N-CSRS 1 c57557nvcsrs.txt FORM N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-4133 RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 9/30 Date of reporting period: 3/31 Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE STRATEGIC ALLOCATION FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED MARCH 31, 2010 RIVERSOURCE STRATEGIC ALLOCATION FUND SEEKS TO PROVIDE SHAREHOLDERS MAXIMUM TOTAL RETURN THROUGH A COMBINATION OF GROWTH OF CAPITAL AND CURRENT INCOME. (ADVICE-BUILT(SM) SOLUTIONS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 10 Portfolio of Investments........... 13 Statement of Assets and Liabilities...................... 49 Statement of Operations............ 51 Statements of Changes in Net Assets........................... 53 Financial Highlights............... 55 Notes to Financial Statements...... 63 Proxy Voting....................... 83
-------------------------------------------------------------------------------- 2 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Strategic Allocation Fund (the Fund) Class A shares increased 8.90% (excluding sales charge) for the six months ended March 31, 2010. > The Fund underperformed the 11.75% increase of the broad-based Standard & Poor's 500 Index (S&P 500 Index), an unmanaged group of large company stocks for the same period. > The Fund outperformed the Blended Index, which is composed of 45% S&P 500 Index, 15% Morgan Stanley Capital International (MSCI) EAFE Index and 40% Barclays Capital U.S. Aggregate Bond Index (the Barclays Index), which gained 6.60% during the same time period. > The Fund outperformed the 1.99% increase of the Barclays Index, an unmanaged index representing U.S. taxable investment-grade bonds, during the same period. > The Fund outperformed the 3.18% increase of the MSCI EAFE Index for the same period. > The Fund also outperformed the Lipper Flexible Portfolio Funds Index, representing the Fund's peer group, which rose 8.03% for the same period. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- ANNUALIZED TOTAL RETURNS (for period ended March 31, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------------------- RiverSource Strategic Allocation Fund Class A (excluding sales charge) +8.90% +35.11% -3.31% +3.09% +1.98% ------------------------------------------------------------------------- S&P 500 Index(1) (unmanaged) +11.75% +49.77% -4.17% +1.92% -0.65% ------------------------------------------------------------------------- Blended Index(2) (unmanaged) +6.60% +32.46% +0.01% +4.05% +2.81% ------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index(3) (unmanaged) +1.99% +7.69% +6.14% +5.44% +6.29% ------------------------------------------------------------------------- MSCI EAFE Index(4) (unmanaged) +3.18% +55.20% -6.55% +4.24% +1.68% ------------------------------------------------------------------------- Lipper Flexible Portfolio Funds Index(5) +8.03% +40.96% +0.38% +4.62% +2.47% -------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 800.221.2450. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- 4 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- (2) The Blended Index consists of 45% S&P 500 Index, 40% Barclays Capital U.S. Aggregate Bond Index and 15% MSCI EAFE Index. The Barclays Capital U.S. Aggregate Bond Index and the MSCI EAFE Index are shown in the table because they are separate components of the Blended Index. (3) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices. (4) The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index, is compiled from a composite of securities markets of Europe, Australia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices. (5) The Lipper Flexible Portfolio Funds Index includes the 30 largest flexible portfolio funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT MARCH 31, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 1/23/85) +8.90% +35.11% -3.31% +3.09% +1.98% N/A ------------------------------------------------------------------------------------- Class B (inception 3/20/95) +8.45% +34.07% -4.06% +2.31% +1.19% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +8.38% +33.98% -4.07% +2.31% N/A +1.40% ------------------------------------------------------------------------------------- Class I (inception 12/11/06) +9.15% +35.57% -2.93% N/A N/A -1.81% ------------------------------------------------------------------------------------- Class R2 (inception 12/11/06) +8.71% +34.53% -3.54% N/A N/A -2.44% ------------------------------------------------------------------------------------- Class R3 (inception 12/11/06) +8.83% +34.85% -3.30% N/A N/A -2.20% ------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) +8.95% +35.08% -3.16% +3.27% +2.15% N/A ------------------------------------------------------------------------------------- Class R5 (inception 12/11/06) +9.11% +35.51% -2.98% N/A N/A -1.87% ------------------------------------------------------------------------------------- With sales charge Class A (inception 1/23/85) +2.64% +27.34% -5.20% +1.88% +1.38% N/A ------------------------------------------------------------------------------------- Class B (inception 3/20/95) +3.45% +29.07% -4.91% +1.95% +1.19% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +7.38% +32.98% -4.07% +2.31% N/A +1.40% -------------------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to qualifying institutional investors only. *Not annualized. **For classes with less than 10 years performance. -------------------------------------------------------------------------------- 6 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE - EQUITY VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL
DURATION - FIXED INCOME SHORT INT. LONG X HIGH X MEDIUM QUALITY X LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. Investments in small-capitalization companies involve greater risks and volatility than investments in larger, more established companies. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer-term securities. Non-investment grade securities, commonly called "high- yield" or "junk" bonds, have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 7 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- ASSET ALLOCATION & SECTOR BREAKDOWN(1) (at March 31, 2010) ---------------------------------------------------------------------
STOCKS 75.9% ------------------------------------------------ Consumer Discretionary 6.7% ------------------------------------------------ Consumer Staples 3.9% ------------------------------------------------ Energy 9.6% ------------------------------------------------ Financials 17.4% ------------------------------------------------ Health Care 11.2% ------------------------------------------------ Industrials 6.7% ------------------------------------------------ Information Technology 9.5% ------------------------------------------------ Materials 4.5% ------------------------------------------------ Telecommunication Services 4.4% ------------------------------------------------ Utilities 2.0% ------------------------------------------------ BONDS 17.4% ------------------------------------------------ Asset-Backed 0.8% ------------------------------------------------ Commercial Mortgage-Backed 0.7% ------------------------------------------------ Consumer Discretionary 0.5% ------------------------------------------------ Consumer Staples 0.5% ------------------------------------------------ Energy 0.5% ------------------------------------------------ Financials 0.2% ------------------------------------------------ Foreign Government 1.0% ------------------------------------------------ Health Care 0.4% ------------------------------------------------ Industrials 0.3% ------------------------------------------------ Materials 0.2% ------------------------------------------------ Residential Mortgage-Backed 3.2% ------------------------------------------------ Telecommunication 1.1% ------------------------------------------------ U.S. Government Obligations & Agencies 7.1% ------------------------------------------------ Utilities 0.9% ------------------------------------------------ EXCHANGE TRADED FUNDS 4.2% ------------------------------------------------ FDIC-INSURED DEBT(2) 0.3% ------------------------------------------------ OTHER(3) 2.2% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Debt guaranteed under the FDIC's Temporary Liquidity Guarantee Program (TLGP). (3) Cash & Cash Equivalents. -------------------------------------------------------------------------------- 8 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- The sectors identified on the previous page are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. TOP TEN HOLDINGS(1,2) (at March 31, 2010) ---------------------------------------------------------------------
