655
03-15-38 7.00 1,425,000(c) 1,014,576
---------------
Total 9,290,831
- -------------------------------------------------------------------------------------
PACKAGING (0.3%)
Crown Americas LLC/Capital
11-15-15 7.75 4,475,000 4,508,562
Owens-Brockway Glass Container
05-15-13 8.25 4,320,000 4,363,200
Vitro
02-01-17 9.13 4,465,000(b,c) 1,127,413
---------------
Total 9,999,175
- -------------------------------------------------------------------------------------
PAPER (0.1%)
Georgia-Pacific LLC
01-15-17 7.13 1,970,000(d,s) 1,807,475
NewPage
Sr Secured
05-01-12 10.00 3,530,000 1,067,825
Smurfit-Stone Container Enterprises
Sr Unsecured
03-15-17 8.00 890,000(b,r) 77,875
---------------
Total 2,953,175
- -------------------------------------------------------------------------------------
PHARMACEUTICALS (0.1%)
Roche Holdings
03-01-39 7.00 2,780,000(d) 2,913,079
- -------------------------------------------------------------------------------------
RAILROADS (0.7%)
CSX
Sr Unsecured
03-15-12 6.30 4,400,000 4,309,131
03-15-13 5.75 10,785,000 10,249,503
04-01-15 6.25 10,349,000 9,631,183
---------------
Total 24,189,817
- -------------------------------------------------------------------------------------
RETAILERS (0.1%)
Home Depot
Sr Unsecured
03-01-11 5.20 2,060,000 2,068,819
- -------------------------------------------------------------------------------------
TECHNOLOGY (0.3%)
SunGard Data Systems
08-15-13 9.13 3,246,000 2,759,100
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
26 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
TECHNOLOGY (CONT.)
Tyco Electronics Group
10-01-12 6.00% $1,720,000(c) $1,516,003
01-15-14 5.95 7,850,000(c) 6,938,053
---------------
Total 11,213,156
- -------------------------------------------------------------------------------------
TRANSPORTATION SERVICES (0.9%)
Erac USA Finance
10-15-17 6.38 23,290,000(d) 15,227,573
FedEx
Sr Nts
01-15-19 8.00 13,570,000 14,186,357
---------------
Total 29,413,930
- -------------------------------------------------------------------------------------
TREASURY (--%)
Govt of Indonesia
(Indonesian Rupiah)
07-15-22 10.25 15,000,000,000(c) 926,098
- -------------------------------------------------------------------------------------
WIRELESS (1.0%)
Centennial Communications
Sr Nts
01-01-13 7.19 4,005,000(j) 3,984,975
Nextel Communications
Series D
08-01-15 7.38 4,480,000 2,060,800
Nextel Communications
Series E
10-31-13 6.88 310,000 147,250
Rogers Communications
08-15-18 6.80 8,830,000(c) 8,818,962
Sprint Capital
01-30-11 7.63 6,800,000 5,899,000
US Cellular
Sr Unsecured
12-15-33 6.70 5,685,000 4,079,619
Verizon Wireless Capital LLC
Sr Unsecured
02-01-14 5.55 7,445,000(d) 7,401,730
---------------
Total 32,392,336
- -------------------------------------------------------------------------------------
WIRELINES (5.5%)
AT&T
Sr Unsecured
03-15-11 6.25 14,811,000 15,443,326
01-15-38 6.30 5,605,000 4,992,274
02-15-39 6.55 9,055,000 8,403,049
Frontier Communications
Sr Unsecured
03-15-19 7.13 1,770,000 1,486,800
Qwest
Sr Unsecured
10-01-14 7.50 7,220,000 6,416,775
06-15-15 7.63 2,030,000 1,811,775
Telecom Italia Capital
11-15-13 5.25 24,965,000(c) 22,419,893
Telefonica Europe
09-15-10 7.75 19,171,000(c) 20,143,698
TELUS
Sr Unsecured
06-01-11 8.00 41,981,000(c) 43,482,241
Verizon New York
Sr Unsecured Series A
04-01-12 6.88 41,117,000 42,011,706
Verizon Pennsylvania
Sr Unsecured Series A
11-15-11 5.65 3,290,000 3,348,508
Windstream
08-01-16 8.63 5,560,000 5,337,600
03-15-19 7.00 2,700,000 2,322,000
---------------
Total 177,619,645
- -------------------------------------------------------------------------------------
TOTAL BONDS
(Cost: $3,787,127,356) $3,545,419,860
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 27
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (0.1%)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE RATE AMOUNT VALUE(a)
TOBACCO
Tobacco Settlement Financing Corporation
Revenue Bonds
Series 2007A-1
06-01-46 6.71% $7,730,000 $4,026,093
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $7,716,800) $4,026,093
- -------------------------------------------------------------------------------------
<Caption>
SENIOR LOANS (1.7%)(t)
COUPON PRINCIPAL
BORROWER RATE AMOUNT VALUE(a)
CHEMICALS (0.2%)
Hexion Specialty Chemicals
Tranche C1 Term Loan
TBD TBD $2,200,032(g,u) $821,338
05-05-13 3.69% 8,835,838 3,298,683
Hexion Specialty Chemicals
Tranche C2 Term Loan
TBD TBD 477,909(g,u) 178,418
05-05-13 3.75 1,921,996 717,539
---------------
Total 5,015,978
- -------------------------------------------------------------------------------------
CONSUMER CYCLICAL SERVICES (0.2%)
West Corp
Term B2 Loan
10-24-13 2.82-2.85 7,805,502 5,691,538
- -------------------------------------------------------------------------------------
ELECTRIC (0.1%)
Energy Future Holdings LLC
Tranche B3 Term Loan
TBD TBD 3,401,389(g,u) 2,104,609
10-10-14 3.95-4.45 8,503,472 5,261,523
---------------
Total 7,366,132
- -------------------------------------------------------------------------------------
FOOD AND BEVERAGE (0.2%)
Pinnacle Foods Finance LLC
Term Loan
04-02-14 3.16 6,024,709 4,881,099
- -------------------------------------------------------------------------------------
HEALTH CARE (--%)
HCA
Tranche B1 Term Loan
11-18-13 3.71 126,406 106,050
- -------------------------------------------------------------------------------------
MEDIA CABLE (0.2%)
Charter Communications Operating LLC
Term Loan
03-06-14 3.18-3.36 6,375,957 5,068,184
- -------------------------------------------------------------------------------------
MEDIA NON CABLE (0.2%)
Idearc
Tranche B Term Loan
11-17-14 2.48-3.46 2,604,767 909,506
Nielsen Finance LLC
Term Loan
08-09-13 2.45 5,795,898(c) 4,552,215
---------------
Total 5,461,721
- -------------------------------------------------------------------------------------
OIL FIELD SERVICES (0.2%)
Dresser
Tranche B Term Loan
05-04-14 2.73-3.49 7,166,795 5,098,673
- -------------------------------------------------------------------------------------
PAPER (0.1%)
Georgia-Pacific LLC
Tranche B Term Loan
12-20-12 2.96-4.19 7,209 6,212
NewPage
Term Loan
TBD TBD 8,877,000(g,u) 5,501,520
12-22-14 5.31 1,157,078 717,099
---------------
Total 6,224,831
- -------------------------------------------------------------------------------------
TECHNOLOGY (0.1%)
SunGard Data Systems
Term Loan
02-28-14 2.20-2.99 5,386,260 4,489,124
- -------------------------------------------------------------------------------------
TRANSPORTATION SERVICES (0.1%)
Hertz
Letter of Credit
TBD TBD 124,230(g,u) 81,915
12-21-12 1.53 248,460 163,829
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
28 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SENIOR LOANS (CONTINUED)
COUPON PRINCIPAL
BORROWER RATE AMOUNT VALUE(a)
TRANSPORTATION SERVICES (CONT.)
