SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __________ Post-Effective Amendment No. 8 (File No. 333-131683) [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 9 (File No. 811-21852) [X] RIVERSOURCE SERIES TRUST 50606 Ameriprise Financial Center Minneapolis, MN 55474 Scott R. Plummer 5228 Ameriprise Financial Center Minneapolis, MN 55474 (612) 671-1947 Approximate Date of Proposed Public Offering: February 19, 2009 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on Jan. 28, 2009 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485 If appropriate, check the following box: [ ] This Post-Effective Amendment designates a new effective date for a previously filed Post -Effective Amendment. |
Prospectus (RIVERSOURCE INVESTMENTS LOGO) |
RIVERSOURCE
RECOVERY AND INFRASTRUCTURE FUND
PROSPECTUS JAN. 28, 2009
RIVERSOURCE RECOVERY AND INFRASTRUCTURE FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL.
Classes A, B, C, I, R2, R3, R4 and R5
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
YOU MAY QUALIFY FOR SALES CHARGE DISCOUNTS ON PURCHASES OF CLASS A SHARES. PLEASE NOTIFY YOUR FINANCIAL INSTITUTION IF YOU HAVE OTHER ACCOUNTS HOLDING SHARES OF RIVERSOURCE FUNDS TO DETERMINE WHETHER YOU QUALIFY FOR A SALES CHARGE DISCOUNT. SEE "BUYING AND SELLING SHARES" FOR MORE INFORMATION.
NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE
TABLE OF CONTENTS
THE FUND.......................................... 3P Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 4p Past Performance.................................. 7p Fees and Expenses................................. 8p Other Investment Strategies and Risks............. 10p Fund Management and Compensation.................. 12p BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.5 Opening an Account.............................. S.12 Exchanging or Selling Shares...................... S.15 Exchanges....................................... S.17 Selling Shares.................................. S.19 VALUING FUND SHARES............................... S.20 DISTRIBUTIONS AND TAXES........................... S.21 GENERAL INFORMATION............................... S.23 |
RIVERSOURCE COMPLEX OF FUNDS
The RiverSource complex of funds includes a comprehensive array of funds from RiverSource Investments, including several Seligman funds. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource complex. RiverSource funds, RiverSource Partners funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section. Although the Seligman funds share the same Board, they do not currently have the same policies and procedures, and may not be exchanged for shares of the RiverSource funds, RiverSource Partners funds or Threadneedle funds. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource complex of funds.
RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies.
THE FUND
OBJECTIVE
RiverSource Recovery and Infrastructure Fund (the Fund) seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund is a non-diversified mutual fund that generally seeks to invest in infrastructure-related companies that appear to be undervalued or that may be temporarily out of favor, but that the investment manager (RiverSource Investments, LLC) believes are entering a period of recovery (i.e., a period in which these infrastructure-related companies have good prospects for growth or capital appreciation). Under normal market conditions, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in equity securities issued by infrastructure-related companies. Infrastructure-related companies are defined as companies that derive at least 50% of their revenues or profits from the ownership, development, construction, operation, utilization or financing of infrastructure-related assets, or have at least 50% of the fair market value of their assets invested in infrastructure- related assets.
Infrastructure assets are the physical structures and networks which provide necessary services to society. Examples of infrastructure assets include transportation assets (e.g., roads, bridges, railroads, airports, seaports, tunnels), utility assets (e.g., electric transmission and distribution lines, power generation facilities, broadcast and wireless towers, gas and water distribution facilities, cable and satellite networks) and social assets (e.g., hospitals, schools, stadiums, courthouses). The Fund invests in companies with a direct investment in infrastructure companies and in companies that operate or utilize infrastructure assets (e.g., airlines, automakers, and technology companies) or companies with indirect exposure to infrastructure investment (e.g., suppliers of construction materials). The Fund may invest up to 20% of its assets in securities of issuers that are not infrastructure-related companies including companies that the investment manager believes may be undervalued due to their cyclical nature, market conditions, and/or changes in the economy.
The Fund may invest in companies of any size and may invest up to 25% of its net assets in foreign investments. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy.
In pursuit of the Fund's objective, the investment manager chooses equity investments by seeking to:
- Select companies that are undervalued, based on a variety of measures, including, but not limited to price-to-earnings ratios, price-to-book ratios, price-to-free cash flow, current and projected dividends, sum-of-the parts or breakup value and historic relative price valuations.
- Identify companies with moderate growth potential based on:
- effective management, as demonstrated by overall performance; and
- financial strength.
In evaluating whether to sell a security, the investment manager considers, among other factors, whether:
- The security is overvalued relative to alternative investments.
- The security has reached the investment manager's price objective.
- The company has met the investment manager's earnings and/or growth expectations.
- The security exhibits unacceptable correlation characteristics with other portfolio holdings.
- The company or the security continues to meet the other standards described above.
In addition to investing in individual stocks of companies of any size, the Fund may invest in publicly-traded units of master limited partnerships (MLPs), real estate investment trusts (REITs), and exchange-traded funds (ETFs) and other investment companies.
PRINCIPAL RISKS
Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include:
ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives.
DIVERSIFICATION RISK. The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer issuers than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, the Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly.
RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are
primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks:
Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices.
Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment.
Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring.
ETF RISK. The price movement of an ETF may not track the underlying index and may result in a loss. In addition, shareholders bear both their proportionate share of the Fund's expenses and similar expenses incurred through ownership of the ETF.
INFRASTRUCTURE-RELATED COMPANIES RISK. Because the Fund concentrates its investments in infrastructure-related securities, the Fund has greater exposure to adverse economic, regulatory, political, legal, and other changes affecting the issuers of such securities. Infrastructure-related businesses are subject to a variety of factors that may adversely affect their business or operations including high interest costs in connection with capital construction programs, costs associated with environmental and other regulations, the effects of economic slowdown and surplus capacity, increased competition from other providers of services, uncertainties concerning availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. Additionally, infrastructure-related entities may be subject to regulation by various governmental authorities and may also be affected by governmental regulation of rates charged to customers, service interruption and/or legal challenges due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards.
There is also the risk that corruption may negatively affect publicly-funded infrastructure projects, especially in foreign markets, resulting in delays and cost overruns.
ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors.
LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity.
MASTER LIMITED PARTNERSHIP RISK. Investments in securities (units) of master limited partnerships involve risks that differ from an investment in common stock. Holders of the units of master limited partnerships have more limited control and limited rights to vote on matters affecting the partnership. There are also certain tax risks associated with an investment in units of master limited partnerships. In addition, conflicts of interest may exist between common unit holders, subordinated unit holders and the general partner of a master limited partnership, including a conflict arising as a result of incentive distribution payments.
MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market.
REAL ESTATE INVESTMENT TRUST (REIT) RISK. Because of the Fund's ability to invest in REITs, the Fund is more susceptible to risks associated with the ownership of real estate and with the real estate industry in general. These risks can include fluctuations in the value of the underlying properties, defaults by borrowers or tenants, market saturation, decreases in market rates for rents, and other economic, political, or regulatory occurrences affecting the real estate industry, including REITs.
REITs depend upon specialized management skills, may have limited financial resources, may have less trading volume, and may be subject to more abrupt or erratic price movements than the overall securities markets. REITs are also subject to the risk of failing to qualify for tax-free pass-through of income. Some REITs (especially mortgage REITs) are affected by risks similar to those
associated with investments in debt securities including changes in interest rates and the quality of credit extended.
REITs often do not provide complete tax information until after the calendar year-end. Consequently, because of the delay, it may be necessary for the Fund to request permission to extend the deadline for issuance of Forms 1099-DIV beyond January 31.
SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium sized companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. Additionally, in many instances, the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading may be substantially less and may be more volatile than is typical of larger companies.
PAST PERFORMANCE
The Fund is new as of the date of this prospectus and therefore performance information is not available.
When available, the Fund intends to compare its performance to the performance of the S&P 500 Index, an unmanaged index of common stocks, that is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. The Fund's performance will be measured against this index for purposes of determining the performance incentive adjustment. See "Fund Management and Compensation" for more information.
FEES AND EXPENSES
Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None |
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C Management fees(c) 0.65% 0.65% 0.65% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% Other expenses(d) 1.08% 1.09% 1.09% Total annual fund operating expenses 1.98% 2.74% 2.74% Fee waiver/expense reimbursement 0.59% 0.59% 0.59% Total annual (net) fund operating expenses(e) 1.39% 2.15% 2.15% |
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(c) 0.65% 0.65% 0.65% 0.65% 0.65% Distribution and/or service (12b-1) fees 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(d) 0.89% 1.19% 1.19% 1.19% 0.94% Total annual fund operating expenses 1.54% 2.34% 2.09% 1.84% 1.59% Fee waiver/expense reimbursement 0.55% 0.55% 0.55% 0.55% 0.55% Total annual (net) fund operating expenses(e) 0.99% 1.79% 1.54% 1.29% 1.04% |
(a) This charge may be reduced depending on the value of your total investments
in RiverSource Funds. See "Sales Charges."
(b) A 1% CDSC may be assessed on Class A shares sold without a sales charge
within 18 months after purchase. See "Sales Charges."
(c) The Fund's management fee may be increased or decreased due to the effect of a performance incentive adjustment. The index against which the Fund's performance will be measured for purposes of determining the performance incentive adjustment is the S&P 500 Index. See "Fund Management and Compensation" for more information.
(d) Other expenses are based on estimated amounts for the current fiscal year. Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2, Class R3 and Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds fees and expenses for the current fiscal year is expected to be less than 0.01%. Because acquired funds will have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred by the Fund with respect to such investments will vary.
(e) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 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), before giving effect to any performance incentive adjustment, will not exceed 1.39% for Class A, 2.15%, for Class B, 2.15% for Class C, 0.99% for Class I, 1.79% for Class R2, 1.54% for Class R3, 1.29% for Class R4 and 1.04% for Class R5.
EXAMPLES
These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs (based on estimated Fund expenses) would be:
1 YEAR 3 YEARS Class A(a) $708 $1,107 Class B $718(b) $1,195(b) Class C $318(b) $ 795 Class I $101 $ 433 Class R2 $182 $ 678 Class R3 $157 $ 602 Class R4 $131 $ 526 Class R5 $106 $ 448 |
(a) Includes a 5.75% sales charge.
(b) Includes the applicable CDSC.
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS Class A(a) $708 $1,107 Class B $218 $ 795 Class C $218 $ 795 Class I $101 $ 433 Class R2 $182 $ 678 Class R3 $157 $ 602 Class R4 $131 $ 526 Class R5 $106 $ 448 |
(a) Includes a 5.75% sales charge.
OTHER INVESTMENT STRATEGIES AND RISKS
Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses. Although ETFs are designed to replicate the price and yield of a specified market index, there is no guarantee that an ETF will track its specified market index, which may result in a loss. Additionally, the Fund may use derivatives such as futures, options, forward contracts, and swaps (which are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, indexes or currencies). These derivative instruments are used to produce incremental earnings, to hedge existing positions, to increase or reduce market or credit exposure, or to increase flexibility. Derivative instruments will typically increase the Fund's exposure to the principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position, may offset losses, but they may also offset gains. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including, accepting a lower price for the derivative instrument, selling other investments, or foregoing another, more appealing investment opportunity. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. In addition, a relatively small price movement in the underlying security, currency or index may result in a substantial gain or loss for the Fund using derivatives and certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio managers are not required to use derivatives. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI.
Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during
normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated money market fund. See "Cash Reserves" under the section "General Information" for more information.
Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment.
Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund.
Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's annual portfolio turnover rate, which measures how frequently the Fund buys and sells investments, will average less than 100% per year over a 5-year time horizon.
Directed Brokerage. The Fund's Board of Trustees (Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions.
Additional information regarding securities transactions can be found in the
SAI.
FUND MANAGEMENT AND COMPENSATION
INVESTMENT MANAGER
RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource funds (including the RiverSource Partners funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for all of the RiverSource funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information.
The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee is 0.65% of the Fund's average daily net assets on the first $1 billion, gradually reducing to 0.50% as assets increase, subject to a possible adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of the S&P 500 Index. In certain circumstances, the Fund's Board may approve a change in the index without shareholder approval. The maximum adjustment (increase or decrease) is 0.12% of the Fund's average net assets on an annual basis. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement will be available in the Fund's annual or semiannual shareholder report.
Portfolio Manager(s). The portfolio manager responsible for the day-to-day management of the Fund is:
Warren Spitz, Senior Portfolio Manager
- Managed the Fund since 2009.
- Joined RiverSource Investments in 2000 as a Senior Portfolio Manager.
- Portfolio Manager, Prudential Global Asset Management, 1987 to 2000.
- Began investment career in 1984.
- MBA, Wharton School, University of Pennsylvania.
The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund.
RIVERSOURCE COMPLEX OF FUNDS
THE RIVERSOURCE COMPLEX OF FUNDS INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, AND "THREADNEEDLE" FUNDS (EACH INDIVIDUALLY A "FUND" OR A "RIVERSOURCE FUND" AND COLLECTIVELY THE "FUNDS" OR THE "RIVERSOURCE FUNDS"). THE RIVERSOURCE COMPLEX OF FUNDS ALSO INCLUDES "SELIGMAN" FUNDS. THE RIVERSOURCE
FUNDS AND THE SELIGMAN FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD"), BUT INVESTORS MAY NOT CURRENTLY MAKE EXCHANGES BETWEEN THE SELIGMAN FUNDS AND THE RIVERSOURCE FUNDS. SELIGMAN FUNDS GENERALLY HAVE SEPARATE AND DISTINCT POLICIES AND PROCEDURES FROM THE RIVERSOURCE FUNDS. THE RIVERSOURCE FUNDS SHARE THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THIS SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A RIVERSOURCE FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL RIVERSOURCE FUNDS (INCLUDING "THREADNEEDLE" OR "RIVERSOURCE PARTNERS" FUNDS), OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." AN INVESTOR OR FINANCIAL ADVISOR MAY NOT INCLUDE THE MARKET VALUE OF ANY SELIGMAN FUNDS OWNED BY THE INVESTOR IN THIS CALCULATION.
BUYING AND SELLING SHARES
The RiverSource funds are generally available directly and through broker- dealers, banks, and other financial intermediaries or institutions (financial institutions), including certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial institutions. THESE FINANCIAL INSTITUTIONS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial institutions through which your shares of the fund(s) are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial institution through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial institutions to carry out its obligations to its customers.
S-6400-4
DESCRIPTION OF SHARE CLASSES
INVESTMENT OPTIONS -- CLASSES OF SHARES
The RiverSource funds offer different classes of shares. There are differences
among the fees and expenses for each share class. See the "Fees and Expenses"
table for more information. Not everyone is eligible to buy every share class.
After determining which share classes you are eligible to buy, decide which
share class best suits your needs. Your financial institution can help you with
this decision. The following table shows the key features of each share class.
(THE COVER OF THIS PROSPECTUS INDICATES WHICH SHARE CLASSES ARE CURRENTLY
OFFERED FOR THIS FUND.)
INVESTMENT OPTIONS SUMMARY
Contingent Plan Initial Deferred Sales Distribution and Administration AVAILABILITY(a) Sales Charge Charge (CDSC) Service Fee(b) Fee -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25% Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00% invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00% invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- |
INVESTMENT OPTIONS SUMMARY (CONTINUED)
Contingent Plan Initial Deferred Sales Distribution and Administration AVAILABILITY(a) Sales Charge Charge (CDSC) Service Fee(b) Fee -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25% discretionary managed accounts. -------------------------------------------------------------------------------------------------------------------------------- |
(a) See "Buying and Selling Shares, Determining which class of shares to
purchase" for more information on availability of share classes and eligible
investors. See "Buying and Selling Shares, Opening an Account" for
information on minimum investment and account balance requirements.
(b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W
shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the
Investment Company Act of 1940, as amended, that allows it to pay
distribution and shareholder servicing-related expenses for the sale of
shares and the servicing of shareholders. This plan has been reviewed and
approved by the Board. Because these fees are paid out of fund assets on an
on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of distribution
(sales) or servicing charges.
(c) A 1% CDSC may be assessed on Class A shares sold within 18 months after
purchase. See "Buying and Selling Shares, Sales Charges, Class
A -- contingent deferred sales charge" for more information.
(d) See "Buying and Selling Shares, Sales Charges, Class B and Class
C -- contingent deferred sales charge alternative" for more information on
the timing of conversion of Class B shares to Class A shares. Timing of
conversion will vary depending on the date of your original purchase of the
Class B shares.
DISTRIBUTION AND SERVICE FEES
The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing a fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and shareholder servicing fees to financial institutions that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25% of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial institutions also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial institutions that sell Class B shares, and to pay for other distribution related expenses. Financial institutions may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INSTITUTION OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES WILL BE RETAINED BY THE DISTRIBUTOR.
PLAN ADMINISTRATION FEE
Class R2, Class R3 and Class R4 shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class.
DETERMINING WHICH CLASS OF SHARES TO PURCHASE
CLASS A, CLASS B AND CLASS C SHARES
New purchases of Class B shares will not be permitted if your Rights of Accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your Rights of Accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation (ROA)" for information on Rights of Accumulation.
Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares in the ninth year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares.
Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial institution.
CLASS I SHARES.
The following eligible investors may purchase Class I shares:
- Any fund distributed by RiverSource Distributors, Inc., if the fund seeks to achieve its investment objective by investing primarily in shares of the fund and other RiverSource funds.
Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution.
CLASS R SHARES.
The following eligible institutional investors may purchase Class R2, Class R3, Class R4 and Class R5 shares:
- Qualified employee benefit plans.
- Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code.
- Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above.
- State sponsored college savings plans established under Section 529 of the Internal Revenue Code.
- Health Savings Accounts (HSAs) created pursuant to public law 108-173.
Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares:
- Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all RiverSource funds).
- Bank Trust departments.
Class R shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SAR- SEPs, SIMPLE IRAs and individual 403(b) plans.
Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution.
CLASS W SHARES.
The following eligible investors may purchase Class W shares:
- Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs.
Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution.
Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account.
IN ADDITION, FOR CLASS I, CLASS R AND CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INSTITUTIONS TO ACCEPT INVESTMENTS FROM OTHER PURCHASERS NOT LISTED ABOVE.
For more information, see the SAI.
SALES CHARGES
CLASS A -- INITIAL SALES CHARGE ALTERNATIVE
Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial institution through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly (not through a separately authorized financial institution). Sales charges vary depending on the amount of your purchase.
SALES CHARGE* FOR CLASS A SHARES:
MAXIMUM RE-ALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE** NET AMOUNT INVESTED PURCHASE PRICE ---------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000 -- $99,999 4.75 4.99 4.00 $100,000 -- $249,999 3.50 3.63 3.00 $250,000 -- $499,999 2.50 2.56 2.15 $500,000 -- $999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00*** |
*Because of rounding in the calculation of the offering price, the portion
of the sales charge retained by the distributor may vary and the actual
sales charge you pay may be more or less than the sales charge calculated
using these percentages.
**Purchase price includes the sales charge.
***Although there is no sales charge for purchases with a total market value
over $1,000,000, and therefore no re-allowance, the distributor may pay a
financial institution the following: a sales commission of up to 1.00% for
a sale with a total market value of $1,000,000 to $2,999,999; a sales
commission up to 0.50% for a sale of $3,000,000 to $9,999,999; and a sales
commission up to 0.25% for a sale of $10,000,000 or more.
INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group, as described below. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase:
- Your current investment in a fund; and
- Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other RiverSource funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21 sharing a mailing address.
The following accounts are eligible to be included in determining the sales charge on your purchase:
- Individual or joint accounts;
- Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge;
- UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child;
- Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor;
- Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and
- Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan.
The following accounts are NOT eligible to be included in determining the sales charge on your purchase:
- Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts);
- Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts;
- Investments in Class D, Class E, Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares;
- Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and
- Charitable and irrevocable trust accounts.
If you purchase RiverSource fund shares through different financial institutions, and you want to include those assets toward a reduced sales charge, you must inform your financial institution in writing about the other accounts when placing your purchase order. Contact your financial institution to determine what information is required.
Unless you provide your financial institution in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial institution provide this information to the fund when placing your purchase order.
For more information on rights of accumulation, please see the SAI.
INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial institution. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow.
Existing ROA Example. Shareholder currently has $60,000 ROA in RiverSource funds. Shareholder completes an LOI to invest $100,000 in RiverSource funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in RiverSource funds' Class A shares in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months.
Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial institution provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial institution or see the SAI.
INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales
charges do not apply to:
- current or retired Board members, officers or employees of RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents.
- current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents.
- registered representatives and other employees of financial institutions having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents.
- portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents.
- partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees.
- direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund.
- purchases made:
- with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource complex of funds;
- through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or clears trades through a financial intermediary that has, a selling agreement with the distributor;
- through state sponsored college savings plans established under Section 529 of the Internal Revenue Code;
- through bank trust departments.
- purchases made through "eligible employee benefit plans" created under section
401(a), 401(k), 457 and 403(b) which:
- have at least $1 million in plan assets at the time of investment;
- have a plan level or omnibus account that is maintained with the fund or its transfer agent; and
- transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper.
For more information regarding waivers of sales charges for Class A purchases, please see the SAI.
The distributor may, in its sole discretion, authorize the waiver of sales charges for additional purchases or categories of purchases. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time.
Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order.
Because the current prospectus is available on the funds' website at riversource.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website.
CLASS A -- CONTINGENT DEFERRED SALES CHARGE
For Class A shares purchased after Dec. 1, 2008 without a sales charge, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less.
CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares:
- To which no sales commission or transaction fee was paid to an authorized financial institution at the time of purchase.
- Purchased through reinvestment of dividends and capital gain distributions.
- In the event of the shareholder's death.
- From a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis.
- In an account that has been closed because it falls below the minimum account balance.
- That result in mandatory withdrawals from an ERISA plan of a shareholder who is at least 70 1/2 years old.
- That result from returns of excess contributions or excess deferral amounts made to a retirement plan participant.
- Purchased prior to Dec. 1, 2008.
The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional purchases or categories of purchases. Policies relating to waiving the CDSC may be modified or withdrawn at any time.
CLASS B AND CLASS C -- CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0% |
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages.
Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial institutions that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares.
You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99.
Purchases made prior to May 21, 2005 age on a calendar year basis. Purchases made beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging.
Class B shares purchased prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased beginning May 21, 2005 will convert to Class A shares one month after the completion of the eighth year of ownership.
FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial institutions that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99.
For both Class B and Class C, if the amount you sell causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC will be based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment.
EXAMPLE
Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase.
CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares:
- in the event of the shareholder's death;
- held in trust for an employee benefit plan; or
- held in IRAs or certain qualified plans, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is:
- at least 59 1/2 years old AND
- taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR
- selling under an approved substantially equal periodic payment arrangement.
CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares in the event of the shareholder's death.
CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5 AND CLASS W -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W, there is no initial sales charge or CDSC.
OPENING AN ACCOUNT
Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the financial institution through which you are investing in the fund may not be able to open an account for you. If the financial institution through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate.
When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial institution.
You may establish and maintain your account with an authorized financial institution or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts maintained by the fund will be supported by the fund's transfer agent.
METHODS OF PURCHASING SHARES
These methods of purchasing shares generally apply to Class A, Class B, and Class C shares.
ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INSTITUTION
ALL REQUESTS The financial institution through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. |
ACCOUNT ESTABLISHED WITH THE FUND
BY MAIL You or the financial institution through which you buy shares may establish an account directly with the fund. To establish an account in this fashion, complete a RiverSource funds account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained at riversource.com or may be requested by calling (888) 791- 3380. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, ------------------------------------------------------------------------------- |
METHODS OF PURCHASING SHARES (CONTINUED)
ACCOUNT ESTABLISHED WITH THE FUND (CONT.)
BY MAIL (CONT.)
money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents.
Mail your check and completed application to:
REGULAR MAIL RIVERSOURCE FUNDS
P.O. BOX 8041
BOSTON, MA 02266-8041
EXPRESS MAIL RIVERSOURCE FUNDS
C/O BFDS
30 DAN ROAD
CANTON, MA 02021-2809
If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans.
BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (888) 791-3380 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial institution may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (888) 791-3380 or send signed written instructions to the address above. |
S.13
MINIMUM INVESTMENT AND ACCOUNT BALANCE
FOR ALL FUNDS, RIVERSOURCE 120/20 CLASSES AND CONTRARIAN ACCOUNTS EXCEPT RIVERSOURCE EQUITY FUND THOSE LISTED TO DISCIPLINED THREADNEEDLE THE RIGHT TAX QUALIFIED SMALL CAP GLOBAL EXTENDED (NONQUALIFIED) ACCOUNTS VALUE FUND ALPHA FUND CLASS W ------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $5,000 $10,000 $500 ------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None ------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $300 None $2,500 $5,000 $500 |
MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
FOR ALL FUNDS, RIVERSOURCE 120/20 CLASSES AND CONTRARIAN ACCOUNTS EXCEPT RIVERSOURCE EQUITY FUND THOSE LISTED TO DISCIPLINED THREADNEEDLE THE RIGHT TAX QUALIFIED SMALL CAP GLOBAL EXTENDED (NONQUALIFIED) ACCOUNTS VALUE FUND ALPHA FUND CLASS W ------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100 $100 $5,000 $10,000 $500 ------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None ------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None None $2,500 $5,000 $500 |
These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor.
The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice.
Please contact your financial institution for information regarding wire or electronic funds transfer.
IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 10 days to clear. If you request a sale within 10 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds.
EXCHANGING OR SELLING SHARES
You may exchange or sell shares by having your financial institution process your transaction. If your account is maintained directly with your financial institution, you must contact that financial institution to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund.
WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES
ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INSTITUTION
ALL REQUESTS You can exchange or sell shares by having your financial institution process your transaction. The financial institution through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. |
ACCOUNT ESTABLISHED WITH THE FUND
BY MAIL Mail your exchange or sale request to:
REGULAR MAIL RIVERSOURCE FUNDS
P.O. BOX 8041
BOSTON, MA 02266-8041
EXPRESS MAIL RIVERSOURCE FUNDS
C/O BFDS
30 DAN ROAD
CANTON, MA 02021-2809
Include in your letter:
- your name
- the name of the fund(s)
- your account number
- the class of shares to be exchanged or sold
- your Social Security number or Employer Identification number
- the dollar amount or number of shares you want to exchange or sell
- specific instructions regarding delivery or exchange destination
- signature(s) of registered account owner(s)
- any special documents the transfer agent may require in order to process your order
WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED)
ACCOUNT ESTABLISHED WITH THE FUND (CONT.)
BY MAIL (CONT.)
Corporate, trust or partnership accounts may need to send additional documents.
Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners.
A Medallion Signature Guarantee is required if:
- Amount is over $50,000.
- You want your check made payable to someone other than yourself.
- Your address has changed within the last 30 days.
- You want the check mailed to an address other than the address of record.
- You want the proceeds sent to a bank account not on file.
- You are the beneficiary of the account and the account owner is deceased (additional documents may be required).
A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial institution providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable.
NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions.
BY TELEPHONE Call (888) 791-3380. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $100,000 per day. |
S.16
WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED)
ACCOUNT ESTABLISHED WITH THE FUND (CONT.)
BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (888) 791-3380 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: $100 Your bank or financial institution may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. |
EXCHANGES
Generally, you may exchange your fund shares for shares of the same class of any other publicly offered RiverSource fund without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund.
SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET
TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT
MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS.
FUNDS THAT INVEST IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV
IS CALCULATED. TO THE EXTENT THAT A FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS.
SEE "VALUING FUND SHARES" FOR A DISCUSSION OF THE RIVERSOURCE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING.
THE RIVERSOURCE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS:
- The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial institution for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial institutions in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited.
- The fund may rely on the monitoring policy of a financial institution, for example, a retirement plan administrator or similar authorized financial institution authorized to distribute the funds, if it determines the policy and procedures of such financial institutions are sufficient to protect the fund and its shareholders.
- If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial institution. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts.
- Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial institutions where market timing activity may not always be successfully detected.
Other exchange policies:
- Exchanges must be made into the same class of shares of the new fund.
- Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares.
- If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases.
- Once the fund receives your exchange request, you cannot cancel it.
- Shares of the new fund may not be used on the same day for another exchange or sale.
- Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund.
- If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
SELLING SHARES
You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order.
When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC.
REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of RiverSource funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any RiverSource fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the same Class C account and fund
you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy.
In order for you to take advantage of this repurchase waiver, you must notify your financial institution within 90 days of the date your sale request was processed. Contact your financial institution for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences.
The fund reserves the right to redeem in kind.
For more details and a description of other sales policies, please see the SAI.
VALUING FUND SHARES
For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV.
Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, contact your financial institution.
The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations. Market quotations are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost.
When reliable market quotations are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund has significant holdings of foreign securities or small cap stocks that may trade infrequently, fair valuation may be used more frequently than for other funds. The RiverSource funds use an unaffiliated service provider to assist in determining fair values for foreign securities.
Foreign investments are valued in U.S. dollars. Some of a fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's shares may change on days when shareholders will not be able to purchase or sell the fund's shares.
DISTRIBUTIONS AND TAXES
As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital.
Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders.
REINVESTMENTS
Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund, unless you request distributions in cash. The financial institution through which you purchased shares may have different policies.
Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed.
TAXES
If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable.
For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year).
You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91(st) day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91(st) day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI.
Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares.
Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor.
Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes.
REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January.
IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor.
GENERAL INFORMATION
AVAILABILITY AND TRANSFERABILITY OF FUND SHARES
Please consult with your financial institution to determine the availability of the RiverSource funds. RiverSource funds may only be purchased or sold directly or through financial institutions authorized by the distributor to offer the RiverSource funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE FUNDS. If you set up an account at a financial institution that does not have, and is unable to obtain, a selling agreement with the distributor of the RiverSource funds, you will not be able to transfer RiverSource fund holdings to that account. In that event, you must either maintain your RiverSource fund holdings with your current financial institution, find another financial institution with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability.
ADDITIONAL SERVICES AND COMPENSATION
In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds.
Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the RiverSource funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses."
Custody Services. JPMorgan Chase Bank, N.A., 1 Chase Manhattan Plaza, 19(th) Floor, New York, NY 10005, provides custody services to the RiverSource funds. In addition to paying the custodian for these services, the RiverSource funds pay for certain transaction fees and out-of-pocket expenses incurred while providing custody services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses."
Distribution and Shareholder Services. RiverSource Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, and RiverSource Fund Distributors, Inc., 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (collectively, the distributor), provide underwriting and distribution services to the RiverSource funds. Under the Distribution Agreement and related distribution and shareholder servicing plans,
the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial institutions that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the RiverSource funds' policy regarding directed brokerage.
Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the RiverSource funds. The RiverSource funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial institutions that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements.
Plan Administration Services. Under a Plan Administration Services Agreement the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts (HSAs). Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses."
PAYMENTS TO FINANCIAL INSTITUTIONS
The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial institutions, including inter-company allocation of resources or payments to affiliated broker-dealers, in connection with agreements between the distributor and financial institutions pursuant to which these financial institutions sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do
not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund.
In exchange for these payments, a financial institution may elevate the prominence or profile of the fund within the financial institution's organization, and may provide the distributor and its affiliates with preferred access to the financial institution's registered representatives or preferred access to the financial institution's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial institution's pecuniary interest and its duties to its customers, for example, if the financial institution receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial institution or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund.
These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial institution, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial institution, and the access the distributor or other representatives of the fund may have within the financial institution for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial institution and its customers.
These payments are usually calculated based on a percentage of fund assets owned through the financial institution and/or as a percentage of fund sales attributable to the financial institution. Certain financial institutions require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial institution charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial institution (e.g., initial platform
set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI.
Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial institutions and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of RiverSource fund assets (in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker-dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators.
From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial institutions or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial institutions and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial institution to the extent the cost of such services was less than the actual expense of the service.
The financial institution through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial institution may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your
financial institution. The SAI contains additional detail regarding payments made by the distributor to financial institutions.
The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial institutions for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial institutions for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial institution to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund.
Financial institutions may separately charge you additional fees. See "Buying and Selling Shares."
ADDITIONAL MANAGEMENT INFORMATION
MANAGER OF MANAGERS EXEMPTION. The RiverSource funds have received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change.
RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board.
AFFILIATED PRODUCTS. RiverSource Investments also serves as investment manager to RiverSource funds which are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other RiverSource funds (Funds of Funds) and to discretionary managed accounts that invest exclusively in RiverSource funds (collectively referred to as "affiliated products"). These affiliated products, individually or collectively, may own a significant percentage of the fund's outstanding shares. The fund may experience relatively large purchases or redemptions from the affiliated products. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, the fund may experience increased expenses as it buys and sells securities to
manage transactions for the affiliated products. In addition, because the affiliated products may own a substantial portion of the fund, a redemption by one or more affiliated products could cause the fund's expense ratio to increase as the fund's fixed costs would be spread over a smaller asset base. RiverSource Investments monitors expense levels and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products.
CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency.
FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI.
LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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.
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RiverSource Funds can be purchased from authorized financial institutions. The fund can be found under the "RiverSource" banner in most mutual fund quotations.
Additional information about the fund and its investments is available in the fund's SAI. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, or to request other information about the fund, contact RiverSource Funds or your financial institution. To make a shareholder inquiry, contact the financial institution through whom you purchased the fund.
RiverSource Funds
734 Ameriprise Financial Center
Minneapolis, MN 55474
(888) 791-3380
RiverSource Funds information available at RiverSource Investments website
address:
riversource.com/funds
You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-0102.
Investment Company Act File #811-21852
TICKER SYMBOL Class A: Class B: Class C: Class I: Class R2: Class R3: Class R4: Class R5: |
(RIVERSOURCE INVESTMENTS LOGO) S-6529-99 A (1/09)
STATEMENT OF ADDITIONAL
INFORMATION
JAN. 28, 2009
RIVERSOURCE SERIES TRUST
RiverSource Recovery and Infrastructure Fund
This is the Statement of Additional Information (SAI) for each of the funds listed above. This SAI is not a prospectus. It should be read together with the appropriate current fund prospectus, dated the same day as this SAI. For a free copy of a fund prospectus, annual or semiannual report, contact your financial institution or write to RiverSource Funds, 734 Ameriprise Financial Center, Minneapolis, MN 55474, call (888) 791-3380 or visit riversource.com/funds.
The current prospectus for each of the funds is incorporated in this SAI by reference.
Each fund is governed by a Board of Directors ("Board") that meets regularly to review a wide variety of matters affecting the funds. Detailed information about fund governance, the funds' investment manager, RiverSource Investments, LLC (the "investment manager" or "RiverSource Investments"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), and other aspects of fund management can be found by referencing the Table of Contents.
TABLE OF CONTENTS
Fundamental and Nonfundamental Investment Policies.............................. p. 3 Investment Strategies and Types of Investments.................................. p. 4 Information Regarding Risks and Investment Strategies........................... p. 5 Securities Transactions......................................................... p. 25 Brokerage Commissions Paid to Brokers Affiliated with the Investment Manager.... p. 27 Valuing Fund Shares............................................................. p. 27 Portfolio Holdings Disclosure................................................... p. 28 Proxy Voting.................................................................... p. 29 Investing in a Fund............................................................. p. 32 Selling Shares.................................................................. p. 34 Pay-out Plans................................................................... p. 34 Taxes........................................................................... p. 34 Service Providers............................................................... p. 37 Investment Management Services................................................ p. 37 Administrative Services....................................................... p. 39 Transfer Agency Services...................................................... p. 39 Plan Administration Services.................................................. p. 40 Distribution Services......................................................... p. 40 Plan and Agreement of Distribution............................................ p. 40 Payments to Financial Intermediaries.......................................... p. 41 Custodian Services............................................................ p. 42 Board Services Corporation.................................................... p. 43 Organizational Information...................................................... p. 43 Board Members and Officers...................................................... p. 48 Information Regarding Pending and Settled Legal Proceedings..................... p. 52 Independent Registered Public Accounting Firm................................... p. 53 Appendix A: Description of Ratings.............................................. p. A-1 Appendix B: Seligman Funds...................................................... p. B-1 |
LIST OF TABLES
1. Investment Strategies and Types of Investments............................... p. 4 2. Class A Sales Charge......................................................... p. 32 3. Investment Management Services Agreement Fee Schedule........................ p. 37 4. Performance Incentive Adjustment Calculation................................. p. 37 5. Portfolio Managers........................................................... p. 38 6. Administrative Services Agreement Fee Schedule............................... p. 39 7. Fund History Table for RiverSource Funds..................................... p. 43 8. Board Members................................................................ p. 48 9. Fund Officers................................................................ p. 49 10. Board Member Holdings -- All Funds........................................... p. 51 |
The RiverSource complex of funds includes a comprehensive array of funds from RiverSource Investments, including several Seligman funds. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource complex. RiverSource funds, RiverSource Partners funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section. Although the Seligman funds share the same Board, they do not currently have the same policies and procedures, and may not be exchanged for shares of the RiverSource funds, RiverSource Partners funds or Threadneedle funds.
Please reference Appendix B for a complete list of Seligman funds.
Statement of Additional Information - Jan. 28, 2009 Page 2
FUNDAMENTAL AND NONFUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies adopted by a fund cannot be changed without the approval of a majority of the outstanding voting securities of the fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Nonfundamental investment policies may be changed by the Board at any time.
Notwithstanding any of a fund's other investment policies, each fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the fund for the purpose of having those assets managed as part of a combined pool.
FUNDAMENTAL POLICIES
Fundamental policies are policies that can be changed only with shareholder approval.
FOR EACH FUND: The fund will not:
- Act as an underwriter (sell securities for others). However, under the securities laws, the fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them.
- Lend securities or participate in an interfund lending program if the total of all such loans would exceed 33 1/3% of the fund's total assets except this fundamental investment policy shall not prohibit the fund from purchasing money market securities, loans, loan participation or other debt securities, or from entering into repurchase agreements.
- Borrow money, except for temporary purposes (not for leveraging or
investment) in an amount not exceeding 33 1/3% of its total assets
(including the amount borrowed) less liabilities (other than borrowings)
immediately after the borrowings.
- Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships.
- The fund will not buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options, futures contracts and foreign currency or from entering into forward currency contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities.
- Issue senior securities, except as permitted under the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
- The fund will not concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry.
NONFUNDAMENTAL POLICIES
Nonfundamental policies are policies that can be changed by the Board without shareholder approval. The following are guidelines that may be changed by the Board at any time.
- No more than 15% of the fund's net assets will be held in securities and other instruments that are illiquid.
- Up to 25% of the fund's net assets may be invested in foreign investments.
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INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
This table shows many of the various investment strategies and investments that the funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager or subadviser (individually and collectively, the "investment manager") may make on behalf of a fund. For a description of principal risks for an individual fund, please see the applicable prospectus for that fund. Notwithstanding a fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion.
TABLE 1. INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
INVESTMENT STRATEGY FUND ------------------------------------------------------------------------------------------------------- Agency and government securities Yes ------------------------------------------------------------------------------------------------------- Borrowing Yes ------------------------------------------------------------------------------------------------------- Cash/money market instruments Yes ------------------------------------------------------------------------------------------------------- Collateralized bond obligations Yes ------------------------------------------------------------------------------------------------------- Commercial paper Yes ------------------------------------------------------------------------------------------------------- Common stock Yes ------------------------------------------------------------------------------------------------------- Convertible securities Yes ------------------------------------------------------------------------------------------------------- Corporate bonds Yes ------------------------------------------------------------------------------------------------------- Debt obligations Yes ------------------------------------------------------------------------------------------------------- Depositary receipts Yes ------------------------------------------------------------------------------------------------------- Derivative instruments (including options and futures) Yes ------------------------------------------------------------------------------------------------------- Exchange-traded funds Yes ------------------------------------------------------------------------------------------------------- Floating rate loans No ------------------------------------------------------------------------------------------------------- Foreign currency transactions Yes ------------------------------------------------------------------------------------------------------- Foreign securities Yes ------------------------------------------------------------------------------------------------------- Funding agreements Yes ------------------------------------------------------------------------------------------------------- High yield debt securities (junk bonds) Yes ------------------------------------------------------------------------------------------------------- Illiquid and restricted securities Yes ------------------------------------------------------------------------------------------------------- Indexed securities Yes ------------------------------------------------------------------------------------------------------- Inflation protected securities Yes ------------------------------------------------------------------------------------------------------- Inverse floaters No ------------------------------------------------------------------------------------------------------- Investment companies Yes ------------------------------------------------------------------------------------------------------- Lending of portfolio securities Yes ------------------------------------------------------------------------------------------------------- Loan participations Yes ------------------------------------------------------------------------------------------------------- Mortgage- and asset-backed securities Yes ------------------------------------------------------------------------------------------------------- Mortgage dollar rolls No ------------------------------------------------------------------------------------------------------- Municipal obligations Yes ------------------------------------------------------------------------------------------------------- Pay-in-kind securities Yes ------------------------------------------------------------------------------------------------------- Preferred stock Yes ------------------------------------------------------------------------------------------------------- Real estate investment trusts Yes ------------------------------------------------------------------------------------------------------- Repurchase agreements Yes ------------------------------------------------------------------------------------------------------- Reverse repurchase agreements Yes ------------------------------------------------------------------------------------------------------- Short sales Yes ------------------------------------------------------------------------------------------------------- Sovereign debt Yes ------------------------------------------------------------------------------------------------------- Structured investments Yes ------------------------------------------------------------------------------------------------------- Swap agreements Yes ------------------------------------------------------------------------------------------------------- Variable- or floating-rate securities Yes ------------------------------------------------------------------------------------------------------- Warrants Yes ------------------------------------------------------------------------------------------------------- When-issued securities and forward commitments Yes ------------------------------------------------------------------------------------------------------- Zero-coupon and step-coupon securities Yes ------------------------------------------------------------------------------------------------------- |
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INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES
RISKS
The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). A mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with a fund at any time (for a description of principal risks for an individual fund, please see that fund's prospectus):
ACTIVE MANAGEMENT RISK. For a fund that is actively managed, its performance will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the fund's investment objective. Due to its active management, a fund could underperform other mutual funds with similar investment objectives.
BORROWING RISK. To the extent the fund borrows money for investment purposes, which is commonly referred to as "leveraging," the fund's exposure to fluctuations in the prices of its assets will be increased as compared to the fund's exposure if the fund did not borrow. The fund's borrowing activities will exaggerate any increase or decrease in the net asset value of the fund. In addition, the interest which the fund pays on borrowed money, together with any additional costs of maintaining a borrowing facility, are additional costs borne by the fund and could reduce or eliminate any net investment profits. Unless profits on assets acquired with borrowed funds exceed the costs of borrowing, the use of borrowing will diminish the investment performance of the fund compared with what it would have been without borrowing. When the fund borrows money it must comply with certain asset coverage requirements, which at times may require the fund to dispose of some of its holdings, even though it may be disadvantageous to do so at the time.
CREDIT RISK. Credit risk is the risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the fund purchases unrated securities, or if the rating of a security is reduced after purchase, the fund will depend on the investment manager's analysis of credit risk more heavily than usual.
COUNTERPARTY RISK. Counterparty risk is the risk that a counterparty to a financial instrument entered into by the fund or held by a special purpose or structured vehicle becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. The fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The fund may obtain only limited recovery or may obtain no recovery in such circumstances. The fund will typically enter into financial instrument transactions with counterparties whose credit rating is investment grade, or, if unrated, determined to be of comparable quality by the investment manager.
DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Gains or losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial gain or loss for the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk, and liquidity risk.
Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses.
Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed.
Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains.
Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment.
Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a
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lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity.
Certain derivatives have the potential for unlimited losses regardless of the size of the initial investment.