Vanguard Emerging Markets ETF 3.9% ------------------------------------------------ Apple, Inc. 3.5% ------------------------------------------------ Chevron Corp. 2.9% ------------------------------------------------ Pfizer, Inc. 2.6% ------------------------------------------------ Bank of America Corp. 2.3% ------------------------------------------------ AT&T, Inc. 1.9% ------------------------------------------------ Johnson & Johnson 1.7% ------------------------------------------------ General Electric Co. 1.4% ------------------------------------------------ ConocoPhillips 1.3% ------------------------------------------------ Wal-Mart Stores, Inc. 1.3% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). (2) Excludes U.S. Treasury and U.S. Government Agency holdings. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended March 31, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Direct expenses paid during the period" to estimate the expenses you paid on your account during this period. You can also estimate the direct and indirect expenses you paid over the period by using the number in the first line under the heading "Direct and indirect expenses paid during the period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- 10 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING OCT. 1, 2009 MARCH 31, 2010 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,089.00 $5.36 $5.42 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.80 $5.19 $5.24 ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,084.50 $9.35 $9.41 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.96 $9.05 $9.10 ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,083.80 $9.30 $9.35 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.01 $9.00 $9.05 ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,091.50 $3.02 $3.08 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.04 $2.92 $2.97 ------------------------------------------------------------------------------------------- Class R2 ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,087.10 $7.39 $7.44 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.85 $7.14 $7.19 ------------------------------------------------------------------------------------------- Class R3 ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,088.30 $6.25 $6.30 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.95 $6.04 $6.09 ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,089.50 $4.64 $4.69 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.49 $4.48 $4.53 ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,091.10 $3.44 $3.49 ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.64 $3.33 $3.38 -------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 11 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES ---------------------------------------------------------------------- Class A 1.03% .01% 1.04% ---------------------------------------------------------------------- Class B 1.80% .01% 1.81% ---------------------------------------------------------------------- Class C 1.79% .01% 1.80% ---------------------------------------------------------------------- Class I .58% .01% .59% ---------------------------------------------------------------------- Class R2 1.42% .01% 1.43% ---------------------------------------------------------------------- Class R3 1.20% .01% 1.21% ---------------------------------------------------------------------- Class R4 .89% .01% .90% ---------------------------------------------------------------------- Class R5 .66% .01% .67% ----------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class as indicated above, plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended March 31, 2010: +8.90% for Class A, +8.45% for Class B, +8.38% for Class C, +9.15% for Class I, +8.71% for Class R2, +8.83% for Class R3, +8.95% for Class R4 and +9.11% for Class R5. -------------------------------------------------------------------------------- 12 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- MARCH 31, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (74.4%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.2%) BE Aerospace, Inc. 3,795(b) $115,558 Ceradyne, Inc. 6,829(b) 154,950 Empresa Brasileira de Aeronautica SA, ADR 400(c) 9,584 European Aeronautic Defence and Space Co. NV 12,518(c) 251,846 General Dynamics Corp. 45,818 3,537,149 Lockheed Martin Corp. 36,626 3,048,016 Northrop Grumman Corp. 29,391 1,927,168 Raytheon Co. 37,677(o) 2,152,110 Spirit AeroSystems Holdings, Inc., Class A 4,767(b) 111,452 Triumph Group, Inc. 2,017(o) 141,372 United Technologies Corp. 38,818 2,857,393 --------------- Total 14,306,598 ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.3%) Air Transport Services Group, Inc. 15,567(b) 52,461 Atlas Air Worldwide Holdings, Inc. 3,978(b) 211,033 CH Robinson Worldwide, Inc. 14,400(o) 804,240 FedEx Corp. 25,180(o) 2,351,812 TNT NV 9,490(c) 272,129 --------------- Total 3,691,675 ------------------------------------------------------------------------------------- AIRLINES (0.2%) Air China Ltd., Series H 20,000(b,c,o) 20,659 Air France-KLM 14,656(b,c) 231,710 Alaska Air Group, Inc. 4,116(b) 169,703 Allegiant Travel Co. 2,577(b,o) 149,105 Continental Airlines, Inc., Class B 6,258(b,o) 137,488 Deutsche Lufthansa AG 12,414(c) 205,906 Hawaiian Holdings, Inc. 15,661(b,o) 115,422 Qantas Airways Ltd. 68,778(c) 179,215 Singapore Airlines Ltd. 29,533(c) 320,965 SkyWest, Inc. 14,238 203,319 Southwest Airlines Co. 65,326 863,610 --------------- Total 2,597,102 ------------------------------------------------------------------------------------- AUTO COMPONENTS (0.2%) Aisin Seiki Co., Ltd. 6,200(c) 185,708 ArvinMeritor, Inc. 7,902(b) 105,492 Autoliv, Inc. 7,280(b,c) 375,138 Cooper Tire & Rubber Co. 6,920(o) 131,618 Dana Holding Corp. 15,598(b) 185,304 Denso Corp. 18,000(c) 536,263 Exide Technologies 11,122(b) 63,952 Hyundai Mobis 168(c) 22,279 Nokian Renkaat OYJ 4,952(c,o) 128,623 Spartan Motors, Inc. 15,310 85,736 Tenneco, Inc. 6,078(b) 143,745 The Goodyear Tire & Rubber Co. 12,218(b) 154,436 TRW Automotive Holdings Corp. 3,675(b) 105,032 UMW Holdings Bhd 2,500(c) 4,870 --------------- Total 2,228,196 ------------------------------------------------------------------------------------- AUTOMOBILES (1.0%) Astra International Tbk PT 24,000(c) 110,627 BMW AG 5,449(c) 192,868 BMW AG 10,779(c,o) 497,633 Daimler AG 3,206(c) 150,934 Denway Motors Ltd. 44,000(c) 23,405 Dongfeng Motor Group Co., Ltd., Series H 32,000(c) 52,014 Fiat SpA 15,874(b,c) 206,691 Ford Motor Co. 237,369(b,o) 2,983,727 Fuji Heavy Industries Ltd. 16,000(b,c) 82,841 Harley-Davidson, Inc. 42,123 1,182,393 Honda Motor Co., Ltd. 30,700(c) 1,083,761 Hyundai Motor Co. 1,211(c) 123,659 Hyundai Motor Co., Ltd. 1,400(c) 51,923 Kia Motors Corp. 1,400(c) 31,253 Mazda Motor Corp. 61,000(c) 171,620
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) AUTOMOBILES (CONT.) Nissan Motor Co., Ltd. 87,200(b,c) $747,189 Peugeot SA 14,909(b,c,o) 438,999 Porsche Automobil Holding SE 4,377(c) 267,134 Renault SA 13,536(b,c) 634,423 Toyota Motor Corp. 49,200(c) 1,971,053 Volkswagen AG 8,463(c) 776,163 Yamaha Motor Co., Ltd. 8,800(b,c,o) 131,887 Yulon Motor Co., Ltd. 8,000(c) 8,883 --------------- Total 11,921,080 ------------------------------------------------------------------------------------- BEVERAGES (1.0%) Anheuser-Busch InBev NV 15,057(c) 758,487 Brown-Forman Corp., Class B 10,954 651,215 Carlsberg A/S, Series B 4,761(c) 399,666 Coca-Cola Amatil Ltd. 12,267(c) 126,618 Coca-Cola Hellenic Bottling Co., SA 10,404(c) 280,491 Coca-Cola West Co., Ltd. 28,400(c) 464,523 PepsiCo, Inc. 20,087 1,328,956 SABMiller PLC 9,933(c) 291,217 The Coca-Cola Co. 143,901 7,914,555 --------------- Total 12,215,728 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.4%) Amgen, Inc. 67,070(b,o) 4,008,104 Cephalon, Inc. 9,402(b,o) 637,268 CSL Ltd. 5,930(c) 198,207 Cubist Pharmaceuticals, Inc. 3,224(b) 72,669 PDL BioPharma, Inc. 15,516 96,354 --------------- Total 5,012,602 ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.1%) Apogee Enterprises, Inc. 7,855 124,188 Compagnie de St-Gobain 19,316(c,o) 928,807 Masco Corp. 13,813(o) 214,378 Quanex Building Products Corp. 3,658 60,467 --------------- Total 1,327,840 ------------------------------------------------------------------------------------- CAPITAL MARKETS (2.1%) 3i Group PLC 20,588(c) 90,978 Apollo Investment Corp. 21,382 272,193 BGC Partners, Inc., Class A 17,355(o) 106,039 Broadpoint Gleacher Securities, Inc. 10,343(b) 41,372 Deutsche Bank AG 25,221(c) 1,942,784 Franklin Resources, Inc. 28,368 3,146,011 GFI Group, Inc. 16,613 96,023 International Assets Holding Corp. 2,726(b) 40,808 Invesco Ltd. 57,698 1,264,163 Investec Ltd. 3,402(c) 29,191 Knight Capital Group, Inc., Class A 9,191(b) 140,163 Macquarie Group Ltd. 8,662(c,o) 375,514 MF Global Holdings Ltd. 13,564(b) 109,461 Morgan Stanley 81,426 2,384,968 MVC Capital, Inc. 3,350(o) 45,460 Oppenheimer Holdings, Inc., Class A 2,031(o) 51,811 optionsXpress Holdings, Inc. 3,598(b) 58,611 Penson Worldwide, Inc. 7,005(b,o) 70,540 State Street Corp. 51,106(o) 2,306,925 SWS Group, Inc. 5,697(o) 65,686 T Rowe Price Group, Inc. 2,293(o) 125,954 The Bank of New York Mellon Corp. 150,146 4,636,508 The Goldman Sachs Group, Inc. 44,138 7,531,268 --------------- Total 24,932,431 ------------------------------------------------------------------------------------- CHEMICALS (1.1%) Akzo Nobel NV 2,023(c) 115,296 Asahi Kasei Corp. 43,000(c) 231,376 Ashland, Inc. 4,860 256,462 Braskem SA, ADR 1,600(b,c,o) 23,152 Celanese Corp., Series A 2,361 75,198 CF Industries Holdings, Inc. 12,543 1,143,671 Cytec Industries, Inc. 2,528 118,159 Eastman Chemical Co. 1,731(o) 110,230 Formosa Chemicals & Fibre Corp. 34,000(c) 79,575 Hanwha Corp. 440(c) 16,046 Huntsman Corp. 14,490 174,605 Innophos Holdings, Inc. 4,245 118,436 Innospec, Inc. 3,929(c) 44,633 Koninklijke DSM NV 11,499(c) 512,779