Hertz
Tranche B Term Loan
TBD TBD $694,031(g,u) $457,630
12-21-12 2.20-2.65% 1,388,061 915,260
---------------
Total 1,618,634
- -------------------------------------------------------------------------------------
WIRELINES (0.1%)
Fairpoint Communications
Tranche B Term Loan
TBD TBD 7,735,000(g,u) 4,215,575
- -------------------------------------------------------------------------------------
TOTAL SENIOR LOANS)
(Cost: $60,231,513) $55,237,539
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (--%)
ISSUER SHARES VALUE(a)
PAPER & FOREST PRODUCTS
Crown Paper Escrow 6,950,000(b,o) $7
TOTAL COMMON STOCKS
(Cost: $--) 7
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (7.7%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.29% 249,118,002(w) $249,118,002
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $249,118,002) $249,118,002
- -------------------------------------------------------------------------------------
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (9.1%)
SHARES VALUE(a)
JPMorgan Prime Money Market Fund 293,327,710 $293,327,710
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $293,327,710) $293,327,710
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $4,397,521,381)(x) $4,147,129,211
=====================================================================================
</Table>
INVESTMENTS IN DERIVATIVES
FUTURES CONTRACTS OUTSTANDING AT FEB. 28, 2009
<Table>
<Caption>
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION
CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
- ------------------------------------------------------------------------------------
U.S. Long Bond, 20-year 169 $20,845,094 June 2009 $(482,021)
U.S. Treasury Note, 2-
year 366 79,279,033 July 2009 (114,971)
U.S. Treasury Note, 5-
year (4,130) (485,500,870) April 2009 (1,797,815)
U.S. Treasury Note, 5-
year (230) (26,814,766) July 2009 29,477
U.S. Treasury Note, 10-
year (1,070) (130,222,349) March 2009 1,896,363
- ------------------------------------------------------------------------------------
Total $(468,967)
- ------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 29
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING AT FEB. 28, 2009
<Table>
<Caption>
REFERENCED BUY/SELL PAY/RECEIVE EXPIRATION UNREALIZED
COUNTERPARTY ENTITY PROTECTION FIXED RATE DATE NOTIONAL AMOUNT APPRECIATION
- ---------------------------------------------------------------------------------------------------------------
Goldman Sachs Home Depot Buy .50 March 20, 2011 $1,920,000 $59,462
- ---------------------------------------------------------------------------------------------------------------
Goldman Sachs ConAgra Foods Buy .18 Sept. 20, 2011 3,895,000 28,039
- ---------------------------------------------------------------------------------------------------------------
Citibank Reed Elsevier Buy .26 Sept. 20, 2011 1,915,000 53,372
Capital
- ---------------------------------------------------------------------------------------------------------------
Goldman Sachs FirstEnergy Buy .60 Dec. 20, 2011 1,750,000 20,064
- ---------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank Cardinal Health Buy .225 June 20, 2012 3,860,000 36,908
- ---------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank NiSource Finance Buy .55 Dec. 20, 2012 3,890,000 576,782
- ---------------------------------------------------------------------------------------------------------------
Total $774,627
- ---------------------------------------------------------------------------------------------------------------
</Table>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT FEB. 28, 2009
<Table>
<Caption>
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED
EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION
- ---------------------------------------------------------------------------------------------
March 11, 2009 7,643,000 9,619,938 $-- $(66,622)
European Monetary Unit U.S. Dollar
- ---------------------------------------------------------------------------------------------
March 11, 2009 4,984,000 6,344,134 27,528 --
European Monetary Unit U.S. Dollar
- ---------------------------------------------------------------------------------------------
March 11, 2009 65,957,000 9,884,696 498,804 --
Norwegian Krone U.S. Dollar
- ---------------------------------------------------------------------------------------------
March 11, 2009 7,495,000 6,485,864 77,692 --
Swiss Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------
March 11, 2009 16,040,462 24,360,000 -- (480,841)
U.S. Dollar Australian Dollar
- ---------------------------------------------------------------------------------------------
March 11, 2009 408,064 640,000 727 --
U.S. Dollar Australian Dollar
- ---------------------------------------------------------------------------------------------
March 11, 2009 6,445,423 608,163,000 -- (212,061)
U.S. Dollar Japanese Yen
- ---------------------------------------------------------------------------------------------
March 11, 2009 10,178,653 18,910,000 -- (717,201)
U.S. Dollar New Zealand Dollar
- ---------------------------------------------------------------------------------------------
Total $604,751 $(1,476,725)
- ---------------------------------------------------------------------------------------------
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 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, 2009, the value of foreign securities represented 9.0%
of net assets.
- --------------------------------------------------------------------------------
30 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(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,
2009, the value of these securities amounted to $193,201,833 or 6.0% 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, 2009, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$671,693,305. See Note 1 to the financial statements.
(h) The following abbreviations are used in the portfolio security descriptions
to identify the insurer of the issue:
<Table>
AMBAC -- Ambac Assurance Corporation
FSA -- Financial Security Assurance
MBIA -- MBIA Insurance Corporation
</Table>
(i) 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.
(j) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Feb. 28,
2009.
(k) Adjustable rate mortgage; interest rate varies to reflect current market
conditions; rate shown is the effective rate on Feb. 28, 2009.