EXCHANGE-TRADED FUND (ETF) RISK. The price movement of an ETF may not track the underlying index and may result in a loss. In addition, shareholders bear both their proportionate share of the Fund's expenses and similar expenses incurred through ownership of the ETF.
FOREIGN/EMERGING MARKETS RISK. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks:
Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices.
Currency risk results from the constantly changing exchange rates between local currency and the U.S. dollar. Whenever the fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment.
Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring.
Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries.
INFLATION PROTECTED SECURITIES RISK. Inflation-protected debt securities tend to react to change in real interest rates. Real interest rates can be described as nominal interest rates minus the expected impact of inflation. In general, the price of an inflation-protected debt security falls when real interest rates rise, and rises when real interest rates fall. Interest payments on inflation- protected debt securities will vary as the principal and/or interest is adjusted for inflation and may be more volatile than interest paid on ordinary bonds. In periods of deflation, the fund may have no income at all. Income earned by a shareholder depends on the amount of principal invested and that principal will not grow with inflation unless the investor reinvests the portion of fund distributions that comes from inflation adjustments.
INITIAL PUBLIC OFFERING (IPO) RISK. IPOs are subject to many of the same risks as investing in companies with smaller market capitalizations. To the extent a fund determines to invest in IPOs it may not be able to invest to the extent desired, because, for example, only a small portion (if any) of the securities being offered in an IPO may be made available. The investment performance of a fund during periods when it is unable to invest significantly or at all in IPOs may be lower than during periods when the fund is able to do so. In addition, as a Fund increases in size, the impact of IPOs on the Fund's performance will generally decrease. IPOs will frequently be sold within 12 months of purchase. This may result in increased short-term capital gains, which will be taxable to shareholders as ordinary income.
INTEREST RATE RISK. The securities in the portfolio are subject to the risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates.
ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors.
LEVERAGE RISK. Leverage occurs when the fund increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. Due to the fact that short sales involve borrowing securities and then selling them, the fund's short sales effectively leverage the fund's assets. The use of leverage may make any change in the fund's net asset value ("NAV") even greater and thus result in increased volatility of returns. The fund's assets that are used as collateral to secure the short sales may decrease in value while the short positions are outstanding, which may force the fund
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to use its other assets to increase the collateral. Leverage can also create an interest expense that may lower the fund's overall returns. Lastly, there is no guarantee that a leveraging strategy will be successful.
LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity.
MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market.
PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the portfolio managers may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The portfolio managers may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time.
QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole as a result of the factors used in the quantitative method, the weight placed on each factor, and changes in the factors' historical trends. The quantitative methodology employed by the investment manager has been extensively tested using historical securities market data, but has only recently begun to be used to manage open-end mutual funds. There can be no assurance that the methodology will enable the fund to achieve its objective.
REINVESTMENT RISK. The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning.
SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk and potentially reduces the risks of loss and volatility.
SHORT SALES RISK. The fund may make short sales, which involves selling a security the fund does not own in anticipation that the security's price will decline. The fund must borrow those securities to make delivery to the buyer. The fund may not always be able to borrow a security it wants to sell short. The fund will suffer a loss if it sells a security short and the value of the security rises rather than falls. It is possible that the fund's long positions will decline in value at the same time that the value of its short positions increase, thereby increasing potential losses to the fund. Short sales expose the fund to the risk that it will be required to buy the security sold short (also known as "covering" the short position) at a time when the security has appreciated in value, thus resulting in a loss to the fund. The fund may also be required to close out a short position at a time when it might not otherwise choose, for example, if the lender of the security calls it back, which may have the effect of reducing or eliminating potential gain, or cause the fund to realize a loss. Short positions introduce more risk to the fund than long positions (purchases) because the maximum sustainable loss on a security purchased (held long) is limited to the amount paid for the security plus the transaction costs, whereas there is no maximum attainable price of the shorted security. Therefore, in theory, securities sold short have unlimited risk. Additionally, the fund's use of short sales in effect "leverages" the fund, as the fund intends to use the cash proceeds from short sales to invest in additional long positions. This leverage effect potentially exposes the fund to greater risks due to unanticipated market movements, which may magnify losses and increase the volatility of returns. See Leverage Risk and Market Risk.
SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies.
TAX RISK. As a regulated investment company, a fund must derive at least 90% of its gross income for each taxable year from sources treated as "qualifying income" under the Internal Revenue Code of 1986, as amended. The Fund currently intends to take positions in forward currency contracts with notional value up to the Fund's total net assets. Although foreign currency gains currently constitute "qualifying income" the Treasury Department has the authority to issue regulations excluding from the definition of "qualifying incomes" a fund's foreign currency gains not "directly related" to its "principal business" of investing in stocks or securities (or options and futures with respect thereto). Such regulations might treat gains
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from some of the Fund's foreign currency-denominated positions as not "qualifying income" and there is a remote possibility that such regulations might be applied retroactively, in which case, the Fund might not qualify as a regulated investment company for one or more years. In the event the Treasury Department issues such regulations, the Fund's Board of Directors may authorize a significant change in investment strategy or Fund liquidation.
INVESTMENT STRATEGIES
The following information supplements the discussion of each fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes strategies that many mutual funds use and types of securities that they purchase. Please refer to the table titled Investment Strategies and Types of Investments to see which are applicable to various categories of funds.
AGENCY AND GOVERNMENT SECURITIES
The U.S. government and its agencies issue many different types of securities.
U.S. Treasury bonds, notes, and bills and securities, including mortgage pass
through certificates of the Government National Mortgage Association (GNMA), are
guaranteed by the U.S. government.
Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government- sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with agency and government securities include:
Inflation Risk, Interest Rate Risk, Prepayment and Extension Risk, and
Reinvestment Risk.
BORROWING
A fund may borrow money for temporary purposes or to engage in transactions
permissible under the 1940 Act that may be considered a borrowing (such as
derivative instruments). Borrowings are subject to costs (in addition to any
interest that may be paid) and typically reduce a fund's total return. Except as
noted in the nonfundamental policies, however, a fund may not buy securities on
margin.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Borrowing Risk and Inflation Risk.
CASH/MONEY MARKET INSTRUMENTS
Cash-equivalent investments include short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable fixed-time
deposits, bankers' acceptances, and letters of credit of banks or savings and
loan associations having capital, surplus, and undivided profits (as of the date
of its most recently published annual financial statements) in excess of $100
million (or the equivalent in the instance of a foreign branch of a U.S. bank)
at the date of investment. A fund also may purchase short-term notes and
obligations of U.S. and foreign banks and corporations and may use repurchase
agreements with broker-dealers registered under the Securities Exchange Act of
1934 and with commercial banks. (See also Commercial Paper, Debt Obligations,
Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types
of instruments generally offer low rates of return and subject a fund to certain
costs and expenses. See Appendix A for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk and Inflation Risk.
COLLATERALIZED BOND OBLIGATIONS
Collateralized bond obligations (CBOs) are investment grade bonds backed by a
pool of bonds, which may include junk bonds. CBOs are similar in concept to
collateralized mortgage obligations (CMOs), but differ in that CBOs represent
different degrees of credit quality rather than different maturities. (See also
Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and
diversified pool of high-risk, high-yield junk bonds, which is then separated
into "tiers." Typically, the first tier represents the higher quality collateral
and pays the lowest interest rate; the second tier is backed by riskier bonds
and pays a higher rate; the third tier represents the lowest credit quality and
instead of receiving a
Statement of Additional Information - Jan. 28, 2009 Page 8
fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, may earn certain of the tiers investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield Debt Securities (Junk Bonds).)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Credit Risk, Interest Rate Risk and Prepayment and Extension Risk.
COMMERCIAL PAPER
Commercial paper is a short-term debt obligation with a maturity ranging from 2
to 270 days issued by banks, corporations, and other borrowers. It is sold to
investors with temporary idle cash as a way to increase returns on a short-term
basis. These instruments are generally unsecured, which increases the credit
risk associated with this type of investment. (See also Debt Obligations and
Illiquid and Restricted Securities.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk and Liquidity Risk.
COMMON STOCK
Common stock represents units of ownership in a corporation. Owners typically
are entitled to vote on the selection of directors and other important matters
as well as to receive dividends on their holdings. In the event that a
corporation is liquidated, the claims of secured and unsecured creditors and
owners of bonds and preferred stock take precedence over the claims of those who
own common stock.
The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Issuer Risk, Market Risk, and Small and Mid-Sized Company Risk.
CONVERTIBLE SECURITIES
Convertible securities are bonds, debentures, notes, preferred stocks, or other
securities that may be converted into common, preferred or other securities of
the same or a different issuer within a particular period of time at a specified
price. Some convertible securities, such as preferred equity-redemption
cumulative stock (PERCs), have mandatory conversion features. Others are
voluntary. A convertible security entitles the holder to receive interest
normally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted, or exchanged.
Convertible securities have unique investment characteristics in that they
generally (i) have higher yields than common stocks but lower yields than
comparable non-convertible securities, (ii) are less subject to fluctuation in
value than the underlying stock since they have fixed income characteristics,
and (iii) provide the potential for capital appreciation if the market price of
the underlying common stock increases.
The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Interest Rate Risk, Issuer Risk, Market Risk, Prepayment and Extension Risk, and Reinvestment Risk.
CORPORATE BONDS
Corporate bonds are debt obligations issued by private corporations, as distinct
from bonds issued by a government agency or a municipality. Corporate bonds
typically have four distinguishing features: (1) they are taxable; (2) they have
a par value of $1,000; (3) they have a term maturity, which means they come due
all at once; and (4) many are traded on major exchanges. Corporate bonds are
subject to the same concerns as other debt obligations. (See also Debt
Obligations and High-Yield Debt
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Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See Appendix A for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Credit Risk, Interest Rate Risk, Issuer Risk, Prepayment and Extension Risk, and Reinvestment Risk.
DEBT OBLIGATIONS
Many different types of debt obligations exist (for example, bills, bonds, or
notes). Issuers of debt obligations have a contractual obligation to pay
interest at a fixed, variable or floating rate on specified dates and to repay
principal on a specified maturity date. Certain debt obligations (usually
intermediate- and long-term bonds) have provisions that allow the issuer to
redeem or "call" a bond before its maturity. Issuers are most likely to call
these securities during periods of falling interest rates. When this happens, an
investor may have to replace these securities with lower yielding securities,
which could result in a lower return.
The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines.
In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability.
As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High- Yield Debt Securities (Junk Bonds).)
Generally, debt obligations that are investment grade are those that have been rated in one of the top four credit quality categories by two out of the three independent rating agencies. In the event that a debt obligation has been rated by only two agencies, the most conservative, or lower, rating must be in one of the top four credit quality categories in order for the security to be considered investment grade. If only one agency has rated the debt obligation, that rating must be in one of the top four credit quality categories for the security to be considered investment grade. See Appendix A for a discussion of securities ratings.
All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by a fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating agency or its rating system, a fund will attempt to use comparable ratings as standards for selecting investments.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Credit Risk, Interest Rate Risk, Issuer Risk, Prepayment and Extension Risk, and Reinvestment Risk.
DEPOSITARY RECEIPTS
Some foreign securities are traded in the form of American Depositary Receipts
(ADRs). ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities of foreign issuers. European
Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts
typically issued by foreign banks or trust companies, evidencing ownership of
underlying securities issued by either a foreign or U.S. issuer. Generally,
depositary receipts in registered form are designed for use in the U.S. and
depositary receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Depositary receipts involve the risks of other investments in foreign
securities. In addition, ADR holders may not have all the legal rights of
shareholders and may experience difficulty in receiving shareholder
communications. (See also Common Stock and Foreign Securities.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, and Market Risk.
DERIVATIVE INSTRUMENTS
Derivative instruments are commonly defined to include securities or contracts
whose values depend, in whole or in part, on (or "derive" from) the value of one
or more other assets, such as securities, currencies, or commodities.
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A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument.
Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward- based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange- traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets.
Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below- market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price.
When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions.
One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change.
Options on many securities are listed on options exchanges. If a fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, Chicago Board Options Exchange, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices.
Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised.
Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges.
Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market.
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Futures contracts may be based on various securities, securities indexes (such as the S&P 500 Index), foreign currencies and other financial instruments and indexes.
A fund may engage in futures and related options transactions to produce incremental earnings, to hedge existing positions, and to increase flexibility. The fund intends to comply with Rule 4.5 of the Commodity Futures Trading Commission (CFTC), under which a mutual fund is exempt from the definition of a "commodity pool operator." The fund, therefore, is not subject to registration or regulation as a pool operator, meaning that the fund may invest in futures contracts without registering with the CFTC.
Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily.
One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments.
Options on Indexes. Options on indexes are securities traded on national securities exchanges. An option on an index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Options may also be traded with respect to other types of indexes, such as options on indexes of commodities futures.
Tax and Accounting Treatment. As permitted under federal income tax laws and to the extent a fund is allowed to invest in futures contracts, a fund would intend to identify futures contracts as part of a mixed straddle and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If a fund is using short futures contracts for hedging purposes, the fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Any losses incurred on securities that are part of a straddle may be deferred to the extent there is unrealized appreciation on the offsetting position until the offsetting position is sold. Federal income tax treatment of gains or losses from transactions in options, options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, a fund would either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term.
The Internal Revenue Service (IRS) has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements.
Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (a fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last- quoted sales price on their primary exchange.
Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed.
Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-
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negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses.
When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded.
Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange- traded derivatives since they often can only be closed out with the other party to the transaction.
Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products.
(See also Foreign Currency Transactions.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Derivatives Risk and Liquidity Risk.
EXCHANGE-TRADED FUNDS
Exchange-traded funds (ETFs) represent shares of ownership in mutual funds, unit
investment trusts or depositary receipts. ETFs hold portfolios of securities
that are designed to replicate, as closely as possible before expenses, the
price and yield of a specified market index. The performance results of ETFs
will not replicate exactly the performance of the pertinent index due to
transaction and other expenses, including fees to service providers, borne by
ETFs. ETF shares are sold and redeemed at net asset value only in large blocks
called creation units and redemption units, respectively. ETF shares also may be
purchased and sold in secondary market trading on national securities exchanges,
which allows investors to purchase and sell ETF shares at their market price
throughout the day.
Although one or more of the other risks described in this SAI may apply, investments in ETFs involve the same risks associated with a direct investment in the types of securities included in the indices the ETFs are designed to replicate, including Market Risk. Shares of an ETF may trade at a market price that is less than their net asset value and an active trading market in such shares may not develop or continue. Finally, there can be no assurance that the portfolio of securities purchased by an EFT to replicate a particular index will replicate such index.
FOREIGN CURRENCY TRANSACTIONS
Investments in foreign countries usually involve currencies of foreign
countries. In addition, a fund may hold cash and cash equivalent investments in
foreign currencies. As a result, the value of a fund's assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
exchange rates and exchange control regulations. Also, a fund may incur costs in
connection with conversions between various currencies. Currency exchange rates
may fluctuate significantly over short periods of time causing a fund's NAV (Net
Asset Value) to fluctuate. Currency exchange rates are generally determined by
the forces of supply and demand in the foreign exchange markets, actual or
anticipated changes in interest rates, and other complex factors. Currency
exchange rates also can be affected by the intervention of U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments.
Spot Rates and Derivative Instruments. A fund may conduct its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts). (See also Derivative Instruments.) These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, a fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots.
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A fund may enter into forward contracts for a variety of reasons, but primarily it will enter into such contracts for risk management (hedging) or for investment purposes.
For hedging purposes, a fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When a fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, a fund would be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received.
A fund may also enter into forward contracts when management of the fund believes the currency of a particular foreign country may decline in value relative to another currency. When selling currencies forward in this fashion, a fund may seek to hedge the value of foreign securities it holds against an adverse move in exchange rates. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. A fund would not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate it to deliver an amount of foreign currency in excess of the value of its securities or other assets denominated in that currency.
This method of protecting the value of the fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase.
For investment purposes, a fund may invest in a combination of forward currency contracts and U.S. dollar-denominated market instruments in an attempt to obtain an investment result that is substantially the same as a direct investment in a foreign currency-denominated instrument. For example, the combination of U.S. dollar-denominated instruments with long forward currency exchange contracts creates a position economically equivalent to a position in the foreign currency, in anticipation of an increase in the value of the foreign currency against the U.S. dollar. Conversely, the combination of U.S. dollar-denominated instruments with short forward currency exchange contracts is economically equivalent to borrowing the foreign currency for delivery at a specified date in the future, in anticipation of a decrease in the value of the foreign currency against the U.S. dollar. Unanticipated changes in the currency exchange results could result in poorer performance for funds that enter into these types of transactions.
A fund may designate cash or securities in an amount equal to the value of the fund's total assets committed to consummating forward contracts entered into under the circumstance set forth immediately above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the fund's commitments on such contracts.
At maturity of a forward contract, a fund may either deliver (if a contract to sell) or take delivery of (if a contract to buy) the foreign currency or terminate its contractual obligation by entering into an offsetting contract with the same currency trader, the same maturity date, and covering the same amount of foreign currency.
If a fund engages in an offsetting transaction, it would incur a gain or loss to the extent there has been movement in forward contract prices. If a fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to buy or sell the foreign currency.
Although a fund values its assets each business day in terms of U.S. dollars, it may not intend to convert its foreign currencies into U.S. dollars on a daily basis. It would do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a fund at one rate, while offering a lesser rate of exchange should a fund desire to resell that currency to the dealer.
It is possible, under certain circumstances, including entering into forward currency contracts for investment purposes, that the fund may have to limit or restructure its forward contract currency transactions to qualify as a "regulated investment company" under the Internal Revenue Code.
Options on Foreign Currencies. A fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes and to gain exposure to foreign currencies. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, a fund may
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buy put options on the foreign currency. If the value of the currency does decline, a fund would have the right to sell the currency for a fixed amount in dollars and would offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted.
Conversely, where a change in the dollar value of a currency would increase the cost of securities a fund plans to buy, or where a fund would benefit from increased exposure to the currency, a fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates.
As in the case of other types of options, however, the benefit to a fund derived from purchases of foreign currency options would be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates.
A fund may write options on foreign currencies for the same types of purposes. For example, when a fund anticipates a decline in the dollar value of foreign- denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option would most likely not be exercised and the diminution in value of securities would be fully or partially offset by the amount of the premium received.
Similarly, instead of purchasing a call option when a foreign currency is expected to appreciate, a fund could write a put option on the relevant currency. If rates move in the manner projected, the put option would expire unexercised and allow the fund to hedge increased cost up to the amount of the premium.
As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates.
All options written on foreign currencies will be covered. An option written on foreign currencies is covered if a fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions.
Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the- counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost.
Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. A fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements)
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and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. A fund may use currency futures for the same purposes as currency forward contracts, subject to CFTC limitations.
Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the fund's investments. A currency hedge, for example, should protect a Yen- denominated bond against a decline in the Yen, but will not protect a fund against price decline if the issuer's creditworthiness deteriorates. Because the value of a fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of a fund's investments denominated in that currency over time.
A fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The fund would not enter into an option or futures position that exposes the fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Derivatives Risk, Interest Rate Risk, and Liquidity Risk.
FOREIGN SECURITIES
Foreign securities, foreign currencies, and securities issued by U.S. entities
with substantial foreign operations involve special risks, including those set
forth below, which are not typically associated with investing in U.S.
securities. Foreign companies are not generally subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
domestic companies. Additionally, many foreign stock markets, while growing in
volume of trading activity, have substantially less volume than the New York
Stock Exchange, and securities of some foreign companies are less liquid and
more volatile than securities of domestic companies. Similarly, volume and
liquidity in most foreign bond markets are less than the volume and liquidity in
the U.S. and, at times, volatility of price can be greater than in the U.S.
Further, foreign markets have different clearance, settlement, registration, and
communication procedures and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions making it difficult to conduct such transactions. Delays in such
procedures could result in temporary periods when assets are uninvested and no
return is earned on them. The inability of an investor to make intended security
purchases due to such problems could cause the investor to miss attractive
investment opportunities.
Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures).
The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities.
The introduction of a single currency, the euro, on Jan. 1, 1999 for participating European nations in the Economic and Monetary Union (EU) presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after Jan. 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other EU countries such as the United Kingdom and Denmark into the euro and the admission of other non-EU countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk and Issuer Risk.
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FUNDING AGREEMENTS
A fund may invest in funding agreements issued by domestic insurance companies.
Funding agreements are short-term, privately placed, debt obligations of
insurance companies that offer a fixed- or floating-rate of interest. These
investments are not readily marketable and therefore are considered to be
illiquid securities. (See also Illiquid and Restricted Securities.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with funding agreements include: Credit Risk and Liquidity Risk.
HIGH-YIELD DEBT SECURITIES (JUNK BONDS)
High yield (high-risk) debt securities are sometimes referred to as junk bonds.
They are non-investment grade (lower quality) securities that have speculative
characteristics. Lower quality securities, while generally offering higher
yields than investment grade securities with similar maturities, involve greater
risks, including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below.
See Appendix A for a discussion of securities ratings. (See also Debt Obligations.)
All fixed rate interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher- rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than a default by issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery.
Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality.
An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher- rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales.
Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield debt securities include: Credit Risk, Interest Rate Risk, and Prepayment and Extension Risk.
ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are securities that are not readily marketable. These
securities may include, but are not limited to, certain securities that are
subject to legal or contractual restrictions on resale, certain repurchase
agreements, and derivative instruments. To the extent a fund invests in illiquid
or restricted securities, it may encounter difficulty in determining a market
value for the securities. Disposing of illiquid or restricted securities may
involve time-consuming negotiations and legal expense, and it may be difficult
or impossible for a fund to sell the investment promptly and at an acceptable
price.
In determining the liquidity of all securities and derivatives, such as Rule 144A securities, which are unregistered securities offered to qualified institutional buyers, and interest-only and principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S. government or its agencies and instrumentalities the investment manager, under guidelines established by
Statement of Additional Information - Jan. 28, 2009 Page 17
the Board, will consider any relevant factors including the frequency of trades, the number of dealers willing to purchase or sell the security and the nature of marketplace trades.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with illiquid and restricted securities include:
Liquidity Risk.
INDEXED SECURITIES
The value of indexed securities is linked to currencies, interest rates,
commodities, indexes, or other financial indicators. Most indexed securities are
short- to intermediate-term fixed income securities whose values at maturity or
interest rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile than the
underlying instrument itself and they may be less liquid than the securities
represented by the index. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk and Market Risk.
INFLATION PROTECTED SECURITIES
Inflation is a general rise in prices of goods and services. Inflation erodes
the purchasing power of an investor's assets. For example, if an investment
provides a total return of 7% in a given year and inflation is 3% during that
period, the inflation-adjusted, or real, return is 4%. Inflation-protected
securities are debt securities whose principal and/or interest payments are
adjusted for inflation, unlike debt securities that make fixed principal and
interest payments. One type of inflation-protected debt security is issued by
the U.S. Treasury. The principal of these securities is adjusted for inflation
as indicated by the Consumer Price Index for Urban Consumers (CPI) and interest
is paid on the adjusted amount. The CPI is a measurement of changes in the cost
of living, made up of components such as housing, food, transportation and
energy.
If the CPI falls, the principal value of inflation-protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Conversely, if the CPI rises, the principal value of inflation-protected securities will be adjusted upward, and consequently the interest payable on these securities will be increased. Repayment of the original bond principal upon maturity is guaranteed in the case of U.S. Treasury inflation-protected securities, even during a period of deflation. However, the current market value of the inflation-protected securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Other issuers of inflation-protected debt securities include other U.S. government agencies or instrumentalities, corporations and foreign governments. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States.
If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure.
Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. By contrast, a fund holding these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with inflation-protected securities include: Interest Rate Risk and Market Risk.
INITIAL PUBLIC OFFERINGS (IPOS)
Companies issuing IPOs generally have limited operating histories, and their
prospects for future profitability are uncertain. These companies often are
engaged in new and evolving businesses and are particularly vulnerable to
competition and to changes in technology, markets and economic conditions. They
may be dependent on certain key managers and third parties, need more personnel
and other resources to manage growth and require significant additional capital.
They may also be dependent on limited product lines and uncertain property
rights and need regulatory approvals. Funds that invest in IPOs can be affected
by sales of additional shares and by concentration of control in existing
management and principal shareholders. Stock prices of IPOs can also be highly
unstable, due to the absence of a prior public market, the small number of
shares available for trading and limited investor information. Most IPOs involve
a high degree of risk not normally associated with offerings of more seasoned
companies.
Statement of Additional Information - Jan. 28, 2009 Page 18
Although one or more risks described in this SAI may apply, the largest risks associated with IPOs include: Small and Mid- Sized Company Risk and Initial Public Offering (IPO) Risk.
INVERSE FLOATERS
Inverse floaters are created by underwriters using the interest payment on
securities. A portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. The remainder, minus
a servicing fee, is paid to holders of inverse floaters. As interest rates go
down, the holders of the inverse floaters receive more income and an increase in
the price for the inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price for the inverse
floaters. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with inverse floaters include: Interest Rate Risk.
INVESTMENT COMPANIES
Investing in securities issued by registered and unregistered investment
companies may involve the duplication of advisory fees and certain other
expenses.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Market Risk.
LENDING OF PORTFOLIO SECURITIES
A fund may lend certain of its portfolio securities. The current policy of the
Board is to make these loans, either long- or short-term, to broker-dealers. In
making loans, the lender receives the market price in cash,
U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the Board. If the market price of the loaned securities goes up, the lender will get additional collateral on a daily basis. If the market price of the loaned securities goes down, the borrower may request that some collateral be returned. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the lender receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The lender may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The lender will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned.
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with the lending of portfolio securities include:
Credit Risk.
LOAN PARTICIPATIONS
Loans, loan participations, and interests in securitized loan pools are
interests in amounts owed by a corporate, governmental, or other borrower to a
lender or consortium of lenders (typically banks, insurance companies,
investment banks, government agencies, or international agencies). Loans involve
a risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to an investor in the event of fraud or misrepresentation.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk.
MORTGAGE- AND ASSET-BACKED SECURITIES
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 (CMOs). These securities may be issued or guaranteed by
U.S. government agencies or instrumentalities (see also Agency and Government
Securities), or by private issuers, generally originators and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities. Mortgage-backed
securities issued by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement. Commercial mortgage-
backed securities (CMBS) are a specific type of mortgage-backed security
collateralized by a pool of mortgages on commercial real estate.
Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities:
Statement of Additional Information - Jan. 28, 2009 Page 19
Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage- backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security.
CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity.
The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield.
Asset-backed securities have structural characteristics similar to mortgage- backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset-backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage and asset-backed securities include:
Credit Risk, Interest Rate Risk, Liquidity Risk, and Prepayment and Extension
Risk.
MUNICIPAL OBLIGATIONS
Municipal obligations include debt obligations issued by or on behalf of states,
territories, possessions, or sovereign nations within the territorial boundaries
of the United States (including the District of Columbia and Puerto Rico). The
interest on these obligations is generally exempt from federal income tax.
Municipal obligations are generally classified as either "general obligations"
or "revenue obligations."
General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax- exempt commercial paper, demand notes, and similar instruments.
Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities.
An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year.
Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only
Statement of Additional Information - Jan. 28, 2009 Page 20
rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See Appendix A for a discussion of securities ratings. (See also Debt Obligations.)
Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption.
These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Inflation Risk, Interest Rate Risk, and Market Risk.
PREFERRED STOCK
Preferred stock is a type of stock that pays dividends at a specified rate and
that has preference over common stock in the payment of dividends and the
liquidation of assets. Preferred stock does not ordinarily carry voting rights.
The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk and Market Risk.
REAL ESTATE INVESTMENT TRUSTS
Real estate investment trusts (REITs) are pooled investment vehicles that manage
a portfolio of real estate or real estate related loans to earn profits for
their shareholders. REITs are generally classified as equity REITs, mortgage
REITs or a combination of equity and mortgage REITs. Equity REITs invest the
majority of their assets directly in real property, such as shopping centers,
nursing homes, office buildings, apartment complexes, and hotels, and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. REITs can be subject to extreme
volatility due to fluctuations in the demand for real estate, changes in
interest rates, and adverse economic conditions. Similar to investment
companies, REITs are not taxed on income distributed to shareholders provided
they comply with certain requirements under the tax law. The failure of a REIT
to continue to qualify as a REIT for tax purposes can materially affect its
value. A fund will indirectly bear its proportionate share of any expenses paid
by a REIT in which it invests.
REITs often do not provide complete tax information until after the calendar year-end. Consequently, because of the delay, it may be necessary for a fund investing in REITs to request permission to extend the deadline for issuance of Forms 1099-DIV beyond January 31.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Interest Rate Risk, Issuer Risk and Market Risk.
REPURCHASE AGREEMENTS
Repurchase agreements may be entered into with certain banks or non-bank
dealers. In a repurchase agreement, the purchaser buys a security at one price,
and at the time of sale, the seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within seven days). The repurchase
agreement determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve certain risks in the event of a
default or insolvency of the other party to the agreement, including possible
delays or restrictions upon the purchaser's ability to dispose of the underlying
securities.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk.
REVERSE REPURCHASE AGREEMENTS
In a reverse repurchase agreement, an investor sells a security and enters into
an agreement to repurchase the security at a specified future date and price.
The investor generally retains the right to interest and principal payments on
the security.
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Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.)
Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk and Interest Rate Risk.
SHORT SALES
In short selling transactions, a fund sells a security it does not own in
anticipation of a decline in the market value of the security. To complete the
transaction, a fund must borrow the security to make delivery to the buyer. A
fund is obligated to replace the security borrowed by purchasing it at the
market price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by a fund, which may result
in a loss or gain, respectively. Unlike taking a long position in a security by
purchasing the security, where potential losses are limited to the purchase
price, short sales have no cap on maximum losses, and gains are limited to the
price of the security at the time of the short sale.
Short sales of forward commitments and derivatives do not involve borrowing a security. These types of short sales may include futures, options, contracts for differences, forward contracts on financial instruments and options such as contracts, credit linked instruments, and swap contracts.
A fund may not always be able to borrow a security it wants to sell short. A fund also may be unable to close out an established short position at an acceptable price and may have to sell long positions at disadvantageous times to cover its short positions. The value of your investment in a fund will fluctuate in response to the movements in the market. Fund performance also will depend on the effectiveness of the investment manager's research and the management team's investment decisions.
Short sales also involve other costs. A fund must repay to the lender an amount equal to any dividends or interest that accrues while the loan is outstanding. To borrow the security, a fund may be required to pay a premium. A fund also will incur truncation costs in effecting short sales. The amount of any ultimate gain for a fund resulting from a short sale will be decreased and the amount of any ultimate loss will be increased, by the amount of premiums, interest or expenses a fund may be required to pay in connection with the short sale. Until a fund closes the short position, it will earmark and reserve fund assets, in cash or liquid securities to offset a portion of the leverage risk. Realized gains from short sales are typically treated as short-term gains/losses.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Market Risk.
SOVEREIGN DEBT
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by a variety of factors, including its cash
flow situation, the extent of its reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
international lenders, and the political constraints to which a sovereign debtor
may be subject. (See also Foreign Securities.)
With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt.
Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness.
Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk and Foreign/Emerging Markets Risk.
STRUCTURED INVESTMENTS
A structured investment is a security whose return is tied to an underlying
index or to some other security or pool of assets. Structured investments
generally are individually negotiated agreements and may be traded over-the-
counter. Structured investments are created and operated to restructure the
investment characteristics of the underlying security. This restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments, such as commercial bank loans, and the issuance
by that entity of one or more classes of debt obligations ("structured
securities")
Statement of Additional Information - Jan. 28, 2009 Page 22
backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities, and interest rate provisions. The extent of the payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Structured securities are often offered in different classes. As a result a given class of a structured security may be either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and at any given time there may be no active trading market for a particular structured security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured investments include: Credit Risk and Liquidity Risk.
SWAP AGREEMENTS
Swap agreements are typically individually negotiated agreements that obligate
two parties to exchange payments based on a reference to a specified asset,
reference rate or index. Swap agreements will tend to shift a party's investment
exposure from one type of investment to another. A swap agreement can increase
or decrease the volatility of a fund's investments and its net asset value.
Swap agreements are traded in the over-the-counter market and may be considered to be illiquid. Swap agreements entail the risk that a party will default on its payment obligations. A fund will enter into a swap agreement only if the claims- paying ability of the other party or its guarantor is considered to be investment grade by the investment manager. Generally, the unsecured senior debt or the claims-paying ability of the other party or its guarantor must be rated in one of the three highest rating categories of at least one Nationally Recognized Statistical Rating Organization (NRSRO) at the time of entering into the transaction. If there is a default by the other party to such a transaction, a fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. In certain circumstances, a fund may seek to minimize counterparty risk by requiring the counterparty to post collateral.
Swap agreements are usually entered into without an upfront payment because the value of each party's position is the same. The market values of the underlying commitments will change over time resulting in one of the commitments being worth more than the other and the net market value creating a risk exposure for one counterparty or the other.
Interest Rate Swaps. Interest rate swap agreements are often used to obtain or preserve a desired return or spread at a lower cost than through a direct investment in an instrument that yields the desired return or spread. They are financial instruments that involve the exchange of one type of interest rate for another type of interest rate cash flow on specified dates in the future. In a standard interest rate swap transaction, two parties agree to exchange their respective commitments to pay fixed or floating rates on a predetermined specified (notional) amount.
The swap agreement notional amount is the predetermined basis for calculating the obligations that the swap counterparties have agreed to exchange. Under most swap agreements, the obligations of the parties are exchanged on a net basis. The two payment streams are netted out, with each party receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps can be based on various measures of interest rates, including LIBOR, swap rates, treasury rates and other foreign interest rates.
Cross Currency Swaps. Cross currency swaps are similar to interest rate swaps, except that they involve multiple currencies. A fund may enter into a currency swap when it has exposure to one currency and desires exposure to a different currency. Typically the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal amounts are exchanged at the beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and termination of the agreements, both sides will also have to pay in full periodically based upon the currency they have borrowed. Change in foreign exchange rates and changes in interest rates, as described above, may negatively affect currency swaps.
Total Return Swaps. Total return swaps are contracts in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. For example, CMBS total return swaps are bilateral financial contracts designed to replicate synthetically the total returns of collateralized mortgage-backed securities. In a typical total return equity swap, payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees
Statement of Additional Information - Jan. 28, 2009 Page 23
to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
Swaption Transaction. A swaption is an option on a swap agreement and a contract
that gives a counterparty the right (but not the obligation) to enter into a new
swap agreement or to shorten, extend, cancel or otherwise modify an existing
swap agreement, at some designated future time on specified terms, in return for
payment of the purchase price (the "premium") of the option. The fund may write
(sell) and purchase put and call swaptions to the same extent it may make use of
standard options on securities or other instruments. The writer of the contract
receives the premium and bears the risk of unfavorable changes in the market
value on the underlying swap agreement.
Swaptions can be bundled and sold as a package. These are commonly called interest rate caps, floors and collars. In interest rate cap transactions, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or cap. Interest rate floor transactions require one party, in exchange for a premium to agree to make payments to the other to the extent that interest rates fall below a specified level, or floor. In interest rate collar transactions, one party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts.
Credit Default Swaps. A credit default swap agreement may have as reference obligations one or more securities that are not currently held by the fund. The fund may be either the buyer or seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a seller, the fund generally receives an up front payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the seller must pay the buyer the full face amount of deliverable obligations of the reference obligations that may have little or no value. If the fund is a buyer and no credit event occurs, the fund recovers nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference obligation that may have little or no value.
The use of swap agreements by a fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index, but also of the swap itself, without the benefit of observing the performance of the swap under all the possible market conditions. Because some swap agreements have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with swaps include: Credit Risk, Liquidity Risk and Market Risk.
VARIABLE- OR FLOATING-RATE SECURITIES
Variable-rate securities provide for automatic establishment of a new interest
rate at fixed intervals (daily, monthly, semiannually, etc.). Floating-rate
securities generally provide for automatic adjustment of the interest rate
whenever some specified interest rate index changes. Variable- or floating-rate
securities frequently include a demand feature enabling the holder to sell the
securities to the issuer at par. In many cases, the demand feature can be
exercised at any time. Some securities that do not have variable or floating
interest rates may be accompanied by puts producing similar results and price
characteristics. Variable-rate demand notes include master demand notes that are
obligations that permit the investor to invest fluctuating amounts, which may
change daily without penalty, pursuant to direct arrangements between the
investor as lender, and the borrower. The interest rates on these notes
fluctuate from time to time. The issuer of such obligations normally has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. Because
these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be traded.
There generally is not an established secondary market for these obligations.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, the lender's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. Such
obligations frequently are not rated by credit rating agencies and may involve
heightened risk of default by the issuer.
Statement of Additional Information - Jan. 28, 2009 Page 24
Although one or more of the other risks described in this SAI may apply, the
largest risks associated with variable- or floating-rate securities include:
Credit Risk.
WARRANTS
Warrants are securities giving the holder the right, but not the obligation, to
buy the stock of an issuer at a given price (generally higher than the value of
the stock at the time of issuance) during a specified period or perpetually.
Warrants may be acquired separately or in connection with the acquisition of
securities. Warrants do not carry with them the right to dividends or voting
rights and they do not represent any rights in the assets of the issuer.
Warrants may be considered to have more speculative characteristics than certain
other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to its expiration date.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Market Risk.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
When-issued securities and forward commitments involve a commitment to purchase
or sell specific securities at a predetermined price or yield in which payment
and delivery take place after the customary settlement period for that type of
security. Normally, the settlement date occurs within 45 days of the purchase
although in some cases settlement may take longer. The investor does not pay for
the securities or receive dividends or interest on them until the contractual
settlement date. Such instruments involve the risk of loss if the value of the
security to be purchased declines prior to the settlement date and the risk that
the security will not be issued as anticipated. If the security is not issued as
anticipated, a fund may lose the opportunity to obtain a price and yield
considered to be advantageous.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk.
ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES
These securities are debt obligations that do not make regular cash interest
payments (see also Debt Obligations). Zero-coupon and step-coupon securities are
sold at a deep discount to their face value because they do not pay interest
until maturity. Pay-in-kind securities pay interest through the issuance of
additional securities. Because these securities do not pay current cash income,
the price of these securities can be extremely volatile when interest rates
fluctuate. See Appendix A for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk and Interest Rate Risk.
A fund cannot issue senior securities but this does not prohibit certain investment activities for which assets of the fund are set aside, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, delayed- delivery and when-issued securities transactions, and contracts to buy or sell options, derivatives, and hedging instruments.
SECURITIES TRANSACTIONS
Except as otherwise noted, the description of policies and procedures in this section also applies to any fund subadviser. Subject to policies set by the Board, as well as the terms of the investment management agreements, the investment manager or subadviser is authorized to determine, consistent with a fund's investment objective and policies, which securities will be purchased, held, or sold. In determining where the buy and sell orders are to be placed, the investment manager has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the Board.
Each fund, the investment manager, any subadviser and RiverSource Distributors, Inc. (principal underwriter and distributor of the Funds) has a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the fund.
A fund's securities may be traded on an agency basis with brokers or dealers or on a principal basis with dealers. In an agency trade, the broker-dealer generally is paid a commission. In a principal trade, the investment manager will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. The investment manager may pay the dealer a commission, or instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security.
Statement of Additional Information - Jan. 28, 2009 Page 25
BROKER-DEALER SELECTION
In selecting broker-dealers to execute transactions, the investment manager and
each subadviser will consider from among such factors as the ability to minimize
trading costs, trading expertise, infrastructure, ability to provide information
or services, financial condition, confidentiality, competitiveness of commission
rates, evaluations of execution quality, promptness of execution, past history,
ability to prospect for and find liquidity, difficulty of trade, security's
trading characteristics, size of order, liquidity of market, block trading
capabilities, quality of settlement, specialized expertise, overall
responsiveness, willingness to commit capital and research services provided.
The Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the funds as a factor in the selection of broker-dealers through which to execute securities transactions.
On a periodic basis, the investment manager makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions, including review by an independent third-party evaluator. The review evaluates execution, operational efficiency, and research services.
COMMISSION DOLLARS
Broker-dealers typically provide a bundle of services including research and
execution of transactions. The research provided can be either proprietary
(created and provided by the broker-dealer) or third party (created by a third
party but provided by the broker-dealer). Consistent with the interests of the
fund, the investment manager and each subadviser may use broker-dealers who
provide both types of research products and services in exchange for
commissions, known as "soft dollars," generated by transactions in fund
accounts.
The receipt of research and brokerage products and services is used by the investment manager, and by each subadviser, to the extent it engages in such transactions, to supplement its own research and analysis activities, by receiving the views and information of individuals and research staffs of other securities firms, and by gaining access to specialized expertise on individual companies, industries, areas of the economy and market factors. Research and brokerage products and services may include reports on the economy, industries, sectors and individual companies or issuers; statistical information; accounting and tax law interpretations; political analyses; reports on legal developments affecting portfolio securities; information on technical market actions; credit analyses; on-line quotation systems; risk measurement; analyses of corporate responsibility issues; on-line news services; and financial and market database services. Research services may be used by the investment manager in providing advice to multiple RiverSource accounts, including the funds (or by any subadviser to any other client of the subadviser) even though it is not possible to relate the benefits to any particular account or fund.
On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The Board has adopted a policy authorizing the investment manager to do so, to the extent authorized by law, if the investment manager or subadviser determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or the investment manager's or subadviser's overall responsibilities with respect to a fund and the other funds or accounts for which it acts as investment manager (or by any subadviser to any other client of that subadviser).
As a result of these arrangements, some portfolio transactions may not be effected at the lowest commission, but overall execution may be better. The investment manager and each subadviser have represented that under its procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services and research products and services provided.
The investment manager or a subadviser may use step-out transactions. A "step- out" is an arrangement in which the investment manager or subadviser executes a trade through one broker-dealer but instructs that broker-dealer to step-out all or a part of the trade to another broker-dealer. The second broker-dealer will clear and settle, and receive commissions for, the stepped-out portion. The investment manager or subadviser may receive research products and services in connection with step-out transactions.
Use of fund commissions may create potential conflicts of interest between the investment manager or subadviser and a fund. However, the investment manager and each subadviser has policies and procedures in place intended to mitigate these conflicts and ensure that the use of fund commissions falls within the "safe harbor" of Section 28(e) of the Securities Exchange Act of 1940. Some products and services may be used for both investment decision-making and non-investment decision-making purposes ("mixed use" items). The investment manager and each subadviser, to the extent it has mixed use items, has procedures in place to assure that fund commissions pay only for the investment decision-making portion of a mixed-use item.
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TRADE AGGREGATION AND ALLOCATION
Generally, orders are processed and executed in the order received. When a fund
buys or sells the same security as another portfolio, fund, or account, the
investment manager or subadviser carries out the purchase or sale pursuant to
policies and procedures designed in such a way believed to be fair to the fund.
Purchase and sale orders may be combined or aggregated for more than one account
if it is believed it would be consistent with best execution. Aggregation may
reduce commission costs or market impact on a per-share and per-dollar basis,
although aggregation may have the opposite effect. There may be times when not
enough securities are received to fill an aggregated order, including in an
initial public offering, involving multiple accounts. In that event, the
investment manager and each subadviser has policies and procedures designed in
such a way believed to result in a fair allocation among accounts, including the
fund.
From time to time, different portfolio managers with the investment manager may make differing investment decisions related to the same security. However, with certain exceptions for funds managed using strictly quantitative methods, a portfolio manager or portfolio management team may not sell a security short if the security is owned in another portfolio managed by that portfolio manager or portfolio management team. On occasion, a fund may purchase and sell a security simultaneously in order to profit from short-term price disparities.