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) CHEMICALS (CONT.) Kuraray Co., Ltd. 19,000(c) $255,691 Lubrizol Corp. 1,484 136,112 Mitsubishi Chemical Holdings Corp. 30,000(c) 153,402 Nan Ya Plastics Corp. 39,000(c) 79,607 NewMarket Corp. 1,817 187,133 Nitto Denko Corp. 3,500(c) 135,911 Olin Corp. 12,427(o) 243,818 OM Group, Inc. 5,066(b) 171,636 Orica Ltd. 8,783(c) 215,885 PolyOne Corp. 6,282(b) 64,328 PPG Industries, Inc. 7,664 501,226 Shin-Etsu Chemical Co., Ltd. 9,400(c) 546,021 Sigma-Aldrich Corp. 4,832 259,285 Solutia, Inc. 5,830(b) 93,921 Stepan Co. 2,314 129,329 Taiwan Fertilizer Co., Ltd. 3,000(c) 9,592 Terra Industries, Inc. 6,832 312,632 The Dow Chemical Co. 191,348(o) 5,658,161 The Israel Corp., Ltd. 18(b,c) 15,319 Umicore 3,433(c) 119,888 WR Grace & Co. 18,767(b) 520,972 Yara International ASA 12,700(c,o) 551,718 --------------- Total 13,381,205 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (5.1%) ABSA Group Ltd. 5,523(c) 107,915 Alpha Bank AE 29,954(b,c) 283,617 Asya Katilim Bankasi AS 4,625(b,c) 12,381 Australia & New Zealand Banking Group Ltd. 41,392(c) 963,101 Bancfirst Corp. 1,720 72,085 Banco Bilbao Vizcaya Argentaria SA 101,744(c) 1,392,121 Banco Bradesco SA, ADR 2,970(c) 54,737 Banco do Brasil SA 3,600(c) 60,233 Banco do Estado do Rio Grande do Sul 3,500(c) 29,103 Banco Santander SA 516,762(c) 6,868,223 Bank Hapoalim BM 10,220(b,c) 45,428 Bank Leumi Le-Israel BM 14,489(b,c) 68,096 Bank of China Ltd., Series H 24,000(c) 12,797 Bank Pekao SA 621(b,c) 36,122 Bank Zachodni WBK SA 75(b,c) 5,411 Barclays PLC 702,123(c) 3,838,892 BB&T Corp. 24,921(o) 807,191 BNP Paribas 10,979(c) 843,196 BOC Hong Kong Holdings Ltd. 125,000(c) 298,167 Busan Bank 5,370(c) 57,683 Chang Hwa Commercial Bank 11,000(c) 4,990 China Construction Bank Corp., Series H 39,000(c,o) 31,947 Comerica, Inc. 18,267 694,877 Commerzbank AG 36,921(b,c,o) 316,221 Commonwealth Bank of Australia 90,202(c) 4,658,580 Credit Agricole SA 11,405(c,o) 199,645 Daegu Bank 2,900(c) 38,843 Danske Bank A/S 27,663(b,c) 680,694 Dexia SA 31,362(b,c) 187,065 DNB NOR ASA 92,544(b,c) 1,058,064 Erste Group Bank AG 13,626(c) 572,384 Fifth Third Bancorp 147,784 2,008,385 First Horizon National Corp. 44,872(b,o) 630,453 Grupo Financiero Banorte SAB de CV, Series O 15,300(c) 67,912 Hana Financial Group, Inc. 1,720(c) 53,299 Hong Leong Financial Group Bhd 2,400(c) 6,221 HSBC Holdings PLC 54,463(c) 552,086 Huntington Bancshares, Inc. 90,824 487,725 Industrial & Commercial Bank of China, Series H 31,000(c) 23,637 Industrial Bank of Korea 3,470(c) 45,404 Intesa Sanpaolo SpA 62,346(b,c) 232,211 Israel Discount Bank Ltd., Series A 11,831(b,c) 27,096 Itau Unibanco Holding SA, ADR 1,800(c) 39,582 KB Financial Group, Inc., ADR 3,100(c) 148,676 KBC Groep NV 7,393(b,c) 358,038 KeyCorp 45,883 355,593 Korea Exchange Bank 4,400(c) 52,515 Lloyds Banking Group PLC 2,370,847(b,c) 2,258,313 M&T Bank Corp. 8,112(o) 643,931 Malayan Banking Bhd 14,600(c) 33,455 Marshall & Ilsley Corp. 68,519(o) 551,578
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMMERCIAL BANKS (CONT.) Mega Financial Holding Co., Ltd. 88,000(c) $51,005 National Bank of Greece SA 30,902(b,c) 621,916 Natixis 52,583(b,c) 283,740 Nedbank Group Ltd. 1,470(c) 28,258 Nordea Bank AB 57,002(c,o) 562,676 OTP Bank PLC 4,409(b,c) 154,358 PNC Financial Services Group, Inc. 146,924(o) 8,771,362 Powszechna Kasa Oszczednosci Bank Polski SA 3,268(c) 45,748 Raiffeisen International Bank Holding AG 4,837(c,o) 229,973 Royal Bank of Scotland Group PLC 340,730(b,c) 227,505 Shinhan Financial Group Co., Ltd., ADR 2,000(c) 159,000 Skandinaviska Enskilda Banken AB, Series A 114,721(b,c) 733,178 Standard Bank Group Ltd. 2,956(c) 46,515 Standard Chartered PLC 16,833(c) 459,155 State Bank of India Ltd., GDR 541(c) 50,854 SunTrust Banks, Inc. 56,682(o) 1,518,511 SVB Financial Group 5,912(b) 275,854 Svenska Handelsbanken AB, Series A 3,222(c) 94,455 Swedbank AB, Series A 47,008(b,c) 482,584 Taiwan Cooperative Bank 83,000(c) 50,198 Turkiye Garanti Bankasi AS 15,444(c) 72,297 Turkiye Halk Bankasi AS 2,573(c) 18,661 Turkiye Vakiflar Bankasi Tao, Series D 20,678(b,c) 55,352 UMB Financial Corp. 1,563 63,458 UniCredit SpA 1,163,127(c) 3,436,640 United Overseas Bank Ltd. 18,000(c) 247,362 US Bancorp 47,719(o) 1,234,968 Wells Fargo & Co. 285,049 8,870,724 Wintrust Financial Corp. 1,741 64,783 Woori Finance Holdings Co., Ltd. 3,710(c) 54,448 --------------- Total 61,841,457 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Consolidated Graphics, Inc. 1,612(b) 66,753 Corrections Corp of America 4,197(b) 83,352 Dai Nippon Printing Co., Ltd. 27,000(c,o) 364,795 Herman Miller, Inc. 4,877(o) 88,079 Kimball International, Inc., Class B 9,996 69,472 Pitney Bowes, Inc. 17,192 420,344 RR Donnelley & Sons Co. 45,187 964,742 Steelcase, Inc., Class A 8,415 54,445 The Brink's Co. 5,552 156,733 United Stationers, Inc. 2,248(b) 132,295 Viad Corp. 4,421(o) 90,852 --------------- Total 2,491,862 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.6%) 3Com Corp. 44,852(b) 344,912 Blue Coat Systems, Inc. 2,902(b) 90,078 Cisco Systems, Inc. 138,083(b,o) 3,594,300 Motorola, Inc. 310,967(b) 2,182,988 NETGEAR, Inc. 3,650(b) 95,265 Nokia OYJ 19,117(c) 297,720 Plantronics, Inc. 5,871 183,645 Tellabs, Inc. 40,401 305,836 --------------- Total 7,094,744 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (5.1%) Apple, Inc. 173,408(b) 40,738,740 Asustek Computer, Inc. 27,000(c) 47,033 Catcher Technology Co., Ltd. 20,000(c) 49,140 Chimei Innolux Corp. 39,682(c) 60,562 Compal Electronics, Inc. 22,000(c) 28,794 Dell, Inc. 306,070(b) 4,594,111 IBM Corp. 53,486 6,859,580 Intevac, Inc. 3,174(b) 43,865 Inventec Co., Ltd. 36,000(c) 20,582 Lenovo Group Ltd. 18,000(c) 12,426 Lexmark International, Inc., Class A 35,953(b,o) 1,297,184 Lite-On Technology Corp. 42,000(c) 55,765 Mitac International 25,000(c) 11,498 NCR Corp. 11,758(b) 162,260 NetApp, Inc. 89,915(b) 2,927,632 Novatel Wireless, Inc. 7,394(b) 49,762 Qisda Corp. 34,000(b,c) 19,171 Quanta Computer, Inc. 4,000(c) 7,762
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMPUTERS & PERIPHERALS (CONT.) Seagate Technology 28,269(b,c) $516,192 Teradata Corp. 14,764(b) 426,532 Western Digital Corp. 91,354(b) 3,561,892 Wistron Corp. 16,000(c) 29,081 --------------- Total 61,519,564 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.3%) Aveng Ltd. 1,777(c) 9,174 Bouygues SA 8,583(c) 431,494 Comfort Systems USA, Inc. 8,249(o) 103,030 Daelim Industrial Co., Ltd. 330(c) 21,881 EMCOR Group, Inc. 14,471(b) 356,421 Fluor Corp. 32,391 1,506,506 Granite Construction, Inc. 4,282 129,402 Hochtief AG 1,423(c) 119,590 KBR, Inc. 12,259 271,659 Layne Christensen Co. 2,216(b) 59,189 Leighton Holdings Ltd. 6,806(c,o) 243,536 Michael Baker Corp. 2,181(b) 75,201 Murray & Roberts Holdings Ltd. 708(c) 4,208 The Shaw Group, Inc. 3,385(b) 116,512 Tutor Perini Corp. 8,391(b,o) 182,504 --------------- Total 3,630,307 ------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.2%) Anhui Conch Cement Co., Ltd., Class H 4,000(c) 26,429 Boral Ltd. 20,548(c) 105,764 CEMEX SAB de Cv, ADR 12,400(b,c) 126,604 China National Building Material Co., Ltd., Series H 6,000(c) 11,623 CRH PLC 43,794(c) 1,093,731 Fletcher Building Ltd. 15,156(c) 89,840 HeidelbergCement AG 8,691(c) 484,818 Indocement Tunggal Prakarsa Tbk PT 8,000(c) 12,541 Lafarge SA 13,334(c,o) 938,333 --------------- Total 2,889,683 ------------------------------------------------------------------------------------- CONSUMER FINANCE (1.0%) Advance America Cash Advance Centers, Inc. 14,112(o) 82,132 American Express Co. 157,983 6,518,378 Capital One Financial Corp. 52,092(o) 2,157,130 Cash America International, Inc. 2,296 90,646 Discover Financial Services 149,872 2,233,092 EZCORP, Inc., Class A 2,546(b) 52,448 SLM Corp. 71,359(b,o) 893,415 --------------- Total 12,027,241 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (--%) Rock-Tenn Co., Class A 1,637 74,598 Temple-Inland, Inc. 3,255 66,500 Toyo Seikan Kaisha Ltd. 6,100(c) 108,061 --------------- Total 249,159 ------------------------------------------------------------------------------------- DISTRIBUTORS (0.1%) Core-Mark Holding Co., Inc. 1,497(b) 45,823 Genuine Parts Co. 11,703 494,334 Imperial Holdings Ltd. 1,106(c) 15,231 Jardine Cycle & Carriage Ltd. 6,000(c) 126,040 Li & Fung Ltd. 46,000(c) 226,324 --------------- Total 907,752 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.2%) Apollo Group, Inc., Class A 15,048(b) 922,292 Corinthian Colleges, Inc. 5,999(b,o) 105,522 H&R Block, Inc. 28,936 515,061 Pre-Paid Legal Services, Inc. 1,125(b,o) 42,581 Regis Corp. 6,872 128,369 Sotheby's 3,850 119,697 --------------- Total 1,833,522 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (3.0%) Bank of America Corp. 1,499,598 26,767,824 BM&FBOVESPA SA 5,900(c) 39,632 China Everbright Ltd. 8,000(c) 21,432 Citigroup, Inc. 1,343,954(b) 5,443,014 Deutsche Boerse AG 3,165(c) 234,610 FirstRand Ltd. 28,469(c) 78,963 Groupe Bruxelles Lambert SA 2,742(c) 242,291 Haci Omer Sabanchi Holding AS 3,413(c) 14,627