(l) 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.
(m) Interest only represents securities that entitle holders to receive only
interest payments on the underlying mortgages. The yield to maturity of an
interest only is extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of principal repayments
may have an adverse (positive) effect on yield to maturity. The principal
amount shown is the notional amount of the underlying mortgages. The
interest rate disclosed represents yield based upon the estimated timing
and amount of future cash flows at Feb. 28, 2009.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 31
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(n) 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, 2009.
(o) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at Feb. 28, 2009, is as follows:
<Table>
<Caption>
ACQUISITION
SECURITY DATES COST
--------------------------------------------------------------------------
Banc of America Funding*
Series 2006-2 Cl N1
7.25% 2046 11-14-06 thru 10-14-08 $286,277
Crown Paper Escrow
Common 04-16-07 --
United Artist Theatre Circuit
Pass-Through Ctfs
9.30% 2015 02-23-96 thru 08-12-96 4,784,489
</Table>
* Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended.
(p) Represents comparable securities held to satisfy future delivery
requirements of the following open forward sale commitments at Feb. 28,
2009:
<Table>
<Caption>
PRINCIPAL SETTLEMENT PROCEEDS
SECURITY AMOUNT DATE RECEIVABLE VALUE
---------------------------------------------------------------------------
Federal Natl Mtge
Assn
03-01-24 5.50% $13,000,000 03-17-09 $13,426,563 $13,475,306
</Table>
(q) Negligible market value.
(r) This position is in bankruptcy.
(s) At Feb. 28, 2009, security was partially or fully on loan. See Note 5 to
the financial statements.
(t) 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.
(u) 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.
- --------------------------------------------------------------------------------
32 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(v) At Feb. 28, 2009, investments in securities included securities valued at
$13,272,061 that were partially pledged as collateral to cover initial
margin deposits on open interest rate futures contracts.
(w) Affiliated Money Market Fund -- See Note 6 to the financial statements. The
rate shown is the seven-day current annualized yield at Feb. 28, 2009.
(x) At Feb. 28, 2009, the cost of securities for federal income tax purposes
was approximately $4,397,521,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $63,336,000
Unrealized depreciation (313,728,000)
------------------------------------------------------------
Net unrealized depreciation $(250,392,000)
------------------------------------------------------------
</Table>
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 33
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, it is likely
that there may be a range of practices utilized and it may be some period of
time before industry practices become more uniform. For this reason care should
be exercised in interpreting this information and/or using it for comparison
with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the fund, and unobservable inputs reflect the fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2009:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2009
----------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- --------------------------------------------------------------------------------------
Investments in
securities $856,397,627 $3,238,554,152 $52,177,432 $4,147,129,211
Other financial
instruments* (468,967) (97,347) -- (566,314)
- --------------------------------------------------------------------------------------
Total $855,928,660 $3,238,456,805 $52,177,432 $4,146,562,897
- --------------------------------------------------------------------------------------
</Table>
* Other financial instruments are derivative instruments, such as futures,
forwards and swap contracts, which are valued at the unrealized
appreciation/depreciation on the instrument.
The following table is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value.
<Table>
<Caption>
INVESTMENTS IN
SECURITIES
- ---------------------------------------------------------------
Balance as of Aug. 31, 2008 $90,234,544
Accrued discounts/premiums (784,860)
Realized gain (loss) (7,464,861)
Change in unrealized appreciation
(depreciation) (11,565,684)
Net purchases (sales) (9,446,863)
Transfers in and/or out of Level 3 (8,794,844)
- ---------------------------------------------------------------
Balance as of Feb. 28, 2009 $52,177,432
- ---------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
34 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 35
STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------
FEB. 28, 2009 (UNAUDITED)
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $3,855,075,669) $3,604,683,499
Affiliated money market fund (identified cost $249,118,002) 249,118,002
Investments of cash collateral received for securities on loan
(identified cost $293,327,710) 293,327,710
- ---------------------------------------------------------------------------------
Total investments in securities (identified cost $4,397,521,381) 4,147,129,211
Foreign currency holdings (identified cost $67,520) 63,105
Capital shares receivable 23,293,877
Dividends and accrued interest receivable 32,328,744
Receivable for investment securities sold 232,646,868
Unrealized appreciation on forward foreign currency contracts 604,751
Unrealized appreciation on swap contracts 774,627
- ---------------------------------------------------------------------------------
Total assets 4,436,841,183
- ---------------------------------------------------------------------------------
LIABILITIES
Forward sale commitments, at value (proceeds receivable
$13,426,563) 13,475,306
Disbursements in excess of cash 28,573
Dividends payable to shareholders 1,756,899
Capital shares payable 5,742,073
Payable for investment securities purchased 217,075,535
Payable for securities purchased on a forward-commitment basis 671,693,305
Payable upon return of securities loaned 293,327,710
Variation margin payable on futures contracts 824,871
Unrealized depreciation on forward foreign currency contracts 1,476,725
Accrued investment management services fees 39,984
Accrued distribution fees 523,430
Accrued transfer agency fees 12,120
Accrued administrative services fees 5,456
Accrued plan administration services fees 12,181
Other accrued expenses 271,973
- ---------------------------------------------------------------------------------
Total liabilities 1,206,266,141
- ---------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $3,230,575,042
- ---------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
36 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
REPRESENTED BY
Capital stock -- $.01 par value $ 7,388,588
Additional paid-in capital 3,756,220,136
Excess of distributions over net investment income (1,825,032)
Accumulated net realized gain (loss) (280,196,592)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (251,012,058)
- ---------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $3,230,575,042
- ---------------------------------------------------------------------------------
*Including securities on loan, at value $ 287,118,567
- ---------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $1,855,839,496 424,538,198 $4.37(1)
Class B $ 228,953,596 52,385,585 $4.37
Class C $ 35,588,809 8,139,899 $4.37
Class I $ 540,978,429 123,592,552 $4.38
Class R2 $ 10,779 2,464 $4.37
Class R3 $ 9,039 2,067 $4.37
Class R4 $ 62,314,688 14,273,068 $4.37
Class R5 $ 9,023 2,067 $4.37
Class W $ 506,871,183 115,922,859 $4.37
- -------------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $4.59. 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 -- 2009 SEMIANNUAL REPORT 37
STATEMENT OF OPERATIONS --------------------------------------------------------
SIX MONTHS ENDED FEB. 28, 2009 (UNAUDITED)
<Table>
<Caption>
INVESTMENT INCOME
Income:
Interest $ 86,775,555
Income distributions from affiliated money market fund 1,357,326
Fee income from securities lending 604,059
Less foreign taxes withheld (4,106)
- --------------------------------------------------------------------------------
Total income 88,732,834
- --------------------------------------------------------------------------------
Expenses:
Investment management services fees 7,469,436
Distribution fees