The investment manager has portfolio management teams in its Minneapolis and Los Angeles offices that may share research information regarding leveraged loans. The investment manager operates separate and independent trading desks in these locations for the purpose of purchasing and selling leveraged loans. As a result, the investment manager does not aggregate orders in leveraged loans across portfolio management teams. For example, funds and other client accounts being managed by these portfolio management teams may purchase and sell the same leveraged loan in the secondary market on the same day at different times and at different prices. There is also the potential for a particular account or group of accounts, including a fund, to forego an opportunity or to receive a different allocation (either larger or smaller) than might otherwise be obtained if the investment manager were to aggregate trades in leveraged loans across the portfolio management teams. Although the investment manager does not aggregate orders in leveraged loans across its portfolio management teams in Minneapolis and Los Angeles, it operates in this structure subject to its duty to seek best execution.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE INVESTMENT MANAGER
Affiliates of the investment manager may engage in brokerage and other securities transactions on behalf of a fund according to procedures adopted by the Board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the Board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. The investment manager will use an affiliate only if (i) the investment manager determines that the fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the fund and (ii) the affiliate charges the fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement.
VALUING FUND SHARES
In determining net assets before shareholder transactions, a fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange):
- Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded.
- Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market.
- Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market.
- Securities included in the NASDAQ National Market System for which a last- quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices.
- Futures and options traded on major exchanges are valued at the last- quoted sales price on their primary exchange.
Statement of Additional Information - Jan. 28, 2009 Page 27
- Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars utilizing spot exchange rates at the close of regular trading on the NYSE.
- Occasionally, events affecting the value of securities occur between the time the primary market on which the securities are traded closes and the close of the Exchange. If events materially affect the value of securities, the securities will be valued at their fair value according to procedures decided upon in good faith by the Board. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price.
- Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date.
- Securities without a readily available market price and securities for which the price quotations or valuations received from other sources are deemed unreliable or not reflective of market value are valued at fair value as determined in good faith by the Board. The Board is responsible for selecting methods it believes provide fair value.
- When possible, bonds are valued by a pricing service independent from the funds. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available.
PORTFOLIO HOLDINGS DISCLOSURE
Each fund's Board and the investment manager believe that the investment ideas of the investment manager with respect to management of a fund should benefit the fund and its shareholders, and do not want to afford speculators an opportunity to profit by anticipating fund trading strategies or by using fund portfolio holdings information for stock picking. However, each fund's Board also believes that knowledge of the fund's portfolio holdings can assist shareholders in monitoring their investments, making asset allocation decisions, and evaluating portfolio management techniques.
Each fund's Board has therefore adopted the investment manager's policies and approved the investment manager's procedures, including the investment manager's oversight of subadviser practices, relating to disclosure of the fund's portfolio securities. These policies and procedures are intended to protect the confidentiality of fund portfolio holdings information and generally prohibit the release of such information until such information is made public, unless such persons have been authorized to receive such information on a selective basis, as described below. It is the policy of the fund not to provide or permit others to provide holdings information on a selective basis, and the investment manager does not intend to selectively disclose holdings information or expect that such holdings information will be selectively disclosed, except where necessary for the fund's operation or where there are legitimate business purposes for doing so and, in any case, where conditions are met that are designed to protect the interests of the fund and its shareholders. Although the investment manager seeks to limit the selective disclosure of portfolio holdings information and such selective disclosure is monitored under the fund's compliance program for conformity with the policies and procedures, there can be no assurance that these policies will protect the fund from the potential misuse of holdings information by individuals or firms in possession of that information. Under no circumstances may the investment manager, its affiliates or any employee thereof receive any consideration or compensation for disclosing such holdings information.
A complete schedule of each fund's portfolio holdings is available semi-annually and annually in shareholder reports filed on Form N-CSR and, after the first and third fiscal quarters, in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC in accordance with federal securities laws and are generally available within sixty (60) days of the end of a fund's fiscal quarter, on the SEC's website. Once holdings information is filed with the SEC, it will also be posted on the funds' website (riversource.com/funds), and it may be mailed, e-mailed or otherwise transmitted to any person.
In addition, the investment manager makes publicly available, on a monthly basis, information regarding a fund's top ten holdings (including name and percentage of a fund's assets invested in each such holding) and the percentage breakdown of a fund's investments by country, sector and industry, as applicable. This holdings information is generally made available through the website, marketing communications (including printed advertisements and sales literature), and/or telephone
Statement of Additional Information - Jan. 28, 2009 Page 28
customer service centers that support the fund. This holdings information is generally not released until it is at least fifteen (15) days old.
From time to time, the investment manager may make partial or complete fund holdings information that is not publicly available on the website or otherwise available in advance of the time restrictions noted above (1) to its affiliated and unaffiliated service providers that require the information in the normal course of business in order to provide services to the fund (including, without limitation entities identified by name in the fund's prospectus or this SAI, such as custodians, auditors, subadvisers, financial printers (Cenveo, Inc., Vestek, Data Communique, Inc.), pricing services (including Reuters Pricing Service, FT Interactive Data Corporation, Bear Stearns Pricing Service, and Kenny S&P), proxy voting services (Institutional Shareholder Services), and companies that deliver or support systems that provide analytical or statistical information (including Factset Research Systems, Bloomberg, L.P.), (2) to facilitate the review and/or rating of the fund by ratings and rankings agencies (including Morningstar, Inc., Thomson Financial and Lipper Inc.), and (3) other entities that provide trading, research or other investment related services (including Citigroup, Lehman Brothers Holdings, Merrill Lynch & Co., and Morgan Stanley). In such situations, the information is released subject to confidentiality agreements, duties imposed under applicable policies and procedures (for example, applicable codes of ethics) designed to prevent the misuse of confidential information, general duties under applicable laws and regulations, or other such duties of confidentiality. In addition, the fund discloses holdings information as required by federal or state securities laws, and may disclose holdings information in response to requests by governmental authorities.
Each fund's Board has adopted the policies of the investment manager and approved the procedures Ameriprise Financial has established to ensure that the fund's holdings information is only disclosed in accordance with these policies. Before any selective disclosure of holdings information is permitted, the person seeking to disclose such holdings information must submit a written request to the Portfolio Holdings Committee ("PHC"). The PHC is comprised of members from the investment manager's General Counsel's Office, Compliance, and Communications. The PHC has been authorized by the fund's Board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of a fund and its shareholders, to consider any potential conflicts of interest between the fund, the investment manager, and its affiliates, and to safeguard against improper use of holdings information. Factors considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure was authorized, including a duty not to trade on such information. Before portfolio holdings may be selectively disclosed, requests approved by the PHC must also be authorized by a fund's Chief Compliance Officer or the fund's General Counsel. On at least an annual basis the PHC reviews the approved recipients of selective disclosure and, where appropriate, requires a resubmission of the request, in order to re-authorize any ongoing arrangements. These procedures are intended to be reasonably designed to protect the confidentiality of fund holdings information and to prohibit their release to individual investors, institutional investors, intermediaries that distribute the fund's shares, and other parties, until such holdings information is made public or unless such persons have been authorized to receive such holdings information on a selective basis, as set forth above.
Although the investment manager has set up these procedures to monitor and control selective disclosure of holdings information, there can be no assurance that these procedures will protect a fund from the potential misuse of holdings information by individuals or firms in possession of that information.
PROXY VOTING
GENERAL GUIDELINES, POLICIES AND PROCEDURES
The funds uphold a long tradition of supporting sound and principled corporate governance. For over 30 years, the Board, which consists of a majority of independent Board members, has determined policies and voted proxies. The funds' investment manager, RiverSource Investments, and the funds' administrator, Ameriprise Financial, provide support to the Board in connection with the proxy voting process.
GENERAL GUIDELINES
CORPORATE GOVERNANCE MATTERS -- The Board supports proxy proposals that it believes are tied to the interests of shareholders and votes against proxy proposals that appear to entrench management. For example:
- The Board generally votes in favor of proposals for an independent chairman or, if the chairman is not independent, in favor of a lead independent director.
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- The Board supports annual election of all directors and proposals to eliminate classes of directors.
- In a routine election of directors, the Board will generally vote with management's recommendations because the Board believes that management and nominating committees of independent directors are in the best position to know what qualifications are required of directors to form an effective board. However, the Board will generally vote against a nominee who has been assigned to the audit, compensation, or nominating committee if the nominee is not independent of management based on established criteria. The Board will also withhold support for any director who fails to attend 75% of meetings or has other activities that appear to interfere with his or her ability to commit sufficient attention to the company and, in general, will vote against nominees who are determined to have been involved in options backdating.
- The Board generally supports proposals requiring director nominees to receive a majority of affirmative votes cast in order to be elected to the board, and opposes cumulative voting based on the view that each director elected should represent the interests of all shareholders.
- Votes in a contested election of directors are evaluated on a case-by-case basis. In general, the Board believes that incumbent management and nominating committees, with access to more and better information, are in the best position to make strategic business decisions. However, the Board will consider an opposing slate if it makes a compelling business case for leading the company in a new direction.
SHAREHOLDER RIGHTS PLANS -- The Board generally supports shareholder rights plans based on a belief that such plans force uninvited bidders to negotiate with a company's board. The Board believes these negotiations allow time for the company to maximize value for shareholders by forcing a higher premium from a bidder, attracting a better bid from a competing bidder or allowing the company to pursue its own strategy for enhancing shareholder value. The Board supports proposals to submit shareholder rights plans to shareholders and supports limiting the vote required for approval of such plans to a majority of the votes cast.
AUDITORS -- The Board values the independence of auditors based on established criteria. The Board supports a reasonable review of matters that may raise concerns regarding an auditor's service that may cause the Board to vote against a management recommendation, including, for example, auditor involvement in significant financial restatements, options backdating, material weaknesses in control, attempts to limit auditor liability or situations where independence has been compromised.
STOCK OPTION PLANS AND OTHER MANAGEMENT COMPENSATION ISSUES -- The Board expects company management to give thoughtful consideration to providing competitive long-term employee incentives directly tied to the interest of shareholders. The Board votes against proxy proposals that it believes dilute shareholder value excessively. The Board believes that equity compensation awards can be a useful tool, when not abused, for retaining employees and giving them incentives to engage in conduct that will improve the performance of the company. In this regard, the Board generally favors minimum holding periods of stock obtained by senior management pursuant to an option plan and will vote against compensation plans for executives that it deems excessive.
SOCIAL AND CORPORATE POLICY ISSUES -- The Board believes proxy proposals should address the business interests of the corporation. Shareholder proposals sometime seek to have the company disclose or amend certain business practices based purely on social or environmental issues rather than compelling business arguments. In general, the Board recognizes our fund shareholders are likely to have differing views of social and environmental issues and believes that these matters are primarily the responsibility of a company's management and its board of directors.
POLICIES AND PROCEDURES
The policy of the Board is to vote all proxies of the companies in which a fund holds investments. Because of the volume and complexity of the proxy voting process, including inherent inefficiencies in the process that are outside the control of the Board or the Proxy Team (below), not all proxies may be voted. The Board has implemented policies and procedures that have been reasonably designed to vote proxies and to ensure that there are no conflicts between interests of a fund's shareholders and those of the funds' principal underwriters, RiverSource Investments, or other affiliated persons. In exercising its proxy voting responsibilities, the Board may rely upon the research or recommendations of one or more third party service providers.
The administration of the proxy voting process is handled by the RiverSource Proxy Administration Team ("Proxy Team"). In exercising its responsibilities, the Proxy Team may rely upon one or more third party service providers. The Proxy Team assists the Board in identifying situations where its guidelines do not clearly require a vote in a particular manner and assists in researching matters and making voting recommendations. RiverSource Investments may recommend that a proxy be voted in a manner contrary to the Board's guidelines. In making recommendations to the Board about voting on a proposal, the
Statement of Additional Information - Jan. 28, 2009 Page 30
investment manager relies on its own investment personnel (or the investment personnel of a fund's subadviser(s)) and information obtained from an independent research firm. The investment manager makes the recommendation in writing. The process requires that Board members who are independent from the investment manager consider the recommendation and decide how to vote the proxy proposal or establish a protocol for voting the proposal.
On an annual basis, or more frequently as determined necessary, the Board reviews recommendations to revise the existing guidelines or add new guidelines. Recommendations are based on, among other things, industry trends and the frequency that similar proposals appear on company ballots.
The Board considers management's recommendations as set out in the company's proxy statement. In each instance in which a fund votes against management's recommendation (except when withholding votes from a nominated director), the Board sends a letter to senior management of the company explaining the basis for its vote. This permits both the company's management and the Board to have an opportunity to gain better insight into issues presented by the proxy proposal(s).
VOTING IN COUNTRIES OUTSIDE THE UNITED STATES (NON-U.S. COUNTRIES) -- Voting proxies for companies not domiciled in the United States may involve greater effort and cost due to the variety of regulatory schemes and corporate practices. For example, certain non-U.S. countries require securities to be blocked prior to a vote, which means that the securities to be voted may not be traded within a specified number of days before the shareholder meeting. The Board typically will not vote securities in non-U.S. countries that require securities to be blocked as the need for liquidity of the securities in the funds will typically outweigh the benefit of voting. There may be additional costs associated with voting in non-U.S. countries such that the Board may determine that the cost of voting outweighs the potential benefit.
SECURITIES ON LOAN -- The Board will generally refrain from recalling securities on loan based upon its determination that the costs and lost revenue to the funds, combined with the administrative effects of recalling the securities, generally outweigh the benefit of voting the proxy. While neither the Board nor the funds' administrator assesses the economic impact and benefits of voting loaned securities on a case-by-case basis, situations may arise where the Board requests that loaned securities be recalled in order to vote a proxy. In this regard, if a proxy relates to matters that may impact the nature of a company, such as a proposed merger or acquisition, and the funds' ownership position is more significant, the Board has established a guideline to direct the funds' administrator to use its best efforts to recall such securities based upon its determination that, in these situations, the benefits of voting such proxies generally outweigh the costs or lost revenue to the funds, or any potential adverse administrative effects to the funds, of not recalling such securities.
INVESTMENT IN AFFILIATED FUNDS -- Certain RiverSource funds may invest in shares of other RiverSource funds (referred to in this context as "underlying funds") and may own substantial portions of these underlying funds. The proxy policy of the funds is to ensure that direct public shareholders of underlying funds control the outcome of any shareholder vote. To help manage this potential conflict of interest, recognizing that the direct public shareholders of these underlying funds may represent only a minority interest, the policy of the funds is to vote proxies of the underlying funds in the same proportion as the vote of the direct public shareholders. If there are no direct public shareholders of an underlying fund, the policy is to cast votes in accordance with instructions from the independent members of the Board.
OBTAIN A PROXY VOTING RECORD
Each year the RiverSource funds file their proxy voting records with the SEC and make them available by August 31 for the 12-month period ending June 30 of that year. The records can be obtained without charge through riversource.com/funds or searching the website of the SEC at www.sec.gov.
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INVESTING IN A FUND
SALES CHARGE
Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the contingent deferred sales charge ("CDSC") and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of a fund.
Shares of a fund are sold at the public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 there is no initial sales charge so the public offering price is the same as the NAV.
CLASS A - CALCULATION OF THE SALES CHARGE
Sales charges are determined as shown in the following table.
TABLE 2. CLASS A SALES CHARGE
----------------------------------------------------------------------------------------- Sales charge* as a percentage of: ------------------------------------------------- PUBLIC OFFERING TOTAL MARKET VALUE PRICE** NET AMOUNT INVESTED ----------------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% ----------------------------------------------------------------------------------------- $50,000 - $99,999 4.75% 4.99% ----------------------------------------------------------------------------------------- $100,000 - $249,999 3.50% 3.63% ----------------------------------------------------------------------------------------- $250,000 - $499,999 2.50% 2.56% ----------------------------------------------------------------------------------------- $500,000 - $999,999 2.00% 2.04% ----------------------------------------------------------------------------------------- $1,000,000 or more*** 0.00% 0.00% ----------------------------------------------------------------------------------------- |
* Because of rounding in the calculation of purchase price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages.
** Purchase price includes the sales charge.
*** Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary making such a sale. Money market funds do not have a sales charge for Class A shares.
CLASS A - LETTER OF INTENT (LOI)
If you intend to invest $50,000 or more over a period of time, you may be able
to reduce the sales charge for investments in Class A by completing a LOI form
and committing to invest a certain amount. The LOI must be filed with and
accepted in good order by the distributor. The LOI can start at any time and you
will have up to 13 months to fulfill your commitment. Existing Rights of
Accumulation (ROA) can be included in your LOI. For example, a shareholder
currently has $60,000 ROA in RiverSource funds. Shareholder completes an LOI to
invest $100,000 in RiverSource funds (ROA eligible accounts). Shareholder only
needs to invest an additional $40,000 in RiverSource funds' Class A shares in
order to fulfill the LOI commitment and receive reduced front-end sales
charge(s) over the next 13 months. Your investments will be charged the sales
charge that applies to the amount you have committed to invest under the LOI.
Five percent of the commitment amount will be placed in escrow. The LOI will
remain in effect for the entire 13 months, even if you reach your commitment
amount. At the end of the 13-month period, the LOI will end and the shares will
be released from escrow. Once the LOI has ended, future sales charges will be
determined by ROA or the total value of the new investment combined with the
market value of the existing RiverSource fund investments as described in the
prospectus. If you do not invest the commitment amount by the end of the 13
months, the remaining unpaid sales charge will be redeemed from the escrowed
shares and the remaining balance released from escrow. The commitment amount
does not include purchases in any class of RiverSource funds other than Class A;
does not include any new reinvested dividends and directed dividends earned in
any RiverSource funds during the 13-month period; purchases in RiverSource funds
held within a wrap product; and purchases of RiverSource Cash Management Fund
and RiverSource Tax-Exempt Money Market Fund unless they are subsequently
exchanged to Class A shares of a RiverSource fund within the 13 month period. A
LOI is not an option (absolute right) to buy shares. If you purchase shares
through different channels, for example, in a brokerage account or through a
third party, you must inform your financial institution in writing about the LOI
when placing any purchase orders during the period of the LOI. If
Statement of Additional Information - Jan. 28, 2009 Page 32
you do not complete and file the LOI form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge.
CLASS A SHARES
Class A shares may be sold at net asset value to certain persons since such sales require less sales effort and lower sales-related expenses as compared with sales to the general public. If you are eligible to purchase Class A shares without a sales charge, you should inform your financial advisor, financial intermediary or the transfer agent of such eligibility and be prepared to provide proof thereof.
INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales
charges do not apply to:
- Shareholders whose original purchase was in a Strategist fund merged into a RiverSource fund in 2000.
- Participants of "eligible employee benefit plans" including 403(b) plans for which Ameriprise Financial Services, Inc. (Ameriprise Financial Services) serves as broker-dealer, and the school district or group received a written proposal from Ameriprise Financial Services between November 1, 2007 and December 31, 2008 (each a Qualifying 403(b) Plan). In order for participants in one of these 403(b) plans to receive this waiver, at least one participant account of the 403(b) plan must have been funded at Ameriprise Financial Services prior to December 31, 2009. This waiver may be discontinued for any Qualifying 403(b) Plan, in the sole discretion of the distributor, after December 31, 2009.
- To participants in retirement and benefit plans made through financial intermediaries that perform participant recordkeeping or other administrative services for the plans and that have entered into arrangements with the funds and/or the distributor specifically for such purchases.
CLASS B SHARES
Class B shares have a CDSC for six years. For Class B shares purchased prior to
May 21, 2005, those shares will convert to Class A shares in the ninth calendar
year of ownership. For Class B shares purchased beginning May 21, 2005, those
shares will convert to Class A shares one month after the eighth year of
ownership.
CLASS C SHARES
Class C shares are available to all investors. Class C shares are sold without a
front-end sales charge. For Class C shares, a 1% CDSC may apply if shares are
sold within one year after purchase. Class C shares are subject to a
distribution fee.
CLASS I SHARES
Class I shares are offered to qualifying institutional investors. Class I shares
are sold without a front-end sales charge or CDSC.
CLASS R SHARES
Class R2, Class R3, Class R4 and Class R5 shares are offered to certain
institutional investors. Class R2, Class R3, Class R4 and Class R5 shares are
sold without a front-end sales charge or a CDSC. Class R2 and Class R3 shares
are subject to a distribution fee. Class R2, Class R3 and R4 shares are subject
to a plan administration fee. The following investors are eligible to purchase
Class R2, Class R3, Class R4 and Class R5 shares:
- Qualified employee benefit plans;
- Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code;
- Nonqualified deferred compensation plans;
- State sponsored college savings plans established under Section 529 of the Internal Revenue Code;
- Health Savings Accounts (HSAs) created pursuant to public law 108-173.
Additionally, the following eligible investors may purchase Class R5 shares:
- Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all RiverSource funds); and
- Bank Trusts.
Statement of Additional Information - Jan. 28, 2009 Page 33
REJECTION OF BUSINESS
Each fund and RiverSource Distributors, Inc. reserves the right to reject any business, in its sole discretion.
SELLING SHARES
You have a right to sell your shares at any time. For an explanation of sales procedures, please see the applicable prospectus.
During an emergency, the Board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of a fund to redeem shares for more than seven days. Such emergency situations would occur if:
- The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or
- Disposal of a fund's securities is not reasonably practicable or it is not reasonably practicable for the fund to determine the fair value of its net assets, or
- The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist.
Should a fund stop selling shares, the Board may make a deduction from the value of the assets held by the fund to cover the cost of future liquidations of the assets so as to distribute these costs fairly among all shareholders.
Each fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the fund as determined by the Board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should a fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law.
Applications for a systematic investment in a class of a fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted.
To start any of these plans, please consult your financial institution. Your authorization must be received at least five days before the date you want your payments to begin. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it.
TAXES
SUBCHAPTER M COMPLIANCE
Each fund has elected to be taxed under Subchapter M of the Internal Revenue
Code as a regulated investment company. Each fund intends to maintain its
qualification as a regulated investment company by meeting certain requirements
relating to distributions, source of income, and asset diversification.
Distribution requirements include distributing at least 90% of the fund's
investment company taxable income and tax-exempt ordinary income to fund
shareholders each taxable year. The source of income rules require that at least
90% of the fund's gross income be derived from dividends, interest, certain
payments with respect to securities loans, gain from the sale or other
disposition of stock, securities or foreign currencies (subject to certain
limitations), and certain other income derived with respect to its business of
investing in stock, securities or currencies, and net income from certain
interests in qualified publicly traded partnerships. Asset diversification
requirements are met when the Fund owns, at the end of each quarter of its
taxable year, a portfolio, 50% of which includes cash and cash items, U.S.
government securities, securities of other regulated investment companies and,
securities of other issuers in which the fund has not invested more than 5% of
the value of the fund's assets (or 10% of the value of the
Statement of Additional Information - Jan. 28, 2009 Page 34
outstanding voting securities of any one issuer). Also, no more than 25% of the fund's assets may be invested in the securities of any one issuer or two or more issuers which the fund controls and which are engaged in the same or similar trades or businesses (excepting U.S. government securities and securities of other regulated investment companies) or the securities of one or more qualified publicly traded partnerships. This is a simplified description of the relevant laws.
If the fund fails to qualify as a regulated investment company under Subchapter M, the fund would be taxed as a corporation on the entire amount of its taxable income without a dividends paid deduction. Also, "all of" a shareholder's distributions would become ordinary dividends (or could be treated as a return of capital, if there weren't sufficient earnings and profits).
Under federal tax law, by the end of a calendar year a fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. Each fund intends to comply with federal tax law and avoid any excise tax. For purposes of the excise tax distributions, section 988 ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end.
The fund intends to distribute sufficient dividends within each calendar year, as well as on a fiscal year basis, to avoid income and excise taxes.
A fund may be subject to U.S. taxes resulting from holdings in passive foreign investment companies (PFIC). To avoid unfavorable tax consequences, a fund may make an election to mark to market its PFIC investments. A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income.
Income earned by a fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of a fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the fund will be eligible to file an election with the Internal Revenue Service (IRS) under which shareholders of the fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes.
A fund may use equalization payments to satisfy its requirement to make distributions of net investment income and capital gain net income. Equalization payments occur when a fund allocates a portion of its net investment income and realized capital gain net income to redemptions of fund shares. These payments reduce the amount of taxable distributions paid to shareholders. The IRS has not issued any guidance concerning the methods used to allocate investment income and capital gain to redemptions of shares. If the IRS determines that a fund is using an improper method of allocation for these purposes, the fund may be liable for additional federal income tax.
This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to fund distributions.
EXCHANGES
For tax purposes, an exchange is considered a sale and purchase, and may result
in a gain or loss. A sale is a taxable transaction. If you sell shares for less
than their cost, the difference is a capital loss. If you sell shares for more
than their cost, the difference is a capital gain. Your gain may be short term
(for shares held for one year or less) or long term (for shares held more than
one year).
A capital loss on a sale or redemption of a security in a nonqualified account may be disallowed for tax purposes if the same or a substantially identical security is purchased or acquired within 30 days before or after the date of the loss transaction. This is called a wash sale. When a wash sale occurs, the loss is disallowed to the extent of shares repurchased, and the cost basis on the security acquired is increased by the amount of the loss that is disallowed. The loss is disallowed in a nonqualified account whether the purchase is in a nonqualified account or in an IRA or Roth IRA, however, an individual's cost basis in an IRA or Roth IRA is not increased due to the wash sale rules. The wash sale rules apply only to capital losses. Sales of securities that result in capital gains are generally recognized when incurred.
If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased.
Statement of Additional Information - Jan. 28, 2009 Page 35
FOR EXAMPLE
You purchase 100 shares of an equity fund having a public offering price of
$10.00 per share. With a sales load of 5.75%, you pay $57.50 in sales load. With
a NAV of $9.425 per share, the value of your investment is $942.50. Within 91
days of purchasing that fund, you decide to exchange out of that fund, now at a
NAV of $11.00 per share, up from the original NAV of $9.425, and purchase a
second fund, at a NAV of $15.00 per share. The value of your investment is now
$1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load
when calculating your tax gain or loss in the sale of the first fund shares. So
instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50
gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the
calculation of your tax gain or loss when you sell shares in the second fund.
If you have a nonqualified investment in a fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. See wash sale discussion above. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged exceeds annual contribution limitations. You should consult your tax advisor for further details about this complex subject.
DISTRIBUTIONS
DIVIDENDS
Net investment income dividends received should be treated as dividend income
for federal income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of a fund's dividend that is
attributable to dividends the fund received from domestic (U.S.) securities. If
there is debt-financed portfolio stock, that is, bank financing is used to
purchase long securities, the 70% dividends received deduction would be reduced
by the average amount of portfolio indebtedness divided by the average adjusted
basis in the stock. This does not impact the qualified dividend income available
to individual shareholders. For the most recent fiscal period, net investment
income dividends qualified for the corporate deduction as shown in the following
table.
Only certain qualified dividend income (QDI) will be subject to the 15% and 0% (for lower-bracket taxpayers) tax rates for 2008-2010. QDI is dividends earned from domestic corporations and qualified foreign corporations. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established U.S. securities market (ADRs), and certain other corporations eligible for relief under an income tax treaty with the U.S. that includes an exchange of information agreement. PFICs are excluded from this treatment. Holding periods for shares must also be met to be eligible for QDI treatment (more than 60 days for common stock and more than 90 days for certain preferred's dividends).
CAPITAL GAINS DISTRIBUTIONS
Capital gain distributions, if any, received by shareholders should be treated
as long-term capital gains regardless of how long shareholders owned their
shares. Short-term capital gains earned by a fund are paid to shareholders as
part of their ordinary income dividend and are taxable as ordinary income.
Special rates on capital gains may apply to sales of precious metals, if any,
owned directly by a fund and to investments in REITs.
Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time a fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition may be treated as ordinary or capital gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of a fund's investment company taxable income to be distributed to its shareholders as ordinary income.
RETURN OF CAPITAL
If a mutual fund is the holder of record of any share of stock on the record
date for any dividend payable with respect to the stock, the dividend will be
included in gross income by the fund as of the later of (1) the date the share
became ex-dividend or (2) the date the fund acquired the share. Because the
dividends on some foreign equity investments may be received some time after the
stock goes ex-dividend, and in certain rare cases may never be received by the
fund, this rule may cause a fund to pay income to its shareholders that it has
not actually received. To the extent that the dividend is never received, the
fund will take a loss at the time that a determination is made that the dividend
will not be received.
If a fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to its shareholders. A return of capital will generally not be taxable, however, any amounts
Statement of Additional Information - Jan. 28, 2009 Page 36
received in excess of a shareholder's tax basis are treated as capital gain. Forms 1099 will be sent to shareholders to report any return of capital.
SERVICE PROVIDERS
INVESTMENT MANAGEMENT SERVICES
RiverSource Investments is the investment manager for the fund. Under the Investment Management Services Agreement, the investment manager, subject to the policies set by the Board, provides investment management services.
For its services, the investment manager is paid a monthly fee based on the following schedule. Each class of the fund pays its proportionate share of the fee. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding day.
TABLE 3. INVESTMENT MANAGEMENT SERVICES AGREEMENT FEE SCHEDULE
----------------------------------------------------------------------------------------- ANNUAL RATE AT EACH FUND ASSETS (BILLIONS) ASSET LEVEL ----------------------------------------------------------------------------------------- Recovery and Infrastructure First $1.0 0.650% Next 1.0 0.600 Next 4.0 0.550 Over 6.0 0.500 ----------------------------------------------------------------------------------------- |
Under the agreement, the fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees and charges; fidelity bond premiums; certain legal fees; registration fees for shares; consultants' fees; compensation of Board members, officers and employees not employed by the investment manager or its affiliates; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; and expenses properly payable by the fund, approved by the Board.
Before the fee based on the asset charge is paid, it is adjusted for the Fund's investment performance relative to the S&P 500 Index (Index). The adjustment will be determined monthly by measuring the percentage difference over a rolling 36-month period (subject to earlier determination based on the Transition Period, as set forth below) between the annualized performance of one Class A share of the fund and the annualized performance of the Index ("performance difference"). The performance difference is then used to determine the adjustment rate. The adjustment rate, computed to five decimal places, is determined in accordance with the following table and is applied against average daily net assets for the applicable rolling 36-month period or Transition Period, and divided by 12 to obtain the fee reflecting the performance fee adjustment for that month.
TABLE 4. PERFORMANCE INCENTIVE ADJUSTMENT CALCULATION
PERFORMANCE DIFFERENCE ADJUSTMENT RATE ------------------------------------------------------------------------------------------------- 0.00% -- 0.50% 0 ------------------------------------------------------------------------------------------------- 0.50% -- 1.00% 6 basis points times the performance difference over 0.50%, times 100 (maximum of 3 basis points if a 1% performance difference) ------------------------------------------------------------------------------------------------- 1.00% -- 2.00% 3 basis points, plus 3 basis points times the performance difference over 1.00%, times 100 (maximum 6 basis points if a 2% performance difference) ------------------------------------------------------------------------------------------------- 2.00% -- 4.00% 6 basis points, plus 2 basis points times the performance difference over 2.00%, times 100 (maximum 10 basis points if a 4% performance difference) ------------------------------------------------------------------------------------------------- 4.00% -- 6.00% 10 basis points, plus 1 basis point times the performance difference over 4.00%, times 100 (maximum 12 basis points if a 6% performance difference) ------------------------------------------------------------------------------------------------- 6.00% or more 12 basis points ------------------------------------------------------------------------------------------------- |
For example, if the performance difference for an Equity Fund is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the fund is 0.0012 per year. Where the fund's Class A performance exceeds that of the Index, the fee paid to the investment manager will increase. Where the performance of the Index exceeds the performance of the fund's Class A shares, the fee paid to the investment manager will
Statement of Additional Information - Jan. 28, 2009 Page 37
decrease. The 36-month comparison period rolls over with each succeeding month, so that it always equals 36 months, ending with the month for which the performance adjustment is being computed.
TRANSITION PERIOD
The performance incentive adjustment will not be calculated for the first 24 months from the inception of the fund. After 24 full calendar months, the performance fee adjustment will be determined using the average assets and Performance Difference over the first 24 full calendar months, and the Adjustment Rate will be applied in full. Each successive month an additional calendar month will be added to the performance adjustment computation. After 36 full calendar months, the full rolling 36-month period will take affect.
CHANGE IN INDEX
If the Index ceases to be published for a period of more than 90 days, changes in any material respect, otherwise becomes impracticable or, at the discretion of the Board, is no longer appropriate to use for purposes of a performance incentive adjustment, the Board may take action it deems appropriate and in the best interests of shareholders, including: (1) discontinuance of the performance incentive adjustment until such time as it approves a substitute index, or (2) adoption of a methodology to transition to a substitute index it has approved.
In the case of a change in index, the Fund's performance will be compared to a 36-month blended index return that reflects the performance of the current index for the portion of the 36-month performance measurement period beginning the effective date of the current index and the performance of the prior index for the remainder of the measurement period. As the conclusion of the transition period, the performance of the prior index will be eliminated from the performance incentive adjustment calculation, and the calculation will include only the performance of the current index.
MANAGER OF MANAGERS EXEMPTION
The RiverSource funds have received an order from the SEC that permits
RiverSource Investments, subject to the approval of the Board, to appoint a
subadviser or change the terms of a subadvisory agreement for a fund without
first obtaining shareholder approval. The order permits the fund to add or
change unaffiliated subadvisers or the fees paid to subadvisers from time to
time without the expense and delays associated with obtaining shareholder
approval of the change.
PORTFOLIO MANAGERS. For funds other than money market funds, the following table provides information about the funds' portfolio manager as of Nov. 30, 2008.
TABLE 5. PORTFOLIO MANAGERS
OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT(A) ASSETS ACCOUNTS(B) SHARES(C) INTEREST COMPENSATION ----------------------------------------------------------------------------------------------------------------------------------- Recovery and Warren Spitz 16 RICs $11.82 billion 10 RICs ($11.45B) None (1) (A) Infrastructure 2 PIVs $25.51 million 9 Other accounts(d) $361.48 million ----------------------------------------------------------------------------------------------------------------------------------- |
(a) RIC refers to a Registered Investment Company; PIV refers to a Pooled Investment Vehicle.
(b) Number of accounts for which the advisory fee paid is based in part or wholly on performance and the aggregate net assets in those accounts.
(c) The fund is new and shares were not yet being offered as of Nov. 30, 2008.
(d) Reflects each wrap program strategy as a single client, rather than counting each participant in the program as a separate client.
POTENTIAL CONFLICTS OF INTEREST
(1) RiverSource Investments portfolio managers may manage one or more mutual
funds as well as other types of accounts, including hedge funds,
proprietary accounts, separate accounts for institutions and
individuals, and other pooled investment vehicles. Portfolio managers
make investment decisions for an account or portfolio based on its
investment objectives and policies, and other relevant investment
considerations. A portfolio manager may manage another account whose
fees may be materially greater than the management fees paid by the Fund
and may include a performance-based fee. Management of multiple funds
and accounts may create potential conflicts of interest relating to the
allocation of investment opportunities, competing investment decisions
made for different accounts and the aggregation and allocation of
trades. In addition, RiverSource Investments monitors a variety of areas
(e.g., allocation of investment opportunities) and compliance with the
firm's Code of Ethics, and places additional investment restrictions on
portfolio managers who manage hedge funds and certain other accounts.
RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and
Statement of Additional Information - Jan. 28, 2009 Page 38
then allocate securities to client accounts in a fair and equitable basis over time. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients.
In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager's Code of Ethics is designed to address conflicts and, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts.
STRUCTURE OF COMPENSATION
(A) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, plus, where applicable, a percentage of the assets of the funds they support as research analysts, and by the short term (typically one-year) and long-term (typically three-year and five-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level.
ADMINISTRATIVE SERVICES
Each fund has an Administrative Services Agreement with Ameriprise Financial. Under this agreement, the fund pays Ameriprise Financial for providing administration and accounting services. The fee is calculated as follows:
TABLE 6. ADMINISTRATIVE SERVICES AGREEMENT FEE SCHEDULE
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ------------------------------------------------------------------------------------------ $500,000,001 - $1,000,000,001 - $3,000,000,001 - FUND $0 - 500,000,000 1,000,000,000 3,000,000,000 $12,000,000,000 12,000,000,001 + ------------------------------------------------------------------------------------------------------------------------------ Recovery and Infrastructure 0.060% 0.055% 0.050% 0.040% 0.030% ------------------------------------------------------------------------------------------------------------------------------ |
The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding day.
Third parties with which Ameriprise Financial contracts to provide services for the fund or its shareholders may pay a fee to Ameriprise Financial to help defray the cost of providing administrative and accounting services. The amount of any such fee is negotiated separately with each service provider and does not constitute compensation for investment advisory, distribution, or other services. Payment of any such fee neither increases nor reduces fees or expenses paid by shareholders of the fund.
TRANSFER AGENCY SERVICES
Each fund has a Transfer Agency Agreement with RiverSource Service Corporation (the "transfer agent") located at 734 Ameriprise Financial Center, Minneapolis, MN 55474. This agreement governs RiverSource Service Corporation's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the fund's shares.
Statement of Additional Information - Jan. 28, 2009 Page 39
CLASS A, CLASS B AND CLASS C. RiverSource Service Corporation will earn a fee from the fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The fund will pay on the basis of the relative percentage of net assets of each class of shares, first allocating the base fee (equal to Class A shares) across share classes, and then allocating the incremental per share class fee, based on the number of shareholder accounts.
The annual per account fee accrued daily and payable monthly, for the applicable classes is as follows:
Class A Class B Class C ------- ------- ------- $19.50 $20.50 $20.00 |
CLASS R2, CLASS R3, CLASS R4 AND CLASS R5. RiverSource Service Corporation will earn a fee from the fund, accrued daily and payable monthly, determined by multiplying the average daily net assets of the applicable class by the annual rate shown below:
Class R2 Class R3 Class R4 Class R5 -------- -------- -------- -------- 0.05% 0.05% 0.05% 0.05% |
In addition, an annual closed-account fee of $5.00 per inactive account may be charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system, generally within one year. The fees paid to RiverSource Service Corporation may be changed by the Board without shareholder approval.
PLAN ADMINISTRATION SERVICES
The funds have a Plan Administration Services Agreement with the transfer agent. Under the agreement the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts (HSAs).
The fee for services is equal on an annual basis to 0.25% of the average daily net assets of the fund for Class R2, Class R3 and Class R4.
The fees paid to the transfer agent may be changed by the Board without shareholder approval.
DISTRIBUTION SERVICES
RiverSource Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, MN 55474, a wholly-owned subsidiary of Ameriprise Financial, Inc., and RiverSource Fund Distributors, Inc., 100 Park Avenue, New York, NY 10017, an indirect wholly-owned subsidiary of RiverSource Investments, LLC (collectively the "distributor") serve as the fund's principal underwriters. The fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing fund shares are paid to the distributor daily.
Part of the sales charge may be paid to selling dealers who have agreements with the distributor. The distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers.
PLAN AND AGREEMENT OF DISTRIBUTION
To help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, each fund approved a Plan of Distribution (the "Plan") and entered into an agreement under the Plan pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, of the type known as a reimbursement plan, the fund pays the distributor a fee up to actual expenses incurred at an annual rate as follows:
The fee is equal on an annual basis to the following percentage of the average daily net assets of the fund attributable to the applicable class:
Class A Class B Class C Class R2 Class R3 ------- ------- ------- -------- -------- 0.25% 1.00% 1.00% 0.50% 0.25% |
For each class, up to 0.75% (up to the total fee if less than 0.75%) is reimbursed for distribution expenses.
For Class B and Class C, up to an additional 0.25% is paid to the distributor to reimburse certain expenses incurred in connection with providing services to fund shareholders.
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Distribution and shareholder servicing expenses include payment of distribution and shareholder servicing fees to financial institutions that sell shares of the fund. Financial institutions may compensate their financial advisors with the distribution and shareholder servicing fees paid to them by the distributor.
Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material increase to expenses charged under the Class A plan.
Distribution expenses covered under this Plan include commissions to financial intermediaries, printing prospectuses and reports used for sales purposes, the preparation, printing and distribution of advertising and sales literature, personnel, travel, office expense and equipment, and other distribution-related expenses. Shareholder service expenses include costs of establishing and maintaining shareholder accounts and records, assisting with purchase, redemption and exchange requests, arranging for bank wires, monitoring dividend payments from the funds on behalf of shareholders, forwarding certain shareholder communications from funds to shareholders, receiving and responding to inquiries and answering questions regarding the funds, aiding in maintaining the investment of shareholders in the funds and other service-related expenses.
A substantial portion of the expenses are not specifically identified to any one of the RiverSource funds. The fee is not allocated to any one service (such as advertising, compensation to financial intermediaries, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses.
The Plan must be approved annually by the Board, including a majority of the disinterested Board members, if it is to continue for more than a year. At least quarterly, the Board reviews written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of Board members who are not interested persons of the fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the distributor.
Any agreement related to the Plan will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the Board members, including a majority of the Board members who are not interested persons of the fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested Board members is the responsibility of the other disinterested Board members. No Board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement.
PAYMENTS TO FINANCIAL INTERMEDIARIES
The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the funds) to financial intermediaries, including inter-company allocation of resources or payment to affiliated broker-dealers, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the funds. These payments and inter-company allocations (collectively, "payments") do not change the price paid by investors and fund shareholders for the purchase or ownership of shares of the funds, and these payments are not reflected in the fees and expenses of the funds, as they are not paid by the funds. These payments are in addition to fees paid by the funds to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the funds to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the funds.
These payments are typically made pursuant to an agreement between the distributor and the financial intermediary, and are typically made in support of marketing and sales support efforts or program and shareholder servicing, as further described below. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of or in addition to these asset-based fees as compensation for including or maintaining funds on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its representatives for effecting transactions in the funds. The amount of payment varies by financial intermediary, and often is significant. In addition, the amount of payments may differ based upon the type of fund sold or maintained; for instance, the amount of payments for an equity fund may differ from payments for a money-market or fixed income fund. Asset-based payments generally will be made in a range of up to 0.25% of assets or 0.25% of sales or some
Statement of Additional Information - Jan. 28, 2009 Page 41
combination thereof. Exceptions to these general ranges will be considered on a case-by-case basis. Flat fees or annual minimum fees required by a financial intermediary in addition to such asset-based fees, are considered on a case-by- case basis.
MARKETING AND SALES SUPPORT
Payments may be paid in support of retail, institutional, plan or other fee- based advisory program distribution efforts. These payments are typically made by the distributor in its efforts to advertise to and/or educate the financial intermediary's personnel, including its registered representatives, about the fund. As a result of these payments, the distributor may obtain a higher profile and greater visibility for the fund within the financial intermediary's organization, including placement of the fund on the financial intermediary's preferred or recommended list. The distributor may also obtain greater access to sales meetings, sales representatives, and management representatives of the financial intermediary, including potentially having increased opportunity for fund representatives to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and their clients and other events sponsored by the financial intermediary.
PROGRAM AND SHAREHOLDER SERVICING
Payments may be made in support of recordkeeping, reporting, transaction processing, and other plan administration services provided by a financial intermediary to or through retirement plans, 529 plans, Health Savings Account plans, or other plans or fee-based advisory programs but may also be made in support of certain retail advisory programs, including wrap programs. A financial intermediary may perform program services itself or may arrange with a third party to perform program services. These payments may also include services rendered in connection with fund selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services.
OTHER PAYMENTS
The distributor and its affiliates may separately pay financial intermediaries in order to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other financial intermediary employees, client and investor events and other financial intermediary-sponsored events, and for travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, asset retention and due diligence trips. The amount of these payments varies depending upon the nature of the event. The distributor and its affiliates make payments for such events as they deem appropriate, subject to internal guidelines and applicable law.
From time to time, to the extent permitted by SEC and NASD rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payment to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service.
FINANCIAL INTERMEDIARY ARRANGEMENTS
The financial intermediary through which you are purchasing or own shares of funds has been authorized directly or indirectly by the distributor to sell funds and/or to provide services to you as a shareholder of funds. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares.
If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of funds, please contact your financial intermediary.