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) DIVERSIFIED FINANCIAL SERVICES (CONT.) Hong Kong Exchanges and Clearing Ltd. 30,500(c) $509,112 ING Groep NV 258,482(b,c) 2,580,781 IntercontinentalExchange, Inc. 2,716(b) 304,681 Remgro Ltd. 8,347(c) 112,320 RMB Holdings Ltd. 8,700(c) 38,669 --------------- Total 36,387,956 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (3.4%) AT&T, Inc. 861,335 22,256,897 Brasil Telecom SA 909(c) 5,845 BT Group PLC 107,702(c) 202,499 CenturyTel, Inc. 46,467(o) 1,647,720 China Telecom Corp., Ltd., ADR 2,700(c,o) 132,273 Chunghwa Telecom Co., Ltd., ADR 3,318(c) 64,469 France Telecom SA 40,226(c,o) 962,513 KT Corp., ADR 4,600(c) 95,496 LG Telecom Ltd. 2,910(c) 19,861 Magyar Telekom Telecommunications PLC 4,779(c) 19,529 Magyar Telekom Telecommunications PLC, ADR 700(c) 14,420 Nippon Telegraph & Telephone Corp. 24,400(c) 1,028,412 Qwest Communications International, Inc. 102,985 537,582 Tele Norte Leste Participacoes SA 400(c) 8,482 Tele Norte Leste Participacoes SA, ADR 2,500(c) 44,150 TELE2 AB, Series B 16,320(c) 272,452 Telecom Italia SpA 784,913(c) 973,728 Telefonica SA 88,396(c) 2,094,214 Telefonos de Mexico SAB de CV, ADR, Series L 500(c) 7,800 Telekom Malaysia Bhd 9,100(c) 9,602 Telekomunikacja Polska SA 6,578(c) 37,364 Telemar Norte Leste SA, Series A 400(c) 11,353 Telenor ASA 30,400(b,c) 412,575 Telkom SA Ltd. 5,137(c) 24,088 Telstra Corp., Ltd. 114,169(c) 313,203 Verizon Communications, Inc. 305,249 9,468,824 Vimpel-Communications, ADR 2,600(c) 47,866 --------------- Total 40,713,217 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.1%) Centrais Eletricas Brasileiras SA, ADR 3,200(c) 48,000 Centrais Eletricas Brasileiras SA, Series B 3,900(c) 70,211 Cia Energetica de Minas Gerais, ADR 5,900(c) 98,176 Cia Paranaense Energia, ADR 2,500(c) 51,200 CPFL Energia SA, ADR 800(c,o) 48,752 Edison International 44,940 1,535,600 EDP Energias do Brasil SA 2,700(c) 51,843 Enel SpA 316,906(c) 1,772,106 Exelon Corp. 77,142(o) 3,379,591 FirstEnergy Corp. 36,744(o) 1,436,323 Korea Electric Power Corp., ADR 1,300(b,c) 21,112 Prime Infrastructure Group 167(b,c) 559 Progress Energy, Inc. 33,493 1,318,284 Scottish & Southern Energy PLC 15,281(c) 255,310 Southern Co. 103,109(o) 3,419,094 --------------- Total 13,506,161 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.2%) Emerson Electric Co. 37,081 1,866,658 EnerSys 5,829(b) 143,743 General Cable Corp. 3,409(b) 92,043 GrafTech International Ltd. 16,460(b) 225,008 Harbin Power Equipment Co., Ltd., Series H 26,000(c,o) 21,465 Teco Electric & Machinery Co., Ltd. 16,000(c) 7,031 --------------- Total 2,355,948 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.7%) Agilent Technologies, Inc. 75,813(b) 2,607,208 Anixter International , Inc. 6,414(b) 300,496 Arrow Electronics, Inc. 4,398(b) 132,512 AU Optronics Corp., ADR 7,600(c) 86,108
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (CONT.) Avnet, Inc. 4,887(b) $146,610 Benchmark Electronics, Inc. 7,769(b) 161,129 Byd Co., Ltd., Series H 6,000(b,c,o) 59,775 Chunghwa Picture Tubes Ltd. 144,000(b,c) 16,466 Corning, Inc. 14,118 285,325 FUJIFILM Holdings Corp. 12,900(c) 444,352 HannStar Display Corp. 78,000(b,c) 17,199 Ingram Micro, Inc., Class A 6,483(b) 113,777 Insight Enterprises, Inc. 10,539(b) 151,340 Jabil Circuit, Inc. 34,419 557,243 Kyocera Corp. 4,600(c) 448,288 LG Display Co., Ltd., ADR 2,600(c,o) 45,968 Littelfuse, Inc. 2,937(b) 111,635 Methode Electronics, Inc. 8,045(o) 79,646 Murata Manufacturing Co., Ltd. 7,800(c) 443,068 Nan Ya Printed Circuit Board Corp. 13,000(c) 51,597 Omron Corp. 7,300(c) 169,459 Plexus Corp. 3,100(b) 111,693 SYNNEX Corp. 5,375(b) 158,885 TDK Corp. 2,800(c) 186,307 Tech Data Corp. 3,885(b) 162,782 Tyco Electronics Ltd. 39,710(c) 1,091,230 Unimicron Technology Corp. 9,000(c) 11,553 Vishay Intertechnology, Inc. 8,938(b,o) 91,436 --------------- Total 8,243,087 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.1%) Atwood Oceanics, Inc. 4,222(b) 146,208 Baker Hughes, Inc. 15,031(o) 704,052 BJ Services Co. 32,080 686,512 Bristow Group, Inc. 2,325(b) 87,722 Cal Dive International, Inc. 9,377(b) 68,733 CARBO Ceramics, Inc. 2,460 153,356 Cie Generale de Geophysique-Veritas 5,118(b,c) 145,205 Diamond Offshore Drilling, Inc. 13,913(o) 1,235,614 Dril-Quip, Inc. 2,824(b) 171,812 Ensco PLC, ADR 16,225(c) 726,556 FMC Technologies, Inc. 21,799(b) 1,408,869 Fugro NV 3,924(c) 256,474 Gulfmark Offshore, Inc., Class A 4,004(b,o) 106,306 Halliburton Co. 15,400 464,002 Helmerich & Payne, Inc. 5,023 191,276 Key Energy Services, Inc. 20,207(b) 193,078 Lufkin Industries, Inc. 3,446(o) 272,751 Matrix Service Co. 4,923(b) 52,971 Nabors Industries Ltd. 41,810(b,c) 820,730 National Oilwell Varco, Inc. 41,129 1,669,016 Noble Corp. 10,472(b,c,o) 437,939 Oil States International, Inc. 3,639(b) 164,992 Parker Drilling Co. 23,472(b,o) 115,717 Patterson-UTI Energy, Inc. 5,380 75,159 Pride International, Inc. 9,291(b) 279,752 Rowan Companies, Inc. 8,486(b) 247,027 Saipem SpA 7,460(c) 288,684 SEACOR Holdings, Inc. 1,278(b) 103,083 SeaDrill Ltd. 19,100(c,o) 445,428 Smith International, Inc. 2,710 116,042 Superior Energy Services, Inc. 6,291(b) 132,237 Technip SA 3,600(c) 292,724 TETRA Technologies, Inc. 9,871(b,o) 120,624 Tidewater, Inc. 3,361(o) 158,874 Unit Corp. 2,053(b) 86,801 Weatherford International Ltd. 15,557(b,c) 246,734 Willbros Group, Inc. 6,775(b) 81,368 WorleyParsons Ltd. 5,652(c) 131,976 --------------- Total 13,086,404 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.9%) BJ's Wholesale Club, Inc. 3,668(b) 135,679 Casino Guichard Perrachon SA 1,219(c) 103,153 Cia Brasileira de Distribulcao Grupo Pao de Acucar, ADR 200(c,o) 13,446 Delhaize Group SA 3,491(c) 280,560 Koninklijke Ahold NV 22,267(c) 296,850 Metro AG 3,921(c,o) 232,604 Nash Finch Co. 1,270 42,736 Ruddick Corp. 5,411(o) 171,204 Safeway, Inc. 67,713 1,683,345 Spartan Stores, Inc. 3,135 45,207
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) FOOD & STAPLES RETAILING (CONT.) SUPERVALU, Inc. 47,545(o) $793,051 The Andersons, Inc. 1,721 57,619 The Pantry, Inc. 4,068(b,o) 50,809 Walgreen Co. 58,339 2,163,794 Wal-Mart de Mexico SAB de CV, Series V 10,100(c) 51,788 Wal-Mart Stores, Inc. 269,397 14,978,473 Wesfarmers Ltd. 34,912(c) 1,019,011 Whole Foods Market, Inc. 17,641(b) 637,722 Winn-Dixie Stores, Inc. 12,432(b,o) 155,276 Woolworths Ltd. 15,414(c) 395,986 --------------- Total 23,308,313 ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.8%) American Italian Pasta Co., Class A 1,787(b) 69,461 Archer-Daniels-Midland Co. 80,523 2,327,115 Associated British Foods PLC 8,500(c) 126,214 Astra Agro Lestari Tbk PT 5,000(c) 13,531 Bunge Ltd. 2,266(o) 139,654 Cal-Maine Foods, Inc. 4,409 149,421 Chaoda Modern Agriculture Holdings Ltd. 90,000(c,o) 95,864 China Agri-Industries Holdings Ltd. 20,000(c) 27,614 Chiquita Brands International, Inc. 4,845(b) 76,212 Darling International, Inc. 11,362(b) 101,804 Dean Foods Co. 43,955(b) 689,654 Fresh Del Monte Produce, Inc. 8,834(b,c) 178,889 General Mills, Inc. 13,660 966,991 Golden Agri-Resources Ltd. 815,000(b,c) 337,981 Green Mountain Coffee Roasters, Inc. 1,070(b) 103,597 Hormel Foods Corp. 11,439 480,552 Indofood Sukses Makmur Tbk PT 138,500(c) 57,518 JBS SA 3,400(c) 15,207 Nestle SA 15,462(c) 792,020 Nisshin Seifun Group, Inc. 48,000(c) 619,769 Parmalat SpA 195,629(c) 535,739 Sara Lee Corp. 86,802 1,209,152 Tiger Brands Ltd. 996(c) 25,082 Unilever PLC 9,591(c) 281,626 Wilmar International Ltd. 62,000(c) 297,011 Wimm-Bill-Dann Foods OJSC, ADR 300(c) 6,726 --------------- Total 9,724,404 ------------------------------------------------------------------------------------- GAS UTILITIES (0.1%) Gas Natural SDG SA 5,057(c) 93,373 Korea Gas Corp. 300(c) 12,678 Nicor, Inc. 9,005 377,490 ONEOK, Inc. 13,655 623,351 Osaka Gas Co., Ltd. 37,000(c) 132,595 Questar Corp. 2,942 127,094 --------------- Total 1,366,581 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.9%) Abaxis, Inc. 3,236(b) 87,987 Becton Dickinson and Co. 19,378 1,525,630 CareFusion Corp. 23,468(b) 620,259 CR Bard, Inc. 10,265 889,154 ev3, Inc. 10,777(b) 170,923 Intuitive Surgical, Inc. 9,317(b,o) 3,243,527 Medtronic, Inc. 61,870 2,786,006 Sirona Dental Systems, Inc. 2,058(b) 78,266 Sonova Holding AG 1,438(c) 178,693 St. Jude Medical, Inc. 7,290(b) 299,255 Stryker Corp. 11,715 670,332 TERUMO Corp. 3,900(c) 207,766 Varian Medical Systems, Inc. 10,911(b,o) 603,706 --------------- Total 11,361,504 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.5%) Aetna, Inc. 69,925 2,455,067 Allied Healthcare International, Inc. 16,107(b) 43,811 AMERIGROUP Corp. 8,951(b,o) 297,531 AmerisourceBergen Corp. 11,706 338,538 Cardinal Health, Inc. 91,727(o) 3,304,924 Catalyst Health Solutions, Inc. 1,806(b) 74,732 Centene Corp. 8,898(b) 213,908 CIGNA Corp. 108,733 3,977,453 Coventry Health Care, Inc. 36,309(b) 897,558 Emergency Medical Services Corp., Class A 1,430(b) 80,867