Class A 2,254,038
Class B 1,163,816
Class C 159,939
Class R2 24
Class R3 11
Class W 732,950
Transfer agency fees
Class A 1,408,362
Class B 194,598
Class C 25,693
Class R2 2
Class R3 2
Class R4 16,886
Class R5 2
Class W 586,360
Administrative services fees 1,016,624
Plan administration services fees
Class R2 12
Class R3 11
Class R4 84,430
Compensation of board members 56,438
Custodian fees 107,252
Printing and postage 151,000
Registration fees 78,750
Professional fees 50,516
Other 38,290
- --------------------------------------------------------------------------------
Total expenses 15,595,442
Expenses waived/reimbursed by the Investment Manager and its
affiliates (1,624,350)
Earnings and bank fee credits on cash balances (8,655)
- --------------------------------------------------------------------------------
Total net expenses 13,962,437
- --------------------------------------------------------------------------------
Investment income (loss) -- net 74,770,397
- --------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
38 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $ (93,276,709)
Foreign currency transactions 1,741,328
Futures contracts (35,067,625)
Swap transactions 38,838
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (126,564,168)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies (84,159,858)
- --------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (210,724,026)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(135,953,629)
- --------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 39
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2009 AUG. 31, 2008
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 74,770,397 $ 152,258,368
Net realized gain (loss) on investments (126,564,168) 4,060,405
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities in
foreign currencies (84,159,858) (142,483,859)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (135,953,629) 13,834,914
- ---------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (42,623,309) (84,539,939)
Class B (4,631,013) (10,768,502)
Class C (635,910) (828,277)
Class I (15,331,508) (22,019,428)
Class R2 (217) (290)
Class R3 (219) (308)
Class R4 (1,631,671) (3,476,394)
Class R5 (229) (328)
Class W (13,716,255) (18,133,130)
- ---------------------------------------------------------------------------------------------------
Total distributions (78,570,331) (139,766,596)
- ---------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
40 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2009 AUG. 31, 2008
(UNAUDITED)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 294,620,892 $ 386,502,419
Class B shares 34,707,309 80,268,108
Class C shares 10,091,770 20,510,381
Class I shares 58,512,021 193,548,806
Class R2 shares 1,728 --
Class R4 shares 11,764,423 31,152,017
Class W shares 88,283,154 529,049,476
Fund Merger (Note 8)
Class A shares -- 52,349,504
Class B shares -- 13,151,218
Class C shares -- 1,247,150
Class I shares -- 250,084,366
Class R2 shares -- 4,925
Class R3 shares -- 4,925
Class R4 shares -- 11,052
Class R5 shares -- 4,913
Class W shares -- 4,890
Reinvestment of distributions at net asset value
Class A shares 35,166,779 71,053,046
Class B shares 4,177,762 9,967,093
Class C shares 554,184 747,742
Class I shares 15,201,345 22,202,710
Class R2 shares 9 --
Class R4 shares 1,616,599 3,527,696
Class W shares 13,609,140 18,163,448
Payments for redemptions
Class A shares (281,495,450) (458,212,241)
Class B shares (49,409,187) (142,424,544)
Class C shares (4,787,368) (6,555,566)
Class I shares (186,646,058) (137,684,266)
Class R4 shares (22,025,002) (34,245,276)
Class W shares (209,033,703) (92,614,678)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (185,089,653) 811,819,314
- ---------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (399,613,613) 685,887,632
Net assets at beginning of period 3,630,188,655 2,944,301,023
- ---------------------------------------------------------------------------------------------------
Net assets at end of period $3,230,575,042 $3,630,188,655
- ---------------------------------------------------------------------------------------------------
Undistributed (excess of distributions over) net investment
income $ (1,825,032) $ 1,974,902
- ---------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 41
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(k) 2008 2007 2006 2005
Net asset value, beginning of period $4.65 $4.81 $4.77 $4.89 $4.87
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10(b) .22(b) .21(b) .19 .18
Net gains (losses) (both realized and
unrealized) (.28) (.17) .05 (.11) .03
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.18) .05 .26 .08 .21
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.21) (.21) (.20) (.19)
Tax return of capital -- -- (.01) -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.21) (.22) (.20) (.19)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.65 $4.81 $4.77 $4.89
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1,856 $1,920 $1,937 $2,013 $1,774
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) .94%(e) .95% .97% .99% 1.02%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) .83%(e) .89% .89% .89% .94%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.50%(e) 4.68% 4.43% 4.09% 3.67%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(h) 160% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------
Total return(i) (3.76%)(j) .93% 5.54% 1.64% 4.38%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) 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
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(g) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(h) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(l) 2008 2007 2006 2005
Net asset value, beginning of period $4.65 $4.81 $4.77 $4.89 $4.88
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08(b) .19(b) .18(b) .16 .15
Net gains (losses) (both realized and
unrealized) (.27) (.18) .04 (.12) .01
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.19) .01 .22 .04 .16
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.17) (.18) (.16) (.15)
Tax return of capital -- -- (.00)(c) -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.17) (.18) (.16) (.15)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.65 $4.81 $4.77 $4.89
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $229 $254 $304 $402 $484
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.71%(f) 1.71% 1.73% 1.76% 1.78%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.59%(f) 1.65% 1.65% 1.65% 1.70%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.75%(f) 3.91% 3.66% 3.31% 2.92%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(i) 160% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------
Total return(j) (4.12%)(k) .16% 4.74% .88% 3.39%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Rounds to zero.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(i) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(j) Total return does not reflect payment of a sales charge.
(k) Not annualized.
(l) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 43
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(l) 2008 2007 2006 2005
Net asset value, beginning of period $4.65 $4.81 $4.77 $4.90 $4.88
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08(b) .19(b) .18(b) .16 .15
Net gains (losses) (both realized and
unrealized) (.27) (.18) .04 (.13) .02
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.19) .01 .22 .03 .17
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.17) (.18) (.16) (.15)
Tax return of capital -- -- (.00)(c) -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.17) (.18) (.16) (.15)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.65 $4.81 $4.77 $4.90
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $36 $32 $17 $17 $18
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.70%(f) 1.70% 1.73% 1.76% 1.79%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.58%(f) 1.65% 1.65% 1.66% 1.70%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.75%(f) 3.93% 3.67% 3.31% 2.93%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(i) 160% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------
Total return(j) (4.12%)(k) .16% 4.73% .66% 3.60%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Rounds to zero.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(i) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(j) Total return does not reflect payment of a sales charge.