CUSTODIAN SERVICES
The funds' securities and cash are held pursuant to a custodian agreement with JPMorgan Chase Bank, N.A. ("JPMorgan"), 1 Chase Manhattan Plaza, 19th Floor, New York, NY 10005. The custodian is permitted to deposit some or all of their securities in central depository systems as allowed by federal law. For its services, each fund pays its custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses.
As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of JPMorgan or in other financial institutions as permitted by law and by the fund's custodian agreement.
Statement of Additional Information - Jan. 28, 2009 Page 42
BOARD SERVICES CORPORATION
Each fund has an agreement with Board Services Corporation (Board Services) located at 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402. This agreement sets forth the terms of Board Services' responsibility to assist the funds' Board, as the Board may reasonably request, to carry out the legal and fiduciary responsibilities of the Board and its members.
ORGANIZATIONAL INFORMATION
Each fund is an open-end management investment company. The fund's headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268.
SHARES
The shares of a fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of a fund would have the same rights to dividends and assets as every other share of that fund.
VOTING RIGHTS
As a shareholder in a fund, you have voting rights over the fund's management and fundamental policies. You are entitled to vote based on your total dollar interest in the fund. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. All shares have cumulative voting rights with respect to the election of Board members. This means that you have as many votes as the dollar amount you own, including the fractional amount, multiplied by the number of members to be elected.
DIVIDEND RIGHTS
Dividends paid by a fund, if any, with respect to each applicable class of shares will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures.
TABLE 7. FUND HISTORY TABLE FOR RIVERSOURCE FUNDS
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE BOND SERIES, 4/29/81, 6/13/86(1) Corporation NV/MN 7/31 INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 2/16/06 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Income 6/19/03 Yes Opportunities Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Inflation 3/4/04 No Protected Securities Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration 6/19/03 Yes Bond Fund -------------------------------------------------------------------------------------------------------------------------- CALIFORNIA TAX-EXEMPT TRUST 4/7/86 Business Trust(2) MA 8/31(10) -------------------------------------------------------------------------------------------------------------------------- RiverSource California Tax- 8/18/86 No Exempt Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE DIMENSIONS SERIES, 2/20/68, 6/13/86(1) Corporation NV/MN 7/31 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 5/18/06 Yes and Mid Cap Equity Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 2/16/06 Yes Cap Value Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE DIVERSIFIED INCOME 6/27/74, 6/31/86(1) Corporation NV/MN 8/31 SERIES, INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 10/3/74 Yes Fund(3) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE EQUITY SERIES, 3/18/57, 6/13/86(1) Corporation NV/MN 11/30 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 6/4/57 Yes Fund(4) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE GLOBAL SERIES, 10/28/88 Corporation MN 10/31 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return 6/15/06 No Currency and Income Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets 2/16/06 No Bond Fund -------------------------------------------------------------------------------------------------------------------------- |
Statement of Additional Information - Jan. 28, 2009 Page 43
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** -------------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond Fund 3/20/89 No -------------------------------------------------------------------------------------------------------------------------- RiverSource Global Technology 11/13/96 Yes Fund -------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 11/13/96 Yes Fund(4),(5),(11) -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 5/29/90 Yes Fund(5),(6),(11) -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 8/1/08 Yes Income Fund -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended 8/1/08 Yes Alpha Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE GOVERNMENT INCOME 3/12/85 Corporation MN 5/31 SERIES, INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration 8/19/85 Yes U.S. Government Fund(3) -------------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government 2/14/02 Yes Mortgage Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE HIGH YIELD INCOME 8/17/83 Corporation MN 5/31 SERIES, INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 12/8/83 Yes Fund(3) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INCOME SERIES, 2/10/45; 6/13/86(1) Corporation NV/MN 1/31 INC.(7) -------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 No Basic Income Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 No Enhanced Income Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 No Moderate Income Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INTERNATIONAL 5/9/01 Corporation MN 10/31 MANAGERS SERIES, INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 9/28/01 Yes International Select Growth Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 9/28/01 Yes International Select Value Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 10/3/02 Yes International Small Cap Fund(11) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INTERNATIONAL 7/18/84 Corporation MN 10/31 SERIES, INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 5/18/06 Yes International Equity Fund -------------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 6/26/00 Yes Fund(5),(11) -------------------------------------------------------------------------------------------------------------------------- Threadneedle International 11/15/84 Yes Opportunity Fund(4),(5),(11) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INVESTMENT SERIES, 1/18/40; 6/13/86(1) Corporation NV/MN 9/30 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Balanced Fund(4) 4/16/40 Yes -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 5/17/07 Yes Cap Growth Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 8/1/08 Yes Cap Value Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified 10/15/90 Yes Equity Income Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 2/14/02 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP SERIES, 5/21/70, 6/13/86(1) Corporation NV/MN 7/31 INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 4/24/03 Yes Equity Fund(4) -------------------------------------------------------------------------------------------------------------------------- RiverSource Growth Fund 3/1/72 Yes -------------------------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity 3/28/02 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Large Cap Value 6/27/02 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MANAGERS SERIES, 3/20/01 Corporation MN 5/31 INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 4/24/03 Yes Aggressive Growth Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 6/18/01 Yes Fundamental Value Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select 3/8/02 Yes Value Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 3/8/02 Yes Cap Equity Fund(4),(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 6/18/01 Yes Cap Value Fund(11) -------------------------------------------------------------------------------------------------------------------------- |
Statement of Additional Information - Jan. 28, 2009 Page 44
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MARKET ADVANTAGE 8/25/89 Corporation MN 1/31 SERIES, INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Conservative Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Conservative Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Aggressive Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Aggressive Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Total Equity Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index 10/25/99 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Small Company 8/19/96 Yes Index Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MONEY MARKET 8/22/75; 6/13/86(1) Corporation NV/MN 7/31 SERIES, INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management 10/6/75 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SERIES TRUST(14) 1/27/06 Business Trust(2) MA 4/30 -------------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian 10/18/07 Yes Equity -------------------------------------------------------------------------------------------------------------------------- RiverSource 130/30 U.S. 10/18/07 Yes Equity -------------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and 1/28/09 No Infrastructure Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2010 Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2015 Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2020 Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2025 Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2030 Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2035 Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2040 Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2045 Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SECTOR SERIES, 3/25/88 Corporation MN 6/30 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Dividend 8/1/88 Yes Opportunity Fund(8) -------------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate Fund 3/4/04 Yes -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SELECTED SERIES, 10/5/84 Corporation MN 3/31 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals 4/22/86 No and Mining Fund(9) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SHORT TERM 4/23/68, 6/13/86(1) Corporation NV/MN 7/31 INVESTMENTS SERIES, INC.(15) -------------------------------------------------------------------------------------------------------------------------- RiverSource Short-Term Cash 9/26/06 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SPECIAL TAX-EXEMPT 4/7/86 Business Trust(2) MA 8/31(10) SERIES TRUST -------------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax- 8/18/86 No Exempt Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax- 8/18/86 No Exempt Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC 10/9/84 Corporation MN 9/30 ALLOCATION SERIES, INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic 1/23/85 Yes Allocation Fund(4) -------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income 5/17/07 Yes Allocation Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE STRATEGY SERIES, 1/24/84 Corporation MN 3/31 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value Fund 5/14/84 Yes -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 1/24/01 Yes Cap Growth Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Small Cap 5/4/99 Yes Advantage Fund -------------------------------------------------------------------------------------------------------------------------- |
Statement of Additional Information - Jan. 28, 2009 Page 45
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT INCOME 12/21/78; 6/13/86(1) Corporation NV/MN 11/30 SERIES, INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High 5/7/79 Yes Income Fund(4) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT MONEY 2/29/80, 6/13/86(1) Corporation NV/MN 12/31 MARKET SERIES, INC.(2) -------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money 8/5/80 Yes Market Fund(4) -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT SERIES, 9/30/76, 6/13/86(1) Corporation NV/MN 11/30 INC. -------------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax- 11/13/96 Yes Exempt Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 11/24/76 Yes Fund -------------------------------------------------------------------------------------------------------------------------- RIVERSOURCE VARIABLE SERIES 9/07(12) Business Trust MA 12/31 TRUST(12) -------------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolio - Aggressive -------------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolio - Conservative -------------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolio - Moderate -------------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolio - Moderately Aggressive -------------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolio - Moderately Conservative -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 5/1/06 Yes Portfolio - Fundamental Value Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 2/4/04 Yes Portfolio - Select Value Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 8/14/01 Yes Portfolio - Small Cap Value Fund(11) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 4/30/86 Yes Portfolio - Balanced Fund(4) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/31/81 Yes Portfolio - Cash Management Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/10/04 Yes Portfolio - Core Equity Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/13/81 Yes Portfolio - Diversified Bond Fund(3) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Diversified Equity Income Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/96 No Portfolio - Global Bond Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/13/04 No Portfolio - Global Inflation Protected Securities Fund(13) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Growth Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/96 Yes Portfolio - High Yield Bond Fund(3) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 6/1/04 Yes Portfolio - Income Opportunities Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/13/81 Yes Portfolio - Large Cap Equity Fund(5) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 02/4/04 Yes Portfolio - Large Cap Value Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/01 Yes Portfolio - Mid Cap Growth Fund(4) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/2/05 Yes Portfolio - Mid Cap Value Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/00 Yes Portfolio - S&P 500 Index Fund -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Short Duration U.S. Government Fund(3) -------------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Small Cap Advantage Fund -------------------------------------------------------------------------------------------------------------------------- Threadneedle Variable 5/1/00 Yes Portfolio - Emerging Markets Fund(4),(5),(11) -------------------------------------------------------------------------------------------------------------------------- Threadneedle Variable 1/13/92 Yes Portfolio - International Opportunity Fund(4),(5),(11) -------------------------------------------------------------------------------------------------------------------------- |
* Effective Oct. 1, 2005 American Express Funds changed its name to RiverSource funds and the names Threadneedle and Partners were removed from fund names.
** If a non-diversified fund is managed as if it were a diversified fund for a period of three years, its status under the 1940 Act will convert automatically from non-diversified to diversified. A diversified fund may convert to non-diversified status only with shareholder approval.
Statement of Additional Information - Jan. 28, 2009 Page 46
(1) Date merged into a Minnesota corporation incorporated on April 7, 1986.
(2) Effective April 21, 2006, AXP Discovery Series, Inc. changed its name to RiverSource Bond Series, Inc.; AXP Fixed Income Series, Inc. changed its name to RiverSource Diversified Income Series, Inc.; AXP Growth Series, Inc. changed its name to RiverSource Large Cap Series, Inc.; AXP High Yield Tax-Exempt Series, Inc. changed its name to RiverSource Tax-Exempt Income Series, Inc.; AXP Managed Series, Inc. changed its name to RiverSource Strategic Allocation Series, Inc.; AXP Partners International Series, Inc. changed its name to RiverSource International Managers Series, Inc.; AXP Partners Series, Inc. changed its name to RiverSource Managers Series, Inc.; AXP Tax-Free Money Series, Inc. changed its name to RiverSource Tax-Exempt Money Market Series, Inc.; and for all other corporations and business trusts, AXP was replaced with RiverSource in the registrant name.
(3) Effective June 27, 2003, Bond Fund changed its name to Diversified Bond Fund, Federal Income Fund changed its name to Short Duration U.S. Government Fund and Extra Income Fund changed its name to High Yield Bond Fund, Variable Portfolio - Bond Fund changed its name to Variable Portfolio - Diversified Bond Fund, Variable Portfolio - Extra Income Fund changed its name to Variable Portfolio - High Yield Bond Fund and Variable Portfolio - Federal Income Fund changed its name to Variable Portfolio - Short Duration U.S. Government Fund.
(4) Effective Oct. 1, 2005, Equity Select Fund changed its name to Mid Cap Growth Fund, High Yield Tax-Exempt Fund changed its name to Tax- Exempt High Income Fund, Managed Allocation Fund changed its name to Strategic Allocation Fund, Mutual changed its name to Balanced Fund, Partners Growth Fund changed its name to Fundamental Growth Fund, Partners International Core Fund changed its name to International Equity Fund, Partners Small Cap Core Fund changed its name to Small Cap Equity Fund, Quantitative Large Cap Equity Fund changed its name to Disciplined Equity Fund, Tax-Free Money Fund changed its name to Tax-Exempt Money Market Fund, and Threadneedle International Fund changed its name to International Opportunity Fund. Variable Portfolio - Equity Select Fund changed its name to Variable Portfolio - Mid Cap Growth Fund, Variable Portfolio - Threadneedle Emerging Markets Fund changed its name to Variable Portfolio - Emerging Markets Fund, Variable Portfolio - Threadneedle International Fund changed its name to Variable Portfolio - International Opportunity Fund, and Variable Portfolio - Managed Fund changed its name to Variable Portfolio - Balanced Fund.
(5) Effective July 9, 2004, Emerging Markets Fund changed its name to Threadneedle Emerging Markets Fund, European Equity Fund changed its name to Threadneedle European Equity Fund, Global Equity Fund changed its name to Threadneedle Global Equity Fund, and International Fund changed its name to Threadneedle International Fund, Variable Portfolio - Capital Resource Fund changed its name to Variable Portfolio - Large Cap Equity Fund, Variable Portfolio - Emerging Markets Fund changed its name to Variable Portfolio - Threadneedle Emerging Markets Fund and Variable Portfolio - International Fund changed its name to Variable Portfolio - Threadneedle International Fund.
(6) Effective Oct. 20, 2003, Global Growth Fund changed its name to Global Equity Fund.
(7) Effective Jan. 31, 2008, the fiscal year end was changed from May 31 to Jan. 31.
(8) Effective Feb. 18, 2004, Utilities Fund changed its name to Dividend Opportunity Fund.
(9) Effective Nov. 1, 2006, Precious Metals Fund changed its name to Precious Metals and Mining Fund.
(10) Effective April 13, 2006, the fiscal year end was changed from June 30 to Aug. 31.
(11) Effective March 31, 2008, RiverSource Emerging Markets Fund changed its name to Threadneedle Emerging Markets Fund; RiverSource Global Equity Fund changed its name to Threadneedle Global Equity Fund; RiverSource European Equity Fund changed its name to Threadneedle European Equity Fund; RiverSource International Opportunity Fund changed its name to Threadneedle International Opportunity Fund; RiverSource International Aggressive Growth Fund changed its name to RiverSource Partners International Select Growth Fund; RiverSource International Select Value Fund changed its name to RiverSource Partners International Select Value Fund; RiverSource International Small Cap Fund changed its name to RiverSource Partners International Small Cap Fund; RiverSource Aggressive Growth Fund changed its name to RiverSource Partners Aggressive Growth Fund; RiverSource Fundamental Value Fund changed its name to RiverSource Partners Fundamental Value Fund; RiverSource Select Value Fund changed its name to RiverSource Partners Select Value Fund; RiverSource Small Cap Equity Fund changed its name to RiverSource Partners Small Cap Equity Fund; RiverSource Small Cap Value Fund changed its name to RiverSource Partners Small Cap Value Fund; RiverSource Small Cap Growth Fund changed its name to RiverSource Partners Small Cap Growth Fund; RiverSource Variable Portfolio -- Fundamental Value Fund changed its name to RiverSource Partners Variable Portfolio -- Fundamental Value Fund; RiverSource Variable Portfolio -- Select Value Fund changed its name to RiverSource Partners Variable Portfolio -- Select Value Fund; and RiverSource Variable Portfolio -- Small Cap Value Fund changed its name to RiverSource Partners Variable Portfolio -- Small Cap Value Fund.
(12) Prior to January 2008, the assets in the funds in RiverSource Variable Series Trust were held by funds organized under six separate Minnesota Corporations.
(13) Effective June 8, 2005, Variable Portfolio -- Inflation Protected Securities Fund changed its name to Variable Portfolio -- Global Inflation Protected Securities Fund.
(14) Prior to September 11, 2007, RiverSource Series Trust was known as RiverSource Retirement Series Trust.
(15) Prior to April 21, 2006, RiverSource Short Term Investments Series, Inc. was known as AXP Stock Series, Inc.
Statement of Additional Information - Jan. 28, 2009 Page 47
BOARD MEMBERS AND OFFICERS
Shareholders elect a Board that oversees a fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of each fund's Board members. The RiverSource complex of funds that each Board member oversees consists of 162 funds, which includes 103 RiverSource funds and 59 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday.
TABLE 8. BOARD MEMBERS
INDEPENDENT BOARD MEMBERS
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------- Kathleen Blatz 901 S. Board member Chief Justice, Minnesota None Board Governance, Marquette Ave. since 2006 Supreme Court, 1998-2006; Compliance, Minneapolis, MN 55402 Attorney Investment Review, Age 54 Joint Audit ---------------------------------------------------------------------------------------------------------------------- Arne H. Carlson 901 S. Board member Chair, RiverSource Funds, 1999- None Board Governance, Marquette Ave. since 1999 2006; former Governor of Compliance, Minneapolis, MN 55402 Minnesota Contracts, Age 74 Executive, Investment Review ---------------------------------------------------------------------------------------------------------------------- Pamela G. Carlton 901 Board member President, Springboard-Partners None Distribution, S. Marquette Ave. since 2007 in Cross Cultural Leadership Investment Review, Minneapolis, MN 55402 (consulting company) Joint Audit Age 54 ---------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn 901 Board member Trustee Professor of Economics None Board Governance, S. Marquette Ave. since 2004 and Management, Bentley Contracts, Minneapolis, MN 55402 College; former Dean, McCallum Investment Review Age 58 Graduate School of Business, Bentley College ---------------------------------------------------------------------------------------------------------------------- Anne P. Jones 901 S. Board member Attorney and Consultant None Board Governance, Marquette Ave. since 1985 Compliance, Minneapolis, MN 55402 Executive, Age 73 Investment Review, Joint Audit ---------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, American Progressive Distribution, 901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance Executive Minneapolis, MN 55402 Investment Review, Age 73 Joint Audit ---------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Chair of the President Emeritus and Valmont Industries, Board Governance, 901 S. Marquette Ave. Board since Professor of Economics, Inc. (manufactures Compliance, Minneapolis, MN 55402 2007, Board Carleton College irrigation systems) Contracts, Age 69 member since Executive, 2002 Investment Review ---------------------------------------------------------------------------------------------------------------------- John F. Maher Board member Retired President and Chief None Distribution, 100 Park Avenue since 2008 Executive Officer and former Investment Review, New York, NY 10017 Director, Great Western Joint Audit Age 64 Financial Corporation (financial services) 1986-1997 ---------------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset None Board Governance 901 S. Marquette Ave. since 2004 Management, Inc. (private real Compliance, Minneapolis, MN 55402 estate and asset management Contracts, Age 56 company) Executive, Investment Review ---------------------------------------------------------------------------------------------------------------------- |
Statement of Additional Information - Jan. 28, 2009 Page 48
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------- Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. Digital Ally, Inc. Contracts, 100 Park Avenue since 2008 Since 1987; Vice President and (digital imaging); Distribution, New York, NY 100 General Counsel, Automotive Infinity, Inc. (oil Investment Review Age 66 Legal Affairs, Chrysler and gas exploration Corporation, 1990-1997 and production); OGE Energy Corp. (energy and energy services provider. ---------------------------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer and Idera Pharmaceuticals, Contracts, 901 S. Marquette Ave. since 2002 Director, RiboNovix, Inc. since Inc. (biotechnology); Distribution, Minneapolis, MN 55402 2003 (biotechnology); former Healthways, Inc. Executive, Age 64 President, Forester Biotech (health management Investment Review programs) ---------------------------------------------------------------------------------------------------------------------- |
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------- William F. Truscott Board member President - U.S. Asset None Investment Review 53600 Ameriprise since 2001, Vice Management and Chief Investment Financial Center President since Officer, Ameriprise Financial, Minneapolis, MN 55474 2002 Inc. and President, Chairman of Age 48 the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 ---------------------------------------------------------------------------------------------------------------------- |
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments.
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the fund's other officers are:
TABLE 9. FUND OFFICERS
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since Director and Senior Vice President - Asset 172 Ameriprise Financial Center 2006 Management, Products and Marketing, Minneapolis, MN 55474 RiverSource Investments, LLC since 2006; Age 43 Director and Vice President - Asset Management, Products and Marketing, RiverSource Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002- 2004 -------------------------------------------------------------------------------------------------- |
Statement of Additional Information - Jan. 28, 2009 Page 49
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------- Michelle M. Keeley 172 Vice President Executive Vice President - Equity and Fixed Ameriprise Financial Center since 2004 Income, Ameriprise Financial, Inc. and Minneapolis, MN 55474 RiverSource Investments, LLC since 2006; Vice Age 44 President - Investments, Ameriprise Certificate Company since 2003; Senior Vice President - Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President Vice President - Asset Management and Trust 5228 Ameriprise Financial Center since 2006 Company Services, RiverSource Investments, Minneapolis, MN 55474 LLC, since 2006; Vice President - Operations Age 43 and Compliance, RiverSource Investments, LLC, 2004-2006; Director of Product Development - Mutual Funds, American Express Financial Corporation, 2001-2004 -------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since Vice President - Investment Accounting, 105 Ameriprise Financial Center 2002 Ameriprise Financial, Inc. since 2002; Chief Minneapolis, MN 55474 Financial Officer, RiverSource Distributors, Age 53 Inc. since 2006 -------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel - Asset 5228 Ameriprise Financial Center General Counsel Management, Ameriprise Financial, Inc. since Minneapolis, MN 55474 and Secretary 2005; Chief Counsel, RiverSource Distributors, Age 49 since 2006 Inc. since 2006; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President - Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------- Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Financial Center Officer since Officer, RiverSource Investments, LLC, since Minneapolis, MN 55474 2006 2006; Director - Mutual Funds, Voyageur Asset Age 47 Management, 2003-2006; Director of Finance, Voyageur Asset Management, 2000-2003 -------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering 2934 Ameriprise Financial Center Prevention Officer, Ameriprise Financial, Inc., since Minneapolis, MN 55474 Officer since 2004; Manager Anti-Money Laundering, Age 44 2004 Ameriprise Financial, Inc., 2003-2004; Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 -------------------------------------------------------------------------------------------------- |
RESPONSIBILITIES OF BOARD WITH RESPECT TO FUND MANAGEMENT
The Board initially approves an Investment Management Services Agreement and
other contracts with the investment manager and its affiliates, and other
service providers. Once the contracts are approved, the Board monitors the level
and quality of services including commitments of service providers to achieve
expected levels of investment performance and shareholder services. In addition,
the Board oversees that processes are in place to assure compliance with
applicable rules, regulations and investment policies and addresses possible
conflicts of interest. Annually, the Board evaluates the services received under
the contracts by receiving reports covering investment performance, shareholder
services, marketing, and the investment manager's profitability in order to
determine whether to continue existing contracts or negotiate new contracts.
SEVERAL COMMITTEES FACILITATE ITS WORK
BOARD GOVERNANCE COMMITTEE -- Recommends to the Board the size, structure and
composition of the Board and its committees; the compensation to be paid to
members of the Board; and a process for evaluating the Board's performance. The
committee also reviews candidates for Board membership including candidates
recommended by shareholders. To be considered, recommendations must include a
curriculum vitae and be mailed to the Chairman of the Board, RiverSource Funds,
901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The
committee also makes recommendations to the Board regarding responsibilities and
duties of the Board, oversees proxy voting and supports the work of the Board
Chair in relation to furthering the interests of the Funds and their
shareholders on external matters.
Statement of Additional Information - Jan. 28, 2009 Page 50
COMPLIANCE COMMITTEE -- Supports the Funds' maintenance of a strong compliance program by providing a forum for independent Board members to consider compliance matters impacting the Funds or their key service providers; developing and implementing, in coordination with the Funds' Chief Compliance Officer (CCO), a process for the review and consideration of compliance reports that are provided to the Boards; and providing a designated forum for the Funds' CCO to meet with independent Board members on a regular basis to discuss compliance matters.
CONTRACTS COMMITTEE -- Reviews and oversees the contractual relationships with service providers. Receives and analyzes reports covering the level and quality of services provided under contracts with the fund and advises the Board regarding actions taken on these contracts during the annual review process.
DISTRIBUTION COMMITTEE -- Reviews and supports product development, marketing, sales activity and practices related to the funds and will report to the Board as appropriate.
EXECUTIVE COMMITTEE -- Acts for the Board between meetings of the Board.
INVESTMENT REVIEW COMMITTEE -- Reviews and oversees the management of the Funds' assets. Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the Board.
JOINT AUDIT COMMITTEE -- Oversees the accounting and financial reporting processes of the Funds and internal controls over financial reporting. Oversees the quality and integrity of the Funds' financial statements and independent audits as well as the Funds' compliance with legal and regulatory requirements relating to the Funds' accounting and financial reporting, internal controls over financial reporting and independent audits. The committee also makes recommendations regarding the selection of the Funds' independent auditor and reviews and evaluates the qualifications, independence and performance of the auditor.
BOARD MEMBER HOLDINGS
The following table shows the aggregate dollar range of equity securities of all RiverSource funds overseen by the Board member.
TABLE 10. BOARD MEMBER HOLDINGS - ALL FUNDS
Based on net asset values as of Dec. 31, 2008:
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF BOARD MEMBER ALL FUNDS OVERSEEN BY BOARD MEMBER ---------------------------------------------------------------------------------------------- Kathleen Blatz Over $100,000 ---------------------------------------------------------------------------------------------- Arne Carlson Over $100,000 ---------------------------------------------------------------------------------------------- Pamela Carlton $10,001-$50,000 ---------------------------------------------------------------------------------------------- Patricia Flynn Over $100,000* ---------------------------------------------------------------------------------------------- Anne P. Jones Over $100,000 ---------------------------------------------------------------------------------------------- Jeffrey Laikind Over $100,000 ---------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Over $100,000* ---------------------------------------------------------------------------------------------- John F. Maher Over $100,000* ---------------------------------------------------------------------------------------------- Catherine James Paglia Over $100,000* ---------------------------------------------------------------------------------------------- Leroy C. Richie Over 100,000 ---------------------------------------------------------------------------------------------- Alison Taunton Rigby Over $100,000 ---------------------------------------------------------------------------------------------- |
* Includes deferred compensation invested in share equivalents.
As of 30 days prior to the date of this SAI, the Board members and officers as a group owned less than 1% of the outstanding shares of any class of any fund.
COMPENSATION OF BOARD MEMBERS
The independent Board members determine the amount of compensation that they receive, including the amount paid to the Chair of the Board. In determining compensation for the independent Board members, the independent Board members take into account a variety of factors including, among other things, their collective significant work experience (e.g., in business and finance, government or academia). The independent Board members also recognize that these individuals' advice and counsel are in demand by other organizations, that these individuals may reject other opportunities because the time demands of their duties as independent Board members, and that they undertake significant legal responsibilities. The independent
Statement of Additional Information - Jan. 28, 2009 Page 51
Board members also consider the compensation paid to independent board members of other mutual fund complexes of comparable size. In determining the compensation paid to the Chair, the independent Board members take into account, among other things, the Chair's significant additional responsibilities (e.g., setting the agenda for Board meetings, communicating or meeting regularly with the Funds' Chief Compliance Officer, Counsel to the independent Board members, and the Funds' service providers) which result in a significantly greater time commitment required of the Board Chair. The Chair's compensation, therefore, has generally been set at a level between 2.5 and 3 times the level of compensation paid to other independent Board members.
Effective Jan. 1, 2008, independent Board members will be paid an annual
retainer of $95,000. Committee and sub- committee Chairs will each receive an
additional annual retainer of $5,000. In addition, independent Board members
will be paid the following fees for attending Board and committee meetings:
$5,000 per day of in-person Board meetings and $2,500 per day of in-person
committee or sub-committee meetings (if such meetings are not held on the same
day as a Board meeting). Independent Board members are not paid for special
telephonic meetings. In 2008, the Board's Chair will receive total annual cash
compensation of $400,000.
The independent Board members may elect to defer payment of up to 100% of the compensation they receive in accordance with a Deferred Compensation Plan (the Deferred Plan). Under the Deferred Plan, a Board member may elect to have his or her deferred compensation treated as if they had been invested in shares of one or more RiverSource funds and the amount paid to the Board member under the Deferred Plan will be determined based on the performance of such investments. Distributions may be taken in a lump sum or over a period of years. The Deferred Plan will remain unfunded for federal income tax purposes under the Internal Revenue Code of 1986, as amended. It is anticipated that deferral of Board member compensation in accordance with the Deferred Plan will have, at most, a negligible impact on Fund assets and liabilities.
INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendant's motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on Aug. 8, 2007.
In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Board 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
Statement of Additional Information - Jan. 28, 2009 Page 52
distributor of the Seligman Funds, 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.
In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. (transfer agent for the Seligman Funds) and Brian T. Zino (collectively, the "Seligman Parties"), alleging, in substance, that, in addition to the four arrangements noted above, the Seligman Parties permitted other persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies 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. The NYAG is seeking damages of at least $80 million and restitution, disgorgement, penalties and costs and injunctive relief. The Seligman Parties answered the complaint in December 2006 and believe that the claims are without merit. Any resolution of these matters may include the relief noted above or other sanctions or changes in procedures. Any damages would be paid by Seligman and not by the Seligman Funds. If the NYAG obtains injunctive relief, each of Seligman, RiverSource Investments and their affiliates could, in the absence of the SEC in its discretion granting exemptive relief, be enjoined from providing advisory and underwriting services to the Seligman Funds and other registered investment companies including those funds in the RiverSource complex of funds. Neither Seligman nor RiverSource Investments believes that the foregoing legal action or other possible actions will have a material adverse impact on Seligman, RiverSource Investments or their current or former clients, including the Seligman Funds and other investment companies managed by RiverSource Investments; however, there can be no assurance of this or that these matters and any related publicity will not affect demand for shares of the Seligman Funds and such other investment companies or have other adverse consequences.
Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements contained in a fund's Annual Report will be audited by the independent registered public accounting firm, Ernst & Young LLP, 220 South 6th Street, Suite 1400 Minneapolis, MN 55402-3900. The independent registered public accounting firm also provides other accounting and tax-related services as requested by the fund.
Statement of Additional Information - Jan. 28, 2009 Page 53
APPENDIX A
DESCRIPTION OF RATINGS
STANDARD & POOR'S LONG-TERM DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances.
The ratings are based, in varying degrees, on the following considerations:
- Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation.
- Nature of and provisions of the obligation.
- Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating.
Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating.
Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating.
Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.
Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.
Statement of Additional Information - Jan. 28, 2009 A-1
The rating CI is reserved for income bonds on which no interest is being paid.
Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future.
Baa - Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements -- their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca - Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
FITCH'S LONG-TERM DEBT RATINGS
Fitch's bond ratings provide a guide to investors in determining the credit risk
associated with a particular security. The ratings represent Fitch's assessment
of the issuer's ability to meet the obligations of a specific debt issue in a
timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
Statement of Additional Information - Jan. 28, 2009 A-2
INVESTMENT GRADE
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+.
A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
SPECULATIVE GRADE
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery.
SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. |
Statement of Additional Information - Jan. 28, 2009 A-3
STANDARD & POOR'S MUNI BOND AND NOTE RATINGS
An S&P municipal bond or note rating reflects the liquidity factors and market-
access risks unique to these instruments. Notes maturing in three years or less
will likely receive a note rating. Notes maturing beyond three years will most
likely receive a long-term debt rating.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. |
Municipal bond rating symbols and definitions are as follows:
Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest.
Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest.
MOODY'S SHORT-TERM RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:
Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
MOODY'S SHORT-TERM MUNI BONDS AND NOTES
Short-term municipal bonds and notes are rated by Moody's. The ratings reflect
the liquidity concerns and market access risks unique to notes.
Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing.
Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group.
Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
Moody's MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
Statement of Additional Information - Jan. 28, 2009 A-4
FITCH'S SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes. The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment default.
Statement of Additional Information - Jan. 28, 2009 A-5
APPENDIX B
SELIGMAN FUNDS:
SELIGMAN CAPITAL FUND, INC. SELIGMAN CASH MANAGEMENT FUND, INC. SELIGMAN COMMON STOCK FUND, INC. SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. SELIGMAN CORE FIXED INCOME FUND, INC. SELIGMAN FRONTIER FUND, INC. SELIGMAN GLOBAL FUND SERIES, INC. Seligman Emerging Markets Fund Seligman Global Smaller Companies Fund Seligman Global Growth Fund Seligman Global Technology Fund Seligman International Growth Fund SELIGMAN GROWTH FUND, INC. SELIGMAN HIGH INCOME FUND SERIES Seligman U.S. Government Securities Fund Seligman High-Yield Fund SELIGMAN INCOME AND GROWTH FUND, INC. SELIGMAN LASALLE REAL ESTATE FUND SERIES, INC. Seligman LaSalle Global Real Estate Fund Seligman LaSalle Monthly Dividend Real Estate Fund SELIGMAN MUNICIPAL FUND SERIES, INC. Seligman National Municipal Class Seligman Colorado Municipal Class Seligman Georgia Municipal Class Seligman Louisiana Municipal Class Seligman Maryland Municipal Class Seligman Massachusetts Municipal Class Seligman Michigan Municipal Class Seligman Minnesota Municipal Class Seligman Missouri Municipal Class Seligman New York Municipal Class Seligman Ohio Municipal Class Seligman Oregon Municipal Class Seligman South Carolina Municipal Class SELIGMAN MUNICIPAL SERIES TRUST Seligman California Municipal High Yield Series Seligman California Municipal Quality Series Seligman Florida Municipal Series Seligman North Carolina Municipal Series SELIGMAN NEW JERSEY MUNICIPAL FUND, INC. SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES SELIGMAN PORTFOLIOS, INC. Seligman Capital Portfolio Seligman Cash Management Portfolio Seligman Common Stock Portfolio Seligman Communications and Information Portfolio Seligman Global Technology Portfolio Seligman International Growth Portfolio Seligman Investment Grade Fixed Income Portfolio Seligman Large-Cap Value Portfolio Seligman Smaller-Cap Value Portfolio SELIGMAN TARGETHORIZON ETF PORTFOLIOS, INC. Seligman TargETFund 2045 Seligman TargETFund 2035 Seligman TargETFund 2025 Seligman TargETFund 2015 Seligman TargETFund Core SELIGMAN ASSET ALLOCATION SERIES, INC. Seligman Asset Allocation Aggressive Growth Fund Seligman Asset Allocation Balanced Fund Seligman Asset Allocation Growth Fund Seligman Asset Allocation Moderate Growth Fund SELIGMAN VALUE FUND SERIES, INC. Seligman Large-Cap Value Fund Seligman Smaller-Cap Value Fund SELIGMAN LASALLE INTERNATIONAL REAL ESTATE FUND, INC. SELIGMAN SELECT MUNICIPAL FUND, INC. TRI-CONTINENTAL CORPORATION |
S-6529-20 (1/09)
Statement of Additional Information - Jan. 28, 2009 B-1
PART C. OTHER INFORMATION
Item 23. Exhibits
(a)(1) Agreement and Declaration of Trust effective January 27, 2006, filed electronically on or about Feb. 8, 2006 as Exhibit (a) to Registrant's Registration Statement is incorporated by reference.
(a)(2) Amendment No. 1 to the Agreement and Declaration of Trust filed electronically on or about Oct. 2, 2007 as Exhibit (a)(2) to Registrant's Post-Effective Amendment No. 5 to Registration Statement No. 333-131683 is incorporated by reference.
(a)(3) Amendment No. 2 to the Agreement and Declaration of Trust, dated Jan. 8, 2009, is filed electronically herewith as Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(b) By-laws filed electronically on or about April 21, 2006 as Exhibit (b) to Registrant's Pre-Effective Amendment No. 1 to Registration Statement No. 333-131683 are incorporated by reference.
(c) Stock Certificate: Not applicable.
(d) Form of Investment Management Services Agreement, dated May 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Investments, LLC is filed electronically herewith as Exhibit (d) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(e)(1) Distribution Agreement, effective Aug. 1, 2006, amended and restated as of Sept. 11, 2007, between Registrant and RiverSource Distributors, Inc. filed electronically on or about Oct. 30, 2007 as Exhibit (e)(2) to Diversified Income Series, Inc. Post-Effective Amendment No. 63 to Registration Statement No. 2-51586 is incorporated by reference.
(e)(2) Distribution Agreement, effective Nov. 7, 2008, between Registrant and Seligman Advisors, Inc. filed electronically on or about Nov. 25, 2008 as Exhibit (e)(2) to RiverSource Investment Series, Inc. Post-Effective Amendment No. 121 to Registration Statement No. 2-11328 is incorporated by reference.
(e)(3) Form of Service Agreement for RiverSource Distributors, Inc. and RiverSource Service Corporation filed electronically on or about Aug. 27, 2007 as Exhibit (e)(3) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference.
(e)(4) Form of RiverSource Funds Dealer Agreement filed electronically on or about Aug. 27, 2007 as Exhibit (e)(4) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference.
(f) Deferred Compensation Plan, amended and restated Jan. 1, 2009, filed electronically on or about Jan. 27, 2009 as Exhibit (f) to RiverSource Equity Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-13188 is incorporated by reference.
(g) Form of Master Global Custody Agreement with JP Morgan Chase Bank, N.A. filed electronically on or about Dec. 23, 2008 as Exhibit (g) to RiverSource International Mangers, Inc. Post-Effective Amendment No. 18 to Registration Statement No. 333-64010 is incorporated by reference.
(h)(1) Form of Administrative Services Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between Registrant and Ameriprise Financial, Inc. is filed electronically herewith as Exhibit (h)(1) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(h)(2) Form of Transfer Agency Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between Registrant and RiverSource Service Corporation is filed electronically herewith as Exhibit (h)(2) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(h)(3) Form of Plan Administration Services Agreement, dated Dec. 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Service Corporation is filed electronically herewith as Exhibit (h)(3) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(h)(4) Form of Master Fee Cap/Fee Waiver Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between RiverSource Investments, LLC, Ameriprise Financial, Inc., RiverSource Service Corporation, RiverSource Distributors, Inc., Seligman Advisors, Inc. and the Registrant is filed electronically herewith as Exhibit (h)(4) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(h)(5) Form of License Agreement, effective May 1, 2006, amended and restated Nov. 12, 2008, between Ameriprise Financial, Inc., RiverSource Funds and Seligman Funds is filed electronically herewith as Exhibit (h)(5) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(i) Opinion and consent of counsel as to the legality of the securities being registered is filed electronically herewith.
(j) Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP): Not applicable.
(k) Omitted Financial Statements: Not Applicable.
(l) Initial Capital Agreement: Not Applicable.
(l) Initial Capital Agreement: Not Applicable.
(m)(1) Form of Plan of Distribution and Agreement of Distribution, dated Aug. 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Distributors, Inc. is filed electronically herewith as Exhibit (m)(1) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(m)(2) Form of Plan of Distribution and Agreement of Distribution, effective
Nov. 7, 2008, amended and restated Nov. 12, 2008, between Registrant and
Seligman Advisors, Inc. is filed electronically herewith as Exhibit
(m)(2) to Registrant's Post-Effective Amendment No. 8 to Registration
Statement No. 333-131683.
(n) Form of Rule 18f - 3(d) Plan, amended and restated as of Nov. 12, 2008, is filed electronically herewith as Exhibit (n) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
(o) Reserved.
(p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about Aug. 27, 2007 as Exhibit (p)(1) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference.
(p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's principal underwriter, dated April 2008, filed electronically on or about April 25, 2008 as Exhibit (p)(2) to RiverSource Variable Series Trust Post-Effective Amendment No. 3 to Registration Statement No. 333-146374 is incorporated by reference.
(p)(3) Code of Ethics adopted under Rule 17j-1 for Registrant's investment adviser, dated Nov. 15, 2008, filed electronically on or about Nov. 25, 2008 as Exhibit (p)(3) to RiverSource Investment Series, Inc. Post-Effective Amendment No. 121 to Registration Statement No. 2-11328 is incorporated by reference.
(q) Directors/Trustees Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 8, 2009, is filed electronically herewith as Exhibit (q) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683.
Item 24. Persons Controlled by or Under Common Control with Registrant:
RiverSource Investments, LLC, as sponsor of the RiverSource Funds, may make initial capital investments in RiverSource funds (seed accounts). RiverSource Investments also serves as investment manager of certain RiverSource funds-of-funds that invest primarily in Class I shares of affiliated RiverSource funds (the "underlying funds"). RiverSource Investments does not make initial capital investments or invest in underlying funds for the purpose of exercising control. However, since these ownership interests may be significant, in excess of 25%, such that RiverSource Investments may be deemed to control certain RiverSource funds, procedures have been put in place to assure that public shareholders determine the outcome of all actions taken at shareholder meetings. Specifically, RiverSource Investments (which votes proxies for the seed accounts) and the Boards of Directors or Trustees of the RiverSource funds-of-funds (which votes proxies for the RiverSource funds-of-funds) vote on each proposal in the same proportion that other shareholders vote on the proposal.
Item 25. Indemnification
The Agreement and Declaration of Trust of the registrant provides that the Trust shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a trustee, officer, employee or agent of the Trust, or is or was serving at the request of the Trust as a trustee, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Trust may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the Commonwealth of Massachusetts, as now existing or hereafter amended. The By-laws of the registrant provide that present or former trustees or officers of the Trust made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Trust to the full extent authorized by the Massachusetts Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a trustee, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the trustees, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940.