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (CONT.) Express Scripts, Inc. 11,412(b) $1,161,285 Health Net, Inc. 8,227(b) 204,605 HealthSpring, Inc. 13,485(b) 237,336 Humana, Inc. 10,928(b) 511,103 Kindred Healthcare, Inc. 12,003(b,o) 216,654 Magellan Health Services, Inc. 10,378(b) 451,235 McKesson Corp. 29,426 1,933,877 Molina Healthcare, Inc. 6,223(b,o) 156,633 Sun Healthcare Group, Inc. 6,446(b) 61,495 Triple-S Management Corp., Class B 6,366(b,c,o) 112,997 UnitedHealth Group, Inc. 256,090 8,366,460 Universal American Financial Corp. 8,675(b,o) 133,595 WellCare Health Plans, Inc. 6,457(b) 192,419 WellPoint, Inc. 67,422(b) 4,340,628 --------------- Total 29,764,711 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (--%) Eclipsys Corp. 3,407(b) 67,731 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.2%) Brinker International, Inc. 3,181 61,330 California Pizza Kitchen, Inc. 5,442(b) 91,371 Carnival PLC 8,829(c) 362,416 Genting Group 6,000(c) 12,147 Genting Malaysia Bhd 62,300(c) 54,847 Genting Singapore PLC 384,000(b,c,o) 242,986 International Game Technology 2,686 49,557 Las Vegas Sands Corp. 7,177(b,o) 151,794 Thomas Cook Group PLC 34,706(c) 142,094 Wyndham Worldwide Corp. 49,236(o) 1,266,841 --------------- Total 2,435,383 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.5%) American Greetings Corp., Class A 5,695 118,684 Cyrela Brazil Realty SA 2,900(c) 33,984 Desarrolladora Homex SAB de CV, ADR 1,300(b,c,o) 36,764 DR Horton, Inc. 25,906 326,416 Electrolux AB, Series B 17,092(b,c) 390,715 Garmin Ltd. 9,121(c,o) 350,976 Harman International Industries, Inc. 3,477(b) 162,654 KB Home 17,276 289,373 Lennar Corp., Class A 32,338(o) 556,537 MRV Engenharia e Participacoes SA 6,600(c) 46,414 NVR, Inc. 108(b) 78,462 Panasonic Corp. 32,500(c) 497,165 Pulte Group, Inc. 67,823(b,o) 763,009 Sekisui House Ltd. 26,000(c) 259,777 Sharp Corp. 23,000(c) 287,623 Sony Corp. 2,800(c) 107,231 Steinhoff International Holdings Ltd. 26,978(b,c,o) 74,087 Tatung Co., Ltd. 68,000(b,c) 16,279 Tupperware Brands Corp. 8,362 403,216 Turk Sise ve Cam Fabrikalari AS 7,006(c) 8,823 Urbi Desarrollos Urbanos SAB de CV 18,200(b,c) 42,057 Whirlpool Corp. 13,518(o) 1,179,445 --------------- Total 6,029,691 ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.1%) Henkel AG & Co. KGaA 5,901(c) 317,703 Kimberly-Clark Corp. 5,861 368,540 --------------- Total 686,243 ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%) Cia Energetica de Sao Paulo, Series B 2,000(c) 27,286 Constellation Energy Group, Inc. 22,881 803,352 Huaneng Power International, Inc., ADR 500(c) 11,620 Iberdrola Renovables SA 42,922(c) 178,272 Mirant Corp. 8,691(b) 94,384 NRG Energy, Inc. 42,718(b) 892,807 Tanjong PLC 9,900(c) 54,480 The AES Corp. 76,438(b) 840,818 --------------- Total 2,903,019 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.0%) 3M Co. 57,273 4,786,305 Alfa SAB de CV, Series A 10,700(c,o) 84,354
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) INDUSTRIAL CONGLOMERATES (CONT.) Beijing Enterprises Holdings Ltd. 1,500(c,o) $10,423 Bidvest Group Ltd. 1,518(c) 28,399 Citic Pacific Ltd. 11,000(c) 26,295 Delek Group Ltd. 94(c) 21,554 Discount Investment Corp. 744(c) 20,770 General Electric Co. 861,229 15,674,369 Hutchison Whampoa Ltd. 50,000(c) 365,786 Keppel Corp., Ltd. 19,000(c) 123,895 Koc Holding AS 6,479(c) 22,213 Koninklijke Philips Electronics NV 23,195(c,o) 743,762 McDermott International, Inc. 10,023(b) 269,819 Seaboard Corp. 96(o) 124,714 Shanghai Industrial Holdings Ltd. 5,000(c) 22,926 SK Holdings Co., Ltd. 360(c) 31,987 Textron, Inc. 42,715 906,839 Tyco International Ltd. 12,509(c) 478,469 --------------- Total 23,742,879 ------------------------------------------------------------------------------------- INSURANCE (4.8%) Aegon NV 68,789(b,c,o) 471,070 AFLAC, Inc. 68,405 3,713,707 Allied World Assurance Co. Holdings Ltd. 3,016(c) 135,268 American Financial Group, Inc. 6,000 170,700 American International Group, Inc. 12,758(b,o) 435,558 American Physicians Capital, Inc. 1,521 48,596 Amerisafe, Inc. 4,709(b) 77,086 AmTrust Financial Services, Inc. 6,386 89,085 Aon Corp. 28,844 1,231,927 Arch Capital Group Ltd. 1,354(b,c) 103,243 Argo Group International Holdings Ltd. 4,122(c) 134,336 Assurant, Inc. 40,795 1,402,532 Axis Capital Holdings Ltd. 3,168(c) 99,032 Berkshire Hathaway, Inc., Class B 31,191(b) 2,534,893 China Life Insurance Co., Ltd., ADR 1,000(c) 72,040 Chubb Corp. 75,507 3,915,038 Cincinnati Financial Corp. 18,361(o) 530,633 CNA Surety Corp. 4,886(b) 86,922 Conseco, Inc. 41,525(b,o) 258,286 Employers Holdings, Inc. 12,047 178,898 Endurance Specialty Holdings Ltd. 2,395(c,o) 88,974 Flagstone Reinsurance Holdings Ltd. 3,415(c) 39,136 Fortis 119,709(b,c) 426,217 FPIC Insurance Group, Inc. 2,760(b) 74,824 Genworth Financial, Inc., Class A 203,325(b) 3,728,981 Hartford Financial Services Group, Inc. 96,251 2,735,453 HCC Insurance Holdings, Inc. 4,749 131,072 Horace Mann Educators Corp. 12,141 182,843 Lincoln National Corp. 43,489 1,335,112 Max Capital Group Ltd. 4,027(c) 92,581 MBIA, Inc. 35,235(b,o) 220,923 Meadowbrook Insurance Group, Inc. 7,702 60,846 MetLife, Inc. 40,936 1,774,166 Montpelier Re Holdings Ltd. 9,001(c) 151,307 National Financial Partners Corp. 9,725(b) 137,123 Old Mutual PLC 320,569(b,c) 595,917 PartnerRe Ltd. 3,314(c) 264,192 PICC Property & Casualty Co., Ltd., Series H 16,000(b,c,o) 16,301 Ping An Insurance Group Co. of China Ltd., Series H 5,000(c,o) 43,083 Platinum Underwriters Holdings Ltd. 13,215(c) 490,012 Principal Financial Group, Inc. 93,425 2,728,944 ProAssurance Corp. 5,580(b) 326,653 Protective Life Corp. 4,914 108,059 Prudential Financial, Inc. 42,507 2,571,674 Prudential PLC 56,902(c) 472,759 RenaissanceRe Holdings Ltd. 1,407(c) 79,861
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 22 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) INSURANCE (CONT.) Safety Insurance Group, Inc. 3,023 $113,876 Sanlam Ltd. 10,289(c) 35,136 SeaBright Insurance Holdings, Inc. 5,530 60,885 StanCorp Financial Group, Inc. 2,370 112,883 Swiss Life Holding AG 1,947(b,c) 255,795 Swiss Reinsurance Co., Ltd. 17,278(b,c) 850,624 The Allstate Corp. 200,598 6,481,322 The Progressive Corp. 189,668 3,620,762 The Travelers Companies, Inc. 151,660 8,180,541 Torchmark Corp. 26,431 1,414,323 Unum Group 28,830 714,119 Validus Holdings Ltd. 2,127(c) 58,556 XL Capital Ltd., Class A 45,683(c) 863,409 Zenith National Insurance Corp. 2,902(o) 111,205 --------------- Total 57,439,299 ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.3%) B2W Cia Global Do Varejo 200(c) 4,321 Drugstore.Com, Inc. 12,670(b) 45,232 Expedia, Inc. 3,363 83,940 Home Retail Group PLC 66,754(c) 274,521 Liberty Media Corp.- Interactive, Class A 10,603(b,q) 162,332 priceline.com, Inc. 11,655(b) 2,972,025 --------------- Total 3,542,371 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.2%) Alibaba.com Ltd. 9,500(c) 19,112 EarthLink, Inc. 28,465(o) 243,091 eBay, Inc. 84,583(b,o) 2,279,513 IAC/InterActiveCorp. 4,038(b) 91,824 ModusLink Global Solutions, Inc. 8,368(b) 70,542 NIC, Inc. 9,261 72,884 --------------- Total 2,776,966 ------------------------------------------------------------------------------------- IT SERVICES (0.7%) Automatic Data Processing, Inc. 10,713 476,407 Ciber, Inc. 20,384(b,o) 76,236 Cognizant Technology Solutions Corp., Class A 81,829(b) 4,171,643 Computer Sciences Corp. 22,384(b) 1,219,705 Convergys Corp. 6,913(b) 84,753 CSG Systems International, Inc. 5,198(b) 108,950 Heartland Payment Systems, Inc. 3,727 69,322 Infosys Technologies Ltd., ADR 700(c) 41,195 Ness Technologies, Inc. 9,527(b,c) 60,115 SAIC, Inc. 46,574(b) 824,360 Sapient Corp. 6,039 55,196 Satyam Computer Services Ltd., ADR 10,700(b,c,o) 55,854 TeleTech Holdings, Inc. 5,584(b) 95,375 Total System Services, Inc. 24,529 384,124 Unisys Corp. 2,690(b) 93,854 Wipro Ltd., ADR 4,100(c,o) 95,571 Wright Express Corp. 4,481(b) 134,968 --------------- Total 8,047,628 ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.1%) Eastman Kodak Co. 80,538(b) 466,315 JAKKS Pacific, Inc. 8,599(b) 112,217 Mattel, Inc. 12,599 286,501 Polaris Industries, Inc. 2,063(o) 105,543 --------------- Total 970,576 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (--%) Life Technologies Corp. 6,671(b) 348,693 ------------------------------------------------------------------------------------- MACHINERY (1.2%) AGCO Corp. 5,608(b,o) 201,159 Atlas Copco AB, Series A 33,354(c) 517,546 Atlas Copco AB, Series B 8,804(c) 123,437 Bucyrus International, Inc. 3,164 208,792 Caterpillar, Inc. 46,532(o) 2,924,535 Chart Industries, Inc. 6,000(b,o) 120,000 Cummins, Inc. 4,129(o) 255,792 Eaton Corp. 6,856 519,479 EnPro Industries, Inc. 2,343(b,o) 68,134 Flowserve Corp. 6,386 704,184 Force Protection, Inc. 15,481(b) 93,196