(k) Not annualized.
(l) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
44 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(j) 2008 2007 2006 2005
Net asset value, beginning of period $4.65 $4.82 $4.78 $4.89 $4.88
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11(b) .24(b) .23(b) .21 .20
Net gains (losses) (both realized and
unrealized) (.27) (.18) .04 (.11) .02
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.16) .06 .27 .10 .22
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) (.23) (.22) (.21) (.21)
Tax return of capital -- -- (.01) -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.11) (.23) (.23) (.21) (.21)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.38 $4.65 $4.82 $4.78 $4.89
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $541 $693 $386 $276 $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) .54%(e) .55% .56% .55% .60%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) .47%(e) .53% .54% .54% .60%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.88%(e) 5.09% 4.80% 4.59% 4.01%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(h) 160% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------
Total return (3.36%)(i) 1.07% 5.90% 2.19% 4.53%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) 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
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(g) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(h) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(i) Not annualized.
(j) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 45
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R2
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(l) 2008 2007(b)
Net asset value, beginning of period $4.65 $4.80 $4.81
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .09 .21 .14
Net gains (losses) (both realized and
unrealized) (.27) (.16) (.02)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.18) .05 .12
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.20) (.13)
Tax return of capital -- -- (.00)(d)
- --------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.20) (.13)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.65 $4.80
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(e),(f) 1.33%(g) 1.34% 1.32%(g)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(f),(h),(i) 1.02%(g) 1.08% 1.32%(g)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.29%(g) 4.53% 4.06%(g)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(j) 160% 226% 295%
- --------------------------------------------------------------------------------------------------------------
Total return (3.85%)(k) .84% 2.70%(k)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to Aug. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Rounds to zero.
(e) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(f) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(g) Adjusted to an annual basis.
(h) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(i) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(j) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(k) Not annualized.
(l) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R3
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(l) 2008 2007(b)
Net asset value, beginning of period $4.65 $4.80 $4.81
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .10 .23 .15
Net gains (losses) (both realized and
unrealized) (.28) (.17) (.02)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.18) .06 .13
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.21) (.14)
Tax return of capital -- -- (.00)(d)
- --------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.21) (.14)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.65 $4.80
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(e),(f) 1.09%(g) 1.08% 1.06%(g)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(f),(h),(i) .76%(g) .83% 1.06%(g)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.59%(g) 4.79% 4.33%(g)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(j) 160% 226% 295%
- --------------------------------------------------------------------------------------------------------------
Total return (3.73%)(k) 1.11% 2.90%(k)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to Aug. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Rounds to zero.
(e) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(f) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(g) Adjusted to an annual basis.
(h) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(i) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(j) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(k) Not annualized.
(l) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 47
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(j) 2008 2007 2006 2005
Net asset value, beginning of period $4.64 $4.80 $4.77 $4.89 $4.88
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10(b) .23(b) .22(b) .20 .19
Net gains (losses) (both realized and
unrealized) (.27) (.17) .04 (.12) .02
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.17) .06 .26 .08 .21
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.22) (.22) (.20) (.20)
Tax return of capital -- -- (.01) -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.22) (.23) (.20) (.20)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.64 $4.80 $4.77 $4.89
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $62 $75 $78 $173 $202
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) .84%(e) .85% .83% .82% .86%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) .77%(e) .76% .73% .73% .78%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.58%(e) 4.81% 4.53% 4.24% 3.85%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(h) 160% 226% 295% 281% 300%
- --------------------------------------------------------------------------------------------------------------
Total return (3.52%)(i) 1.03% 5.49% 1.81% 4.34%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) 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
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(g) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(h) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(i) Not annualized.
(j) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
48 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R5
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(l) 2008 2007(b)
Net asset value, beginning of period $4.64 $4.80 $4.81
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .11 .24 .17
Net gains (losses) (both realized and
unrealized) (.27) (.18) (.02)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.16) .06 .15
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) (.22) (.16)
Tax return of capital -- -- (.00)(d)
- --------------------------------------------------------------------------------------------------------------
Total distributions (.11) (.22) (.16)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.64 $4.80
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(e),(f) .59%(g) .59% .59%(g)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(f),(h),(i) .52%(g) .58% .57%(g)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.81%(g) 5.02% 4.81%(g)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(j) 160% 226% 295%
- --------------------------------------------------------------------------------------------------------------
Total return (3.40%)(k) 1.22% 3.25%(k)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to Aug. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Rounds to zero.
(e) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(f) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(g) Adjusted to an annual basis.
(h) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(i) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(j) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(k) Not annualized.
(l) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 49
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS W
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Aug. 31, 2009(l) 2008 2007(b)
Net asset value, beginning of period $4.65 $4.81 $4.82
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .10 .22 .15
Net gains (losses) (both realized and
unrealized) (.28) (.17) --
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.18) .05 .15
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.21) (.16)
Tax return of capital -- -- (.00)(d)
- --------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.21) (.16)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.37 $4.65 $4.81
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $507 $655 $223
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(e),(f) .99%(g) .99% .98%(g)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(f),(h),(i) .92%(g) .98% .97%(g)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.44%(g) 4.56% 4.32%(g)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(j) 160% 226% 295%
- --------------------------------------------------------------------------------------------------------------
Total return (3.80%)(k) .82% 2.71%(k)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 1, 2006 (inception date) to Aug. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Rounds to zero.
(e) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(f) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(g) Adjusted to an annual basis.
(h) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(i) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the six months ended Feb. 28, 2009 and for the year ended Aug.
31, 2008.
(j) Includes mortgage dollar rolls. If mortgage dollar rolls transactions were
excluded, the portfolio turnovers would have been 70% for the six months
ended Feb. 28, 2009 and 122% for the year ended Aug. 31, 2008, respectively.
(k) Not annualized.
(l) Six months ended Feb. 28, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
50 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS -------------------------------------------------
(UNAUDITED AS TO FEB. 28, 2009)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource Diversified Bond Fund (the Fund) is a series of RiverSource
Diversified Income Series, Inc. and is registered under the Investment Company
Act of 1940 (as amended) as a diversified, open-end management investment
company. RiverSource Diversified Income Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the Board of Directors (the Board). 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 sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - Class C shares may be subject to a CDSC.
- - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a
front-end sales charge or CDSC and are offered to qualifying institutional
investors.