Item 26. Business and Other Connections of the Investment Adviser (RiverSource Investments, LLC)
The following are directors and principal officers of RiverSource Investments, LLC who are directors and/or officers of one or more other companies:
Name and Title Other Companies Address* Title within other companies --------------------- ---------------------------------- --------------------------- -------------------------------------- Neysa M. Alecu, Advisory Capital Strategies Group 100 Park Avenue, New York, Anti-Money Laundering Officer Anti-Money Laundering Inc. NY 10017 Officer Advisory Select LLC Dissolved Anti-Money Laundering Officer (resigned 5/1/07) American Enterprise Investment 70400 AXP Financial Anti-Money Laundering Officer Services Inc. Center, Minneapolis, MN 55474 Ameriprise Auto & Home Insurance 3500 Packerland Drive Anti-Money Laundering Officer Agency, Inc. De Pere, WI 54115 Ameriprise Certificate Company 70100 Ameriprise Financial Anti-Money Laundering Officer Center, Minneapolis, MN (resigned 8/24/07) 55474 Ameriprise Financial, Inc. 200 Ameriprise Financial Anti-Money Laundering Officer Center, Minneapolis, MN 55474 Ameriprise Financial Services, 5221 Ameriprise Financial Anti-Money Laundering Officer Inc. Center, Minneapolis, MN 55474 Ameriprise Trust Company 200 Ameriprise Financial Anti-Money Laundering Officer Center, Minneapolis, MN 55474 Boston Equity General Partner LLC Anti-Money Laundering Officer IDS Capital Holdings Inc. Anti-Money Laundering Officer IDS Management Corporation Anti-Money Laundering Officer Kenwood Capital Management LLC 333 S. 7th Street, Suite Anti-Money Laundering Officer 2330, Minneapolis, MN 55402 RiverSource Distributors, Inc. 50611 Ameriprise Financial Anti-Money Laundering Officer Center, Minneapolis, MN 55474 RiverSource Life Insurance Company 829 Ameriprise Financial Anti-Money Laundering Officer Center, Minneapolis, MN 55474 RiverSource Service Corporation 734 Ameriprise Financial Anti-Money Laundering Officer Center, Minneapolis, MN 55474 Patrick Thomas Ameriprise Trust Company 200 Ameriprise Financial Director, Senior Vice President Bannigan, Center, Minneapolis, MN Director and Senior 55474 Vice President - Asset Management, RiverSource Distributors, Inc. 50611 Ameriprise Financial Vice President Products and Center, Minneapolis, MN Marketing 55474 RiverSource Service Corporation 734 Ameriprise Financial Director Center, Minneapolis, MN 55474 Seligman Advisors, Inc. 100 Park Avenue, New York, Director and Vice President Seligman Services, Inc. NY 10017 Walter S. Berman, Advisory Capital Strategies Group 100 Park Avenue, New York, Treasurer Treasurer Inc. NY 10017 |
Name and Title Other Companies Address* Title within other companies --------------------- ---------------------------------- --------------------------- -------------------------------------- American Enterprise Investment 70400 AXP Financial Treasurer Services Inc. Center, Minneapolis, MN 55474 Ameriprise Auto & Home Insurance 3500 Packerland Drive Treasurer Agency Inc. De Pere, WI 54115 Ameriprise Bank, FSB 9393 Ameriprise Financial Treasurer Center, Minneapolis, MN 55474 Ameriprise Captive Insurance Director and Treasurer Company Ameriprise Certificate Company 70100 Ameriprise Financial Treasurer and Investment Committee Center, Minneapolis, MN Member (resigned 8/24/07) 55474 Ameriprise Financial, Inc. 200 Ameriprise Financial Executive Vice President, Chief Center, Minneapolis, MN Financial Officer and Treasurer 55474 Ameriprise Financial Services, 5221 Ameriprise Financial Director and Treasurer Inc. Center, Minneapolis, MN 55474 Ameriprise Insurance Company 3500 Packerland Drive Treasurer De Pere, WI 54115 Boston Equity General Partner LLC Treasurer IDS Capital Holdings Inc. Treasurer IDS Management Corporation Treasurer IDS Property Casualty Insurance 3500 Packerland Drive Treasurer Company De Pere, WI 54115 Investors Syndicate Development Vice President and Treasurer Corporation RiverSource CDO Seed Investments, Treasurer LLC RiverSource Distributors, Inc. 50611 Ameriprise Financial Treasurer Center, Minneapolis, MN 55474 RiverSource Life Insurance Company 20 Madison Ave. Extension, Vice President and Treasurer of New York Albany, NY 12005 RiverSource Life Insurance Company 829 Ameriprise Financial Vice President and Treasurer Center, Minneapolis, MN 55474 RiverSource Service Corporation 734 Ameriprise Financial Treasurer Center, Minneapolis, MN 55474 RiverSource Tax Advantaged Treasurer Investments, Inc. Securities America Advisors Inc. 12325 Port Grace Blvd., Director Lavista, NE68128-8204 Securities America Financial 7100 W. Center Rd., Ste. Director Corporation 500, Omaha, NE 68106-2716 Securities America, Inc. 12325 Port Grace Blvd., Director Lavista, NE68128 Seligman Advisors, Inc. 100 Park Avenue, New York, Treasurer Seligman Services, Inc. NY 10017 |
Name and Title Other Companies Address* Title within other companies --------------------- ---------------------------------- --------------------------- -------------------------------------- Threadneedle Asset Management 60 St. Mary Axe, London Director Holdings Ltd. EC3A 8JQ Peter Arthur Gallus, Advisory Capital Strategies Group 100 Park Avenue, New York, Director, Vice President and Chief Senior Vice Inc. NY 10017 Operating Officer President, Chief Operating Officer and Advisory Select LLC Dissolved President and Chief Operating Officer Assistant Treasurer (resigned 5/1/07) Ameriprise Financial, Inc. 200 Ameriprise Financial Vice President - Investment Center, Minneapolis, MN Administration 55474 Ameriprise Financial Services, Inc. 5221 Ameriprise Financial Vice President - CAO-AEFA Investment Center, Minneapolis, MN Management 55474 Boston Equity General Partner LLC President, Chief Operating Officer and Chief Compliance Officer IDS Capital Holdings Inc. Vice President and Controller Kenwood Capital Management LLC 333 S. 7th Street, Suite Board Member 2330, Minneapolis, MN 55402 Seligman Advisors, Inc. 100 Park Avenue, New York, Vice President and Chief Operating Seligman Services, Inc. NY 10017 Officer Christopher Paul Ameriprise Trust Company 200 Ameriprise Financial Director, Head of Institutional Sales, Keating, Director and Center, Minneapolis, MN Client Service and Consultant Vice President and 55474 Relationships Head of Institutional Sales, Client Service Kenwood Capital Management LLC 333 S. 7th Street, Suite Board Member and Consultant 2330, Minneapolis, MN 55402 Relationships Seligman Advisors, Inc. 100 Park Avenue, New York, Vice President Seligman Services, Inc. NY 10017 Michelle Marie Ameriprise Bank, FSB 9393 Ameriprise Financial Director Keeley, Director and Center, Minneapolis, MN Executive Vice 55474 President - Equity and Fixed Income Ameriprise Financial, Inc. 200 Ameriprise Financial Executive Vice President - Equity and Center, Minneapolis, MN Fixed Income 55474 Ameriprise Financial Services, Inc. 5221 Ameriprise Financial Executive Vice President - Equity and Center, Minneapolis, MN Fixed Income 55474 IDS Property Casualty Insurance 3500 Packerland Drive Vice President - Investments Company De Pere, WI 54115 Kenwood Capital Management LLC 333 S. 7th Street, Suite Board Member 2330, Minneapolis, MN 55402 RiverSource CDO Seed Investments, Chairperson and President LLC RiverSource Life Insurance Company 829 Ameriprise Financial Vice President - Investments Center, Minneapolis, MN 55474 |
Name and Title Other Companies Address* Title within other companies --------------------- ---------------------------------- --------------------------- -------------------------------------- RiverSource Life Insurance Company 20 Madison Ave. Extension, Vice President - Investments of New York Albany, NY 12005 Ameriprise Certificate Company 70100 Ameriprise Financial Vice President - Investments, Center, Minneapolis, MN Investment Committee Member (resigned 55474 8/24/07) AMEX Assurance Company Vice President - Investments (resigned 9/30/2007) Jennifer Davis Kenwood Capital Management LLC 333 S. 7th Street, Suite Chief Compliance Officer Lammers, 2330, Minneapolis, MN 55402 Chief Compliance Officer RiverSource Service Corporation 734 Ameriprise Financial Chief Compliance Officer Center, Minneapolis, MN 55474 Brian Joseph McGrane, Advisory Capital Strategies Group 100 Park Avenue, New York, Vice President and Chief Financial Director, Vice Inc. NY 10017 Officer President and Chief Financial Officer Advisory Select LLC Dissolved Vice President and Chief Financial Officer (resigned 5/1/07) Ameriprise Financial, Inc. 200 Ameriprise Financial Senior Vice President and Lead Center, Minneapolis, MN Financial Officer 55474 Ameriprise Financial Services, Inc. 5221 Ameriprise Financial Vice President and Lead Financial Center, Minneapolis, MN Officer - Finance 55474 Ameriprise Trust Company 200 Ameriprise Financial Director Center, Minneapolis, MN 55474 Boston Equity General Partner LLC Vice President and Chief Financial Officer RiverSource CDO Seed Investments, Board Member LLC RiverSource Life Insurance Company 829 Ameriprise Financial Director, Executive Vice President and Center, Minneapolis, MN Chief Financial Officer 55474 Ameriprise Certificate Company 70100 Ameriprise Financial Vice President and Chief Financial Center, Minneapolis, MN Officer (resigned 8/24/07) 55474 Thomas R. Moore, Advisory Capital Strategies Group 100 Park Avenue, New York, Secretary Secretary Inc. NY 10017 American Enterprise Investment 70400 AXP Financial Secretary Services Inc. Center, Minneapolis, MN 55474 |
Name and Title Other Companies Address* Title within other companies --------------------- ---------------------------------- --------------------------- -------------------------------------- Ameriprise Bank, FSB 9393 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 Ameriprise Captive Insurance Assistant Secretary Company Ameriprise Financial, Inc. 200 Ameriprise Financial Vice President, Chief Governance Center, Minneapolis, MN Officer and Corporate Secretary 55474 Ameriprise Financial Services, 5221 Ameriprise Financial Secretary Inc. Center, Minneapolis, MN 55474 Ameriprise Insurance Company 3500 Packerland Drive Secretary De Pere, WI 54115 Ameriprise Trust Company 200 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 IDS Capital Holdings Inc. Secretary IDS Futures Corporation 570 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 IDS Management Corporation Secretary IDS Property Casualty Insurance 3500 Packerland Drive Secretary Company De Pere, WI 54115 Investors Syndicate Development Secretary Corporation RiverSource CDO Seed Investments, Secretary LLC RiverSource Distributors, Inc. 50611 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 RiverSource Life Insurance Company 20 Madison Ave. Extension, Secretary of New York Albany, NY 12005 RiverSource Life Insurance Company 829 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 RiverSource Service Corporation 734 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 RiverSource Tax Advantaged Secretary Investments, Inc. Securities America Financial 7100 W. Center Rd., Ste. Secretary (resigned 11/19/07) Corporation 500, Omaha, NE 68106-2716 Seligman Advisors, Inc. 100 Park Avenue, New York, Secretary Seligman Services, Inc. NY 10017 Scott Roane Plummer, Ameriprise Financial, Inc. 200 Ameriprise Financial Vice President - Asset Management Chief Legal Officer Center, Minneapolis, MN Compliance and Assistant 55474 Secretary Ameriprise Financial Services, Inc. 5221 Ameriprise Financial Vice President and Chief Counsel - Center, Minneapolis, MN Asset Management 55474 RiverSource Distributors, Inc. 50611 Ameriprise Financial Chief Counsel Center, Minneapolis, MN 55474 |
Name and Title Other Companies Address* Title within other companies --------------------- ---------------------------------- --------------------------- -------------------------------------- RiverSource Service Corporation 734 Ameriprise Financial Vice President, Chief Legal Officer Center, Minneapolis, MN and Assistant Secretary 55474 Ameriprise Certificate Company 70100 Ameriprise Financial Vice President, General Counsel and Center, Minneapolis, MN Secretary (resigned 8/24/07) 55474 Seligman Advisors, Inc. 100 Park Avenue, New York, Chief Counsel Seligman Services, Inc. NY 10017 William Frederick Advisory Capital Strategies Group 100 Park Avenue, New York, Director 'Ted' Truscott Inc. NY 10017 Chairman, Chief Investment Officer Ameriprise Certificate Company 70100 Ameriprise Financial Director, President and Chief and President Center, Minneapolis, MN Executive Officer (resigned 8/24/07) 55474 Ameriprise Financial, Inc. 200 Ameriprise Financial President - U.S. Asset Management, Center, Minneapolis, MN Annuities and Chief Investment Officer 55474 Ameriprise Financial Services, Inc. 5221 Ameriprise Financial Senior Vice President and Chief Center, Minneapolis, MN Investment Officer 55474 Ameriprise Trust Company 200 Ameriprise Financial Director Center, Minneapolis, MN 55474 IDS Capital Holdings Inc. Director and President Kenwood Capital Management LLC 333 S. 7th Street, Suite Board Member 2330, Minneapolis, MN 55402 RiverSource Distributors, Inc. 50611 Ameriprise Financial Chairman and Chief Executive Officer Center, Minneapolis, MN 55474 Seligman Advisors, Inc. 100 Park Avenue, New York, Chairman and Chief Executive Officer Seligman Services, Inc. NY 10017 Threadneedle Asset Management 60 St. Mary Axe, London Director Holdings Ltd. EC3A 8JQ |
* Unless otherwise noted, address is 50605 Ameriprise Financial Center, Minneapolis, MN 55474
Item 27. Principal Underwriter
(a) RiverSource Distributors, Inc. acts as principal underwriter for the following investment companies:
RiverSource Bond Series, Inc.; RiverSource California Tax-Exempt Trust; RiverSource Dimensions Series, Inc.; RiverSource Diversified Income Series, Inc.; RiverSource Equity Series, Inc.; RiverSource Global Series, Inc.; RiverSource Government Income Series, Inc.; RiverSource High Yield Income Series, Inc.; RiverSource Income Series, Inc.; RiverSource International Managers Series, Inc.; RiverSource International Series, Inc.; RiverSource Investment Series, Inc.; RiverSource Large Cap Series, Inc.; RiverSource Managers Series, Inc.; RiverSource Market Advantage Series, Inc.; RiverSource Money Market Series, Inc.; RiverSource Sector Series, Inc.; RiverSource Selected Series, Inc.; RiverSource Series Trust; RiverSource Short Term Investments Series, Inc.; RiverSource Special Tax-Exempt Series Trust; RiverSource Strategic Allocation Series; Inc., RiverSource Strategy Series, Inc.; RiverSource Tax-Exempt Income Series, Inc.; RiverSource Tax-Exempt Money Market Series, Inc.; RiverSource Tax-Exempt Series, Inc.; RiverSource Variable Series Trust.
Seligman Advisors, Inc. acts as principal underwriter for the following investment companies:
THE SELIGMAN FAMILY OF FUNDS: Seligman Asset Allocation Series, Inc., Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Core Fixed Income Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Global Fund Series, Inc., Seligman High Income Fund Series, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc., Seligman Municipal Fund Series, Inc., Seligman
Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund Series, Seligman Portfolios, Inc., Seligman TargetHorizon ETF Portfolios, Inc. and Seligman Value Fund Series, Inc.
THE RIVERSOURCE FAMILY OF FUNDS: RiverSource Bond Series, Inc.; RiverSource California Tax-Exempt Trust; RiverSource Dimensions Series, Inc.; RiverSource Diversified Income Series, Inc.; RiverSource Equity Series, Inc.; RiverSource Global Series, Inc.; RiverSource Government Income Series, Inc.; RiverSource High Yield Income Series, Inc.; RiverSource Income Series, Inc.; RiverSource International Managers Series, Inc.; RiverSource International Series, Inc.; RiverSource Investment Series, Inc.; RiverSource Large Cap Series, Inc.; RiverSource Managers Series, Inc.; RiverSource Market Advantage Series, Inc.; RiverSource Money Market Series, Inc.; RiverSource Sector Series, Inc.; RiverSource Selected Series, Inc.; RiverSource Series Trust; RiverSource Special Tax-Exempt Series Trust; RiverSource Strategic Allocation Series; Inc., RiverSource Strategy Series, Inc.; RiverSource Tax-Exempt Income Series, Inc.; RiverSource Tax-Exempt Money Market Series, Inc. and RiverSource Tax-Exempt Series, Inc..
(b) As to each director, principal officer or partner of RiverSource Distributors, Inc.
Name and Principal Business Address Positions and Offices with Underwriter Positions and Offices with Fund --------------------------------- -------------------------------------- -------------------------------- Gumer C. Alvero* Director and Vice President None Patrick Thomas Bannigan* Director and Vice President President Timothy V. Bechtold* Director and Vice President None Paul J. Dolan* Chief Operating Officer and Chief None Administrative Officer Jeffrey P. Fox* Chief Financial Officer Treasurer Jeffrey Lee McGregor, Sr.* President None Scott Roane Plummer* Chief Counsel Vice President, General Counsel and Secretary Julie A. Ruether* Chief Compliance Officer None William Frederick 'Ted' Chairman and Chief Executive Officer Board Member and Vice President Truscott* |
As to each director, principal officer or partner of Seligman Advisors, Inc.
Name and Principal Business Address Positions and Offices with Underwriter Positions and Offices with Fund --------------------------------- -------------------------------------- -------------------------------- William Frederick "Ted" Truscott* Chairman and Chief Executive Officer Director and Vice President Patrick Thomas Bannigan* Director and Vice President President Jeffrey Lee McGregor, Sr.* Director and President None Paul J. Dolan* Chief Operating Officer and Chief None Administrative Officer Peter A. Gallus* Vice President and Chief Operating None Officer Jeffrey P. Fox* Chief Financial Officer Treasurer Christopher P. Keating* Vice President None Scott Roane Plummer* Chief Counsel Vice President, General Counsel and Secretary Brian Mitchell** Chief Compliance Officer None Thomas R. Moore* Secretary None Walter Berman* Treasurer None Eleanor T. M. Hoagland** Anti-Money Laundering Officer None |
* Business address is: 50611 Ameriprise Financial Center, Minneapolis, MN 55474
** Business address is: 100 Park Avenue, New York, NY 10017.
(c) Not Applicable
Item 28. Location of Accounts and Records
Ameriprise Financial, Inc.
707 Second Avenue, South
Minneapolis, MN 55402
Iron Mountain Records Management
920 & 950 Apollo Road
Eagan, MN 55121
Iron Mountain Records Management is an off-site storage facility housing historical records that are no longer required to be maintained on-site. Records stored at this facility include various trading and accounting records, as well as other miscellaneous records.
Item 29. Management Services
Not Applicable
Item 30. Undertakings
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, RIVERSOURCE SERIES TRUST, certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement under Rule 485(b) under the Securities Act and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis and the State of Minnesota on the 27th day of Jan., 2009.
RIVERSOURCE SERIES TRUST
By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer |
Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 27th day of Jan., 2009.
Signature Capacity --------- -------- /s/ Stephen R. Lewis, Jr.* Chair of the Board -------------------------------- Stephen R. Lewis, Jr. /s/ Kathleen A. Blatz* Trustee -------------------------------- Kathleen A. Blatz /s/ Arne H. Carlson* Trustee -------------------------------- Arne H. Carlson /s/ Pamela G. Carlton* Trustee -------------------------------- Pamela G. Carlton /s/ Patricia M. Flynn* Trustee -------------------------------- Patricia M. Flynn /s/ Anne P. Jones* Trustee -------------------------------- Anne P. Jones |
Signature Capacity --------- -------- /s/ Jeffrey Laikind* Trustee -------------------------------- Jeffrey Laikind /s/ John F. Maher* Trustee -------------------------------- John F. Maher /s/ Catherine James Paglia* Trustee -------------------------------- Catherine James Paglia /s/ Leroy C. Richie* Trustee ------------------------------- Leroy C. Richie /s/ Alison Taunton-Rigby* Trustee -------------------------------- Alison Taunton-Rigby /s/ William F. Truscott* Trustee -------------------------------- William F. Truscott |
* Signed pursuant to Directors/Trustees Power of Attorney, dated Jan. 8, 2009, filed electronically herewith as Exhibit (q) to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-131683, by:
/s/ Scott R. Plummer ------------------------------------- Scott R. Plummer |
Contents of this Post-Effective Amendment No. 8 to Registration Statement No. 333-131683
This Post-Effective Amendment contains the following papers and documents:
The facing sheet.
Part A.
The prospectuses for:
RiverSource Recovery and Infrastructure Fund
Part B.
Statement of Additional Information.
Part C.
Other information.
The signatures.
EXHIBIT INDEX
(a)(3) Amendment No. 2 to the Agreement and Declaration of Trust, dated Jan. 8, 2009.
(d) Form of Investment Management Services Agreement, dated May 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Investments, LLC.
(h)(1) Form of Administrative Services Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between Registrant and Ameriprise Financial, Inc.
(h)(2) Form of Transfer Agency Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between Registrant and RiverSource Service Corporation.
(h)(3) Form of Plan Administration Services Agreement, dated Dec. 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Service Corporation.
(h)(4) Form of Master Fee Cap/Fee Waiver Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between RiverSource Investments, LLC, Ameriprise Financial, Inc., RiverSource Service Corporation, RiverSource Distributors, Inc., Seligman Advisors, Inc. and the Registrant.
(h)(5) Form of License Agreement, effective May 1, 2006, amended and restated Nov. 12, 2008, between Ameriprise Financial, Inc., RiverSource Funds and Seligman Funds.
(i) Opinion and consent of counsel as to the legality of the securities being registered.
(m)(1) Form of Plan of Distribution and Agreement of Distribution, dated Aug. 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Distributors, Inc.
(m)(2) Form of Plan of Distribution and Agreement of Distribution, effective Nov. 7, 2008, amended and restated Nov. 12, 2008, between Registrant and Seligman Advisors, Inc.
(n) Form of Rule 18f - 3(d) Plan, amended and restated as of Nov. 12, 2008.
(q) Directors/Trustees Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 8, 2009.
RIVERSOURCE SERIES TRUST
AMENDMENT NO. 2 TO THE
AGREEMENT AND DECLARATION OF TRUST
WHEREAS, Section 5 of Article III of the Agreement and Declaration of Trust (the "Declaration of Trust") of RiverSource Series Trust (the "Trust"), dated January 20, 2006, as amended from time to time, a copy of which is on file in the Office of the Secretary of The Commonwealth of Massachusetts, authorizes the Trustees of the Trust to amend the Declaration of Trust to create one or more Series or classes of Shares without authorization by vote of the Shareholders of the Trust.
WHEREAS, Section 6 of Article III of the Declaration of Trust authorizes the Trustees of the Trust to abolish and rescind the establishment and designation of Series or Class, either by amending the Declaration of Trust or by vote or written consent of a majority of the then Trustees.
NOW, THEREFORE, The undersigned, being at least a majority of the Trustees of RiverSource Series Trust, do hereby certify that we previously authorized the liquidation of RiverSource 130/30 U.S. Equity Fund and have authorized the creation of additional Series of the Trust, and have authorized the following amendment to said Declaration of Trust:
Section 6 of Article III is hereby amended to read as follows:
Section 6. Establishment and Designation of Series and Classes.
Without limiting the authority of the Trustees as set forth in Section 5 and
Section 6, inter alia, to establish and designate any further Series or classes
or to modify the rights and preferences of any Series or class, the following
Series shall be, and are hereby, established and designated;
RiverSource 120/20 Contrarian Equity Fund RiverSource Recovery and Infrastructure Fund RiverSource Retirement Plus Fund - 2010 RiverSource Retirement Plus Fund - 2015 RiverSource Retirement Plus Fund - 2020 RiverSource Retirement Plus Fund - 2025 RiverSource Retirement Plus Fund - 2030 RiverSource Retirement Plus Fund - 2035 RiverSource Retirement Plus Fund - 2040 RiverSource Retirement Plus Fund - 2045
Shares of each Series established in this Section 6 shall have the following rights and preferences relative to Shares of each other Series, and Shares of each class of a Multi-Class Series shall have such rights and preferences relative to other classes of the same Series as are set forth below, together with such other rights and preferences relative to such other classes as are set forth in any resolutions of the Trustees establishing and designating such class of Shares.
The rest of this Section 6 remains unchanged.
The foregoing amendment is effective as of January 8, 2009.
[The remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, the undersigned has signed this Amendment No. 2 to the Agreement and Declaration of Trust on January 8, 2009.
/s/ Kathleen A. Blatz /s/ Stephen R. Lewis, Jr. ------------------------------------- ---------------------------------------- Kathleen A. Blatz Stephen R. Lewis, Jr. /s/ Arne H. Carlson /s/ John F. Maher ------------------------------------- ---------------------------------------- Arne H. Carlson John F. Maher /s/ Pamela G. Carlton /s/ Catherine James Paglia ------------------------------------- ---------------------------------------- Pamela G. Carlton Catherine James Paglia /s/ Patricia M. Flynn /s/ Leroy C. Richie ------------------------------------- ---------------------------------------- Patricia M. Flynn Leroy C. Richie /s/ Anne P. Jones /s/ Alison Taunton-Rigby ------------------------------------- ---------------------------------------- Anne P. Jones Alison Taunton-Rigby /s/ Jeffrey Laikind /s/ William F. Truscott ------------------------------------- ---------------------------------------- Jeffrey Laikind William F. Truscott |
* 901 S. Marquette Avenue
Minneapolis, MN 55402
** 53600 Ameriprise Financial Center
Minneapolis, MN 55474
Registered Agent: Corporation Service Company
84 State Street
Boston, MA 02109
INVESTMENT MANAGEMENT SERVICES AGREEMENT
This Agreement dated as of May 1, 2006, amended and restated November 12, 2008, is by and between RiverSource Investments, LLC (the "Investment Manager"), a Minnesota limited liability company and RiverSource Series Trust (the "Registrant"), a Massachusetts business trust, on behalf of its underlying series listed in Schedule A (the term "Fund" or "Funds" is used to refer to either the Registrant or its underlying series, as context requires).
PART ONE: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains the Investment Manager, and the Investment Manager hereby agrees, for the period of this Agreement and under the terms and conditions hereinafter set forth, to furnish the Fund continuously with investment advice; to determine, consistent with the Fund's investment objectives and policies, which securities in the Investment Manager's discretion shall be purchased, held or sold, and to execute or cause the execution of purchase or sell orders; to prepare and make available to the Fund all necessary research and statistical data in connection therewith; to furnish all other services of whatever nature required in connection with the management of the Fund as provided under this Agreement; and to pay such expenses as may be provided for in Part Three; subject always to the direction and control of the Board of Trustees (the "Board") and the authorized officers of the Fund. The Investment Manager agrees to maintain an adequate organization of competent persons to provide the services and to perform the functions herein mentioned and to maintain adequate oversight over any service providers including subadvisers hired to provide services and to perform the functions herein mentioned. The Investment Manager agrees to meet with any persons at such times as the Board deems appropriate for the purpose of reviewing the Investment Manager's performance under this Agreement. The Fund agrees that the Investment Manager may subcontract for certain of the services described under this Agreement with the understanding that there shall be no diminution in the quality or level of services and also with the understanding, that the Investment Manager shall obtain such approval from the Fund's Board and/or its shareholders as is required by law, rules and regulations promulgated thereunder, terms of the Agreement, resolutions of the Board and commitments of the Investment Manager.
(2) The Investment Manager agrees that the investment advice and investment decisions will be in accordance with general investment policies of the Fund as disclosed to the Investment Manager from time to time by the Fund and as set forth in the prospectus and registration statement filed with the United States Securities and Exchange Commission (the "SEC").
(3) The Investment Manager agrees to provide such support as required or requested by the Board in conjunction with voting proxies solicited by or with respect to the issuers of securities in which the Fund's assets may be invested from time to time, it
being understood that the Board has sole voting power with respect to all such proxies.
(4) The Investment Manager agrees that it will maintain all required records, memoranda, instructions or authorizations relating to the management of the assets for the Fund including the acquisition or disposition of securities, proxy voting and safekeeping of assets.
(5) The Fund agrees that it will furnish to the Investment Manager any information that the latter may reasonably request with respect to the services performed or to be performed by the Investment Manager under this Agreement.
(6) In selecting broker-dealers for execution, the Investment Manager will seek to obtain best execution for securities transactions on behalf of the Fund, except where otherwise directed by the Board. In selecting broker-dealers to execute transactions, the Investment Manager will consider not only available prices (including commissions or mark-up), but also other relevant factors such as, without limitation, the characteristics of the security being traded, the size and difficulty of the transaction, the execution, clearance and settlement capabilities as well as the reputation, reliability, and financial soundness of the broker-dealer selected, the broker-dealer's risk in positioning a block of securities, the broker-dealer's execution service rendered on a continuing basis and in other transactions, the broker-dealer's expertise in particular markets, and the broker-dealer's ability to provide research services. To the extent permitted by law, and consistent with its obligation to seek best execution, the Investment Manager may execute transactions or pay a broker-dealer a commission or markup in excess of that which another broker-dealer might have charged for executing a transaction provided that the Investment Manager determines, in good faith, that the execution is appropriate or the commission or markup is reasonable in relation to the value of the brokerage and/or research services provided, viewed in terms of either that particular transaction or the Investment Manager's overall responsibilities with respect to the Fund and other clients for which it acts as investment adviser. The Investment Manager shall not consider the sale or promotion of shares of the Fund, or other affiliated products, as a factor in the selection of broker-dealers through which transactions are executed.
(7) Except for bad faith, intentional misconduct or negligence in regard to the performance of its duties under this Agreement, neither the Investment Manager, nor any of its respective directors, officers, partners, principals, employees, or agents shall be liable for any acts or omissions or for any loss suffered by the Fund or its shareholders or creditors. Each of the Investment Manager, and its respective directors, officers, partners, principals, employees and agents, shall be entitled to rely, and shall be protected from liability in reasonably relying, upon any information or instructions furnished to it (or any of them as individuals) by the Fund or its agents which is believed in good faith to be accurate and reliable. The Fund understands and acknowledges that the Investment Manager does not warrant
any rate of return, market value or performance of any assets in the Fund. Notwithstanding the foregoing, the federal securities laws impose liabilities under certain circumstances on persons who act in good faith and, therefore, nothing herein shall constitute a waiver of any right which the Fund may have under such laws or regulations.
PART TWO: COMPENSATION TO THE INVESTMENT MANAGER
(1) The Fund agrees to pay to the Investment Manager, and the Investment Manager covenants and agrees to accept from the Fund in full payment for the services furnished, a fee as set forth in Schedule A.
(2) The fee shall be paid on a monthly basis and, in the event of the termination of this Agreement, in whole or in part with respect to any Fund, the fee accrued shall be prorated on the basis of the number of days that this Agreement is in effect during the month with respect to which such payment is made.
(3) The fee provided for hereunder shall be paid in cash by the Fund to the Investment Manager within five business days after the last day of each month.
PART THREE: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Fees payable to the Investment Manager for its services under the terms of this Agreement.
(b) Taxes.
(c) Brokerage commissions and charges in connection with the purchase and sale of assets.
(d) Custodian fees and charges.
(e) Premium on the bond required by Rule 17g-1 under the Investment Company Act of 1940.
(f) Fees and expenses of attorneys (i) it employs in matters not involving the assertion of a claim by a third party against the Fund, its Board members and officers, (ii) it employs in conjunction with a claim asserted by the Board against the Investment Manager, except that the Investment Manager shall reimburse the Fund for such fees and expenses if it is ultimately determined by a court of competent jurisdiction, or the Investment Manager agrees, that it is liable in whole or in part to the Fund, (iii) it employs to assert a claim against a third party, and (iv) it or the Investment Manager employs, with the approval of the
Board, to assist in the evaluation of certain investments or other matters related to the management of the Fund.
(g) Fees paid for the qualification and registration for public sale of the securities of the Fund under the laws of the United States and of the several states in which such securities shall be offered for sale.
(h) Fees of consultants employed by the Fund.
(i) Board member, officer and employee expenses which shall include fees, salaries, memberships, dues, travel, seminars, pension, profit sharing, and all other benefits paid to or provided for Board members, officers and employees, directors and officers liability insurance, errors and omissions liability insurance, worker's compensation insurance and other expenses applicable to the Board members, officers and employees, except the Fund will not pay any fees or expenses of any person who is an officer or employee of the Investment Manager or its affiliates.
(j) Filing fees and charges incurred by the Fund in connection with filing any amendment to its organizational documents, or incurred in filing any other document with the state where the Fund is organized or its political subdivisions.
(k) Organizational expenses of the Fund.
(l) Expenses incurred in connection with lending portfolio securities of the Fund.
(m) Expenses properly payable by the Fund, approved by the Board.
(n) Other expenses payable by the Fund pursuant to separate agreement of the Fund and any of its service providers.
(2) Unless the Fund is obligated to pay an expense pursuant to Part Three,
Section I, above, the Investment Manager agrees to pay all expenses
associated with the services it provides under the terms of this Agreement.
PART FOUR: MISCELLANEOUS
(1) The Investment Manager shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act for or represent the Fund.
(2) A "full business day" shall be as defined in the By-laws of the Fund.
(3) The Fund acknowledges that the Investment Manager and its affiliates may perform investment advisory services for other clients, so long as the Investment Manager's services to the Fund under this Agreement are not impaired thereby. The Investment
Manager and its affiliates may give advice or take action in the performance of duties to other clients that may differ from advice given, or the timing and nature of action taken, with respect to the Fund, and that the Investment Manager and its affiliates may trade and have positions in securities of issuers where the Fund may own equivalent or related securities, and where action may or may not be taken or recommended for the Fund. Nothing in this Agreement shall be deemed to impose upon the Investment Manager or any of its affiliates any obligation to purchase or sell, or recommend for purchase or sale for the Fund, any security or any other property that the Investment Manager or any of its affiliates may purchase, sell or hold for its own account or the account of any other client. Notwithstanding any of the foregoing, the Investment Manager shall allocate investment opportunities among its clients, including the Fund, in an equitable manner, consistent with its fiduciary obligations. By reason of their various activities, the Investment Manager and its affiliates may from time to time acquire information about various corporations and their securities. The Fund recognizes that the Investment Manager and its affiliates may not always be free to divulge such information, or to act upon it.
(4) Neither this Agreement nor any transaction pursuant hereto shall be invalidated or in any way affected by the fact that Board members, officers, agents and/or shareholders of the Fund are or may be interested in the Investment Manager or any successor or assignee thereof, as directors, officers, stockholders or otherwise; that directors, officers, stockholders or agents of the Investment Manager are or may be interested in the Fund as Board members, officers, shareholders, or otherwise; or that the Investment Manager or any successor or assignee, is or may be interested in the Fund as shareholder or otherwise, provided, however, that neither the Investment Manager, nor any officer, Board member or employee thereof or of the Fund, shall sell to or buy from the Fund any property or security other than shares issued by the Fund, except in accordance with applicable regulations or orders of the SEC.
(5) Any notice under this Agreement shall be given in writing, addressed, and delivered, or mailed postpaid, to the party to this Agreement entitled to receive such, at such party's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other.
(6) The Investment Manager agrees that no officer, director or employee of the Investment Manager will deal for or on behalf of the Fund with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit:
(a) Officers, directors or employees of the Investment Manager from having a financial interest in the Fund or in the Investment Manager.
(b) The purchase of securities for the Fund, or the sale of securities owned by the Fund, through a security broker or dealer, one or more of whose partners, officers, directors or employees is an officer, director or employee of the
Investment Manager, provided such transactions are handled in the capacity of broker only and provided commissions charged do not exceed customary brokerage charges for such services.
(c) Transactions with the Fund by a broker-dealer affiliate of the Investment Manager as may be allowed by rule or order of the U.S. Securities and Exchange Commission and if made pursuant to procedures adopted by the Board.
(7) The Investment Manager agrees that, except as herein otherwise expressly provided or as may be permitted consistent with the use of a broker-dealer affiliate of the Investment Manager under applicable provisions of the federal securities laws, neither it nor any of its officers, directors or employees shall at any time during the period of this Agreement, make, accept or receive, directly or indirectly, any fees, profits or emoluments of any character in connection with the purchase or sale of securities (except shares issued by the Fund) or other assets by or for the Fund.
(8) All information and advice furnished by the Investment Manager to the Fund under this Agreement shall be confidential and shall not be disclosed to third parties, except as required by law, order, judgment, decree, or pursuant to any rule, regulation or request of or by any government, court, administrative or regulatory agency or commission, other governmental or regulatory authority or any self-regulatory organization. All information furnished by the Fund to the Investment Manager under this Agreement shall be confidential and shall not be disclosed to any unaffiliated third party, except as permitted or required by the foregoing, where it is necessary to effect transactions or provide other services to the Fund, or where the Fund requests or authorizes the Investment Manager to do so. The Investment Manager may share information with its affiliates in accordance with its privacy policies in effect from time to time.
(9) This Agreement shall be governed by the laws of the State of Minnesota.
(10) For Funds that are organized as a Massachusetts business trust, a copy of the Declaration of Trust, together with all amendments, is on file in the office of the Secretary of State of the Commonwealth of Massachusetts. The execution and delivery of this Agreement has been authorized by the Trustees and the Agreement has been signed by an authorized officer of the Fund. It is expressly agreed that the obligations of the Fund under this Agreement shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Fund personally, but bind only the assets and property of the Fund, as provided in the Declaration of Trust.
PART FIVE: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect for two years or until a new agreement is approved by a vote of the majority of the outstanding shares of the Fund and by vote of the Board, including the vote required by (b) of this paragraph, and if no new
agreement is so approved, this Agreement shall continue from year to year thereafter unless and until terminated by either party as hereinafter provided, except that such continuance shall be specifically approved at least annually (a) by the Board or by a vote of the majority of the outstanding shares of the Fund and (b) by the vote of a majority of the Board members who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. As used in this paragraph, the term "interested person" shall have the same meaning as set forth in the Investment Company Act of 1940, as amended, and the rules promulgated thereunder (the "1940 Act"). As used in this agreement, the term "majority of the outstanding shares of the Fund" shall have the same meaning as set forth in the 1940 Act.
(2) This Agreement may be terminated, with respect to each underlying series of the Fund, by either the Fund or the Investment Manager at any time by giving the other party 60 days' written notice of such intention to terminate, provided that any termination shall be made without the payment of any penalty, and provided further that termination may be effected either by the Board or by a vote of the majority of the outstanding voting shares of the Fund.
(3) This Agreement shall terminate in the event of its assignment, the term "assignment" for this purpose having the same meaning as set forth in the 1940 Act.
(4) Non-material amendments or modifications to this Agreement as may be permitted by the 1940 Act will only be made effective upon written agreement executed by the Investment Manager and the Board.
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written.
RIVERSOURCE SERIES TRUST
RIVERSOURCE INVESTMENTS, LLC
SCHEDULE A
ASSET CHARGE
The following funds shall not pay the Investment Manager a direct fee for services rendered hereunder:
- RiverSource Retirement Plus 2010 Fund
- RiverSource Retirement Plus 2015 Fund
- RiverSource Retirement Plus 2020 Fund
- RiverSource Retirement Plus 2025 Fund
- RiverSource Retirement Plus 2030 Fund
- RiverSource Retirement Plus 2035 Fund
- RiverSource Retirement Plus 2040 Fund
- RiverSource Retirement Plus 2045 Fund
For RiverSource 120/20 Contrarian Equity Fund, RiverSource 130/30 U.S. Equity Fund and RiverSource Recovery and Infrastructure Fund, the asset charge for each calendar day of each year shall be equal to the total of 1/365th (1/366th in each leap year) of the amount computed in accordance with the fee schedule in the table, below, plus or minus a performance incentive adjustment, as set forth below:
ANNUAL RATE AT EACH ASSET LEVEL FUND NET ASSETS (BILLIONS) "ASSET CHARGE" ---- --------------------- ---------------- RiverSource 120/20 Contrarian Equity Fund First $0.25 0.950% RiverSource 130/30 U.S. Equity Fund Next $0.25 0.930% Next $0.50 0.910% Over $1.0 0.890% RiverSource Recovery and Infrastructure Fund First $1.0 0.650% Next $1.0 0.600% Next $4.0 0.550% Over $6.0 0.500% |
The computation shall be made for each calendar day on the basis of net assets as of the close of the preceding day. In the case of the suspension of the computation of net asset value, the fee for each calendar day during such suspension shall be computed as of the close of business on the last full day on which the net assets were computed. Net assets as of the close of a full day shall include all transactions in shares of the Fund recorded on the books of the Fund for that day.
PERFORMANCE INCENTIVE ADJUSTMENT FOR RIVERSOURCE 120/20 CONTRARIAN EQUITY FUND, RIVERSOURCE 130/30 U.S. EQUITY FUND AND RIVERSOURCE RECOVERY AND INFRASTRUCTURE F UND
In addition to an Asset Charge, the fee for the Fund shall be adjusted to include a performance incentive adjustment.
The performance incentive adjustment shall be based on the Fund's performance compared to an appropriate broad-based securities market index (the "Index"). Current Indexes are shown below. These Indexes may change as set forth below.
FUND BENCHMARK INDEX -------------------------------------------- ------------------ RiverSource 120/20 Contrarian Equity Fund Russell 3000 Index RiverSource 130/30 U.S. Equity Fund Russell 1000 Index RiverSource Recovery and Infrastructure Fund S&P 500 Index |
The performance incentive adjustment is determined by measuring the percentage difference over a rolling 36-month period (subject to earlier determination based on the Transition Period, as set forth below) between the annualized performance of one Class A share of the Fund and the annualized performance of the Index ("Performance Difference"). The Performance Difference will then be used to determine the Adjustment Rate.
The Adjustment Rate, computed to five decimal places, is determined in accordance with the table below, and is applied against average daily net assets for the applicable rolling 36-month period or Transition Period, and divided by 12 to obtain the fee reflecting the performance fee adjustment for that month.
RIVERSOURCE 120/20 CONTRARIAN EQUITY FUND
RIVERSOURCE 130/30 U.S. EQUITY FUND
PERFORMANCE DIFFERENCE ADJUSTMENT RATE ------------- ---------------------------------------------------------------- 0.00%-1.00% 0 1.00%-6.00% 10 basis points times the performance difference over 1.00%, times 100 (maximum 50 basis points if a 6% performance difference) 6.00% or more 50 basis points |
For example, if the Performance Difference is 2.38%, the adjustment rate is
0.00138 [the 1.38% performance difference over 1.00%] x 0.0010 [10 basis
points] x 100. Rounded to five decimal places, the adjustment rate is
0.00138. This Adjustment Rate of 0.00138 is then applied against the
average daily net assets for the applicable rolling 36-month or Transition
Period, and divided by 12, which provides the performance adjustment fee
for that month. Where the Fund's Class A performance exceeds that of the
Index for the applicable rolling 36-month period or Transition Period, the
fee paid to the Investment Manager will increase by the adjustment rate.
Where the performance of the Index exceeds the performance of the Fund's
Class A shares for the applicable rolling 36-month period or Transition
Period, the fee paid to the Investment Manager will decrease by the
adjustment rate.
RIVERSOURCE RECOVERY AND INFRASTRUCTURE FUND
PERFORMANCE DIFFERENCE ADJUSTMENT RATE ------------- ---------------------------------------------------------------- 0.00% - 0.50% 0 0.50% - 1.00% 6 basis points times the performance difference over 0.50%, times 100 (maximum of 3 basis points if a 1% performance difference) 1.00% - 2.00% 3 basis points, plus 3 basis points times the performance difference over 1.00%, times 100 (maximum 6 basis points if a 2% performance difference) |
2.00% - 4.00% 6 basis points, plus 2 basis points times the performance difference over 2.00%, times 100 (maximum 10 basis points if a 4% performance difference) 4.00% - 6.00% 10 basis points, plus 1 basis point times the performance difference over 4.00%, times 100 (maximum 12 basis points if a 6% performance difference) 6.00% or more 12 basis points |
For example, if the performance difference is 2.38%, the adjustment rate is
0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance
difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded
to five decimal places, the adjustment rate is 0.00068. The maximum
adjustment rate for the fund is 0.0012 per year. Where the fund's Class A
performance exceeds that of the Index, the fee paid to the investment
manager will increase. Where the performance of the Index exceeds the
performance of the fund's Class A shares, the fee paid to the investment
manager will decrease. The 36-month comparison period rolls over with each
succeeding month, so that it always equals 36 months, ending with the month
for which the performance adjustment is being computed.
The 36-month comparison period rolls over with each succeeding month, so that it always equals 36 months, ending with the month for which the performance adjustment is being computed.
TRANSITION PERIOD
The performance incentive adjustment will not be calculated for the first 24 months from the inception of the fund. After 24 full calendar months, the performance fee adjustment will be determined using the average assets and Performance Difference over the first 24 full calendar months, and the Adjustment Rate will be applied in full. Each successive month an additional calendar month will be added to the performance adjustment computation. After 36 full calendar months, the full rolling 36-month period will take affect.
CHANGE IN INDEX
If an Index ceases to be published for a period of more than 90 days, changes in any material respect, otherwise becomes impracticable or, at the discretion of the Board, is no longer appropriate to use for purposes of a performance incentive adjustment, the Board may take action it deems appropriate and in the best interests of shareholders, including: (1) discontinuance of the performance incentive adjustment until such time as it approves a substitute index, or (2) adoption of a methodology to transition to a substitute index it has approved.
ADMINISTRATIVE SERVICES AGREEMENT
AMENDED AND RESTATED
This Administrative Services Agreement ("Agreement"), effective as of October 1, 2005, amended and restated November 12, 2008, is by and between Ameriprise Financial, Inc. ("Administrator"), a Delaware corporation, and the Corporations and Trusts ("Registrants") listed in Schedule A, each on behalf of its underlying series. The terms "Fund" or "Funds" are used to refer to either the Registrant or the underlying series as context requires.