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MACHINERY (CONT.) Hyundai Heavy Industries Co., Ltd. 217(c) $45,468 Hyundai Mipo Dockyard 131(c) 18,009 Illinois Tool Works, Inc. 46,689(o) 2,211,191 Ingersoll-Rand PLC 27,392(c) 955,159 Invensys PLC 24,277(c) 125,515 Joy Global, Inc. 2,255 127,633 KONE OYJ, Series B 2,876(c,o) 118,869 LB Foster Co., Class A 1,514(b) 43,739 MAN SE 4,038(c,o) 338,047 Manitowoc Co., Inc. 29,561(o) 384,293 Metso OYJ 11,707(c,o) 378,080 Mueller Industries, Inc. 4,994 133,789 Navistar International Corp. 2,420(b) 108,247 Nordson Corp. 4,902 332,944 Oshkosh Corp. 5,738(b) 231,471 Samsung Heavy Industries Co., Ltd. 450(c) 10,483 Sandvik AB 33,243(c) 415,653 SMC Corp. 1,400(c) 190,051 Stanley Black & Decker, Inc. 22,681 1,302,116 Tata Motors Ltd., ADR 6,900(c,o) 127,374 Terex Corp. 4,866(b) 110,507 Timken Co. 6,167 185,072 United Tractors Tbk Pt 16,500(c) 33,309 Vallourec SA 2,656(c) 535,608 Volvo AB, Series B 39,713(c) 399,716 WABCO Holdings, Inc. 3,266(b) 97,719 Weichai Power Co., Ltd., Series H 2,000(c) 16,744 --------------- Total 14,713,060 ------------------------------------------------------------------------------------- MARINE (0.1%) A P Moller -- Maersk A/S, Series A 33(c) 240,372 A P Moller -- Maersk A/S, Series B 59(c,o) 449,671 China COSCO Holdings Co., Ltd., Series H 30,500(c) 40,383 China Shipping Container Lines Co., Ltd., Series H 59,000(b,c,o) 23,557 Evergreen Marine Corp. Taiwan Ltd. 16,000(b,c) 9,425 Genco Shipping & Trading Ltd. 2,203(b,o) 46,505 Mitsui OSK Lines Ltd. 21,000(c) 150,738 Neptune Orient Lines Ltd. 54,000(c) 77,606 Nippon Yusen KK 60,000(c) 236,842 Orient Overseas International Ltd. 39,000(c) 289,081 U-Ming Marine Transport Corp. 6,000(c) 12,172 Yang Ming Marine Transport Corp. 32,000(c) 11,995 --------------- Total 1,588,347 ------------------------------------------------------------------------------------- MEDIA (1.4%) CBS Corp., Class B 177,494 2,474,266 Discovery Communications, Inc., Class A 10,461(b) 353,477 DISH Network Corp., Class A 11,741 244,448 Fairfax Media Ltd. 163,439(c,o) 269,920 Gannett Co., Inc. 15,044(o) 248,527 Lagardere SCA 3,444(c) 139,368 Lamar Advertising Co., Class A 1,839(b) 63,170 Liberty Media Corp.- Capital, Series A 2,453(b,q) 89,216 News Corp., Class A 220,619 3,179,120 Pearson PLC 7,820(c) 122,940 The Interpublic Group of Companies, Inc. 20,925(b,o) 174,096 The New York Times Co., Class A 15,409(b) 171,502 The Walt Disney Co. 156,072 5,448,473 Viacom, Inc., Class B 73,627(b) 2,531,296 Virgin Media, Inc. 9,823 169,545 Vivendi SA 35,909(c) 961,073 --------------- Total 16,640,437 ------------------------------------------------------------------------------------- METALS & MINING (2.8%) AK Steel Holding Corp. 23,432(o) 535,656 Alcoa, Inc. 129,295(o) 1,841,161 Allegheny Technologies, Inc. 16,658 899,365 Alumina Ltd. 87,887(c) 139,098 Aluminum Corp. of China, ADR 2,000(b,c,o) 51,480 AM Castle & Co. 6,574(o) 85,988
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 24 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) METALS & MINING (CONT.) Aneka Tambang Tbk PT 59,000(c) $15,578 Angang Steel Co., Ltd., Series H 10,000(c) 18,341 Anglo American PLC 43,345(b,c) 1,890,402 Antofagasta PLC 7,342(c) 115,871 ArcelorMittal 59,663(c) 2,618,264 BHP Billiton Ltd. 63,812(c) 2,552,087 BlueScope Steel Ltd. 108,172(b,c) 288,811 Bradespar SA 1,500(c) 36,793 Brush Engineered Materials, Inc. 3,456(b,o) 78,002 Carpenter Technology Corp. 1,983 72,578 Century Aluminum Co. 6,458(b) 88,862 China Steel Corp. 109,000(c) 112,791 Cia Siderurgica Nacional SA, ADR 3,200(c) 127,776 Cliffs Natural Resources, Inc. 5,171(o) 366,882 Commercial Metals Co. 4,320 65,059 Eurasian Natural Resources Corp., PLC 16,362(c) 295,965 Fortescue Metals Group Ltd. 55,125(b,c) 247,828 Fosun International 11,000(c) 8,798 Freeport-McMoRan Copper & Gold, Inc. 80,763(o) 6,746,940 Gerdau SA 2,600(c) 31,946 Gerdau SA, ADR 6,500(c) 105,950 Grupo Mexico SAB de CV, Series B 42,700(c) 114,881 Haynes International, Inc. 1,407 49,991 Horsehead Holding Corp. 10,785(b) 127,694 Hyundai Steel Co. 616(c) 46,781 International Nickel Indonesia Tbk PT 30,500(c) 15,854 Jiangxi Copper Co., Ltd., Series H 22,000(c) 49,701 Kaiser Aluminum Corp. 1,787 68,925 Kazakhmys PLC 29,035(b,c) 672,805 KGHM Polska Miedz SA 3,098(c) 116,482 Maanshan Iron & Steel, Series H 28,000(b,c,o) 16,229 Mechel, ADR 2,900(c) 82,418 Metalurgica Gerdau SA 4,300(c) 87,210 MMC Norilsk Nickel, ADR 2,243(b,c) 41,294 Norsk Hydro ASA 73,300(b,c) 559,109 Nucor Corp. 4,608(o) 209,111 Olympic Steel, Inc. 2,946 96,187 OneSteel Ltd. 84,325(c) 301,736 Outokumpu OYJ 4,875(c,o) 107,001 OZ Minerals Ltd. 227,530(b,c,o) 239,029 Rautaruukki OYJ 5,154(c,o) 111,384 Reliance Steel & Aluminum Co. 3,998 196,822 Rio Tinto Ltd. 16,228(c,o) 1,167,313 Rio Tinto PLC 33,663(c) 1,994,813 RTI International Metals, Inc. 3,450(b) 104,639 Salzgitter AG 1,151(c) 106,851 Sims Metal Management Ltd. 13,578(c,o) 269,836 SSAB AB, Series A 14,099(c) 253,540 SSAB AB, Series B 12,100(c,o) 196,470 Sterlite Industries India Ltd., ADR 2,900(c) 53,969 ThyssenKrupp AG 18,346(c) 630,773 United States Steel Corp. 42,336(o) 2,689,182 Usinas Siderurgicas de Minas Gerais SA, Series A 2,300(c) 79,229 Usinas Siderurgicas Minas Gerais SA 2,000(c) 70,459 Vale SA, ADR 7,000(c) 194,320 Vale SA, ADR 2,700(c,o) 86,913 Vedanta Resources PLC 7,978(c) 336,079 voestalpine AG 8,181(c,o) 330,950 Walter Energy, Inc. 2,446 225,692 Worthington Industries, Inc. 7,613 131,629 Xstrata PLC 121,612(b,c) 2,304,058 Zijin Mining Group Co., Ltd., Series H 32,000(c) 25,224 --------------- Total 34,000,855 ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.5%) Big Lots, Inc. 2,300(b) 83,766 Dillard's, Inc., Class A 6,688(o) 157,837 Family Dollar Stores, Inc. 14,933 546,697 JC Penney Co., Inc. 9,589 308,478 Lojas Americanas SA 2,900(c) 21,617 Macy's, Inc. 83,454 1,816,794 Marks & Spencer Group PLC 44,901(c) 252,176 Next PLC 2,526(c) 82,951 Nordstrom, Inc. 49,025 2,002,671
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 25 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MULTILINE RETAIL (CONT.) PPR 982(c) $130,742 Sears Holdings Corp. 4,072(b,o) 441,527 --------------- Total 5,845,256 ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.5%) AGL Energy Ltd. 21,365(c) 294,624 Ameren Corp. 13,472 351,350 Consolidated Edison, Inc. 33,846 1,507,501 DTE Energy Co. 13,272 591,931 GDF Suez 17,088(c) 660,110 PG&E Corp. 41,269(o) 1,750,630 Veolia Environnement 8,200(c,o) 284,425 --------------- Total 5,440,571 ------------------------------------------------------------------------------------- OFFICE ELECTRONICS (0.1%) Brother Industries Ltd. 19,300(c) 233,301 Canon, Inc. 13,000(c) 602,161 Ricoh Co., Ltd. 20,000(c) 312,366 Xerox Corp. 56,042 546,410 --------------- Total 1,694,238 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (8.3%) ATP Oil & Gas Corp. 7,576(b,o) 142,505 Bill Barrett Corp. 3,560(b) 109,328 BP PLC 132,037(c) 1,249,082 Bumi Resources Tbk PT 300,500(c) 74,381 Chevron Corp. 435,494 33,023,509 China Coal Energy Co., Series H 13,000(c) 20,293 China Petroleum & Chemical Corp., ADR 900(c,o) 74,016 China Shenhua Energy Co., Ltd., Series H 21,000(c) 90,745 Cimarex Energy Co. 2,831 168,105 ConocoPhillips 296,251 15,159,163 CVR Energy, Inc. 8,079(b) 70,691 ENI SpA 89,986(c) 2,111,220 Exxon Mobil Corp. 164,475(o) 11,016,535 Forest Oil Corp. 2,368(b) 61,142 Frontline Ltd. 3,641(c,o) 111,524 Gazprom Neft JSC, ADR 815(c) 21,361 Gazprom OAO, ADR 12,252(c) 285,839 Gran Tierra Energy, Inc. 24,694(b,c) 145,695 Hess Corp. 39,800 2,489,490 Inpex Corp. 32(c) 234,831 Knightsbridge Tankers Ltd. 3,624(c) 61,391 Kunlun Energy Co., Ltd. 10,000(c) 14,039 LUKOIL OAO, ADR 3,329(c) 188,754 Marathon Oil Corp. 124,506 3,939,369 Massey Energy Co. 2,773 145,000 McMoRan Exploration Co. 9,821(b) 143,681 MOL Magyar Olaj-es Gazipari 948(b,c) 97,090 Murphy Oil Corp. 38,557 2,166,518 Nippon Mining Holdings, Inc. 20,000(c) 94,779 Nippon Oil Corp. 47,000(c) 238,323 Occidental Petroleum Corp. 58,358 4,933,584 OMV AG 3,004(c) 112,717 Overseas Shipholding Group, Inc. 2,277 89,327 Patriot Coal Corp. 7,331(b) 149,992 Penn Virginia Corp. 4,047 99,152 Petroleo Brasileiro SA, ADR 6,700(c) 272,113 Petroleum Development Corp. 4,642(b) 107,555 Pioneer Natural Resources Co. 2,645(o) 148,966 Polski Koncern Naftowy Orlen SA 7,034(b,c) 95,634 Reliance Industries Ltd., GDR 2,248(c,d,h) 108,354 Repsol YPF SA 70,111(c) 1,660,072 Rosetta Resources, Inc. 7,167(b,o) 168,783 Royal Dutch Shell PLC, Series A 219,868(c) 6,372,704 Royal Dutch Shell PLC, Series B 187,222(c) 5,158,002 Sasol Ltd., ADR 1,600(c) 66,032 SK Energy Co., Ltd. 135(c) 14,501 S-Oil Corp. 269(c) 13,556 Spectra Energy Corp. 68,243 1,537,515 St. Mary Land & Exploration Co. 4,344 151,215 Stone Energy Corp. 3,925(b,o) 69,669 Sunoco, Inc. 25,563 759,477 Swift Energy Co. 5,232(b) 160,832 Tatneft, ADR 2,090(c) 65,417 Tesoro Corp. 37,112(o) 515,857 Total SA 7,798(c) 452,698 Tupras Turkiye Petrol Rafinerileri 2,122(c) 48,269