- - Class W shares are sold without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At Feb. 28, 2009, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of
Class I shares and the Investment Manager owned 100% of Class R3 and Class R5
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.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 51
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
VALUATION OF SECURITIES
Effective Sept. 1, 2008, the Fund adopted Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported in
the Statement of Operations for a fiscal period. There was no impact to the
Fund's net assets or results of operations upon adoption. The fair valuation
measurements disclosure can be found following the Notes to Portfolio of
Investments.
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
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 New York Stock Exchange and therefore the closing prices for securities
in such markets or on such exchanges may not fully reflect events that occur
after such close but before the close of the New York Stock Exchange, 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 New
York Stock
- --------------------------------------------------------------------------------
52 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
Exchange. 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; those maturing in 60 days or less are valued at amortized cost, which
approximates fair value.
ILLIQUID SECURITIES
At Feb. 28, 2009, 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, 2009 was
$4,868,540 representing 0.15% of net assets. Certain illiquid securities may be
valued by management at fair value according to procedures approved, in good
faith, 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, 2009, the Fund has outstanding when-issued securities
of $657,737,658 and other forward-commitments of $13,955,647.
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.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 53
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
Cash collateral may be collected by the Fund to secure certain over-the-counter
options (OTC options) trades. Cash collateral held by the Fund for such option
trades must be returned to the counterparty upon closure, exercise or expiration
of the contract. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities as well as write cash-secured put
options. 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 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.
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 New York Stock Exchange. The Fund will realize a gain or loss when
the option transaction expires or closes. 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. At Feb. 28,
2009, and for the six months then ended, the Fund had no outstanding option
contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include 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.
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
- --------------------------------------------------------------------------------
54 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
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, 2009, foreign currency holdings were entirely
comprised of Indonesian rupiahs.
The Fund may enter into forward foreign currency contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual commitments held by
the Fund and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent pricing
service. The Fund is subject to the credit risk that the counterparty will not
complete its contract obligations.
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 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
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 55
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
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.
CREDIT DEFAULT SWAP TRANSACTIONS
The Fund may enter into credit default swap contracts to increase or decrease
its credit exposure to an issuer, obligation, portfolio, or index of issuers or
obligations, to hedge its exposure on an obligation that it owns or in lieu of
selling such obligations. 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 referenced 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). 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 referenced 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 received and the notional amount
paid will be recorded as a realized gain (loss). As a protection seller, the
maximum amount of the payment that may be made by the Fund may equal the
notional amount (shown in the Credit Default Swap Contracts Outstanding table
following the Portfolio of Investments), at par, of the underlying index or
security as a result of the related credit event.
The notional amounts 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) on the Statement of
Operations. At Feb. 28, 2009, there were no credit default swap contracts
outstanding which had a premium paid or received by the Fund. 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.
- --------------------------------------------------------------------------------
56 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 agreements only with counterparties that meet
certain standards of creditworthiness.
CMBS TOTAL RETURN SWAP TRANSACTIONS
The Fund may enter into swap agreements to earn the total return on a specified
security or index of fixed income securities. CMBS total return swaps are
bilateral financial contracts designed to replicate synthetically the total
returns of commercial mortgage-backed securities. Under the terms of the swaps,
the Fund either receives or pays the total return on a reference security or
index applied to a notional principal amount. In return, the Fund agrees to pay
or receive from the counterparty a floating rate, which is reset periodically
based on short-term interest rates, applied to the same notional amount.
The notional amounts of swap contracts are not recorded in the financial
statements. Swaps are valued daily, and the change in value is recorded as
unrealized appreciation (depreciation) until the termination of the swap, at
which time realized gain (loss) is recorded. Payments received or made are
recorded as realized gains (losses).
Swap agreements may be subject to liquidity risk, which exists when a particular
swap is difficult to purchase or sell. It may not be possible for the Fund to
initiate a transaction or liquidate a position at an advantageous time or price,
which may result in significant losses. Total return swaps are subject to the
risk that the counterparty will default on its obligation to pay net amounts due
to the Fund. At Feb. 28, 2009, the Fund had no outstanding CMBS total return
swap contracts.
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
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 57
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes," clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB Statement 109,
"Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. Management of the Fund has concluded that there are no
significant uncertain tax positions that would require recognition in the
financial statements. Generally, the tax authorities can examine all the tax
returns filed for the last three years.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures and options
contracts, foreign currency transactions, recognition of unrealized appreciation
(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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS
133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No.
45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures
about a fund's derivatives and guarantees. Funds are required to provide
enhanced disclosures about (a) how and why a fund uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for under
SFAS 133 and its related interpretations, (c) how derivative instruments and
related hedged items affect a fund's financial position, financial performance,
and cash flows and (d) the current status of the payment/performance risk of the
credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require
additional disclosures about the current status of the payment/performance risk
of a guarantee. At Feb. 28, 2009, the Fund was not a party to any credit
derivative contracts under which the Fund was the seller of credit protection.
As such, those credit derivative contracts to which the Fund was a party at Feb.
28, 2009 are not within the scope of this pronouncement.
- --------------------------------------------------------------------------------
58 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging
Activities -- an amendment of FASB Statement No. 133," which requires enhanced
disclosures about a fund's derivative and hedging activities. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after Nov. 15, 2008. As of Feb. 28, 2009, management does not believe
the adoption of SFAS 161 will impact the financial statement amounts; however,
additional footnote disclosures may be required about the use of derivative
instruments and hedging items.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared daily and payable monthly, 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.
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.
SECURITY LITIGATION SETTLEMENTS
Litigation proceeds from Enron Corp. related to portfolio securities no longer
included in the portfolio are recorded as realized gains. Proceeds received
during the six months ended Feb. 28, 2009 were $133,574.
2. 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
is a percentage of the Fund's average daily net assets that declines from 0.48%
to 0.29% annually as the Fund's assets increase. The management fee for the six
months ended Feb. 28, 2009 was 0.45% of the Fund's average daily net assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines from 0.07% to 0.04% annually as the
Fund's assets increase. The fee for the six months ended Feb. 28, 2009 was 0.06%
of the Fund's average daily net assets.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 59
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
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, 2009, other expenses paid to this company were $11,576.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), non-interested board members 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
RiverSource funds. The Fund's liability for these amounts is adjusted for market
value changes and remains in the Fund until distributed in accordance with the
Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains shareholder accounts and records. 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 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 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees in the Statement of Operations.