PART ONE: SERVICES
(1) The Fund hereby retains Administrator, and Administrator hereby agrees, for the period of this Agreement and under the terms and conditions set forth in this Agreement, to furnish the Fund continuously with all administrative, accounting, treasury, and other services, as set forth in more detail, below:
(a) Administration services necessary and appropriate for the business of the Fund, including but not limited to:
(i) Preparing all general or routine shareholder communications including notices of dividends and capital gains distributions;
(ii) Preparing and filing of shareholder reports and other required regulatory reports and communications;
(iii) Preparing and filing of tax reports, including the Fund's income tax returns;
(iv) Monitoring the Fund's compliance with Subchapter M of the Internal Revenue Code, and other applicable tax laws and regulations;
(v) Executing the pricing process and monitoring the reliability of the valuation information received from the independent third-party pricing services and brokers;
(vi) Coordinating and supervising relations with, and monitoring the performance of, custodians, depositories, transfer and pricing agents, accountants, underwriters, brokers and dealers, insurers, printers, Fund auditors, and other persons serving the Fund, deemed to be necessary or desirable;
(vii) Maintaining Fund registration statement updates, and maintaining registration in the jurisdictions in which shares of the Fund are offered for sale;
(viii) Preparing reports, information, surveys, or other analyses to third parties as deemed necessary or desirable by the Fund; and
(ix) Preparing reports, evaluations, information, surveys, statistical analysis or other analysis of the Fund as the Boards of Directors/Trustees of the Fund ("Board") may request from time to time.
(x) Providing support for the Board in connection with the Board's efforts to vote proxies on behalf of the Fund.
(b) Accounting and recordkeeping services necessary and appropriate for the business of the Fund, including but not limited to:
(i) Calculating and supervising publication of the Fund's daily net asset value quotations, pricing, performance and yield information, periodic earnings reports, and other financial data, consistent with federal securities laws and the Fund's current prospectus; and
(ii) Monitoring the Fund's compliance with accounting operations control processes.
(c) Treasury services necessary and appropriate for the business of the Fund, including but not limited to:
(i) Monitoring daily cash and transaction statements and reports from the Fund's transfer agent and custodian; and
(ii) Completing daily cash reconciliations, notifying Fund's custodian of such reconciliations, and reporting investable cash to the Fund's investment manager and subadvisers, as directed by the Fund's investment manager or subadviser, if applicable.
(d) Other services necessary and appropriate for the operations of the Fund, not listed above, including but not limited to:
(i) Providing compliance services, as directed by the Fund's Chief Compliance Officer, which may include monitoring the Fund's compliance with applicable federal, state and foreign securities laws, and the rules and regulations thereunder, as applicable, including, without limitation, the Investment Company Act of 1940, the Securities and Exchange Act of 1934 and the Securities Act of 1933, each as amended from time to time, and the rules promulgated under each of the foregoing;
(ii) Providing legal support of all administration services provided by Administrator under this Agreement;
(iii) Providing other services related to this Agreement, including drafting, filing and maintaining Fund's charter documents with regulatory authorities; drafting, negotiating and maintaining any necessary Fund agreements; assisting in the preparation of regulatory filings; and arranging for and preparing or coordinating materials in connection with shareholder meetings, as necessary;
(iv) Providing services to the Fund and to the Board including coordinating and preparing materials for Board and Committee meetings; providing guidance and preparing materials on corporate and legal issues relevant to the Fund's business; and assisting in the Fund's procurement of fidelity bond coverage and error and omissions/directors (trustees) and officers insurance coverage;
(v) Maintaining the Fund's books and records in accordance with all applicable federal and state securities laws and regulations; and
(vi) Maintaining, together with affiliated companies, a business
continuation and recovery program for the Fund, provided that, to
the extent consistent with applicable law and regulation, any
services provided pursuant to clauses (iii) and (iv) in this Part
(1)(d) shall,
in the reasonable discretion of the chairperson of the Board (the "Chair"), be subject to review and oversight of the Board, any committee thereof or the Chair.
(2) Administrator agrees to pay on behalf of the Fund such expenses as may be provided for in Part Three; subject always to the direction and control of the Board, the Executive Committee and the authorized officers of the Fund and to maintain an adequate organization of competent persons,. Administrator agrees to meet with any persons at such times as the Board deems appropriate for the purpose of reviewing Administrator's performance under this Agreement.
(3) The Fund agrees that it will furnish to Administrator any information that the latter may reasonably request with respect to the services performed or to be performed by Administrator under this Agreement.
(4) It is understood and agreed that in furnishing the Fund with services under this Agreement, neither Administrator, nor any officer, director or agent thereof shall be held liable to shareholders of the Fund, the Fund or its creditors for errors of judgment or for anything except willful misfeasance, bad faith, or negligence in the performance of its duties, or reckless disregard of its obligations and duties under the terms of this Agreement. It is further understood and agreed that Administrator may rely upon information furnished to it reasonably believed to be accurate and reliable.
PART TWO: COMPENSATION FOR SERVICES
(1) The Fund agrees to pay to Administrator, and Administrator covenants and agrees to accept from the Fund in full payment for the services furnished, a fee as described in Schedule A. The fee for each calendar day of each year shall be equal to 1/365th (1/366th in each leap year) of the total amount computed. The computation shall be made for each day on the basis of net assets as of the close of the preceding day. In the case of the suspension of the computation of net asset value, the administrative fee for each day during the suspension shall be computed as of the close of business on the last full day on which the net assets were computed. As used in this Agreement "net assets" as of the close of a full day includes all transactions in shares of the Fund recorded on the books of the Fund for that day.
(2) The administrative fee shall be paid on a monthly basis and, in the event of the termination of this Agreement, in whole or in part with respect to any Fund, the administrative fee accrued shall be prorated on the basis of the number of days that this Agreement is in effect during the month with respect to which such payment is made.
(3) The administrative fee shall be paid in cash by the Fund to Administrator within five (5) business days after the last day of each month.
PART THREE: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Administrative fees payable to Administrator for its services under the terms of this Agreement.
(b) Taxes.
(c) Fees and charges of its independent certified public accountants for services the Fund requests.
(d) Commitment fees on lines of credit.
(e) Fees and expenses of attorneys (i) it employs in matters not involving
the assertion of a claim by a third party against the Fund, its Board
members and officers, (ii) it employs in conjunction with a claim
asserted by the Board against Administrator, except that Administrator
shall reimburse the Fund for such fees and expenses if it is
ultimately determined by a court of competent jurisdiction, or
Administrator agrees, that it is liable in whole or in part to the
Fund, (iii) it employs to assert a claim against a third party, and
(iv) it or Administrator employs, with the approval of the Board, to
assist in the evaluation of certain investments or other matters
related to the administration of the Fund.
(f) Fees paid for the qualification and registration for public sale of the securities of the Fund under the laws of the United States and of the several states in which such securities shall be offered for sale.
(g) Fees of consultants employed by the Fund.
(h) Board member, officer and employee expenses which shall include fees, salaries, memberships, dues, travel, seminars, pension, profit sharing, and all other benefits paid to or provided for Board members, officers and employees, directors and officers liability insurance, errors and omissions liability insurance, worker's compensation insurance and other expenses applicable to the Board members, officers and employees, except the Fund will not pay any fees or expenses of any person who is an officer or employee of Administrator or its affiliates.
(i) Filing fees and charges incurred by the Fund in connection with filing any amendment to its organizational documents, or incurred in filing any other document with the state where the Fund is organized or its political subdivisions.
(j) Organizational expenses of the Fund.
(k) Fund Board and Fund office expenses, separate from Administrator or affiliates of Administrator, which shall include a charge for occupancy, insurance on the premises, furniture and equipment, telephone, telegraph, electronic information services, books, periodicals, published services, and office supplies used by the Fund.
(l) Other expenses properly payable by the Fund, approved by the Board.
(2) Administrator agrees to pay all expenses associated with the services it provides under the terms of this Agreement
PART FOUR: MISCELLANEOUS
(1) Administrator shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act for or represent the Fund.
(2) A "full business day" shall be as defined in the By-laws of the Fund.
(3) The Fund recognizes that Administrator and its affiliates, pursuant to separate agreements, now render and may continue to render services to other investment companies and persons which may or may not have policies similar to those of the Fund and that Administrator provides services for its own investments and/or those of its affiliates. Administrator shall be free to provide such services and the Fund hereby consents thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto shall be invalidated or in any way affected by the fact that Board members, officers, agents and/or shareholders of the Fund are or may be interested in Administrator or any successor or assignee thereof, as directors, officers, stockholders or otherwise; that directors, officers, stockholders or agents of Administrator are or may be interested in the Fund as Board members, officers, shareholders, or otherwise; or that Administrator or any successor or assignee, is or may be interested in the Fund as shareholder or otherwise, provided, however, that neither Administrator, nor any officer, Board member or employee thereof or of the Fund, shall sell to or buy from the Fund any property or security other than shares issued by the Fund, except in accordance with applicable regulations or orders of the United States Securities and Exchange Commission.
(5) Any notice under this Agreement shall be given in writing, addressed, and delivered, or mailed postpaid, to the party to this Agreement entitled to receive such, at such party's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other.
(6) Administrator agrees that no officer, director or employee of Administrator will deal for or on behalf of the Fund with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit officers, directors or employees of the Administrator's affiliated companies from having a financial interest in the Fund or in Administrator.
(7) The Fund agrees that Administrator may subcontract for certain of the services described under this Agreement with the understanding that there shall be no diminution in the quality or level of the services and that Administrator remains fully responsible for the services.
(8) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable without the written consent of the other party. This Agreement shall be governed by the laws of the State of Minnesota.
(9) For each Fund that is organized as a Massachusetts business trust, a copy of the Declaration of Trust, together with all amendments, is on file in the office of the Secretary of State of the Commonwealth of Massachusetts. The execution and delivery of this Agreement has been authorized by the Trustees and the Agreement has been signed by an authorized officer of the Fund. It is expressly agreed that the obligations of the Fund under this Agreement shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Fund, personally, but bind only the assets and property of the Fund, as provided in the Declaration of Trust.
PART FIVE: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect until April 30, 2008 and, thereafter, from year to year as the parties may mutually agree, provided that either party may terminate this Agreement by giving the other party notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice.
(2) Non-material amendments or modifications to this Agreement will only be made effective upon written agreement executed by the Administrator and the Fund.
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written.
RIVERSOURCE BOND SERIES, INC.
RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
RIVERSOURCE DIMENSIONS SERIES, INC.
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
RIVERSOURCE EQUITY SERIES, INC.
RIVERSOURCE GLOBAL SERIES, INC.
RIVERSOURCE GOVERNMENT INCOME SERIES, INC.
RIVERSOURCE HIGH YIELD INCOME SERIES, INC.
RIVERSOURCE INCOME SERIES, INC.
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
RIVERSOURCE INTERNATIONAL SERIES, INC.
RIVERSOURCE INVESTMENT SERIES, INC.
RIVERSOURCE LARGE CAP SERIES, INC.
RIVERSOURCE MANAGERS SERIES, INC.
RIVERSOURCE MARKET ADVANTAGE SERIES, INC.
RIVERSOURCE MONEY MARKET SERIES, INC.
RIVERSOURCE SECTOR SERIES, INC.
RIVERSOURCE SELECTED SERIES, INC.
RIVERSOURCE SERIES TRUST
RIVERSOURCE SHORT TERM INVESTMENTS SERIES, INC.
RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST
RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC.
RIVERSOURCE STRATEGY SERIES, INC.
RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC.
RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC.
RIVERSOURCE TAX-EXEMPT SERIES, INC.
RIVERSOURCE VARIABLE SERIES TRUST
AMERIPRISE FINANCIAL, INC.
SCHEDULE A
FEE SCHEDULE
Each Registrant is a Minnesota corporation except, RiverSource California Tax-Exempt Trust, RiverSource Special Tax-Exempt Series Trust, RiverSource Series Trust, and RiverSource Variable Series Trust, which are Massachusetts business trusts:
The fee is based on the net assets of the Fund as set forth in the following table:
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ---------------------------------------------------------------------------------- 500,000,001 - 1,000,000,001 - 3,000,000,001 - FUNDS 0 - 500,000,000 1,000,000,000 3,000,000,000 12,000,000,000 12,000,000,001 + ----- --------------- ------------- --------------- --------------- ---------------- SCHEDULE I 0.080% 0.075% 0.070% 0.060% 0.050% 120/20 Contrarian Equity 0.080% 0.075% 0.070% 0.060% 0.050% 130/30 U.S. Equity 0.080% 0.075% 0.070% 0.060% 0.050% Absolute Return Currency and Income 0.080% 0.075% 0.070% 0.060% 0.050% Disciplined International Equity 0.080% 0.075% 0.070% 0.060% 0.050% Disciplined Small Cap Value 0.080% 0.075% 0.070% 0.060% 0.050% Emerging Markets Bond 0.080% 0.075% 0.070% 0.060% 0.050% Global Bond 0.080% 0.075% 0.070% 0.060% 0.050% Partners International Select Growth 0.080% 0.075% 0.070% 0.060% 0.050% Partners International Select Value 0.080% 0.075% 0.070% 0.060% 0.050% Partners International Small Cap 0.080% 0.075% 0.070% 0.060% 0.050% Partners Small Cap Equity 0.080% 0.075% 0.070% 0.060% 0.050% Partners Small Cap Growth 0.080% 0.075% 0.070% 0.060% 0.050% Partners Small Cap Value 0.080% 0.075% 0.070% 0.060% 0.050% Partners Variable Portfolio-Small Cap Value 0.080% 0.075% 0.070% 0.060% 0.050% Small Cap Advantage 0.080% 0.075% 0.070% 0.060% 0.050% Small Company Index 0.080% 0.075% 0.070% 0.060% 0.050% Strategic Allocation 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle Emerging Markets 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle European Equity 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle Global Equity 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle Global Equity Income 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle Global Extended Alpha 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle International Opportunity 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle Variable Portfolio-Emerging Markets 0.080% 0.075% 0.070% 0.060% 0.050% Threadneedle Variable Portfolio-International Opportunity 0.080% 0.075% 0.070% 0.060% 0.050% Variable Portfolio-Global Bond 0.080% 0.075% 0.070% 0.060% 0.050% Variable Portfolio-Small Cap Advantage 0.080% 0.075% 0.070% 0.060% 0.050% SCHEDULE II 0.070% 0.065% 0.060% 0.050% 0.040% California Tax-Exempt 0.070% 0.065% 0.060% 0.050% 0.040% Diversified Bond 0.070% 0.065% 0.060% 0.050% 0.040% Floating Rate 0.070% 0.065% 0.060% 0.050% 0.040% |
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ---------------------------------------------------------------------------------- 500,000,001 - 1,000,000,001 - 3,000,000,001 - FUNDS 0 - 500,000,000 1,000,000,000 3,000,000,000 12,000,000,000 12,000,000,001 + ----- --------------- ------------- --------------- --------------- ---------------- High-Yield Bond 0.070% 0.065% 0.060% 0.050% 0.040% Income Opportunities 0.070% 0.065% 0.060% 0.050% 0.040% Inflation Protected Securities 0.070% 0.065% 0.060% 0.050% 0.040% Intermediate Tax-Exempt 0.070% 0.065% 0.060% 0.050% 0.040% Limited Duration Bond 0.070% 0.065% 0.060% 0.050% 0.040% Minnesota Tax-Exempt 0.070% 0.065% 0.060% 0.050% 0.040% New York Tax-Exempt 0.070% 0.065% 0.060% 0.050% 0.040% Short Duration U.S. Government 0.070% 0.065% 0.060% 0.050% 0.040% Strategic Income Allocation 0.070% 0.065% 0.060% 0.050% 0.040% Tax-Exempt Bond 0.070% 0.065% 0.060% 0.050% 0.040% Tax-Exempt High Income 0.070% 0.065% 0.060% 0.050% 0.040% U.S. Government Mortgage 0.070% 0.065% 0.060% 0.050% 0.040% Variable Portfolio-Diversified Bond 0.070% 0.065% 0.060% 0.050% 0.040% Variable Portfolio-Global Inflation Protected Securities 0.070% 0.065% 0.060% 0.050% 0.040% Variable Portfolio-High Yield Bond 0.070% 0.065% 0.060% 0.050% 0.040% Variable Portfolio-Income Opportunities 0.070% 0.065% 0.060% 0.050% 0.040% Variable Portfolio-Short Duration U.S. Government 0.070% 0.065% 0.060% 0.050% 0.040% SCHEDULE III 0.060% 0.055% 0.050% 0.040% 0.030% Balanced 0.060% 0.055% 0.050% 0.040% 0.030% Cash Management 0.060% 0.055% 0.050% 0.040% 0.030% Disciplined Equity 0.060% 0.055% 0.050% 0.040% 0.030% Disciplined Large Cap Growth 0.060% 0.055% 0.050% 0.040% 0.030% Disciplined Large Cap Value 0.060% 0.055% 0.050% 0.040% 0.030% Disciplined Small and Mid Cap Equity 0.060% 0.055% 0.050% 0.040% 0.030% Diversified Equity Income 0.060% 0.055% 0.050% 0.040% 0.030% Dividend Opportunity 0.060% 0.055% 0.050% 0.040% 0.030% Equity Value 0.060% 0.055% 0.050% 0.040% 0.030% Global Technology 0.060% 0.055% 0.050% 0.040% 0.030% Growth 0.060% 0.055% 0.050% 0.040% 0.030% Large Cap Equity 0.060% 0.055% 0.050% 0.040% 0.030% Large Cap Value 0.060% 0.055% 0.050% 0.040% 0.030% Mid Cap Growth 0.060% 0.055% 0.050% 0.040% 0.030% Mid Cap Value 0.060% 0.055% 0.050% 0.040% 0.030% Partners Aggressive Growth 0.060% 0.055% 0.050% 0.040% 0.030% Partners Fundamental Value 0.060% 0.055% 0.050% 0.040% 0.030% Partners Select Value 0.060% 0.055% 0.050% 0.040% 0.030% Partners Variable Portfolio-Fundamental Value 0.060% 0.055% 0.050% 0.040% 0.030% Partners Variable Portfolio-Select Value 0.060% 0.055% 0.050% 0.040% 0.030% Precious Metals and Mining 0.060% 0.055% 0.050% 0.040% 0.030% Real Estate 0.060% 0.055% 0.050% 0.040% 0.030% Recovery and Infrastructure 0.060% 0.055% 0.050% 0.040% 0.030% |
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ---------------------------------------------------------------------------------- 500,000,001 - 1,000,000,001 - 3,000,000,001 - FUNDS 0 - 500,000,000 1,000,000,000 3,000,000,000 12,000,000,000 12,000,000,001 + ----- --------------- ------------- --------------- --------------- ---------------- S&P 500 Index 0.060% 0.055% 0.050% 0.040% 0.030% Tax-Exempt Money Market 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Balanced 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Cash Management 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Diversified Equity Income 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Growth 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Large Cap Equity 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Large Cap Value 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Mid Cap Growth 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-Mid Cap Value 0.060% 0.055% 0.050% 0.040% 0.030% Variable Portfolio-S&P 500 Index 0.060% 0.055% 0.050% 0.040% 0.030% SCHEDULE IV 0.020% 0.020% 0.020% 0.020% 0.020% Disciplined Asset Allocation Portfolios - Aggressive 0.020% 0.020% 0.020% 0.020% 0.020% Disciplined Asset Allocation Portfolios - Conservative 0.020% 0.020% 0.020% 0.020% 0.020% Disciplined Asset Allocation Portfolios - Moderate 0.020% 0.020% 0.020% 0.020% 0.020% Disciplined Asset Allocation Portfolios - Moderately Aggressive 0.020% 0.020% 0.020% 0.020% 0.020% Disciplined Asset Allocation Portfolios - Moderately Conservative 0.020% 0.020% 0.020% 0.020% 0.020% Income Builder Basic Income 0.020% 0.020% 0.020% 0.020% 0.020% Income Builder Enhanced Income 0.020% 0.020% 0.020% 0.020% 0.020% Income Builder Moderate Income 0.020% 0.020% 0.020% 0.020% 0.020% Portfolio Builder Aggressive 0.020% 0.020% 0.020% 0.020% 0.020% Portfolio Builder Conservative 0.020% 0.020% 0.020% 0.020% 0.020% Portfolio Builder Moderate 0.020% 0.020% 0.020% 0.020% 0.020% Portfolio Builder Moderate Aggressive 0.020% 0.020% 0.020% 0.020% 0.020% Portfolio Builder Moderate Conservative 0.020% 0.020% 0.020% 0.020% 0.020% Portfolio Builder Total Equity 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2010 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2015 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2020 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2025 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2030 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2035 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2040 0.020% 0.020% 0.020% 0.020% 0.020% Retirement Plus 2045 0.020% 0.020% 0.020% 0.020% 0.020% SCHEDULE V 0 0 0 0 0 Short-Term Cash N/A N/A N/A N/A N/A |
TRANSFER AGENT AGREEMENT
AMENDED AND RESTATED
This Transfer Agent Agreement, effective as of October 1, 2005, amended and restated November 12, 2008 ("Agreement"), is by and between RiverSource Service Corporation ("Transfer Agent"), a Minnesota corporation, and each of the Corporations and Trusts ("Registrants"), each on behalf of their underlying series listed in Schedule A. The terms "Fund" or "Funds" are used to refer to either the Registrants or the underlying series as context requires.
In consideration of the mutual promises set forth below, the Fund and the Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Fund hereby appoints the Transfer Agent, as transfer agent for its shares ("shares") and as shareholder servicing agent for the Fund, and the Transfer Agent accepts such appointment and agrees to perform the duties set forth below.
2. Compensation.
(a) The Fund will compensate the Transfer Agent for the performance of its obligations as set forth in Schedule B. Schedule B does not include out-of-pocket disbursements of the Transfer Agent for which the Transfer Agent shall be entitled to bill the Fund separately.
(b) The Transfer Agent will bill the Fund at the end of each period, as described in Schedule B. The fee provided for hereunder shall be paid in cash by the Fund to the Transfer Agent within five (5) business days after the last day of each period.
(c) Out-of-pocket disbursements shall include, but shall not be limited to, the items specified in Schedule C. Reimbursement by the Fund for expenses incurred by the Transfer Agent in any month shall be made as soon as practicable after the receipt of an itemized bill from the Transfer Agent.
(d) Any compensation jointly agreed to hereunder may be adjusted from time to time by attaching to this Agreement a revised Schedule B, dated and signed by an officer of the parties.
3. Documents. The Fund will furnish from time to time such certificates, documents or opinions as the Transfer Agent deems to be appropriate or necessary for the proper performance of its duties.
4. Representations of the Fund and the Transfer Agent.
(a) The Fund represents to the Transfer Agent that all outstanding shares are validly issued, fully paid and non-assessable by the Fund.
(b) The Transfer Agent represents that it is registered under Section 17A(c) of the Securities Exchange Act of 1934. The Transfer Agent agrees to maintain the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement and to comply with all applicable laws.
5. Duties of the Transfer Agent. The Transfer Agent shall be responsible, separately and through its subsidiaries or affiliates, or authorized designees, including affiliated and unaffiliated financial
intermediaries ("Subcontractors") for the following functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired instructions and payment, or payment identified as being for the account of a shareholder ("shareholder"), the Transfer Agent will deposit the payment, prepare and present the necessary report to the company selected by the Boards of Directors/Trustees of the Fund ("Board") for the safekeeping of the Fund's assets (the "Custodian") and record the purchase of shares in a timely fashion in accordance with the terms of a Fund's prospectus. All shares shall be held in book entry form, and no certificate shall be issued except as has been previously issued.
(2) On receipt of notice that payment was dishonored, the Transfer Agent shall stop redemptions of all shares owned by the shareholder related to that payment, place a stop payment on any checks that have been issued to redeem shares of the shareholder, cancel such shares for which payment was dishonored and take such other action as it deems appropriate.
(b) Redemption of Fund Shares. On receipt of instructions to redeem shares in accordance with the terms of a Fund's prospectus, the Transfer Agent will record the redemption of shares of the Fund, prepare and present the necessary report to the Custodian and pay the proceeds of the redemption to the shareholder, or an authorized agent or legal representative upon the receipt of the monies from the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt of instructions or forms acceptable to the Transfer Agent to transfer the shares to the name of a new owner, change the name or address of the present owner or take other legal action, the Transfer Agent will take such action as is requested.
(d) Exchange of Fund Shares. On receipt of instructions to exchange the shares of a Fund for the shares of another Fund or other affiliated product in accordance with the terms of the prospectus, the Transfer Agent will process the exchange in the same manner as a redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to transfer, exchange or redeem shares of the Fund or take any action requested by a shareholder until it is satisfied that the requested transaction or action is legally authorized or until it is satisfied there is no basis for any claims adverse to the transaction or action. It may rely on the provisions of the Uniform Act for the Simplification of Fiduciary Security Transfers or the Uniform Commercial Code. The Fund shall indemnify the Transfer Agent for any act done or omitted to be done in reliance on such laws or for refusing to transfer, exchange or redeem shares or taking any requested action if it acts on a good faith belief that the transaction or action is illegal or unauthorized.
(f) Shareholder Records, Reports and Services.
(1) The Transfer Agent shall maintain all shareholder accounts, which shall contain all required tax, legally imposed and regulatory information; shall provide shareholders, and file with federal and state agencies, all required tax and other reports pertaining to shareholder accounts; shall prepare or cause to be prepared
shareholder mailing lists and shall cause to be delivered or cooperate with the Fund or its designated agent with respect to the required delivery of all required prospectuses, annual reports, semiannual reports, statements of additional information (upon request), proxies and other communications to shareholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in accordance with all applicable laws, rules and regulations, including, but not limited to, the records required by Section 31(a) of the Investment Company Act of 1940, as amended.
(g) Dividends and Distributions. The Transfer Agent shall prepare and present the necessary report to the Custodian and shall cause to be prepared and transmitted the payment of income dividends and capital gains distributions or cause to be recorded the investment of such dividends and distributions in additional shares of the Fund or as directed by instructions or forms acceptable to the Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm, as required, each transaction either at the time of the transaction or through periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or stolen checks issued to shareholders upon receipt of proper notification and will maintain any stop payment orders against the lost or stolen checks as it is economically desirable to do.
(j) Reports to Fund. The Transfer Agent will provide reports pertaining to the services provided under this Agreement as the Fund may request to ascertain the quality and level of services being provided or as required by law.
(k) Market Timing. The Transfer Agent will assist other Fund service providers as necessary in the implementation of the Fund's market timing policy adopted by the Board, as set forth in the Fund's prospectus.
(l) Money Laundering Prevention Program. The Transfer Agent agrees to perform such agreed anti-money laundering ("AML") functions with respect to purchases of the Funds' shares as the Funds or their agent may delegate to the Transfer Agent from time to time or as the Transfer Agent is otherwise obligated to perform. In accordance with mutually-agreed procedures, the Transfer Agent shall use its best efforts in carrying out such agreed functions consistent with the requirements of the Funds' AML program. The Funds acknowledge that their shareholders (which for this purpose shall mean only shareholders of record) are customers of the Funds and not customers of the Transfer Agent and the Funds retain legal responsibility under the USA PATRIOT Act for AML compliance with respect to transactions in their shares. The Transfer Agent agrees to cooperate with any request from examiners of United States Government agencies having jurisdiction over the Funds for information and records relating to the Funds' AML program and consents to inspection by such examiners for this purpose.
(m) Other Duties. The Transfer Agent may perform other duties for additional compensation if agreed to in writing by the parties to this Agreement as described in Schedule D.
6. Ownership and Confidentiality of Records.
(a) General. The Transfer Agent agrees that all records prepared or maintained by it relating to the services to be performed by it under the terms of this Agreement are the property of the Fund and may be inspected by the Fund or any person retained by the Fund at reasonable times. The Fund and Transfer Agent agree to protect the confidentiality of those records.
(b) Regulation S-P.
(1) In accordance with Regulation S-P of the Securities and Exchange Commission, "Nonpublic Personal Information" includes (1) all personally identifiable financial information; (2) any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived using any personally identifiable financial information that is not publicly available information; and (3) any information derived therefrom.
(2) The Transfer Agent must not use or disclose Nonpublic Personal Information for any purpose other than to carry out the purpose for which Nonpublic Personal Information was provided to the Transfer Agent as set forth in this Agreement, and agrees to cause the Transfer Agent, and its employees, agents, representatives, or any other party to whom the Transfer Agent may provide access to or disclose Nonpublic Personal Information to limit the use and disclosure of Nonpublic Personal Information to that purpose.
(3) The Transfer Agent agrees to implement appropriate measures designed to ensure the security and confidentiality of Nonpublic Personal Information, to protect such information against any anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to, or use of, Nonpublic Personal Information that could result in substantial harm or inconvenience to any customer of the Fund; the Transfer Agent further agrees to cause all its agents, representatives, Subcontractors, or any other party to whom the Transfer Agent may provide access to, or disclose, Nonpublic Personal Information to implement appropriate measures designed to meet the objectives set forth in this paragraph.
(4) With respect only to the provisions of this Section 6(b), the Transfer Agent agrees to indemnify and hold harmless the Fund and any officer or director/trustee of the Board ("Board member"), against losses, claims, damages, expenses, or liabilities to which the Fund, or any officer or Board member of the Fund, may become subject as the result of (1) a material breach of the provisions of this section of the Agreement or (2) any acts or omissions of the Transfer Agent, or of any of its officers, directors, employees, representatives, Subcontractors or agents, that are not in accordance with this Agreement, including, but not limited to, any violation of any federal statute or regulation. Notwithstanding the foregoing, no party shall be entitled to indemnification pursuant to this Section 6(b)(4) if such loss, claim, damage, expense, or liability is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard of duty by the party seeking indemnification.
7. Action by Board and Opinion of Counsel. The Transfer Agent may rely on resolutions of the Board or the Executive Committee of the Board and an opinion of counsel for the Fund.
8. Duty of Care. It is understood and agreed that, in furnishing the Fund with the services as herein provided, neither the Transfer Agent, nor any officer, director or agent thereof shall be held liable for any loss arising out of or in connection with their actions under this Agreement so long as they act in good faith and with due diligence, and are not negligent or guilty of any willful misconduct. It is further understood and agreed that the Transfer Agent may rely upon information furnished to it reasonably believed to be accurate and reliable. In the event the Transfer Agent is unable to perform its obligations under the terms of this Agreement because of an act of God, strike or equipment or transmission failure reasonably beyond its control, the Transfer Agent shall not be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall continue in effect from year to year as the parties may mutually agree, provided that either party may terminate this Agreement by giving the other party notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice. In the event such notice is given by the Fund, it shall be accompanied by a vote of the Board, certified by the Secretary, electing to terminate this Agreement and designating a successor transfer agent or transfer agents. Upon such termination and at the expense of the Fund, the Transfer Agent will promptly deliver to such successor a certified list of shareholders of the Fund (with name, address and taxpayer identification or Social Security number), a historical record of the account of each shareholder and the status thereof, and all other relevant books, records, correspondence, and other data established or maintained by the Transfer Agent under this Agreement in the form reasonably acceptable to the Fund, and will cooperate in the transfer of such duties and responsibilities, including provisions for assistance from the Transfer Agent's personnel in the establishment of books, records and other data by such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any manner except by a written agreement executed by the parties.
11. Subcontractors. The Fund agrees that the Transfer Agent may subcontract for services described under this Agreement with the understanding that there shall be no diminution in the quality or level of the services as determined by the Fund and that the Transfer Agent remains fully responsible for the services. Except for out-of-pocket expenses identified in Schedule C, the Transfer Agent shall bear the cost of subcontracting such services, unless otherwise agreed by the parties. The Fund agrees that the Transfer Agent may use revenues from the Agreement to pay subcontractors for the services they provide.
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable without the written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of Minnesota.
(c) For each Fund that is organized as a Massachusetts Business Trust, a copy of the Declaration of Trust, together with all amendments, is on file in the office of the Secretary of State of the Commonwealth of Massachusetts. The execution and delivery
of this Agreement has been authorized by the Trustees and the Agreement has been signed by an authorized officer of the Fund. It is expressly agreed that the obligations of the Fund under this Agreement shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Fund, personally, but bind only the assets and property of the Fund, as provided in the Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the day and year written above.
RIVERSOURCE BOND SERIES, INC.
RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
RIVERSOURCE DIMENSIONS SERIES, INC.
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
RIVERSOURCE EQUITY SERIES, INC.
RIVERSOURCE GLOBAL SERIES, INC.
RIVERSOURCE GOVERNMENT INCOME SERIES, INC.
RIVERSOURCE HIGH YIELD INCOME SERIES, INC.
RIVERSOURCE INCOME SERIES, INC.
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
RIVERSOURCE INTERNATIONAL SERIES, INC.
RIVERSOURCE INVESTMENT SERIES, INC.
RIVERSOURCE LARGE CAP SERIES, INC.
RIVERSOURCE MANAGERS SERIES, INC.
RIVERSOURCE MARKET ADVANTAGE SERIES, INC.
RIVERSOURCE MONEY MARKET SERIES, INC.
RIVERSOURCE SECTOR SERIES, INC.
RIVERSOURCE SELECTED SERIES, INC.
RIVERSOURCE SERIES TRUST
RIVERSOURCE SHORT TERM INVESTMENTS SERIES, INC.
RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST.
RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC.
RIVERSOURCE STRATEGY SERIES, INC.
RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC.
RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC.
RIVERSOURCE TAX-EXEMPT SERIES, INC.
RIVERSOURCE SERVICE CORPORATION
SCHEDULE A
As of 11/12/2008
FUNDS
Each Registrant is a Minnesota corporation except RiverSource California Tax-Exempt Trust, RiverSource Special Tax-Exempt Series Trust and RiverSource Series Trust, which are Massachusetts business trusts:
EQUITY FUNDS
CLASSES ---------------------------------------------------------- FUNDS A B C D E I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- --- --- RiverSource Dimensions Series, Inc. RiverSource Disciplined Small and Mid Cap Equity A B C -- -- I -- -- R4 -- W -- RiverSource Disciplined Small Cap Value A B C -- -- I R2 R3 R4 R5 -- -- RiverSource Equity Series, Inc. RiverSource Mid Cap Growth A B C -- -- I -- -- R4 -- -- -- RiverSource Global Series, Inc. RiverSource Global Technology A B C -- -- I -- -- R4 -- -- -- Threadneedle Emerging Markets A B C -- -- I -- -- R4 R5 -- -- Threadneedle Global Equity A B C -- -- I R2 R3 R4 R5 W -- Threadneedle Global Equity Income A B C -- -- I R2 R3 R4 R5 -- -- Threadneedle Global Extended Alpha A B C -- -- I R2 R3 R4 R5 -- -- RiverSource International Series, Inc. RiverSource Disciplined International Equity A B C -- -- I R2 R3 R4 R5 W -- Threadneedle European Equity A B C -- -- I -- -- R4 -- -- -- Threadneedle International Opportunity A B C -- -- I R2 R3 R4 R5 -- -- RiverSource International Managers Series, Inc. RiverSource Partners International Select Growth A B C -- -- I -- -- R4 -- -- -- RiverSource Partners International Select Value A B C -- -- I -- -- R4 -- -- -- RiverSource Partners International Small Cap A B C -- -- I -- -- R4 -- -- -- RiverSource Investment Series, Inc. RiverSource Balanced A B C -- -- -- -- -- R4 -- -- -- RiverSource Disciplined Large Cap Growth A B C -- -- I R2 R3 R4 R5 W -- RiverSource Disciplined Large Cap Value A B C -- -- I R2 R3 R4 R5 W -- RiverSource Diversified Equity Income A B C -- -- I R2 R3 R4 R5 W -- RiverSource Mid Cap Value A B C -- -- I R2 R3 R4 R5 W -- RiverSource Large Cap Series, Inc. RiverSource Disciplined Equity A B C -- -- I R2 R3 R4 R5 W -- RiverSource Growth A B C -- -- I R2 R3 R4 R5 W -- RiverSource Large Cap Equity A B C -- -- I R2 R3 R4 R5 -- -- RiverSource Large Cap Value A B C -- -- I R2 R3 R4 R5 -- -- RiverSource Managers Series, Inc. RiverSource Partners Aggressive Growth A B C -- -- I R2 R3 R4 R5 -- -- RiverSource Partners Fundamental Value A B C -- -- I -- -- R4 -- -- -- RiverSource Partners Select Value A B C -- -- I -- -- R4 -- -- -- RiverSource Partners Small Cap Equity A B C -- -- I -- -- R4 -- -- -- RiverSource Partners Small Cap Value A B C -- -- I R2 R3 R4 R5 -- -- RiverSource Market Advantage Series, Inc. RiverSource Portfolio Builder Aggressive A B C -- -- -- -- -- R4 -- -- -- |
EQUITY FUNDS
CLASSES ---------------------------------------------------------- FUNDS A B C D E I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- --- --- RiverSource Portfolio Builder Moderate A B C -- -- -- -- -- R4 -- -- -- RiverSource Portfolio Builder Moderate Aggressive A B C -- -- -- -- -- R4 -- -- -- RiverSource Portfolio Builder Total Equity A B C -- -- -- -- -- R4 -- -- -- RiverSource S&P 500 Index -- -- -- D E -- -- -- -- -- -- -- RiverSource Small Company Index A B -- -- -- -- -- -- R4 -- -- -- RiverSource Sector Series, Inc. RiverSource Dividend Opportunity A B C -- -- I R2 R3 R4 R5 W -- RiverSource Real Estate A B C -- -- I -- -- R4 -- W -- RiverSource Selected Series, Inc. RiverSource Precious Metals and Mining A B C -- -- I -- -- R4 -- -- -- RiverSource Series Trust RiverSource 120/20 Contrarian Equity A B C -- -- I -- -- -- R5 -- -- RiverSource 130/30 U.S. Equity Fund A B C -- -- I -- -- -- R5 -- -- RiverSource Retirement Plus 2010 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2015 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2020 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2025 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2030 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2035 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2040 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2045 A -- -- -- -- -- R2 R3 R4 R5 -- Y RiverSource Recovery and Infrastructure A B C I R2 R3 R4 R5 RiverSource Strategy Series, Inc. RiverSource Equity Value A B C -- -- I R2 R3 R4 R5 W -- RiverSource Partners Small Cap Growth A B C -- -- I R2 R3 R4 R5 -- -- RiverSource Small Cap Advantage A B C -- -- I R2 R3 R4 R5 -- -- RiverSource Strategic Allocation Series, Inc. RiverSource Strategic Allocation A B C -- -- I R2 R3 R4 R5 -- -- |
FIXED INCOME FUNDS
CLASSES ---------------------------------------------------------- FUNDS A B C D E I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- --- --- RiverSource Bond Series, Inc. RiverSource Floating Rate A B C -- -- I -- -- R4 R5 W -- RiverSource Income Opportunities A B C -- -- I -- -- R4 -- -- -- RiverSource Inflation Protected Securities A B C -- -- I -- -- R4 -- W -- RiverSource Limited Duration Bond A B C -- -- I -- -- R4 -- W -- RiverSource California Tax-Exempt Trust RiverSource California Tax-Exempt A B C -- -- -- -- -- -- -- -- -- RiverSource Diversified Income Series, Inc. RiverSource Diversified Bond A B C -- -- I R2 R3 R4 R5 W -- RiverSource Global Series, Inc. RiverSource Absolute Return Currency and Income A B C -- -- I -- -- R4 R5 W -- RiverSource Emerging Markets Bond A B C -- -- I -- -- R4 -- W -- RiverSource Global Bond A B C -- -- I -- -- R4 -- W -- RiverSource Government Income Series, Inc. RiverSource Short Duration U.S. Government A B C -- -- I -- -- R4 -- W -- RiverSource U.S. Government Mortgage A B C -- -- I -- -- R4 -- -- -- |
FIXED INCOME FUNDS
CLASSES ---------------------------------------------------------- FUNDS A B C D E I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- --- --- RiverSource High Yield Income Series, Inc. RiverSource High Yield Bond A B C -- -- I R2 R3 R4 R5 W -- RiverSource Income Series, Inc. RiverSource Income Builder Basic Income A B C -- -- -- -- -- R4 -- -- -- RiverSource Income Builder Enhanced Income A B C -- -- -- -- -- R4 -- -- -- RiverSource Income Builder Moderate Income A B C -- -- -- -- -- R4 -- -- -- RiverSource Market Advantage Series, Inc. RiverSource Portfolio Builder Conservative A B C -- -- -- -- -- R4 -- -- -- RiverSource Portfolio Builder Moderate Conservative A B C -- -- -- -- -- R4 -- -- -- RiverSource Special Tax-Exempt Series Trust RiverSource Minnesota Tax-Exempt A B C -- -- -- -- -- -- -- -- -- RiverSource New York Tax-Exempt A B C -- -- -- -- -- -- -- -- -- RiverSource Strategic Allocation Series, Inc. RiverSource Strategic Income Allocation A B C -- -- -- R2 R3 R4 R5 -- -- RiverSource Tax-Exempt Income Series, Inc. RiverSource Tax-Exempt High Income A B C -- -- -- -- -- -- -- -- -- RiverSource Tax-Exempt Series, Inc. RiverSource Intermediate Tax-Exempt A B C -- -- -- -- -- -- -- -- -- RiverSource Tax-Exempt Bond A B C -- -- -- -- -- -- -- -- -- |
MONEY MARKET FUNDS
CLASSES ---------------------------------------------------------- FUNDS A B C D E I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- --- --- RiverSource Money Market Series, Inc. RiverSource Cash Management A B C -- -- I -- -- -- R5 W Y RiverSource Tax-Exempt Money Market Series, Inc. RiverSource Tax-Exempt Money Market A -- -- -- -- -- -- -- -- -- -- -- |
NON - PUBLIC FUND
RiverSource Short Term Investments Series, Inc. RiverSource Short-Term Cash Fund
SCHEDULE B
Effective as of 12/11/2006 with respect to Class E, Class I, Class Rs and Class Y:
FEE SCHEDULE
The annual fee for services under this Agreement, accrued daily and payable monthly, for the classes applicable to the Fund, is as follows:
1. PER ACCOUNT FEE - CLASSES A, B, C AND D
EQUITY FUNDS
The annual per account fee is as follows:
Class A Class B Class C Class D ------- ------- ------- ------- $19.50 $20.50 $20.00 $19.50 |
FIXED INCOME FUNDS
The annual per account fee is as follows:
Class A Class B Class C ------- ------- ------- $20.50 $21.50 $21.00 |
MONEY MARKET FUNDS
The annual per account fee is as follows:
Class A Class B Class C ------- ------- ------- $22.00 $23.00 $22.50 |
2. ASSET BASED FEE - CLASSES E, I, R2, R3, R4, R5, W AND Y
The annual asset-based fee is as follows:
FEE (asset-based fees are calculated based on average daily net assets CLASS attributable to the applicable class) ----- ------------------------------------------------------------------ E 0.05% I None R2 0.05% R3 0.05% R4 0.05% R5 0.05% W 0.20% Y 0.05% |
FOR ALL FUNDS:
An annual closed-account fee of $5.00 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system.
SCHEDULE C
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for the following out-of-pocket expenses:
- typesetting, printing, paper, envelopes, postage and return postage for proxy soliciting material, and proxy tabulation costs
- printing, paper, envelopes and postage for dividend notices, dividend checks, records of account, purchase confirmations, exchange confirmations and exchange prospectuses, redemption confirmations, redemption checks, confirmations on changes of address and any other communication required to be sent to shareholders
- typesetting, printing, paper, envelopes and postage for prospectuses, annual and semiannual reports, statements of additional information, supplements for prospectuses and statements of additional information and other required mailings to shareholders
- stop orders
- outgoing wire charges
- National Securities Clearing Corporation charges related to fund transactions
- other expenses incurred at the request or with the consent of the Fund
PLAN ADMINISTRATION SERVICES AGREEMENT
AMENDED AND RESTATED
PLAN ADMINISTRATION SERVICES AGREEMENT ("Agreement") dated as of December 1, 2006, amended and restated November 12, 2008, by and among RiverSource Service Corporation, a Minnesota corporation ("RiverSource Service Corporation"), and each of the registrants (acting separately on behalf of their series) identified from time to time on Exhibit A hereto (each a "Fund" and collectively the "Funds").