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 26 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (CONT.) USEC, Inc. 17,204(b,o) $99,267 Valero Energy Corp. 113,641 2,238,728 Western Refining, Inc. 12,165(b,o) 66,908 Whiting Petroleum Corp. 2,194(b) 177,363 World Fuel Services Corp. 9,440 251,482 Yanzhou Coal Mining Co., Ltd., ADR 700(c) 16,870 --------------- Total 99,931,010 ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.2%) Clearwater Paper Corp. 2,237(b) 110,172 Domtar Corp. 911(b,c) 58,678 International Paper Co. 14,138 347,936 KapStone Paper and Packaging Corp. 4,558(b) 54,103 MeadWestvaco Corp. 44,962(o) 1,148,779 Nine Dragons Paper Holdings Ltd. 3,000(c) 5,015 Schweitzer-Mauduit International, Inc. 2,676 127,271 Svenska Cellulosa AB, Series B 15,594(b,c) 219,932 UPM-Kymmene OYJ 8,672(c) 115,083 --------------- Total 2,186,969 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (--%) Hengan International Group Co., Ltd. 3,000(c,o) 22,372 Nu Skin Enterprises, Inc., Class A 5,993(o) 174,397 --------------- Total 196,769 ------------------------------------------------------------------------------------- PHARMACEUTICALS (7.2%) Abbott Laboratories 113,152 5,960,847 AstraZeneca PLC 11,385(c) 507,763 Bayer AG 13,275(c) 897,961 Bristol-Myers Squibb Co. 179,675 4,797,323 Eli Lilly & Co. 58,115(o) 2,104,925 Endo Pharmaceuticals Holdings, Inc. 8,061(b) 190,965 Forest Laboratories, Inc. 80,070(b) 2,510,995 Impax Laboratories, Inc. 4,437(b) 79,334 Johnson & Johnson 304,088(g) 19,826,538 King Pharmaceuticals, Inc. 51,676(b) 607,710 Medicis Pharmaceutical Corp., Class A 2,849 71,681 Merck & Co., Inc. 388,534 14,511,745 Mitsubishi Tanabe Pharma Corp. 26,000(c) 367,137 Novartis AG 33,877(c) 1,830,104 Ono Pharmaceutical Co., Ltd. 4,200(c) 186,906 Par Pharmaceutical Companies, Inc. 5,790(b) 143,592 Pfizer, Inc. 1,732,097 29,705,464 Sanofi-Aventis SA 12,165(c) 906,841 Takeda Pharmaceutical Co., Ltd. 16,800(c) 739,538 Teva Pharmaceutical Industries Ltd., ADR 1,300(c) 82,004 Viropharma, Inc. 7,656(b) 104,351 --------------- Total 86,133,724 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (--%) Administaff, Inc. 5,291 112,910 Heidrick & Struggles International, Inc. 2,174 60,937 Korn/Ferry International 4,228(b,o) 74,624 Randstad Holding NV 2,149(b,c) 102,130 SFN Group, Inc. 10,111(b,o) 80,989 TrueBlue, Inc. 3,557(b,o) 55,134 --------------- Total 486,724 ------------------------------------------------------------------------------------- REAL ESTATE (--%) BGP Holdings PLC 581,000(b,c,h) 1 ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.8%) American Capital Agency Corp. 1,831(o) 46,874 Anworth Mtge Asset Corp. 13,774 92,837 Boston Properties, Inc. 12,214(o) 921,424 Capstead Mortgage Corp. 22,398 267,880 Entertainment Properties Trust 5,098 209,681 Equity Residential 33,358 1,305,966 GPT Group 177,509(c) 93,647 Medical Properties Trust, Inc. 9,765 102,337 MFA Financial, Inc. 20,885 153,714 Mirvac Group 191,529(c) 259,199 NorthStar Realty Finance Corp. 12,077(o) 50,844
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 27 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) REAL ESTATE INVESTMENT TRUSTS (REITS) (CONT.) Simon Property Group, Inc. 34,316 $2,879,111 SL Green Realty Corp. 4,803 275,068 Stockland 67,739(c) 247,981 The Macerich Co. 1,269 48,615 Ventas, Inc. 18,544 880,469 Vornado Realty Trust 18,657 1,412,335 --------------- Total 9,247,982 ------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.2%) Agile Property Holdings, Ltd. 20,000(c) 27,305 CapitaLand Ltd. 37,000(c) 105,026 CB Richard Ellis Group, Inc., Class A 9,309(b) 147,548 Cheung Kong Holdings Ltd. 50,000(c) 643,990 China Overseas Land & Investment Ltd. 8,000(c) 18,073 China Resources Land Ltd. 8,000(c) 17,393 Country Garden Holdings Co. 30,000(c) 10,780 Guangzhou R&F Properties Co., Ltd., Series H 10,000(c,o) 16,383 Hopson Development Holdings Ltd. 6,000(c) 9,691 Jones Lang LaSalle, Inc. 2,382 173,624 Kerry Properties Ltd. 48,500(c) 260,175 Shimao Property Holdings Ltd. 19,500(c) 35,865 Sun Hung Kai Properties Ltd. 36,000(c) 541,570 Wharf Holdings Ltd. 54,000(c,o) 304,285 --------------- Total 2,311,708 ------------------------------------------------------------------------------------- ROAD & RAIL (0.5%) Arkansas Best Corp. 4,511 134,789 CSX Corp. 52,152 2,654,537 Hertz Global Holdings, Inc. 9,394(b,o) 93,846 Kansas City Southern 2,099(b) 75,921 Norfolk Southern Corp. 43,744 2,444,852 Ryder System, Inc. 3,748(o) 145,272 --------------- Total 5,549,217 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.6%) Amkor Technology, Inc. 19,508(b,o) 137,922 ASM Pacific Technology Ltd. 11,700(c) 110,835 Atheros Communications, Inc. 9,327(b) 361,048 Broadcom Corp., Class A 15,908(o) 527,826 Cavium Networks, Inc. 3,795(b) 94,344 Cree, Inc. 2,325(b) 163,262 Hynix Semiconductor, Inc. 1,660(b,c) 39,185 Kinsus Interconnect Technology Corp. 3,000(c) 7,862 Macronix International 12,000(c) 7,938 Marvell Technology Group Ltd. 5,408(b,c) 110,215 MEMC Electronic Materials, Inc. 42,794(b) 656,031 Micron Technology, Inc. 247,330(b,o) 2,569,758 Monolithic Power Systems, Inc. 5,265(b) 117,410 NetLogic Microsystems, Inc. 5,022(b) 147,797 Novatek Microelectronics Corp., Ltd. 6,000(c) 18,711 NVIDIA Corp. 20,473(b) 355,821 OmniVision Technologies, Inc. 8,550(b) 146,889 Power Integrations, Inc. 3,426 141,151 Powertech Technology, Inc. 4,000(c) 14,301 Rohm Co., Ltd. 2,700(c) 201,605 Samsung Electronics Co., Ltd. 220(c) 104,642 Samsung Electronics Co., Ltd., GDR 427(c,h) 156,923 Sigma Designs, Inc. 5,256(b) 61,653 Silicon Image, Inc. 26,135(b) 78,928 Siliconware Precision Industries Co., ADR 1,800(c) 10,818 Skyworks Solutions, Inc. 12,308(b,o) 192,005 STMicroelectronics NV 28,058(c) 279,308 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 5,500(c) 57,695 Teradyne, Inc. 5,545(b) 61,938 United Microelectronics Corp. 120,000(b,c) 63,693 Volterra Semiconductor Corp. 4,171(b) 104,692 --------------- Total 7,102,206 ------------------------------------------------------------------------------------- SOFTWARE (1.3%) ArcSight, Inc. 3,224(b) 90,756 Autodesk, Inc. 5,994(b) 176,343 Blackbaud, Inc. 4,362 109,879
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 28 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SOFTWARE (CONT.) Concur Technologies, Inc. 2,910(b) $119,339 JDA Software Group, Inc. 3,255(b) 90,554 Microsoft Corp. 343,758 10,061,797 MicroStrategy, Inc., Class A 1,310(b) 111,442 Oracle Corp. 59,459 1,527,502 Parametric Technology Corp. 5,707(b) 103,011 Pegasystems, Inc. 2,468 91,316 Red Hat, Inc. 22,185(b) 649,355 Rovi Corp. 3,731(b,o) 138,532 Salesforce.com, Inc. 25,141(b) 1,871,747 Sourcefire, Inc. 3,832(b) 87,944 SuccessFactors, Inc. 5,127(b) 97,618 Take-Two Interactive Software, Inc. 9,496(b) 93,536 Taleo Corp., Class A 4,234(b) 109,703 TIBCO Software, Inc. 15,762(b) 170,072 Ultimate Software Group, Inc. 2,659(b) 87,614 --------------- Total 15,788,060 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.7%) Abercrombie & Fitch Co., Class A 17,670 806,459 AnnTaylor Stores Corp. 5,380(b) 111,366 Asbury Automotive Group, Inc. 4,520(b) 60,116 AutoNation, Inc. 7,598(b) 137,372 Barnes & Noble, Inc. 4,186(o) 90,501 Bed Bath & Beyond, Inc. 10,904(b,o) 477,159 Best Buy Co., Inc. 33,039 1,405,479 Big 5 Sporting Goods Corp. 4,679 71,214 Brown Shoe Co., Inc. 5,283 81,781 Cabela's, Inc. 3,624(b,o) 63,384 Chico's FAS, Inc. 11,257 162,326 Dress Barn, Inc. 10,922(b) 285,720 DSW, Inc., Class A 3,226(b) 82,360 GameStop Corp., Class A 27,653(b,o) 605,877 Genesco, Inc. 5,863(b) 181,812 Group 1 Automotive, Inc. 3,852(b) 122,725 GUESS?, Inc. 2,761 129,712 Gymboree Corp. 2,423(b,o) 125,099 