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 agreements with RiverSource Distributors, Inc. and RiverSource Fund
Distributors, Inc. (collectively, the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, 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
- --------------------------------------------------------------------------------
60 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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, up to 0.75% of the fee is reimbursed for distribution expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed expense") was approximately $7,196,000 and $230,000
for Class B and Class C shares, respectively. These amounts are based on the
most recent information available as of Jan. 31, 2009, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges received by the Distributor for distributing Fund shares were
$653,650 for Class A, $83,053 for Class B and $6,230 for Class C for the six
months ended Feb. 28, 2009.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the six months ended Feb. 28, 2009, 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............................................. 0.83%
Class B............................................. 1.59
Class C............................................. 1.58
Class I............................................. 0.47
Class R2............................................ 1.02
Class R3............................................ 0.76
Class R4............................................ 0.77
Class R5............................................ 0.52
Class W............................................. 0.92
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class A.......................................... $410,552
Class B.......................................... 52,996
Class C.......................................... 7,776
</Table>
The waived/reimbursed fees and expenses for the plan administration services
fees at the class level were as follows:
<Table>
Class R2........................................... $12
Class R3........................................... 11
Class R4........................................... 1,346
</Table>
The management fees waived/reimbursed at the Fund level were $1,151,657.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 61
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
The Investment Manager and its affiliates have contractually agreed to waive
certain fees and expenses until Aug. 31, 2009, unless sooner terminated at the
discretion of the Board, such that net expenses (excluding fees and expenses of
acquired funds*) will not exceed the following percentage of the Fund's average
daily net assets:
<Table>
Class A............................................. 0.83%
Class B............................................. 1.59
Class C............................................. 1.58
Class I............................................. 0.47
Class R2............................................ 1.27
Class R3............................................ 1.02
Class R4............................................ 0.77
Class R5............................................ 0.52
Class W............................................. 0.92
</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.
EARNINGS AND BANK FEE CREDITS
During the six months ended Feb. 28, 2009, the Fund's custodian and transfer
agency fees were reduced by $8,655 as a result of earnings and bank fee credits
from overnight cash balances. Effective Dec. 15, 2008, the Fund pays custodian
fees to JPMorgan Chase Bank, N.A. Prior to Dec. 15, 2008, the Fund paid
custodian fees amounting to $17,995 to Ameriprise Trust Company, a subsidiary of
Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations, but including mortgage dollar rolls) aggregated $5,846,699,664 and
$5,786,384,876, respectively, for the six months ended Feb. 28, 2009. Realized
gains and losses are determined on an identified cost basis.
- --------------------------------------------------------------------------------
62 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
SIX MONTHS ENDED FEB. 28, 2009
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ------------------------------------------------------------------------------------
Class A 67,204,267 8,034,822 (63,844,669) 11,394,420
Class B 7,852,255 955,147 (11,187,154) (2,379,752)
Class C 2,280,799 126,721 (1,085,073) 1,322,447
Class I 13,196,720 3,466,092 (42,035,403) (25,372,591)
Class R2 395 2 -- 397
Class R4 2,660,537 369,641 (5,018,438) (1,988,260)
Class W 19,820,557 3,110,457 (47,978,306) (25,047,292)
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
YEAR ENDED AUG. 31, 2008
ISSUED FOR
REINVESTED NET
SOLD FUND MERGER DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ------------------------------------------------------------------------------------------
Class A 80,328,319 10,921,606 14,809,220 (95,553,562) 10,505,583
Class B 16,633,194 2,743,904 2,076,386 (29,781,790) (8,328,306)
Class C 4,270,266 260,158 156,349 (1,369,182) 3,317,591
Class I 40,548,778 52,110,117 4,637,299 (28,465,148) 68,831,046
Class R2 -- 1,027 -- -- 1,027
Class R3 -- 1,027 -- -- 1,027
Class R4 6,464,647 2,309 736,110 (7,142,397) 60,669
Class R5 -- 1,027 -- -- 1,027
Class W 110,115,534 1,020 3,800,802 (19,306,233) 94,611,123
- ------------------------------------------------------------------------------------------
</Table>
5. LENDING OF PORTFOLIO SECURITIES
Effective Dec. 1, 2008, 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 on behalf of the Fund. Pursuant to the
Agreement, all loaned securities are initially collateralized in an amount
equivalent to 102% (for securities denominated in U.S. dollars) or 105% (for all
other securities) of the value of the loaned securities, including accrued
interest in the case of fixed income securities. Collateral is maintained over
the life of the loan thereafter in an amount not less than 100% of the market
value of loaned securities, as determined at the close of each business day,
except to the extent that a collateral shortfall is due to a diminution in the
market value of authorized investments in which cash collateral is invested. Any
additional collateral
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 63
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
required to maintain those levels due to market fluctuations of the loaned
securities is delivered the following business day. Collateral is either in the
form of cash or U.S. government securities. Cash collateral received is invested
by the lending agent on behalf of the Fund into authorized investments pursuant
to the Agreement. The investments made with the cash collateral are listed in
the Portfolio of Investments and the value of cash collateral received at period
end is disclosed in the Statement of Assets and Liabilities along with the
related obligation to return the collateral upon return of the securities
loaned. At Feb. 28, 2009, securities valued at $287,118,567 were on loan secured
by cash collateral of $293,327,710 invested in short-term securities or cash
equivalents.
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
$599,566 earned from securities lending from Dec. 1, 2008 through Feb. 28, 2009
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
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 Funds or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Prior to Dec. 1, 2008, RiverSource Investments, LLC served as securities lending
agent for the Fund under the Securities Lending Agency Agreement pursuant to
which the Fund agreed to reimburse RiverSource Investments, LLC for expenses
incurred by it in connection with the lending program. Expenses paid to
RiverSource Investments, LLC as securities lending agent were $1,161 through
Nov. 30, 2008 and are included in other expenses in the Statement of Operations.
Cash collateral received on loaned securities had been invested in an affiliated
money market fund. Income of $4,493 earned from securities lending from Sept. 1,
2008 through Nov. 30, 2008 is included in the Statement of Operations.
6. 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 RiverSource
- --------------------------------------------------------------------------------
64 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
funds and other institutional clients of RiverSource Investments. The cost of
the Fund's purchases and proceeds from sales of shares of the RiverSource Short-
Term Cash Fund aggregated $541,297,433 and $622,032,139, respectively, for the
six months ended Feb. 28, 2009. 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, 2009, can be found in the Portfolio of Investments.
7. 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.
16, 2008, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other RiverSource
funds, severally and not jointly, permits collective borrowings up to $475
million. The borrowers shall have the right, upon written notice to the
Administrative Agent to request an increase of up to $175 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 $650
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 federal funds rate plus 0.75%. 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 0.06% per annum, in addition to
an upfront fee equal to its 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, 2009.