WITNESSETH:
WHEREAS, the Funds desire to offer their Class E, Class R2, Class R3, Class R4 and Class Y shares as funding options to retirement plans and to qualified tuition programs pursuant to Section 529 of the Internal Revenue Code ("529 plans") (retirement plans and 529 plans collectively referred to as "plans");
WHEREAS, plans are typically administered directly by financial institutions, third party record keepers or administrators ("third party administrators") who provide certain plan administration services including recordkeeping and communication/educational services to plan sponsors, plans and plan participants;
WHEREAS, the Funds desire that these plan administration services be provided by RiverSource Service Corporation, through third party administrators, to plan sponsors, plans and plan participants that invest in Class E, Class R2, Class R3, Class R4 and Class Y shares;
WHEREAS, the Funds recognize that these plan administration services benefit the plan participants with respect to their investment in the Funds, and therefore benefit the Funds; and
WHEREAS, in consideration for the rendering of these plan administration services, the Funds are willing to provide compensation to RiverSource Service Corporation to pay third party administrators, as set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements of the parties, the parties covenant and agree as follows:
1. PLAN ADMINISTRATION SERVICES. RiverSource Service Corporation shall enter into agreements with third party administrators to provide the services specified in Exhibit B, and such other services as are reflected in future amendments to Exhibit B from time to time (the "Plan Administration Services").
2. MAINTENANCE OF BOOKS AND RECORDS. RiverSource Service Corporation will preserve for each Fund all records required to be maintained as prescribed by the rules and regulations of the Securities and Exchange Commission in the manner and for the time periods prescribed by such rules. In the event of termination of this Agreement for any reason, all such records shall be returned promptly, without charge, to the appropriate Fund, free from any claim or retention of rights by RiverSource Service Corporation, except that RiverSource Service Corporation may retain copies of such records.
3. PLAN ADMINISTRATION SERVICES FEE. In consideration for the rendering of the Plan Administration Services, each Fund shall pay RiverSource Service Corporation with respect to Class E, Class R2, Class R3, Class R4 and Class Y shares, on an annual basis, a fee equal to the percentage set forth on Exhibit C attributable solely to the assets of the Fund's Class E, Class R2, Class R3, Class
Plan Administration Services Agreement
R4 and Class Y shares (the "Plan Administration Fee"). In no event shall the Plan Administration Fee be used for the purpose of distributing or marketing fund shares, including but not limited to advertising, compensation of underwriters, dealers and sales personnel, the printing and mailing of prospectuses to other than current account holders and the printing and mailing of sales literature. The parties to this Agreement expressly agree that the services provided under this Agreement do not include, and the amounts payable under this Agreement do not constitute, compensation for services relating to transfer agency services for the Funds. The Plan Administration Fee shall be accrued for each calendar day and the sum of the daily fee accruals shall be paid quarterly to RiverSource Service Corporation within five (5) calendar days of the last day of each quarter.
The Board of Directors/Trustees ("Board") of each Fund will, on an annual basis, review the Plan Administration Services and the Plan Administration Fee and such other information as such Board may reasonably request.
4. SCOPE OF PLAN ADMINISTRATION SERVICES; REGULATORY AND BUSINESS AND INDUSTRY PRACTICE DEVELOPMENTS. The Plan Administration Services to be furnished by RiverSource Service Corporation include only those services described on Exhibit B. In the event that, because of regulatory developments, or new or modified business or industry practices, the Funds require services in addition to the Plan Administration Services, RiverSource Service Corporation will consider furnishing such additional services, with compensation for such additional services to be agreed upon with respect to each such occasion as it arises.
5. NON-EXCLUSIVITY. The services of RiverSource Service Corporation to the Funds hereunder are not to be deemed exclusive and RiverSource Service Corporation shall be free to render similar services to others.
6. STANDARD OF CARE. Neither RiverSource Service Corporation or any of its affiliates, nor directors, officers, stockholders, agents or employees of RiverSource Service Corporation or any of its affiliates, shall be liable or responsible to any Fund or its shareholders for any error of judgment, mistake of law or any loss arising out of any act or omission in the performance by RiverSource Service Corporation of its duties under this Agreement, except for liability resulting from willful misfeasance, bad faith, negligence or reckless disregard by RiverSource Service Corporation of its obligations and duties under this Agreement.
7. TERM, TERMINATION, AMENDMENT AND ASSIGNMENT. This Agreement shall begin on the date first written above and shall continue indefinitely. The Agreement may be terminated with respect to any Fund at any time, without payment of any penalty, by the Board which oversees the Fund upon 30 days' written notice to RiverSource Service Corporation. This Agreement may be terminated by RiverSource Service Corporation with respect to any Fund at any time upon 30 days' written notice to the Fund. This Agreement may be amended at any time by a written agreement executed by each party hereto and may be assigned with respect to any Fund only with the written consent of the Fund and RiverSource Service Corporation.
8. GOVERNING LAW. The provisions of this Agreement shall be construed and interpreted in accordance with the domestic substantive laws of the State of Minnesota, without giving effect to any conflicts or choice of laws rule or provision that would result in the application of the domestic substantive laws of any other jurisdiction.
Plan Administration Services Agreement
9. SCOPE OF FUND'S OBLIGATIONS. A copy of the Declaration of Trust of each Fund (or trust of which the Fund is a series) organized as a Massachusetts business trust (each a "Trust"), is on file with the Secretary of State of The Commonwealth of Massachusetts. RiverSource Service Corporation acknowledges that the obligations of or arising out of this Agreement are not binding upon any of a Trust's trustees, officers, employees, agents or shareholders individually, but are binding solely upon the assets and property of the Trust in accordance with its proportionate interest thereunder. If this Agreement is executed by the Trust on behalf of one or more series of the Trust, RiverSource Service Corporation further acknowledges that the assets and liabilities of each series of the Trust are separate and distinct and that the obligations of or arising out of this Agreement are binding solely upon the assets or property of the series on whose behalf the Trust has executed this Agreement. RiverSource Service Corporation also agrees that obligations of each Fund hereunder shall be several and not joint, in accordance with its proportionate interest hereunder, and agrees not to proceed (by way of claim, set-off or otherwise) against any Fund for the obligations of another Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the day and year written above.
RIVERSOURCE BOND SERIES, INC.
RIVERSOURCE DIMENSIONS SERIES, INC.
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
RIVERSOURCE EQUITY SERIES, INC.
RIVERSOURCE GLOBAL SERIES, INC.
RIVERSOURCE GOVERNMENT INCOME SERIES, INC.
RIVERSOURCE HIGH YIELD INCOME SERIES, INC.
RIVERSOURCE INCOME SERIES, INC.
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
RIVERSOURCE INTERNATIONAL SERIES, INC.
RIVERSOURCE INVESTMENT SERIES, INC.
RIVERSOURCE LARGE CAP SERIES, INC.
RIVERSOURCE MANAGERS SERIES, INC.
RIVERSOURCE MARKET ADVANTAGE SERIES, INC.
RIVERSOURCE MONEY MARKET SERIES, INC.
RIVERSOURCE SECTOR SERIES, INC.
RIVERSOURCE SELECTED SERIES, INC.
RIVERSOURCE SERIES TRUST
RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC.
RIVERSOURCE STRATEGY SERIES, INC.
RIVERSOURCE SERVICE CORPORATION
Plan Administration Services Agreement
As of November 12, 2008
Each Registrant is a Minnesota corporation except RiverSource California Tax-Exempt Trust, RiverSource Special Tax-Exempt Series Trust and RiverSource Series Trust, which are Massachusetts business trusts:
EXHIBIT A
CLASSES --------------------------- FUNDS E R2 R3 R4 Y ----- --- --- --- --- --- RiverSource Bond Series, Inc. RiverSource Floating Rate -- -- -- R4 -- RiverSource Income Opportunities -- -- -- R4 -- RiverSource Inflation Protected Securities -- -- -- R4 -- RiverSource Limited Duration Bond -- -- -- R4 -- RiverSource Dimensions Series, Inc. RiverSource Disciplined Small and Mid Cap Equity -- -- -- R4 -- RiverSource Disciplined Small Cap Value -- R2 R3 R4 -- RiverSource Diversified Income Series, Inc. RiverSource Diversified Bond -- R2 R3 R4 -- RiverSource Equity Series, Inc. RiverSource Mid Cap Growth -- -- -- R4 -- RiverSource Global Series, Inc. RiverSource Absolute Return Currency and Income -- -- -- R4 -- RiverSource Emerging Markets Bond -- -- -- R4 -- RiverSource Global Bond -- -- -- R4 -- RiverSource Global Technology -- -- -- R4 -- Threadneedle Emerging Markets -- -- -- R4 -- Threadneedle Global Equity -- R2 R3 R4 -- Threadneedle Global Equity Income -- R2 R3 R4 -- Threadneedle Global Extended Alpha -- R2 R3 R4 -- RiverSource Government Income Series, Inc. RiverSource Short Duration U.S. Government -- -- -- R4 -- RiverSource U.S. Government Mortgage -- -- -- R4 -- RiverSource High Yield Income Series, Inc. RiverSource High Yield Bond -- R2 R3 R4 -- RiverSource Income Series, Inc. RiverSource Income Builder Basic Income -- -- -- R4 -- RiverSource Income Builder Moderate Income -- -- -- R4 -- RiverSource Income Builder Enhanced Income -- -- -- R4 -- RiverSource International Series, Inc. RiverSource Disciplined International Equity -- R2 R3 R4 -- Threadneedle European Equity -- -- -- R4 -- Threadneedle International Opportunity -- R2 R3 R4 -- RiverSource International Managers Series, Inc. RiverSource Partners International Select Growth -- -- -- R4 -- RiverSource Partners International Select Value -- -- -- R4 -- RiverSource Partners International Small Cap -- -- -- R4 -- RiverSource Investment Series, Inc. RiverSource Balanced -- -- -- R4 -- RiverSource Disciplined Large Cap Growth -- R2 R3 R4 -- RiverSource Disciplined Large Cap Value -- R2 R3 R4 -- |
Plan Administration Services Agreement
CLASSES --------------------------- FUNDS E R2 R3 R4 Y ----- --- --- --- --- --- RiverSource Diversified Equity Income -- R2 R3 R4 -- RiverSource Mid Cap Value -- R2 R3 R4 -- RiverSource Large Cap Series, Inc. RiverSource Disciplined Equity -- R2 R3 R4 -- RiverSource Growth -- R2 R3 R4 -- RiverSource Large Cap Equity -- R2 R3 R4 -- RiverSource Large Cap Value -- R2 R3 R4 -- RiverSource Managers Series, Inc. RiverSource Partners Aggressive Growth -- R2 R3 R4 -- RiverSource Partners Fundamental Value -- -- -- R4 -- RiverSource Partners Select Value -- -- -- R4 -- RiverSource Partners Small Cap Equity -- -- -- R4 -- RiverSource Partners Small Cap Value -- R2 R3 R4 -- RiverSource Market Advantage Series, Inc. RiverSource Portfolio Builder Moderate Conservative -- -- -- R4 -- RiverSource Portfolio Builder Aggressive -- -- -- R4 -- RiverSource Portfolio Builder Conservative -- -- -- R4 -- RiverSource Portfolio Builder Moderate -- -- -- R4 -- RiverSource Portfolio Builder Moderate Aggressive -- -- -- R4 -- RiverSource Portfolio Builder Total Equity -- -- -- R4 -- RiverSource S&P 500 Index E -- -- -- -- RiverSource Small Company Index -- -- -- R4 -- RiverSource Money Market Series, Inc. RiverSource Cash Management -- -- -- -- Y RiverSource Sector Series, Inc. RiverSource Dividend Opportunity -- R2 R3 R4 -- RiverSource Real Estate -- -- -- R4 -- RiverSource Selected Series, Inc. RiverSource Precious Metals and Mining -- -- -- R4 -- RiverSource Series Trust RiverSource Retirement Plus 2010 -- R2 R3 R4 Y RiverSource Retirement Plus 2015 -- R2 R3 R4 Y RiverSource Retirement Plus 2020 -- R2 R3 R4 Y RiverSource Retirement Plus 2025 -- R2 R3 R4 Y RiverSource Retirement Plus 2030 -- R2 R3 R4 Y RiverSource Retirement Plus 2035 -- R2 R3 R4 Y RiverSource Retirement Plus 2040 -- R2 R3 R4 Y RiverSource Retirement Plus 2045 -- R2 R3 R4 Y RiverSource Recovery and Infrastructure -- R2 R3 R4 -- RiverSource Strategic Allocation Series, Inc. RiverSource Strategic Allocation -- R2 R3 R4 -- RiverSource Strategic Income Allocation -- R2 R3 R4 -- RiverSource Strategy Series, Inc. RiverSource Equity Value -- R2 R3 R4 -- RiverSource Partners Small Cap Growth -- R2 R3 R4 -- RiverSource Small Cap Advantage -- R2 R3 R4 -- |
Plan Administration Services Agreement
EXHIBIT B
PLAN ADMINISTRATION SERVICES
In exchange for the Plan Administration Fee payable on the share classes of the Funds, as set forth on Exhibit C, RiverSource Service Corporation shall enter into agreements with third party administrators to provide Plan Administration Services that may include, but are not limited to, the following:
Plan Implementation and Conversion Services such as:
Design, provide, prepare or amend plan documents
Collect historical data
Set-up plan on recordkeeping system
Coordinate transfer of assets
Prepare and submit plan Internal Revenue Service filings
Prepare summary plan description and summaries of material modification
Prepare participant enrollment kits
Conduct plan education and enrollment meetings
Recordkeeping Services such as:
Administer participant contributions
Administer employer contributions
Administer participant forfeitures
Administer participant withdrawals
Administer dividends, capital gains and interest payments
Administer investment net asset value fluctuations
Administer investment allocations
Balance or reconcile transactions
Administer vesting schedules
Plan Maintenance Services such as
Review employee and participant data
Conduct or administer discrimination testing
Conduct or administer top heavy testing
Monitor section 402(g) compliance
Monitor section 415 compliance
Prepare or provide data for annual reports and Form 5500s
Conduct compliance consulting
Plan and Participant Reports such as:
Periodic participant statements
Participant activity reports
Periodic plan or trust statements
Administrative Services such as:
Provide distribution options
Provide and administer forms
Administer qualified domestic relations orders
Administer loans
Plan Administration Services Agreement
Administer rollovers
Withhold taxes
Prepare and transmit tax forms
Issue checks
Administer asset transfers
Education Activities such as:
Create or make available plan education material
Develop or provide programs designed to increase plan participation
Help participants consider investment/retirement goals
Provide general or customized plan education programs
Provide retirement readiness education material
Provide personalized statements
Support retirement education software, such as Morningstar Clear Future
Offer face to face education seminars
Create or distribute participant educational newsletters
Create or provide plan signage or posters
Plan Sponsor Education Services such as:
Provide plan or investment option information to plan sponsors
Website and Inter-active Voice Response (IVR) System Maintenance Services such
as:
Establish, maintain or improve plan website and IVR systems
Plan Administration Services Agreement
As of 12/11/2006
EXHIBIT C
SHARE CLASS FEE ----------- ---- Class E 0.15% Class R2 0.25% Class R3 0.25% Class R4 0.25% Class Y 0.15% |
FEE CAP/FEE WAIVER AGREEMENT
AMENDED AND RESTATED
This Agreement, dated Oct. 1, 2005, as amended and restated November 12, 2008, is between each of the RiverSource investment companies (each a "Registrant"), on behalf of its underlying series funds, as listed in Schedule A (the term "FUND" is used to refer to either the Registrant or the series as context requires), and RiverSource Investments, LLC, in its capacity as investment manager of the Funds, Ameriprise Financial, Inc, in its capacity as administrator of the Funds, RiverSource Service Corporation, in its capacity as transfer agent of the Funds, and RiverSource Distributors, Inc. and Seligman Advisors, Inc. in their capacity as principal underwriters and distributors of the Funds (collectively referred to as the "SERVICE PROVIDERS"). Under this Agreement, the Service Providers hereby agree to waive all or a portion of the fees they earn and/or cap or reimburse expenses of each Fund incurred in connection with the services they provide to the Funds, in an amount equal to the amount by which the Fund's total operating expense, before giving effect to any applicable performance incentive adjustment (excluding foreign transaction taxes, income paid to brokers related to securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and interest expenses, transaction or brokerage fees, fees and expenses associated with investment in other pooled investment vehicles, including exchange traded funds, other affiliated and unaffiliated mutual funds, and certain other expenses as may be approved by the Funds' Board of Directors) exceed the thresholds set forth in the attached Schedule B ("FEE Caps") for any particular Fund, and the Fund hereby agrees to such Fee Caps.
1. FEE CAPS/FEE WAIVERS. Any allocation of fee waivers and expenses reimbursements among the Service Providers in order to meet the Fee Caps will be determined by the Service Providers.
2. TERMINATION. With respect to any Fund, this Agreement will terminate on the date listed in Schedule B unless modified by written agreement of the Fund and the Service Providers or terminated earlier at the sole discretion of the Fund's Board of Directors.
The Service Providers acknowledge that they (1) shall not be entitled to collect on, or make a claim for, waived fees at any time in the future, and (2) shall not be entitled to collect on, or make a claim for, reimbursed Fund expenses at any time in the future.
Fee Cap/Fee Waiver Agreement
IN WITNESS WHEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written.
Fee Cap/Fee Waiver Agreement
RIVERSOURCE BOND SERIES, INC.
RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
RIVERSOURCE DIMENSIONS SERIES, INC.
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
RIVERSOURCE EQUITY SERIES, INC.
RIVERSOURCE GLOBAL SERIES, INC.
RIVERSOURCE GOVERNMENT INCOME SERIES, INC.
RIVERSOURCE HIGH YIELD INCOME SERIES, INC.
RIVERSOURCE INCOME SERIES, INC.
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
RIVERSOURCE INTERNATIONAL SERIES, INC.
RIVERSOURCE INVESTMENT SERIES, INC.
RIVERSOURCE LARGE CAP SERIES, INC.
RIVERSOURCE MANAGERS SERIES, INC.
RIVERSOURCE MARKET ADVANTAGE SERIES, INC.
RIVERSOURCE MONEY MARKET SERIES, INC.
RIVERSOURCE SECTOR SERIES, INC.
RIVERSOURCE SELECTED SERIES, INC.
RIVERSOURCE SERIES TRUST
RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST
RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC.
RIVERSOURCE STRATEGY SERIES, INC.
RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC.
RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC.
RIVERSOURCE TAX-EXEMPT SERIES, INC.
RIVERSOURCE VARIABLE SERIES TRUST
Patrick T. Bannigan
President
AMERIPRISE FINANCIAL, INC. RIVERSOURCE INVESTMENTS, LLC. By: By: --------------------------------- ------------------------------------ William F. Truscott William F. Truscott President - U.S. Asset Management President and and Chief Investment Officer Chief Investment Officer RIVERSOURCE DISTRIBUTORS, INC. RIVERSOURCE SERVICE CORPORATION By: By: --------------------------------- ------------------------------------ William F. Truscott Lyn Kephart-Strong Vice President President |
SELIGMAN ADVISORS, INC.
Fee Cap/Fee Waiver Agreement
SCHEDULE A - FUNDS
Each Registrant is a Minnesota corporation, except RiverSource California Tax-Exempt Trust, RiverSource Series Trust, RiverSource Special Tax-Exempt Series Trust and RiverSource Variable Series Trust, which are Massachusetts business trusts.
RIVERSOURCE BOND SERIES, INC.
RiverSource Floating Rate Fund
RiverSource Income Opportunities Fund
RiverSource Inflation Protected Securities Fund
RiverSource Limited Duration Bond Fund
RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
RiverSource California Tax-Exempt Fund
RIVERSOURCE DIMENSIONS SERIES, INC.
RiverSource Disciplined Small and Mid Cap Equity Fund
RiverSource Disciplined Small Cap Value Fund
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
RiverSource Diversified Bond Fund
RIVERSOURCE EQUITY SERIES, INC.
RiverSource Mid Cap Growth Fund
RIVERSOURCE GLOBAL SERIES, INC.
RiverSource Absolute Return Currency and Income Fund
RiverSource Emerging Markets Bond Fund
RiverSource Global Bond Fund
RiverSource Global Technology Fund
Threadneedle Emerging Markets Fund
Threadneedle Global Equity Fund
Threadneedle Global Equity Income Fund
Threadneedle Global Extended Alpha Fund
RIVERSOURCE GOVERNMENT INCOME SERIES, INC.
RiverSource Short Duration U.S. Government Fund
RiverSource U.S. Government Mortgage Fund
RIVERSOURCE HIGH YIELD INCOME SERIES, INC.
RiverSource High Yield Bond Fund
RIVERSOURCE INCOME SERIES, INC.
RiverSource Income Builder Basic Income Fund
RiverSource Income Builder Enhanced Income Fund
RiverSource Income Builder Moderate Income Fund
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
RiverSource Partners International Select Growth Fund
RiverSource Partners International Select Value Fund
RiverSource Partners International Small Cap Fund
RIVERSOURCE INTERNATIONAL SERIES, INC.
RiverSource Disciplined International Equity Fund
Threadneedle European Equity Fund
Threadneedle International Opportunity Fund
RIVERSOURCE INVESTMENT SERIES, INC.
RiverSource Balanced Fund
RiverSource Disciplined Large Cap Growth Fund
RiverSource Disciplined Large Cap Value Fund
RiverSource Diversified Equity Income Fund
RiverSource Mid Cap Value Fund
RIVERSOURCE LARGE CAP SERIES, INC.
RiverSource Disciplined Equity Fund
RiverSource Growth Fund
RiverSource Large Cap Equity Fund
RiverSource Large Cap Value Fund
RIVERSOURCE MANAGERS SERIES, INC.
RiverSource Partners Aggressive Growth Fund
RiverSource Partners Fundamental Value Fund
RiverSource Partners Select Value Fund
RiverSource Partners Small Cap Equity Fund
RiverSource Partners Small Cap Value Fund
RIVERSOURCE MARKET ADVANTAGE SERIES, INC.
RiverSource Portfolio Builder Aggressive Fund
RiverSource Portfolio Builder Conservative Fund
RiverSource Portfolio Builder Moderate Aggressive Fund
RiverSource Portfolio Builder Moderate Conservative Fund
RiverSource Portfolio Builder Moderate Fund
RiverSource Portfolio Builder Total Equity Fund
RiverSource S&P 500 Index Fund
RiverSource Small Company Index Fund
RIVERSOURCE MONEY MARKET SERIES, INC.
RiverSource Cash Management Fund
RIVERSOURCE SECTOR SERIES, INC.
RiverSource Dividend Opportunity Fund
RiverSource Real Estate Fund
RIVERSOURCE SELECTED SERIES, INC.
RiverSource Precious Metals and Mining Fund
RIVERSOURCE SERIES TRUST
RiverSource 120/20 Contrarian Equity Fund
RiverSource 130/30 U.S. Equity Fund
RiverSource Retirement Plus 2010 Fund
RiverSource Retirement Plus 2015 Fund
RiverSource Retirement Plus 2020 Fund
RiverSource Retirement Plus 2025 Fund
RiverSource Retirement Plus 2030 Fund
RiverSource Retirement Plus 2035 Fund
RiverSource Retirement Plus 2040 Fund
RiverSource Retirement Plus 2045 Fund
RiverSource Recovery and Infrastructure Fund
RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST
RiverSource Minnesota Tax-Exempt Fund
RiverSource New York Tax-Exempt Fund
RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC.
RiverSource Strategic Allocation Fund
RiverSource Strategic Income Allocation Fund
RIVERSOURCE STRATEGY SERIES, INC.
RiverSource Equity Value Fund
RiverSource Partners Small Cap Growth Fund
RiverSource Small Cap Advantage Fund
Fee Cap/Fee Waiver Agreement
RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC.
RiverSource Tax-Exempt High Income Fund
RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC.
RiverSource Tax-Exempt Money Market Fund
RIVERSOURCE TAX-EXEMPT SERIES, INC.
RiverSource Intermediate Tax-Exempt Fund
RiverSource Tax-Exempt Bond Fund
RIVERSOURCE VARIABLE SERIES TRUST
Discipline Asset Allocation Portfolios - Aggressive
Discipline Asset Allocation Portfolios - Conservative
Discipline Asset Allocation Portfolios - Moderate
Discipline Asset Allocation Portfolios - Moderately Aggressive
Discipline Asset Allocation Portfolios - Moderately Conservative
RiverSource Partners Variable Portfolio - Fundamental Value Fund
RiverSource Partners Variable Portfolio - Select Value Fund
RiverSource Partners Variable Portfolio - Small Cap Value Fund
RiverSource Variable Portfolio - Core Equity Fund
RiverSource Variable Portfolio - Global Bond Fund
RiverSource Variable Portfolio - Global Inflation Protected Securities Fund
RiverSource Variable Portfolio - Income Opportunities Fund
RiverSource Variable Portfolio - Large Cap Value Fund
RiverSource Variable Portfolio - Mid Cap Value Fund
RiverSource Variable Portfolio - S&P 500 Index Fund
RiverSource Variable Portfolio - Small Cap Advantage Fund
Fee Cap/Fee Waiver Agreement
SCHEDULE B - FEE CAPS/FEE WAIVERS
Schedule B is separately maintained and updated from time to time to reflect current fee cap/fee waiver commitments, as they have been approved by the Funds' Board of Directors. Current fee cap/fee waiver commitments are reflected in Fund registration statements as applicable.
LICENSE AGREEMENT
AMENDED AND RESTATED
This Agreement, effective May 1, 2006, amended and restated November 12, 2008, by and between Ameriprise Financial, Inc. (hereinafter called "Licensor"), a corporation organized and existing under the laws of the State of Delaware, whose principal place of business is located at 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, and each of the Corporations and Trusts listed in Schedule A (individually called "Licensee," and collectively the "Licensees"), whose principal place of business is located at 901 Marquette Avenue South, Suite 2810, Minneapolis, Minnesota 55402-3268;
WHEREAS, Licensor owns and is the licensor of the trade names, trademarks and service marks ("Marks") and any corresponding registrations and applications thereof listed on Schedule B; and
WHEREAS, each Licensee wishes to use certain of Licensor's Marks;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises hereinafter set forth, the parties agree as follows:
1. GRANT OF LICENSE
Licensor grants to each Licensee a nonexclusive, nontransferable license to use the Marks, in its name, in the name of any series of its shares, and in connection with advertising or other communications regarding Licensees; and each Licensee accepts the license subject to Licensor's right to add to or delete from Schedule B upon thirty (30) days written notice, as well as the following terms and conditions.
2. LICENSORSHIP OF MARKS
Each Licensee acknowledges the licensorship of the Marks in Licensor, and agrees that it will do nothing inconsistent with such licensorship, and agrees to assist Licensor in recording this Agreement with appropriate government authorities. Each Licensee agrees that nothing in this license shall give Licensee any right, title or interest in the Marks other than the right to use the Marks in accordance with this license.
3. QUALITY STANDARDS
The Licensor and each Licensee agree that in the conduct of its respective business and activities and its rendering of services under such marks it shall adhere to the highest ethical and business standards in the mutual funds field and shall do nothing to bring disrepute to, nor to in any manner damage, the good trade name and marks listed on Schedule B.
4. FORM OF USE
Each Licensee agrees to use the Marks only in the form and manner and with appropriate legends as prescribed from time to time by Licensor, and not to use any other trademark or service mark in combination with any of the Marks without prior written approval of Licensor.
5. TERMINATION
Licensor shall have the right to terminate this Agreement on ninety (90) days written notice to a Licensee.
6. EFFECT OF TERMINATION
Upon termination of this Agreement, each Licensee will be entitled to continue using the Marks until it has obtained shareholder approval to change its corporate name. After that date, Licensee will cooperate with Licensor or its appointed agent to apply to the appropriate authorities to cancel recording of this Agreement from all government records, and to destroy or supplement all printed materials bearing any of the Marks. Licensee agrees that all rights in the Marks and the goodwill connected therewith shall remain the property of Licensor.
7. LIABILITY
All rights, obligations and liabilities of each Licensee shall be several and not joint.
8. INTERPRETATION OF AGREEMENT
It is agreed that this Agreement may be interpreted according to the laws of the State of Minnesota, United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
LICENSOR: LICENSEES: --------- ---------- Ameriprise Financial, Inc. RiverSource Bond Series, Inc. 200 Ameriprise Financial Center RiverSource California Tax-Exempt Trust Minneapolis, Minnesota 55474 RiverSource Dimensions Series, Inc. RiverSource Diversified Income Series, Inc. RiverSource Equity Series, Inc. RiverSource Global Series, Inc. RiverSource Government Income Series, Inc. By: RiverSource High Yield Income Series, Inc. --------------------------------- RiverSource Income Series, Inc. Kim M. Sharan RiverSource International Managers Series, Inc. Executive Vice President RiverSource International Series, Inc. Chief Marketing Officer RiverSource Investment Series, Inc. RiverSource Large Cap Series, Inc. RiverSource Managers Series, Inc. RiverSource Market Advantage Series, Inc. RiverSource Money Market Series, Inc. RiverSource Sector Series, Inc. RiverSource Selected Series, Inc. RiverSource Series Trust RiverSource Short Term Investments Series, Inc. RiverSource Special Tax-Exempt Series Trust RiverSource Stock Series, Inc. |
RiverSource Strategic Allocation Series, Inc. RiverSource Strategy Series, Inc. RiverSource Tax-Exempt Income Series, Inc. RiverSource Tax-Exempt Money Market Series, Inc. RiverSource Tax-Exempt Series, Inc. RiverSource Variable Portfolio - Income Series, Inc. RiverSource Variable Portfolio - Investment Series, Inc. RiverSource Variable Portfolio - Managed Series, Inc. RiverSource Variable Portfolio - Managers Series, Inc. RiverSource Variable Portfolio - Money Market Series, Inc. RiverSource Variable Portfolio - Select Series, Inc. RiverSource Variable Series Trust Seligman Capital Fund, Inc. Seligman Cash Management Fund, Inc. Seligman Common Stock Fund, Inc. Seligman Communications and Information Fund, Inc. Seligman Core Fixed Income Fund, Inc. Seligman Frontier Fund, Inc. Seligman Global Fund Series, Inc. Seligman Growth Fund, Inc. Seligman High Income Fund Series Seligman Income and Growth Fund, Inc. Seligman LaSalle Real Estate Fund Series, Inc. Seligman Municipal Fund Series, Inc. Seligman Municipal Series Trust Seligman New Jersey Municipal Fund, Inc. Seligman Pennsylvania Municipal Fund Series Seligman Portfolios, Inc. Seligman TargetHorizon ETF Portfolios, Inc. Seligman Asset Allocation Series, Inc. Seligman Value Fund Series, Inc. Seligman LaSalle International Real Estate Fund, Inc. Seligman Select Municipal Fund, Inc. Tri-Continental Corporation By: ------------------------------------ Patrick T. Bannigan President |
SCHEDULE A
FUND NAMES
RETAIL FUNDS:
RiverSource Bond Series, Inc.
RiverSource California Tax-Exempt Trust
RiverSource Dimensions Series, Inc.
RiverSource Diversified Income Series, Inc.
RiverSource Equity Series, Inc.
RiverSource Global Series, Inc.
RiverSource Government Income Series, Inc.
RiverSource High Yield Income Series, Inc.
RiverSource Income Series, Inc.
RiverSource International Managers Series, Inc.
RiverSource International Series, Inc.
RiverSource Investment Series, Inc.
RiverSource Large Cap Series, Inc.
RiverSource Managers Series, Inc.
RiverSource Market Advantage Series, Inc.
RiverSource Money Market Series, Inc.
RiverSource Sector Series, Inc.
RiverSource Selected Series, Inc.
RiverSource Series Trust
RiverSource Short Term Investments Series, Inc.
RiverSource Special Tax-Exempt Series Trust
RiverSource Stock Series, Inc.
RiverSource Strategic Allocation Series, Inc.
RiverSource Strategy Series, Inc.
RiverSource Tax-Exempt Income Series, Inc.
RiverSource Tax-Exempt Money Market Series, Inc.
RiverSource Tax-Exempt Series, Inc.
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Core Fixed Income Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Global Fund Series, Inc.
Seligman Growth Fund, Inc.
Seligman Income and Growth Fund, Inc.
Seligman LaSalle Real Estate Fund Series, Inc.
Seligman Municipal Series Trust
Seligman New Jersey Municipal Fund, Inc.
Seligman Pennsylvania Municipal Fund Series
Seligman TargetHorizon ETF Portfolios, Inc.
Seligman Asset Allocation Series, Inc.
Seligman Value Fund Series, Inc.
CLOSED-END FUNDS
Seligman LaSalle International Real Estate Fund, Inc.
Seligman Select Municipal Fund, Inc.
Tri-Continental Corporation
VARIABLE PORTFOLIO FUNDS:
RiverSource Variable Portfolio - Income Series, Inc.
RiverSource Variable Portfolio - Investment Series, Inc.
RiverSource Variable Portfolio - Managed Series, Inc.
RiverSource Variable Portfolio - Managers Series, Inc.
RiverSource Variable Portfolio - Money Market Series, Inc.
RiverSource Variable Portfolio - Select Series, Inc.
RiverSource Variable Series Trust
Seligman Portfolios, Inc.
SCHEDULE B
TRADEMARKS & SERVICE MARKS REGISTRATION NO. -------------------------- ---------------- RIVERSOURCE 3,216,429 RIVERSOURCE RETIREMENT PLUS 3,320,911 SELIGMAN 2,366,135 SELIGMAN TARGETFUND CORE 3,286,986 SELIGMAN TARGETFUND 2015 3,286,905 SELIGMAN TARGETFUND 2025 3,286,904 SELIGMAN TARGET HORIZON ETF PORTFOLIOS 3,286,903 SELIGMAN TIME HORIZON MATRIX 3,189,044 SELIGMAN HARVESTER 2,361,910 INVEST-A-CHECK 872,771 J&WS 1,242,324 |
January 27, 2009
RiverSource Series Trust
50606 Ameriprise Financial Center
Minneapolis, Minnesota 55474
Gentlemen:
I have examined the Agreement and Declaration of Trust and the By-Laws of RiverSource Series Trust (the Trust) and all necessary certificates, permits, minute books, documents and records of the Trust, and the applicable statutes of the Commonwealth of Massachusetts, and it is my opinion that the shares sold in accordance with applicable federal and state securities laws will be legally issued, fully paid, and nonassessable.
This opinion may be used in connection with the Post-Effective Amendment.
Sincerely,
/s/ Scott R. Plummer ------------------------------------- Scott R. Plummer General Counsel RiverSource Funds |
PLAN OF DISTRIBUTION AND
AMENDED AND RESTATED AGREEMENT OF DISTRIBUTION
The Plan of Distribution ("Plan") and the Agreement of Distribution ("Agreement") effective August 1, 2006, amended and restated November 12, 2008 (together "Plan and Agreement"), is by and between RiverSource Distributors, Inc. ("RiverSource Distributors" or the "Distributor"), a Delaware corporation, principal underwriter of the RiverSource Funds pursuant to a separate distribution agreement ("Distribution Agreement"), for distribution services to the Funds, and the Corporations and Trusts ("Registrants"), each acting separately on behalf of its underlying series (each a "fund" and collectively the "funds") and share classes, listed in Schedule A. The terms "Fund" or "Funds" are used to refer to either the Registrants or the underlying series as context requires.
The Plan and Agreement are separate and each has been adopted or approved by members of the Board of Directors or Trustees (the "Board") of the Funds who are not interested persons of the Funds and have no direct or indirect financial interest in the operation of the Plan and Agreement, or any related agreement ("independent Board members"), and all of the members of the Board, in person, at a meeting called for the purpose of voting on the Plan and Agreement.
1. Reimbursement Plan
1.1 The Funds will reimburse the Distributor for expenses incurred in connection with distributing the Funds' shares, providing personal service to shareholders, and maintaining shareholder accounts, as set forth in the fee schedule included in Schedule A.
2. Services Provided and Expenses Borne by Distributor
2.1. The Distributor shall provide distribution and underwriting services and shall bear all distribution related expenses to the extent specified in the Distribution Agreement.
2.2. Each Fund recognizes and agrees that the Distributor (or an affiliate of the Distributor) may compensate financial intermediaries, including brokers, dealers, banks, registered investment advisers, financial advisors, retirement plan administrators, third party administrators and any others having a selling, administration or similar agreement with the Distributor (a "financial intermediary") for providing services to record or beneficial owners of Fund shares or otherwise in connection with the distribution or servicing of Fund shares.
3. Distribution Fees and Service Fees
3.1 Service Fees. As partial consideration for the shareholder and account maintenance services performed by the Distributor directly or through a financial intermediary in the performance of its obligations under an agreement with the Distributor, the Funds shall reimburse the Distributor at a rate not to exceed the rates set forth in Schedule A. These services include assisting in establishing and maintaining shareholder accounts and records, assisting with purchase, redemption and exchange requests, arranging for bank wires, monitoring dividend payments from the Funds on behalf of shareholders, forwarding certain shareholder communications from Funds to shareholders, receiving and responding to inquiries and answering questions regarding the Funds, and aiding in maintaining the investment of shareholders in the Funds.
3.2. Distribution Fees. As partial consideration for the services performed as specified in the Distribution Agreement and expenses incurred in the performance of its obligations directly or, through a financial intermediary, under the Distribution Agreement, the Funds shall reimburse the Distributor at a rate not to exceed the rates set forth in Schedule A. Distribution fees reimburse the Distributor for its expenses incurred in connection with any activity that is principally intended to result in the sale of Fund shares. These expenses include payment of
RiverSource Distributors - 12b-1 Plan and Agreement
commissions (including pre-paid commissions) to financial intermediaries for the sale of Fund shares, including interest or imputed interest on pre-paid commissions, printing prospectuses and reports used for sales purposes, the preparation, printing and distribution of advertising and sales literature, personnel, travel, office expense and equipment, and other distribution-related expenses.
3.3. Reimbursement. Expenses incurred as a result of services provided under Sections 3.1 and 3.2, may be carried forward as unreimbursed expenses and shall continue to be eligible for reimbursement subject to termination of the Agreement or the Plan as provided under Section 8.1.
3.4. Notwithstanding any other provision of this Plan and Agreement, the Funds are not obligated and are in no way liable to make any payment to any person or entity other than directly to the Distributor.
4. Reports
4.1 The Distributor agrees to monitor implementation of the Plan and the level and quality of services it provides.
4.2 The Distributor agrees to provide at least quarterly an analysis of expenses under this Agreement, including any payments to financial intermediaries, and to meet with representatives of the Funds as reasonably requested to provide additional information.
5. Contingent Deferred Sales Charges
5.1. For Funds with Class B shares, for each purchase of Class B shares, the Class B shares will be converted to Class A shares in the ninth year of ownership.
5.2. For Funds with Class B shares, the Funds understand that if a shareholder redeems Class B shares before they are converted to Class A shares, the Distributor will impose a sales charge directly on the redemption proceeds to cover those distribution expenses (including pre-paid commissions) it has previously incurred on the sale of those shares.
5.3. For Funds with Class C shares, the Funds understand that if a shareholder redeems Class C shares in the first year of ownership, the Distributor will impose a sales charge directly on the redemption proceeds to cover those distribution expenses (including pre-paid commissions) it has previously incurred on the sale of those shares.
6. Duration of the Plan and Agreement
6.1. The Plan and Agreement shall continue in effect for a period of more than one year provided it is approved at least annually in the manner provided in the Investment Company Act of 1940 (the "1940 Act").
7. Amendments to the Plan and Agreement
7.1. Neither the Plan nor the Agreement may be amended to increase materially the amount that may be paid by the Funds without the approval of at least a majority of the outstanding shares of the relevant class. Neither the Plan nor the Agreement may be amended in any other material respect except with the approval of a majority of independent Board members. Amendments required to conform the Plan or the Agreement to changes in rule 12b-1 or to other changes in
RiverSource Distributors - 12b-1 Plan and Agreement
the 1940 Act or the rules and regulations under the 1940 Act are not deemed to be material amendments.
8. Termination
8.1. This Agreement may be terminated as to any class of the Funds at any time without payment of any penalty by a vote of a majority of the independent Board members, or by vote of a majority of the outstanding shares of the relevant class, or by the Distributor. The Plan shall continue until terminated by action of the independent Board members, and the related Agreement will terminate automatically in the event of its assignment as that term is defined in the 1940 Act.
9. Severability
9.1. The provisions of this Plan are severable with respect to each class of shares offered by a Fund and with respect to each Fund.
10. Massachusetts Business Trusts.
10.1. For each Fund that is organized as a Massachusetts Business Trust, a copy of the Declaration of Trust, together with all amendments, is on file in the office of the Secretary of State of the Commonwealth of Massachusetts. The execution and delivery of this Agreement has been authorized by the Trustees and the Agreement has been signed by an authorized officer of the Fund. It is expressly agreed that the obligations of the Fund under this Agreement shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Fund, personally, but bind only the assets and property of the Fund, as provided in the Declaration of Trust.
11. Applicable Law
11.1. This Plan and Agreement shall be governed by the laws of the State of Minnesota.
RiverSource Distributors - 12b-1 Plan and Agreement
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written.
RIVERSOURCE BOND SERIES, INC.
RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
RIVERSOURCE DIMENSIONS SERIES, INC.
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
RIVERSOURCE EQUITY SERIES, INC.
RIVERSOURCE GLOBAL SERIES, INC.
RIVERSOURCE GOVERNMENT INCOME SERIES, INC.
RIVERSOURCE HIGH YIELD INCOME SERIES, INC.
RIVERSOURCE INCOME SERIES, INC.
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
RIVERSOURCE INTERNATIONAL SERIES, INC.
RIVERSOURCE INVESTMENT SERIES, INC.
RIVERSOURCE LARGE CAP SERIES, INC.
RIVERSOURCE MANAGERS SERIES, INC.
RIVERSOURCE MARKET ADVANTAGE SERIES, INC.
RIVERSOURCE MONEY MARKET SERIES, INC.
RIVERSOURCE SECTOR SERIES, INC.
RIVERSOURCE SELECTED SERIES, INC.
RIVERSOURCE SERIES TRUST
RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST
RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC.
RIVERSOURCE STRATEGY SERIES, INC.
RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC.
RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC.
RIVERSOURCE TAX-EXEMPT SERIES, INC.
RIVERSOURCE DISTRIBUTORS, INC.