Under the prior credit facility which was effective until Oct. 15, 2008, the
Fund had entered into a revolving credit facility with a syndicate of banks
headed by JPMorgan Chase Bank, N.A., whereby the Fund was permitted to borrow
for the temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The credit facility agreement, which was a collective
agreement between the Fund and certain other RiverSource funds, severally and
not jointly, permitted collective borrowings up to $500 million. Interest was
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.30%. Each borrowing under the credit facility matured no later
than 60 days after the date of borrowing. The Fund also paid a commitment fee
equal
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 65
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
to its pro rata share of the amount of the credit facility at a rate of 0.06%
per annum.
8. FUND MERGER
At the close of business on March 14, 2008, RiverSource Diversified Bond Fund
acquired the assets and assumed the identified liabilities of RiverSource Core
Bond Fund. The reorganization was completed after shareholders approved the plan
on Jan. 29, 2008.
The aggregate net assets of RiverSource Diversified Bond Fund immediately before
the acquisition were $3,162,732,908 and the combined net assets immediately
after the acquisition were $3,479,595,851.
The merger was accomplished by a tax-free exchange of 33,460,754 shares of
RiverSource Core Bond Fund valued at $316,862,943.
In exchange for the RiverSource Core Bond Fund shares and net assets,
RiverSource Diversified Bond Fund issued the following number of shares:
<Table>
<Caption>
SHARES
- ------------------------------------------------------------
Class A......................................... 10,921,606
Class B......................................... 2,743,904
Class C......................................... 260,158
Class I......................................... 52,110,117
Class R2........................................ 1,027
Class R3........................................ 1,027
Class R4........................................ 2,309
Class R5........................................ 1,027
Class W......................................... 1,020
</Table>
The components of RiverSource Core Bond Fund's net assets after adjustments for
any permanent book-to-tax differences at the merger date were as follows:
<Table>
<Caption>
EXCESS
DISTRIBUTIONS OVER
TOTAL CAPITAL UNREALIZED ACCUMULATED NET NET INVESTMENT
NET ASSETS STOCK DEPRECIATION REALIZED LOSS INCOME
- ----------------------------------------------------------------------------------------------
RiverSource
Core Bond
Fund......... $316,862,943 $322,093,199 $(3,350,834) $(1,764,611) $(114,811)
</Table>
- --------------------------------------------------------------------------------
66 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
9. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS
For federal income tax purposes, the Fund had a capital loss carry-over of
$123,970,058 at Aug. 31, 2008, that if not offset by capital gains will expire
as follows:
<Table>
<Caption>
2009 2010 2012 2013 2014
$56,247,571 $49,658,521 $5,227,159 $2,996,287 $9,840,520
</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 2007 and its fiscal year end ("post-October
loss") as occurring on the first day of the following tax year. At Aug. 31,
2008, the Fund had a post-October loss of $1,853,459 that is treated for income
tax purposes as occurring on Sept. 1, 2008.
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.
10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota (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.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 67
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise
Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003,
Seligman conducted an extensive internal review concerning mutual fund trading
practices. Seligman's review, which covered the period 2001-2003, noted one
arrangement that permitted frequent trading in certain open-end registered
investment companies managed by Seligman (the Seligman Funds); this arrangement
was in the process of being closed down by Seligman before September 2003.
Seligman identified three other arrangements that permitted frequent trading,
all of which had been terminated by September 2002. In January 2004, Seligman,
on a voluntary basis, publicly disclosed these four arrangements to its clients
and to shareholders of the Seligman Funds. Seligman also provided information
concerning mutual fund trading practices to the SEC and the Office of the
Attorney General of the State of New York (NYAG). In September 2005, the New
York staff of the SEC indicated that it was considering recommending to the
Commissioners of the SEC the instituting of a formal action against Seligman and
the distributor of the Seligman Funds, Seligman Advisors, Inc. (which is now
known as RiverSource Fund Distributors, Inc.), relating to frequent trading in
the Seligman Funds. Seligman responded to the staff in October 2005 that it
believed that any action would be both inappropriate and unnecessary, especially
in light of the fact that Seligman had previously resolved the underlying issue
with the Independent Directors of the Seligman Funds and made recompense to the
affected Seligman Funds.
- --------------------------------------------------------------------------------
68 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. and Brian
T. Zino (collectively, the Seligman Parties), alleging, in substance, that the
Seligman Parties permitted various persons to engage in frequent trading and, as
a result, the prospectus disclosure used by the registered investment companies
then managed by Seligman is and has been misleading. The NYAG included other
related claims and also claimed that the fees charged by Seligman to the
Seligman Funds were excessive. On March 13, 2009, without admitting or denying
any violations of law or wrongdoing, the Seligman Parties entered into a
stipulation of settlement with the NYAG and settled the claims made by the NYAG.
Under the terms of the settlement, Seligman will pay $11.3 million to four
Seligman Funds. This settlement resolved all outstanding matters between the
Seligman Parties and the NYAG. In addition to the foregoing matter, the New York
staff of the SEC indicated in September 2005 that it was considering
recommending to the Commissioners of the SEC the instituting of a formal action
against Seligman and Seligman Advisors, Inc. relating to frequent trading in the
Seligman Funds. Seligman responded to the staff in October 2005 that it believed
that any action would be both inappropriate and unnecessary, especially in light
of the fact that Seligman had previously resolved the underlying issue with the
Independent Directors of the Seligman Funds and made recompense to the affected
Seligman Funds. There have been no further developments with the SEC on this
matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 69
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
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.
- --------------------------------------------------------------------------------
70 RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 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 RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed
with the SEC by August 31 for the most recent 12-month period ending June 30 of
that year, and is available without charge by visiting riversource.com/funds; or
searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVERSIFIED BOND FUND -- 2009 SEMIANNUAL REPORT 71
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 Distributors, Inc., and
RiverSource Fund Distributors, Inc., Members FINRA, and
managed by RiverSource Investments, LLC. RiverSource is part
of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C) 2009 RiverSource Investments, LLC. S-6490 Z (4/09)
</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. The complete schedule of investments is included in Item 1 of this Form
N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not
applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's Principal Financial Officer and Principal Executive Officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) 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 1, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
---------------------------------
Patrick T. Bannigan
President and Principal Executive
Officer
Date May 1, 2009
By /s/ Jeffrey P. Fox
---------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial
Officer
Date May 1, 2009