RiverSource Distributors - 12b-1 Plan and Agreement
SCHEDULE A
FOR FUNDS OTHER THAN MONEY MARKET FUNDS:
Each Registrant is a Minnesota corporation except RiverSource California Tax-Exempt Trust, RiverSource Special Tax-Exempt Series Trust, and RiverSource Series Trust, which are Massachusetts business trusts:
CLASSES --------------------------------------- FUNDS A B C D R2 R3 W ----- --- --- --- --- --- --- --- RiverSource Bond Series, Inc. RiverSource Floating Rate A B C -- -- -- W RiverSource Income Opportunities A B C -- -- -- -- RiverSource Inflation Protected Securities A B C -- -- -- W RiverSource Limited Duration Bond A B C -- -- -- W RiverSource California Tax-Exempt Trust RiverSource California Tax-Exempt A B C -- -- -- -- RiverSource Dimensions Series, Inc. RiverSource Disciplined Small and Mid Cap Equity A B C -- -- -- W RiverSource Disciplined Small Cap Value A B C -- R2 R3 -- RiverSource Diversified Income Series, Inc. RiverSource Diversified Bond A B C -- R2 R3 W RiverSource Equity Series, Inc. RiverSource Mid Cap Growth A B C -- -- -- -- RiverSource Global Series, Inc. RiverSource Absolute Return Currency and Income A B C -- -- -- W RiverSource Emerging Markets Bond A B C -- -- -- W RiverSource Global Bond A B C -- -- -- W RiverSource Global Technology A B C -- -- -- -- Threadneedle Emerging Markets A B C -- -- -- -- Threadneedle Global Equity A B C -- R2 R3 W Threadneedle Global Equity Income A B C -- R2 R3 -- Threadneedle Global Extended Alpha A B C -- R2 R3 -- RiverSource Government Income Series, Inc. RiverSource Short Duration U.S. Government A B C -- -- -- W RiverSource U.S. Government Mortgage A B C -- -- -- -- RiverSource High Yield Income Series, Inc. RiverSource High Yield Bond A B C -- R2 R3 W RiverSource Income Series, Inc. RiverSource Income Builder Basic Income A B C -- -- -- -- RiverSource Income Builder Moderate Income A B C -- -- -- -- RiverSource Income Builder Enhanced Income A B C -- -- -- -- RiverSource International Series, Inc. RiverSource Disciplined International Equity A B C -- R2 R3 W Threadneedle European Equity A B C -- -- -- -- Threadneedle International Opportunity A B C -- R2 R3 -- RiverSource International Managers Series, Inc. RiverSource Partners International Select Growth A B C -- -- -- -- RiverSource Partners International Select Value A B C -- -- -- -- RiverSource Partners International Small Cap A B C -- -- -- -- RiverSource Investment Series, Inc. RiverSource Balanced A B C -- -- -- -- RiverSource Disciplined Large Cap Growth A B C -- R2 R3 W RiverSource Disciplined Large Cap Value A B C -- R2 R3 W RiverSource Diversified Equity Income A B C -- R2 R3 W |
RiverSource Distributors - 12b-1 Plan and Agreement
CLASSES --------------------------------------- FUNDS A B C D R2 R3 W ----- --- --- --- --- --- --- --- RiverSource Mid Cap Value A B C -- R2 R3 W RiverSource Large Cap Series, Inc. RiverSource Disciplined Equity A B C -- R2 R3 W RiverSource Growth A B C -- R2 R3 W RiverSource Large Cap Equity A B C -- R2 R3 -- RiverSource Large Cap Value A B C -- R2 R3 -- RiverSource Managers Series, Inc. RiverSource Partners Aggressive Growth A B C -- R2 R3 -- RiverSource Partners Fundamental Value A B C -- -- -- -- RiverSource Partners Select Value A B C -- -- -- -- RiverSource Partners Small Cap Equity A B C -- -- RiverSource Partners Small Cap Value A B C -- -- RiverSource Market Advantage Series, Inc. RiverSource Portfolio Builder Conservative A B C -- -- -- -- RiverSource Portfolio Builder Moderate Conservative A B C -- -- -- -- RiverSource Portfolio Builder Moderate A B C -- -- -- -- RiverSource Portfolio Builder Moderate Aggressive A B C -- -- -- -- RiverSource Portfolio Builder Aggressive A B C -- -- -- -- RiverSource Portfolio Builder Total Equity A B C -- -- -- -- RiverSource S&P 500 Index -- -- -- D -- -- -- RiverSource Small Company Index A B -- -- -- -- -- RiverSource Sector Series, Inc. RiverSource Dividend Opportunity A B C -- R2 R3 W RiverSource Real Estate A B C -- -- -- W RiverSource Selected Series, Inc. RiverSource Precious Metals and Mining A B C -- -- -- -- RiverSource Series Trust RiverSource 120/20 Contrarian Equity A B C -- -- -- -- RiverSource 130/30 U.S. Equity A B C -- -- -- -- RiverSource Retirement Plus 2010 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2015 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2020 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2025 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2030 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2035 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2040 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2045 A -- -- -- R2 R3 -- RiverSource Recovery and Infrastructure A B C -- R2 R3 -- RiverSource Special Tax-Exempt Series Trust RiverSource Minnesota Tax-Exempt A B C -- -- -- -- RiverSource New York Tax-Exempt A B C -- -- -- -- RiverSource Strategy Series, Inc. RiverSource Equity Value A B C -- R2 R3 W RiverSource Partners Small Cap Growth A B C -- R2 R3 -- RiverSource Small Cap Advantage A B C -- R2 R3 -- RiverSource Strategic Allocation Series, Inc. RiverSource Strategic Allocation A B C -- R2 R3 -- RiverSource Strategic Income Allocation A B C -- R2 R3 -- RiverSource Tax-Exempt Income Series, Inc. RiverSource Tax-Exempt High Income A B C -- -- -- -- RiverSource Tax-Exempt Series, Inc. RiverSource Intermediate Tax-Exempt A B C -- -- -- -- |
RiverSource Distributors - 12b-1 Plan and Agreement
CLASSES --------------------------------------- FUNDS A B C D R2 R3 W ----- --- --- --- --- --- --- --- RiverSource Tax-Exempt Bond A B C -- -- -- -- |
FEE SCHEDULE
The fee maximum for services under this Plan and Agreement shall be the lesser of the amount of expenses eligible for reimbursement (including any unreimbursed expenses) or a rate equal on an annual basis to the following percentage of the average daily net assets of the Fund attributable to the applicable class:
CLASS FEE ----- ---- A 0.25% B 1.00% C 1.00% D 0.25% R2 0.50% R3 0.25% W 0.25% |
For Class A, Class D and Class W shares, the fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
For Class B and Class C shares, the maximum fee under this Plan and Agreement
will be equal on an annual basis to 1.00% of the average daily net assets of the
Funds attributable to Class B shares and Class C share, respectively. Of that
amount, up to 0.75% shall be reimbursed for distribution expenses. The fee shall
be paid to the Distributor in cash within five (5) business days after the last
day of each month. Up to an additional 0.25% shall be reimbursed for shareholder
servicing expenses. The fee shall be paid to the Distributor in cash within five
(5) business days after the last day of each quarter.
For Class R2 and Class R3, the maximum fee under this Plan and Agreement, which shall be reimbursed for distribution expenses, will be equal on an annual basis of 0.50% of the average daily net assets of the Funds attributable to Class R2 shares and 0.25% of the average daily net assets of the Funds attributable to Class R3 shares. Of that amount, for Class R2, up to 0.25% may be reimbursed for shareholder servicing expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
RiverSource Distributors - 12b-1 Plan and Agreement
FOR MONEY MARKET FUNDS:
Each Registrant is a Minnesota Corporation:
CLASSES --------------------------- FUNDS A B C S W ----- --- --- --- --- --- RiverSource Money Market Series, Inc. RiverSource Cash Management A B C -- W RiverSource Tax-Exempt Money Market Series, Inc. RiverSource Tax-Exempt Money Market A -- -- -- -- |
FEE SCHEDULE
The maximum fee for services under this Plan and Agreement shall be the lesser of the amount of expenses eligible for reimbursement (including any unreimbursed expenses) or a rate equal on an annual basis to the following percentage of the average daily net assets of the Fund attributable to the applicable class.
CLASS FEE ----- ---- A 0.10% B 0.85% C 0.75% W 0.10% |
For Class A and Class W shares, the fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
For Class B shares, the maximum fee under this Plan and Agreement will be equal on an annual basis to 0.85% of the average daily net assets of the Fund attributable to Class B shares. Of that amount, up to 0.75% shall be reimbursed for distribution expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each month. Up to an additional 0.10% shall be reimbursed for shareholder servicing expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
For Class C shares, the maximum fee under this Agreement will be equal on an annual basis to 0.75% of the average daily net assets of the Funds attributable to Class C shares for distribution expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each month.
PLAN OF DISTRIBUTION AND
AMENDED AND RESTATED AGREEMENT OF DISTRIBUTION
The Plan of Distribution ("Plan") and the Agreement of Distribution ("Agreement") effective November 7, 2008, amended and restated November 12, 2008 (together "Plan and Agreement"), is by and between Seligman Advisors, Inc. ("Seligman Advisors" or the "Distributor"), a Delaware corporation, principal underwriter of the RiverSource Funds pursuant to a separate distribution agreement ("Distribution Agreement"), for distribution services to the Funds, and the Corporations and Trusts ("Registrants"), each acting separately on behalf of its underlying series (each a "fund" and collectively the "funds") and share classes, listed in Schedule A. The terms "Fund" or "Funds" are used to refer to either the Registrants or the underlying series as context requires.
The Plan and Agreement are separate and each has been adopted or approved by members of the Board of Directors or Trustees (the "Board") of the Funds who are not interested persons of the Funds and have no direct or indirect financial interest in the operation of the Plan and Agreement, or any related agreement ("independent Board members"), and all of the members of the Board, in person, at a meeting called for the purpose of voting on the Plan and Agreement.
1. Reimbursement Plan
1.1 The Funds will reimburse the Distributor for expenses incurred in connection with distributing the Funds' shares, providing personal service to shareholders, and maintaining shareholder accounts, as set forth in the fee schedule included in Schedule A.
2. Services Provided and Expenses Borne by Distributor
2.1. The Distributor shall provide distribution and underwriting services and shall bear all distribution related expenses to the extent specified in the Distribution Agreement.
2.2. Each Fund recognizes and agrees that the Distributor (or an affiliate of the Distributor) may compensate financial intermediaries, including brokers, dealers, banks, registered investment advisers, financial advisors, retirement plan administrators, third party administrators and any others having a selling, administration or similar agreement with the Distributor (a "financial intermediary") for providing services to record or beneficial owners of Fund shares or otherwise in connection with the distribution or servicing of Fund shares.
3. Distribution Fees and Service Fees
3.1 Service Fees. As partial consideration for the shareholder and account maintenance services performed by the Distributor directly or through a financial intermediary in the performance of its obligations under an agreement with the Distributor, the Funds shall reimburse the Distributor at a rate not to exceed the rates set forth in Schedule A. These services include assisting in establishing and maintaining shareholder accounts and records, assisting with purchase, redemption and exchange requests, arranging for bank wires, monitoring dividend payments from the Funds on behalf of shareholders, forwarding certain shareholder communications from Funds to shareholders, receiving and responding to inquiries and answering questions regarding the Funds, and aiding in maintaining the investment of shareholders in the Funds.
3.2. Distribution Fees. As partial consideration for the services performed as specified in the Distribution Agreement and expenses incurred in the performance of its obligations directly or, through a financial intermediary, under the Distribution Agreement, the Funds shall reimburse the Distributor at a rate not to exceed the rates set forth in Schedule A. Distribution fees reimburse the Distributor for its expenses incurred in connection with any activity that is principally intended to result in the sale of Fund shares. These expenses include payment of
Seligman Advisors - 12b-1 Plan and Agreement
commissions (including pre-paid commissions) to financial intermediaries for the sale of Fund shares, including interest or imputed interest on pre-paid commissions, printing prospectuses and reports used for sales purposes, the preparation, printing and distribution of advertising and sales literature, personnel, travel, office expense and equipment, and other distribution-related expenses.
3.3. Reimbursement. Expenses incurred as a result of services provided under Sections 3.1 and 3.2, may be carried forward as unreimbursed expenses and shall continue to be eligible for reimbursement subject to termination of the Agreement or the Plan as provided under Section 8.1.
3.4. Notwithstanding any other provision of this Plan and Agreement, the Funds are not obligated and are in no way liable to make any payment to any person or entity other than directly to the Distributor.
4. Reports
4.1 The Distributor agrees to monitor implementation of the Plan and the level and quality of services it provides.
4.2 The Distributor agrees to provide at least quarterly an analysis of expenses under this Agreement, including any payments to financial intermediaries, and to meet with representatives of the Funds as reasonably requested to provide additional information.
5. Contingent Deferred Sales Charges
5.1. For Funds with Class B shares, for each purchase of Class B shares, the Class B shares will be converted to Class A shares in the ninth year of ownership.
5.2. For Funds with Class B shares, the Funds understand that if a shareholder redeems Class B shares before they are converted to Class A shares, the Distributor will impose a sales charge directly on the redemption proceeds to cover those distribution expenses (including pre-paid commissions) it has previously incurred on the sale of those shares.
5.3. For Funds with Class C shares, the Funds understand that if a shareholder redeems Class C shares in the first year of ownership, the Distributor will impose a sales charge directly on the redemption proceeds to cover those distribution expenses (including pre-paid commissions) it has previously incurred on the sale of those shares.
6. Duration of the Plan and Agreement
6.1. The Plan and Agreement shall continue in effect for a period of more than one year provided it is approved at least annually in the manner provided in the Investment Company Act of 1940 (the "1940 Act").
7. Amendments to the Plan and Agreement
7.1. Neither the Plan nor the Agreement may be amended to increase materially the amount that may be paid by the Funds without the approval of at least a majority of the outstanding shares of the relevant class. Neither the Plan nor the Agreement may be amended in any other material respect except with the approval of a majority of independent Board members. Amendments required to conform the Plan or the Agreement to changes in rule 12b-1 or to other changes in
Seligman Advisors - 12b-1 Plan and Agreement
the 1940 Act or the rules and regulations under the 1940 Act are not deemed to be material amendments.
8. Termination
8.1. This Agreement may be terminated as to any class of the Funds at any time without payment of any penalty by a vote of a majority of the independent Board members, or by vote of a majority of the outstanding shares of the relevant class, or by the Distributor. The Plan shall continue until terminated by action of the independent Board members, and the related Agreement will terminate automatically in the event of its assignment as that term is defined in the 1940 Act.
9. Severability
9.1. The provisions of this Plan are severable with respect to each class of shares offered by a Fund and with respect to each Fund.
10. Massachusetts Business Trusts.
10.1. For each Fund that is organized as a Massachusetts Business Trust, a copy of the Declaration of Trust, together with all amendments, is on file in the office of the Secretary of State of the Commonwealth of Massachusetts. The execution and delivery of this Agreement has been authorized by the Trustees and the Agreement has been signed by an authorized officer of the Fund. It is expressly agreed that the obligations of the Fund under this Agreement shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Fund, personally, but bind only the assets and property of the Fund, as provided in the Declaration of Trust.
11. Applicable Law
11.1. This Plan and Agreement shall be governed by the laws of the State of Minnesota.
Seligman Advisors - 12b-1 Plan and Agreement
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written.
RIVERSOURCE BOND SERIES, INC.
RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
RIVERSOURCE DIMENSIONS SERIES, INC.
RIVERSOURCE DIVERSIFIED INCOME SERIES, INC.
RIVERSOURCE EQUITY SERIES, INC.
RIVERSOURCE GLOBAL SERIES, INC.
RIVERSOURCE GOVERNMENT INCOME SERIES, INC.
RIVERSOURCE HIGH YIELD INCOME SERIES, INC.
RIVERSOURCE INCOME SERIES, INC.
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
RIVERSOURCE INTERNATIONAL SERIES, INC.
RIVERSOURCE INVESTMENT SERIES, INC.
RIVERSOURCE LARGE CAP SERIES, INC.
RIVERSOURCE MANAGERS SERIES, INC.
RIVERSOURCE MARKET ADVANTAGE SERIES, INC.
RIVERSOURCE MONEY MARKET SERIES, INC.
RIVERSOURCE SECTOR SERIES, INC.
RIVERSOURCE SELECTED SERIES, INC.
RIVERSOURCE SERIES TRUST
RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST
RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC.
RIVERSOURCE STRATEGY SERIES, INC.
RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC.
RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC.
RIVERSOURCE TAX-EXEMPT SERIES, INC.
SELIGMAN ADVISORS, INC.
Seligman Advisors - 12b-1 Plan and Agreement
SCHEDULE A
FOR FUNDS OTHER THAN MONEY MARKET FUNDS:
Each Registrant is a Minnesota corporation except RiverSource California Tax-Exempt Trust, RiverSource Special Tax-Exempt Series Trust, and RiverSource Series Trust, which are Massachusetts business trusts:
CLASSES --------------------------------------- FUNDS A B C D R2 R3 W ----- --- --- --- --- --- --- --- RiverSource Bond Series, Inc. RiverSource Floating Rate A B C -- -- -- W RiverSource Income Opportunities A B C -- -- -- -- RiverSource Inflation Protected Securities A B C -- -- -- W RiverSource Limited Duration Bond A B C -- -- -- W RiverSource California Tax-Exempt Trust RiverSource California Tax-Exempt A B C -- -- -- -- RiverSource Dimensions Series, Inc. RiverSource Disciplined Small and Mid Cap Equity A B C -- -- -- W RiverSource Disciplined Small Cap Value A B C -- R2 R3 -- RiverSource Diversified Income Series, Inc. RiverSource Diversified Bond A B C -- R2 R3 W RiverSource Equity Series, Inc. RiverSource Mid Cap Growth A B C -- -- -- -- RiverSource Global Series, Inc. RiverSource Absolute Return Currency and Income A B C -- -- -- W RiverSource Emerging Markets Bond A B C -- -- -- W RiverSource Global Bond A B C -- -- -- W RiverSource Global Technology A B C -- -- -- -- Threadneedle Emerging Markets A B C -- -- -- -- Threadneedle Global Equity A B C -- R2 R3 W Threadneedle Global Equity Income A B C -- R2 R3 -- Threadneedle Global Extended Alpha A B C -- R2 R3 -- RiverSource Government Income Series, Inc. RiverSource Short Duration U.S. Government A B C -- -- -- W RiverSource U.S. Government Mortgage A B C -- -- -- -- RiverSource High Yield Income Series, Inc. RiverSource High Yield Bond A B C -- R2 R3 W RiverSource Income Series, Inc. RiverSource Income Builder Basic Income A B C -- -- -- -- RiverSource Income Builder Moderate Income A B C -- -- -- -- RiverSource Income Builder Enhanced Income A B C -- -- -- -- RiverSource International Series, Inc. RiverSource Disciplined International Equity A B C -- R2 R3 W Threadneedle European Equity A B C -- -- -- -- Threadneedle International Opportunity A B C -- R2 R3 -- RiverSource International Managers Series, Inc. RiverSource Partners International Select Growth A B C -- -- -- -- RiverSource Partners International Select Value A B C -- -- -- -- RiverSource Partners International Small Cap A B C -- -- -- -- RiverSource Investment Series, Inc. RiverSource Balanced A B C -- -- -- -- RiverSource Disciplined Large Cap Growth A B C -- R2 R3 W RiverSource Disciplined Large Cap Value A B C -- R2 R3 W RiverSource Diversified Equity Income A B C -- R2 R3 W |
Seligman Advisors - 12b-1 Plan and Agreement
CLASSES --------------------------------------- FUNDS A B C D R2 R3 W ----- --- --- --- --- --- --- --- RiverSource Mid Cap Value A B C -- R2 R3 W RiverSource Large Cap Series, Inc. RiverSource Disciplined Equity A B C -- R2 R3 W RiverSource Growth A B C -- R2 R3 W RiverSource Large Cap Equity A B C -- R2 R3 -- RiverSource Large Cap Value A B C -- R2 R3 -- RiverSource Managers Series, Inc. RiverSource Partners Aggressive Growth A B C -- R2 R3 -- RiverSource Partners Fundamental Value A B C -- -- -- -- RiverSource Partners Select Value A B C -- -- -- -- RiverSource Partners Small Cap Equity A B C -- -- RiverSource Partners Small Cap Value A B C -- -- RiverSource Market Advantage Series, Inc. RiverSource Portfolio Builder Conservative A B C -- -- -- -- RiverSource Portfolio Builder Moderate Conservative A B C -- -- -- -- RiverSource Portfolio Builder Moderate A B C -- -- -- -- RiverSource Portfolio Builder Moderate Aggressive A B C -- -- -- -- RiverSource Portfolio Builder Aggressive A B C -- -- -- -- RiverSource Portfolio Builder Total Equity A B C -- -- -- -- RiverSource S&P 500 Index -- -- -- D -- -- -- RiverSource Small Company Index A B -- -- -- -- -- RiverSource Sector Series, Inc. RiverSource Dividend Opportunity A B C -- R2 R3 W RiverSource Real Estate A B C -- -- -- W RiverSource Selected Series, Inc. RiverSource Precious Metals and Mining A B C -- -- -- -- RiverSource Series Trust RiverSource 120/20 Contrarian Equity A B C -- -- -- -- RiverSource 130/30 U.S. Equity A B C -- -- -- -- RiverSource Retirement Plus 2010 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2015 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2020 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2025 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2030 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2035 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2040 A -- -- -- R2 R3 -- RiverSource Retirement Plus 2045 -- -- -- R2 R3 -- RiverSource Recovery and Infrastructure A B C -- R2 R3 -- RiverSource Special Tax-Exempt Series Trust RiverSource Minnesota Tax-Exempt A B C -- -- -- -- RiverSource New York Tax-Exempt A B C -- -- -- -- RiverSource Strategy Series, Inc. RiverSource Equity Value A B C -- R2 R3 W RiverSource Partners Small Cap Growth A B C -- R2 R3 -- RiverSource Small Cap Advantage A B C -- R2 R3 -- RiverSource Strategic Allocation Series, Inc. RiverSource Strategic Allocation A B C -- R2 R3 -- RiverSource Strategic Income Allocation A B C -- R2 R3 -- RiverSource Tax-Exempt Income Series, Inc. RiverSource Tax-Exempt High Income A B C -- -- -- -- RiverSource Tax-Exempt Series, Inc. RiverSource Intermediate Tax-Exempt A B C -- -- -- -- |
Seligman Advisors - 12b-1 Plan and Agreement
CLASSES --------------------------------------- FUNDS A B C D R2 R3 W ----- --- --- --- --- --- --- --- RiverSource Tax-Exempt Bond A B C -- -- -- -- |
FEE SCHEDULE
The fee maximum for services under this Plan and Agreement shall be the lesser of the amount of expenses eligible for reimbursement (including any unreimbursed expenses) or a rate equal on an annual basis to the following percentage of the average daily net assets of the Fund attributable to the applicable class:
CLASS FEE ----- ----- A 0.25% B 1.00% C 1.00% D 0.25% R2 0.50% R3 0.25% W 0.25% |
For Class A, Class D and Class W shares, the fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
For Class B and Class C shares, the maximum fee under this Plan and Agreement
will be equal on an annual basis to 1.00% of the average daily net assets of the
Funds attributable to Class B shares and Class C share, respectively. Of that
amount, up to 0.75% shall be reimbursed for distribution expenses. The fee shall
be paid to the Distributor in cash within five (5) business days after the last
day of each month. Up to an additional 0.25% shall be reimbursed for shareholder
servicing expenses. The fee shall be paid to the Distributor in cash within five
(5) business days after the last day of each quarter.
For Class R2 and Class R3, the maximum fee under this Plan and Agreement, which shall be reimbursed for distribution expenses, will be equal on an annual basis of 0.50% of the average daily net assets of the Funds attributable to Class R2 shares and 0.25% of the average daily net assets of the Funds attributable to Class R3 shares. Of that amount, for Class R2, up to 0.25% may be reimbursed for shareholder servicing expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
Seligman Advisors - 12b-1 Plan and Agreement
FOR MONEY MARKET FUNDS:
Each Registrant is a Minnesota Corporation:
CLASSES --------------------- FUNDS A B C W ----- --- --- --- --- RiverSource Money Market Series, Inc. RiverSource Cash Management A B C W RiverSource Tax-Exempt Money Market Series, Inc. RiverSource Tax-Exempt Money Market A -- -- -- |
FEE SCHEDULE
The maximum fee for services under this Plan and Agreement shall be the lesser of the amount of expenses eligible for reimbursement (including any unreimbursed expenses) or a rate equal on an annual basis to the following percentage of the average daily net assets of the Fund attributable to the applicable class.
CLASS FEE ----- ----- A 0.10% B 0.85% C 0.75% W 0.10% |
For Class A and Class W shares, the fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
For Class B shares, the maximum fee under this Plan and Agreement will be equal on an annual basis to 0.85% of the average daily net assets of the Fund attributable to Class B shares. Of that amount, up to 0.75% shall be reimbursed for distribution expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each month. Up to an additional 0.10% shall be reimbursed for shareholder servicing expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each quarter.
For Class C shares, the maximum fee under this Agreement will be equal on an annual basis to 0.75% of the average daily net assets of the Funds attributable to Class C shares for distribution expenses. The fee shall be paid to the Distributor in cash within five (5) business days after the last day of each month.
PLAN UNDER SECTION 18F-3(D)
AMENDED AND RESTATED AS OF NOVEMBER 12, 2008
Filed pursuant to Item 23(n) of Form N-1A
SECTION I. FOR THE FUNDS LISTED IN SCHEDULE I
(THOSE WITH SOME COMBINATION OF CLASSES A, B, C, I, R2, R3, R4, R5, W AND Y)
SEPARATE ARRANGEMENTS
Each class of shares will represent interests in the same portfolio of
investments of the Fund and be identical except those differences that relate to
(a) the impact of the disproportionate payments made under the Rule 12b-1 plan;
(b) the impact of the disproportionate payments made because of service fees;
(c) the differences in class expenses including transfer agent fees and any
other expense determined by the board to be a class expense; and (d) the
difference in voting rights on the 12b-1 plan, exchange privileges and class
designations. The current classes of shares are as follows:
SALES CHARGES
FIXED INCOME* AND ALTERNATIVE MONEY EQUITY FUNDS FUNDS FIXED INCOME* MARKET FUNDS --------------------------------- --------------------------------- ----------------------------- ---------------- Class A 5.75% initial sales charge waived 4.75% initial sales charge waived 3.00% initial sales charge No sales charge. or reduced for certain purchases. or reduced for certain purchases. waiver or reduced for certain purchases. Class B Contingent deferred sales charge ranging from 5% down to 0% after six years. Class C Contingent deferred sales charge of 1% on redemptions of shares held for one year or less. Class I No sales charge Class R2 No sales charge Class R3 No sales charge Class R4 No sales charge Class R5 No sales charge Class W No sales charge Class Y No sales charge |
* The following fixed income funds have a 3.00% Class A initial sales charge:
Absolute Return Currency Income, Floating Rate Inflation Protected
Securities, Intermediate Tax-Exempt, Limited Duration Bond and Short
Duration U.S. Government.
EXPENSE ALLOCATION PROCEDURES
Ameriprise Financial, Inc. ("Ameriprise Financial"), as the Fund's administrator, on a daily basis shall allocate the income, expenses, and realized and unrealized gains and losses of the Fund on the basis of the relative percentage of net assets of each class of shares, except class specific expenses for plan administration services fees, 12b-1 fees, transfer agent fees and any other class specific fees, which shall be paid directly by the applicable class as follows:
PLAN ADMINISTRATION SERVICES FEE:
Class A None Class B None Class C None Class I None Class R2 25 basis points Class R3 25 basis points Class R4 25 basis points Class R5 None Class Y 15 basis points |
12B-1 FEE:
FIXED INCOME AND MONEY MARKET EQUITY FUNDS ALTERNATIVE FUNDS FUNDS ---------------- ----------------- --------------- Class A 25 basis points 25 basis points 10 basis points Class B 100 basis points 100 basis points 85 basis points Class C 100 basis points 100 basis points 75 basis points Class I None None None Class R2 50 basis points 50 basis points None Class R3 25 basis points 25 basis points None Class R4 None None None Class R5 None None None Class W 25 basis points 25 basis points 10 basis points Class Y None None None |
TRANSFER AGENT FEE:
The annual fee is as follows:
FIXED INCOME AND EQUITY FUNDS ALTERNATIVE FUNDS MONEY MARKET FUNDS -------------- ----------------- ------------------ Class A $19.50/account $20.50/account $22.00/account Class B $20.50/account $21.50/account $23.00/account Class C $20.00/account $21.00/account $22.50/account Class I None Class R2 5 basis points of average daily net assets Class R3 5 basis points of average daily net assets Class R4 5 basis points of average daily net assets Class R5 5 basis points of average daily net assets Class W 20 basis points of average daily net assets Class Y 5 basis points of average daily net assets |
The allocation of transfer agent fees is made as follows:
FOR CLASSES A, B, AND C
1. A base fee, equal to the per account fee assessed to Class A, is multiplied by the total number of accounts in the three classes (A, B, and C). For example, the base fee for an equity fund is $19.50 times the total number of accounts in the three classes (A, B, and C). The total base fee for the three classes (A, B, and C) is then allocated between the three classes (A, B, and C) based on the average daily net assets of the respective classes.
2. For Classes B and C, an additional fee, equal to the difference between the per account fee listed in the table above and the base fee, is multiplied times the number of accounts in the
class. For example, the additional fee attributable to Class B shares in an equity fund is $1.00 per account ($20.50 minus $19.50) times the number of Class B accounts.
FOR CLASS I, there is no transfer agent fee.
FOR CLASS R2, R3, R4 AND R5 the fee is 5 basis points based on average daily net assets of the applicable class.
FOR CLASS W, the fee is 20 basis points based on average daily net assets of Class W.
FOR CLASS Y, the fee is 5 basis points based on average daily net assets of Class Y.
Should an expense of a class be waived or reimbursed, Ameriprise Financial first will determine that the waiver or reimbursement will not result in another class subsidizing the class, is fair and equitable to all classes and does not operate to the detriment of another class and then shall monitor the implementation and operation to assure the waiver or reimbursement operates consistent with the determination. The board shall monitor the actions of Ameriprise Financial.
EXCHANGE PRIVILEGES
Shares of a class may be exchanged for shares of the same class of another Fund that is part of the RiverSource Funds.
CONVERSION PRIVILEGES
Class B shares, including a proportionate amount of shares acquired through reinvestment of distributions, will convert into Class A shares in the ninth year of ownership at relative net asset values without the imposition of any fee.
SECTION II. FOR THE FUNDS LISTED IN SCHEDULE II
(THOSE WITH CLASSES D AND E)
SEPARATE ARRANGEMENTS
Each class of shares will represent interests in the same portfolio of
investments of the Fund and be identical except those differences that relate to
(a) the impact of the disproportionate payments made under the Rule 12b-1 plan;
(b) the impact of the disproportionate payments made because of service fees;
(c) the differences in class expenses including transfer agent fees and any
other expense determined by the board to be a class expense; and (d) the
difference in voting rights on the 12b-1 plan, exchange privileges and class
designations. The current classes of shares are as follows:
Class D shares
Class E shares
EXPENSE ALLOCATION PROCEDURES
Ameriprise Financial, as the Fund's administrator, on a daily basis shall allocate the income, expenses, and realized and unrealized gains and losses of the Fund on the basis of the relative percentage of net assets of each class of shares, except class specific expenses for plan administration services fees, 12b-1 fees, transfer agent fees, and any other class specific fee, which shall be paid directly by the applicable class as follows:
PLAN ADMINISTRATION SERVICES FEE:
Class D None Class E 15 basis points |
12B-1 FEE:
Class D 25 basis points of average daily net assets Class E None |
TRANSFER AGENCY SERVICES FEE:
For CLASS D, the fee is $19.50 multiplied by the total number of accounts for Class D.
For CLASS E, the fee is 5 basis points based on average daily net assets of Class E.
Should an expense of a class be waived or reimbursed, Ameriprise Financial first will determine that the waiver or reimbursement will not result in another class subsidizing the class, is fair and equitable to all classes and does not operate to the detriment of another class and then shall monitor the implementation and operation to assure the waiver or reimbursement operates consistent with the determination. The board shall monitor the actions of Ameriprise Financial.
EXCHANGE PRIVILEGES
Shares of a class may be exchanged for shares of the same class of another fund that is part of the RiverSource Funds.
SCHEDULE I
DATED AS OF NOVEMBER 12, 2008
FUNDS WITH CLASSES A, B, C, I, R2, R3, R4, R5, W AND/OR Y
EQUITY FUNDS
CLASSES --------------------------------------------------------- FUNDS A B C I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- RiverSource Dimensions Series, Inc. RiverSource Disciplined Small and Mid Cap Equity A B C I -- -- R4 -- W -- RiverSource Disciplined Small Cap Value A B C I R2 R3 R4 R5 -- -- RiverSource Equity Series, Inc. RiverSource Mid Cap Growth A B C I -- -- R4 -- -- -- RiverSource Global Series, Inc. RiverSource Global Technology A B C I -- -- R4 -- -- -- Threadneedle Emerging Markets A B C I -- -- R4 R5 -- -- Threadneedle Global Equity A B C I R2 R3 R4 R5 W -- Threadneedle Global Equity Income A B C I R2 R3 R4 R5 -- -- Threadneedle Global Extended Alpha A B C I R2 R3 R4 R5 -- -- RiverSource International Series, Inc. RiverSource Disciplined International Equity A B C I R2 R3 R4 R5 W -- Threadneedle European Equity A B C I -- -- R4 -- -- -- Threadneedle International Opportunity A B C I R2 R3 R4 R5 -- -- RiverSource International Managers Series, Inc. RiverSource Partners International Select Growth A B C I -- -- R4 -- -- -- RiverSource Partners International Select Value A B C I -- -- R4 -- -- -- RiverSource Partners International Small Cap A B C I -- -- R4 -- -- -- RiverSource Investment Series, Inc. RiverSource Balanced A B C -- -- -- R4 -- -- -- RiverSource Disciplined Large Cap Growth A B C I R2 R3 R4 R5 W -- RiverSource Disciplined Large Cap Value A B C I R2 R3 R4 R5 W -- RiverSource Diversified Equity Income A B C I R2 R3 R4 R5 W -- RiverSource Mid Cap Value A B C I R2 R3 R4 R5 W -- RiverSource Large Cap Series, Inc. RiverSource Disciplined Equity A B C I R2 R3 R4 R5 W -- RiverSource Growth A B C I R2 R3 R4 R5 W -- RiverSource Large Cap Equity A B C I R2 R3 R4 R5 -- -- RiverSource Large Cap Value A B C I R2 R3 R4 R5 -- -- RiverSource Managers Series, Inc. RiverSource Partners Aggressive Growth A B C I R2 R3 R4 R5 -- -- RiverSource Partners Fundamental Value A B C I -- -- R4 -- -- -- RiverSource Partners Select Value A B C I -- -- R4 -- -- -- RiverSource Partners Small Cap Equity A B C I -- -- R4 -- -- -- RiverSource Partners Small Cap Value A B C I R2 R3 R4 R5 -- -- RiverSource Market Advantage Series, Inc. RiverSource Portfolio Builder Aggressive A B C -- -- -- R4 -- -- -- RiverSource Portfolio Builder Moderate A B C -- -- -- R4 -- -- -- RiverSource Portfolio Builder Moderate Aggressive A B C -- -- -- R4 -- -- -- RiverSource Portfolio Builder Total Equity A B C -- -- -- R4 -- -- -- RiverSource Small Company Index A B -- -- -- -- R4 -- -- -- RiverSource Sector Series, Inc. RiverSource Dividend Opportunity A B C I R2 R3 R4 R5 W -- RiverSource Real Estate A B C I -- -- R4 -- W -- RiverSource Selected Series, Inc. RiverSource Precious Metals and Mining A B C I -- -- R4 -- -- -- |
CLASSES --------------------------------------------------------- FUNDS A B C I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- RiverSource Series Trust RiverSource 120/20 Contrarian Equity A B C I -- -- -- R5 -- -- RiverSource 130/30 U.S. Equity A B C I -- -- -- R5 -- -- RiverSource Retirement Plus 2010 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2015 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2020 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2025 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2030 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2035 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2040 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Retirement Plus 2045 A -- -- -- R2 R3 R4 R5 -- Y RiverSource Recovery and Infrastructure A B C I R2 R3 R4 R5 -- -- RiverSource Strategic Allocation Series, Inc. RiverSource Strategic Allocation A B C I R2 R3 R4 R5 -- -- RiverSource Strategy Series, Inc. RiverSource Equity Value A B C I R2 R3 R4 R5 W -- RiverSource Partners Small Cap Growth A B C I R2 R3 R4 R5 -- -- RiverSource Small Cap Advantage A B C I R2 R3 R4 R5 -- -- |
FIXED INCOME AND ALTERNATIVE FUNDS
CLASSES --------------------------------------------------------- FUNDS A B C I R2 R3 R4 R5 W Y ----- --- --- --- --- --- --- --- --- --- --- RiverSource Bond Series, Inc. RiverSource Floating Rate A B C I -- -- R4 R5 W -- RiverSource Income Opportunities A B C I -- -- R4 -- -- -- RiverSource Inflation Protected Securities A B C I -- -- R4 -- W -- RiverSource Limited Duration Bond A B C I -- -- R4 -- W -- RiverSource California Tax-Exempt Trust RiverSource California Tax-Exempt A B C -- -- -- -- -- -- -- RiverSource Diversified Income Series, Inc. RiverSource Diversified Bond A B C I R2 R3 R4 R5 W -- RiverSource Global Series, Inc. RiverSource Absolute Return Currency and Income A B C I -- -- R4 R5 W -- RiverSource Emerging Markets Bond A B C I -- -- R4 -- W -- RiverSource Global Bond A B C I -- -- R4 -- W -- RiverSource Government Income Series, Inc. RiverSource Short Duration U.S. Government A B C I -- -- R4 -- W -- RiverSource U.S. Government Mortgage A B C I -- -- R4 -- -- -- RiverSource High Yield Income Series, Inc. RiverSource High Yield Bond A B C I R2 R3 R4 R5 W -- RiverSource Income Series, Inc. RiverSource Income Builder Basic Income A B C -- -- -- R4 -- -- -- RiverSource Income Builder Moderate Income A B C -- -- -- R4 -- -- -- RiverSource Income Builder Enhanced Income A B C -- -- -- R4 -- -- -- RiverSource Market Advantage Series, Inc. RiverSource Portfolio Builder Conservative A B C -- -- -- R4 -- -- -- RiverSource Portfolio Builder Moderate Conservative A B C -- -- -- R4 -- -- -- RiverSource Special Tax-Exempt Series Trust RiverSource Minnesota Tax-Exempt A B C -- -- -- -- -- -- -- RiverSource New York Tax-Exempt A B C -- -- -- -- -- -- -- RiverSource Strategic Allocation Series, Inc. RiverSource Strategic Income Allocation A B C -- R2 R3 R4 R5 -- -- RiverSource Tax-Exempt Income Series, Inc. RiverSource Tax-Exempt High Income A B C -- -- -- -- -- -- -- RiverSource Tax-Exempt Series, Inc. RiverSource Intermediate Tax-Exempt A B C -- -- -- -- -- -- -- RiverSource Tax-Exempt Bond A B C -- -- -- -- -- -- -- |
MONEY MARKET FUNDS
CLASSES --------------------------------------------------------------- FUNDS A B C I R2 R3 R4 R5 S W Y ----- --- --- --- --- --- --- --- --- --- --- --- RiverSource Money Market Series, Inc. RiverSource Cash Management A B C I -- -- -- R5 -- W Y RiverSource Tax-Exempt Money Market Series, Inc. RiverSource Tax-Exempt Money Market A -- -- -- -- -- -- -- -- -- -- |
SCHEDULE II
FUNDS WITH CLASSES D AND E
RiverSource Market Advantage Series, Inc. RiverSource S&P 500 Index Fund
DIRECTORS/TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors and trustees of the below listed open-end investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940 with the Securities and Exchange Commission:
1933 Act 1940 Act Reg. Number Reg. Number ----------- ------------ RiverSource Bond Series, Inc. 2-72174 811-3178 RiverSource California Tax-Exempt Trust 33-5103 811-4646 RiverSource Dimensions Series, Inc. 2-28529 811-1629 RiverSource Diversified Income Series, Inc. 2-51586 811-2503 RiverSource Equity Series, Inc. 2-13188 811-772 RiverSource Global Series, Inc. 33-25824 811-5696 RiverSource Government Income Series, Inc. 2-96512 811-4260 RiverSource High Yield Income Series, Inc. 2-86637 811-3848 RiverSource Income Series, Inc. 2-10700 811-499 RiverSource International Managers Series, Inc. 333-64010 811-10427 RiverSource International Series, Inc. 2-92309 811-4075 RiverSource Investment Series, Inc. 2-11328 811-54 RiverSource Large Cap Series, Inc. 2-38355 811-2111 RiverSource Managers Series, Inc. 333-57852 811-10321 RiverSource Market Advantage Series, Inc. 33-30770 811-5897 RiverSource Money Market Series, Inc. 2-54516 811-2591 RiverSource Sector Series, Inc. 33-20872 811-5522 RiverSource Selected Series, Inc. 2-93745 811-4132 RiverSource Series Trust 333-131683 811-21852 RiverSource Short Term Investments Series, Inc. N/A 811-21914 RiverSource Special Tax-Exempt Series Trust 33-5102 811-4647 RiverSource Strategic Allocation Series, Inc. 2-93801 811-4133 RiverSource Strategy Series, Inc. 2-89288 811-3956 RiverSource Tax-Exempt Series, Inc. 2-57328 811-2686 RiverSource Tax-Exempt Income Series, Inc. 2-63552 811-2901 RiverSource Tax-Exempt Money Market Series, Inc. 2-66868 811-3003 RiverSource Variable Portfolio-Income Series, Inc. 2-73113 811-3219 RiverSource Variable Portfolio-Investment Series, Inc. 2-73115 811-3218 RiverSource Variable Portfolio-Managed Series, Inc. 2-96367 811-4252 RiverSource Variable Portfolio-Managers Series, Inc 333-61346 811-10383 RiverSource Variable Portfolio-Money Market Series, Inc. 2-72584 811-3190 RiverSource Variable Portfolio-Select Series, Inc. 333-113780 811-21534 RiverSource Variable Series Trust 333-146374 811-22127 |
Seligman Capital Fund, Inc. 002-33566 811-01886 Seligman Cash Management Fund, Inc. 002-56805 811-02650 Seligman Common Stock Fund, Inc. 002-10835 811-00234 Seligman Communications and Information Fund, Inc. 002-80168 811-03596 Seligman Core Fixed Income Fund, Inc. 333-63546 811-10423 Seligman Frontier Fund, Inc. 002-92487 811-04078 Seligman Global Fund Series, Inc. 033-44186 811-06485 Seligman Growth Fund, Inc. 002-10836 811-00229 Seligman High Income Fund Series 002-93076 811-04103 Seligman Income and Growth Fund, Inc. 002-10837 811-00525 Seligman LaSalle Real Estate Fund Series, Inc. 333-105799 811-21365 Seligman Municipal Fund Series, Inc. 002-86008 811-03828 Seligman Municipal Series Trust 002-92569 811-04250 Seligman New Jersey Municipal Fund, Inc. 033-13401 811-05126 Seligman Pennsylvania Municipal Fund Series 033-05793 811-04666 Seligman Portfolios, Inc. 033-15253 811-05221 Seligman TargetHorizon ETF Portfolios, Inc. 333-126647 811-21788 Seligman Asset Allocation Series, Inc. 333-85111 811-09545 Seligman Value Fund Series, Inc. 333-20621 811-08031 Seligman LaSalle International Real Estate Fund, Inc. 333-141258 811-22031 Seligman Select Municipal Fund, Inc. 033-32582 811-05976 (common) 033-33727 Tri-Continental Corporation (preferred)* 811-00266 (Common, Preferred, Warrants) |
* Each time additional shares are registered for Tri-Continental Corporation, the SEC assigns a new '33 Act file number.
hereby constitutes and appoints Stephen R. Lewis, Jr., any other member of the Boards who is not an interested person of the investment manager, and Scott R. Plummer or any one of these persons individually as her or his attorney-in-fact and agent to file and sign for her or him in her or his name, place and stead any and all further amendments to said registration statements with all exhibits and other documents thereto pursuant to said Acts and any rules and regulations thereunder and grants them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith.
Dated the 8th day of January, 2009.
/s/ Kathleen A. Blatz /s/ Stephen R. Lewis, Jr. ------------------------------------- ------------------------------------- Kathleen A. Blatz Stephen R. Lewis, Jr. /s/ Arne H. Carlson /s/ John F. Maher ------------------------------------- ------------------------------------- Arne H. Carlson John F. Maher /s/ Pamela G. Carlton /s/ Catherine James Paglia ------------------------------------- ------------------------------------- Pamela G. Carlton Catherine James Paglia /s/ Patricia M. Flynn /s/ Leroy C. Richie ------------------------------------- ------------------------------------- Patricia M. Flynn Leroy C. Richie /s/ Anne P. Jones /s/ Alison Taunton-Rigby ------------------------------------- ------------------------------------- Anne P. Jones Alison Taunton-Rigby /s/ Jeffrey Laikind /s/ William F. Truscott ------------------------------------- ------------------------------------- Jeffrey Laikind William F. Truscott |