Home Depot, Inc. 211,854(o) 6,853,477 Hot Topic, Inc. 12,679(b) 82,414 Jo-Ann Stores, Inc. 6,601(b) 277,110 Jos A Bank Clothiers, Inc. 1,858(b,o) 101,540 Kingfisher PLC 57,317(c) 186,482 Limited Brands, Inc. 65,902 1,622,507 Lowe's Companies, Inc. 16,581 401,923 Lumber Liquidators Holdings, Inc. 1,975(b) 52,673 Office Depot, Inc. 20,668(b) 164,931 OfficeMax, Inc. 9,721(b) 159,619 Pacific Sunwear of California 10,860(b) 57,667 PetSmart, Inc. 3,572 114,161 RadioShack Corp. 28,762 650,884 Rent-A-Center, Inc. 10,196(b,o) 241,135 Signet Jewelers Ltd. 5,624(b,c) 181,880 Sonic Automotive, Inc., Class A 7,840(b) 86,240 Stage Stores, Inc. 3,715(o) 57,174 The Cato Corp., Class A 3,996 85,674 The Children's Place Retail Stores, Inc. 3,554(b,o) 158,331 The Gap, Inc. 16,044 370,777 The Men's Wearhouse, Inc. 8,395(o) 200,976 The Sherwin-Williams Co. 10,786 729,996 The Wet Seal, Inc., Class A 24,265(b,o) 115,501 Tiffany & Co. 11,261 534,785 TJX Companies, Inc. 13,686(o) 581,929 Urban Outfitters, Inc. 22,914(b) 871,419 Williams-Sonoma, Inc. 6,132 161,210 --------------- Total 20,102,877 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.6%) Burberry Group PLC 21,616(c) 234,372 Cie Financiere Richemont SA, Series A 31,043(c) 1,202,320 Coach, Inc. 4,569 180,567 Crocs, Inc. 13,638(b) 119,605 Deckers Outdoor Corp. 1,653(b) 228,114 Formosa Taffeta Co., Ltd. 15,000(c) 11,954 Fossil, Inc. 5,754(b) 217,156 Jones Apparel Group, Inc. 26,055 495,566 Li Ning Co., Ltd. 4,000(c) 14,503 Liz Claiborne, Inc. 8,537(b,o) 63,430 Nike, Inc., Class B 36,479 2,681,207 Polo Ralph Lauren Corp. 7,646 650,216 Pou Chen Corp. 15,000(c) 12,261 Skechers USA, Inc., Class A 3,410(b) 123,851
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 29 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TEXTILES, APPAREL & LUXURY GOODS (CONT.) The Swatch Group AG 1,123(c) $358,141 The Warnaco Group, Inc. 4,922(b) 234,829 True Religion Apparel, Inc. 2,248(b) 68,249 VF Corp. 2,466 197,650 --------------- Total 7,093,991 ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.1%) Federal Home Loan Mortgage Corp. 257,610(b,o) 327,165 Federal National Mortgage Association 383,484(b,o) 402,658 --------------- Total 729,823 ------------------------------------------------------------------------------------- TOBACCO (--%) Alliance One International, Inc. 19,099(b,o) 97,214 KT&G Corp. 724(c) 40,069 Universal Corp. 3,521(o) 185,522 --------------- Total 322,805 ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.2%) Fastenal Co. 2,894 138,883 H&E Equipment Services, Inc. 8,893(b,o) 95,867 ITOCHU Corp. 42,000(c) 367,972 Marubeni Corp. 43,000(c) 267,255 Mitsubishi Corp. 10,000(c) 262,088 Noble Group Ltd. 112,000(c,o) 245,045 Sumitomo Corp. 68,400(c) 786,585 United Rentals, Inc. 6,462(b) 60,614 WESCO International, Inc. 4,139(b,o) 143,665 Wolseley PLC 12,229(b,c) 295,435 --------------- Total 2,663,409 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (--%) COSCO Pacific Ltd. 8,000(c,o) 12,117 MAp Group 70,342(c) 199,425 Zhejiang Expressway Co., Ltd., Series H 10,000(c) 9,029 --------------- Total 220,571 ------------------------------------------------------------------------------------- WATER UTILITIES (--%) Cia de Saneamento Basico do Estado de Sao Paulo, ADR 1,700(c,o) 62,560 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.9%) America Movil SAB de CV, ADR, Series L 900(c,o) 45,306 China Mobile Ltd., ADR 2,000(c,o) 96,240 Far EasTone Telecommunications Co., Ltd. 44,000(c) 52,668 KDDI Corp. 131(c) 678,263 Mobile Telesystems OJSC, ADR 300(c,o) 16,650 NII Holdings, Inc. 3,605(b) 150,184 NTT DoCoMo, Inc. 200(c) 304,664 SK Telecom Co. Ltd., ADR 6,300(c) 108,738 Sprint Nextel Corp. 484,422(b,o) 1,840,804 Telephone & Data Systems, Inc. 2,579 87,299 Tim Participacoes SA, ADR 500(c) 13,880 USA Mobility, Inc. 6,312(b) 79,973 Vodafone Group PLC 3,253,065(c) 7,503,515 --------------- Total 10,978,184 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $938,470,327) $895,939,867 ------------------------------------------------------------------------------------- PREFERRED STOCKS & OTHER (--%) ISSUER SHARES VALUE(a) AUTOMOBILES (--%) Volkswagen AG Rights 8,463(b) $5,430 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (--%) Unione di Banche Italiane SCPA Warrants 2,728(b,c) 135 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (--%) Eletropaulo Metropolitana Eletricidade de Sao Paulo SA, Series B 2,900(c) 63,563 ------------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS & OTHER (Cost: $56,472) $69,128 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 30 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS (4.2%) SHARES VALUE(a) iShares MSCI Emerging Markets Index Fund 125,565(o) $5,288,798 Vanguard Emerging Markets ETF 1,060,586 44,735,517 ------------------------------------------------------------------------------------- TOTAL EXCHANGE TRADED FUNDS (Cost: $45,134,285) $50,024,315 -------------------------------------------------------------------------------------
BONDS (17.0%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FOREIGN AGENCIES (0.2%)(C) Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-10-19 6.50% $400,000(d) $427,015 Empresa Nacional Del Petroleo Sr Unsecured 07-08-19 6.25 300,000(d) 308,565 Pemex Project Funding Master Trust 03-01-18 5.75 250,000 257,286 06-15-35 6.63 825,000(o) 812,779 Petroleos de Venezuela 04-12-17 5.25 800,000 492,000 --------------- Total 2,297,645 ------------------------------------------------------------------------------------- SOVEREIGN (0.6%)(c) Federative Republic of Brazil Sr Unsecured 01-15-19 5.88 350,000 376,250 Perusahaan Penerbit SBSN Sr Unsecured 04-23-14 8.80 500,000(d) 585,785 Republic of Argentina Sr Unsecured 09-12-13 7.00 500,000 445,572 Republic of Colombia 09-18-37 7.38 400,000 448,000 Republic of Colombia Sr Unsecured 03-18-19 7.38 300,000 345,000 Republic of El Salvador 06-15-35 7.65 300,000(d) 315,750 Republic of Indonesia Sr Unsecured 10-12-35 8.50 500,000(d) 622,500 Republic of Peru Sr Unsecured 07-21-25 7.35 400,000 464,000 03-14-37 6.55 400,000 428,000 Republic of Philippines Sr Unsecured 06-17-19 8.38 230,000 280,600 01-20-20 6.50 300,000 323,640 Republic of Turkey 06-05-20 7.00 650,000 715,000 03-17-36 6.88 500,000 505,000 Republic of Turkey Sr Unsecured 07-14-17 7.50 100,000 114,000 Republic of Venezuela Sr Unsecured 05-07-23 9.00 1,230,000 913,275 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 200,000 226,500 Russian Federation 03-31-30 7.50 586,560(d) 676,010 --------------- Total 7,784,882 ------------------------------------------------------------------------------------- TREASURY (0.1%)(c) Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR36 09-15-19 11.50 3,500,000,000 444,276 Mexican Fixed Rate Bonds (Mexican Peso) Series M-10 12-14-17 7.75 5,700,000 469,890 Nota do Tesouro Nacional (Brazilian Real) Series F 01-01-13 10.00 148,000 814,366 --------------- Total 1,728,532 ------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (7.0%) Federal Natl Mtge Assn 10-15-15 4.38 5,115,000 5,457,628 U.S. Treasury 03-31-15 2.50 3,746,000 3,735,474 02-15-20 3.63 5,745,000(o) 5,647,157 02-15-40 4.63 435,000 428,747
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 31 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) U.S. GOVERNMENT OBLIGATIONS & AGENCIES (CONT.) U.S. Treasury Inflation-Indexed Bond 01-15-12 3.38% $8,541,330(k,o) $9,142,271 04-15-12 2.00 3,043,002(k,o) 3,187,428 07-15-12 3.00 4,820,080(k,o) 5,192,736 01-15-14 2.00 6,636,803(k,o) 7,047,719 04-15-14 1.25 1,648,270(k) 1,703,825 01-15-15 1.63 9,832,089(k,o) 10,272,551 01-15-17 2.38 7,284,229(k,o) 7,866,141 01-15-26 2.00 9,278,855(k) 9,231,304 01-15-27 2.38 14,423,417(k) 15,033,590 --------------- Total 83,946,571 ------------------------------------------------------------------------------------- ASSET-BACKED (0.8%) Bank of America Credit Card Trust Series 2008-A1 Cl A1 04-15-13 0.81 1,100,000(i) 1,101,824 Capital Auto Receivables Asset Trust Series 2007-SN2 Cl A4 05-16-11 1.26 496,981(d,i) 497,812 Chrysler Financial Lease Trust Series 2010 A Cl A2 06-15-11 1.78 2,650,000(d) 2,648,885 CitiFinancial Auto Issuance Trust Series 2009-1 Cl A2 11-15-12 1.83 3,700,000(d) 3,703,814 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-2 Cl AIO 08-25-11 18.77 800,000(j) 52,000 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 5.88 1,500,000(j) 165,532 Santander Drive Auto Receivables Trust Series 2007-1 Cl A4 (FGIC) 09-15-14 0.28 801,406(i,m) 792,191 Triad Auto Receivables Owner Trust Series 2007-B Cl A3A (AGM) 10-12-12 5.24 220,000(m) 224,623 --------------- Total 9,186,681 ------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (0.7%)(f) Citigroup Commercial Mtge Trust Series 2006-C5 Cl A4 10-15-49 5.43 350,000 351,561 Citigroup/Deutsche Bank Commercial Mtge Trust Series 2005-CD1 Cl ASB 07-15-44 5.23 175,000 184,114 Commercial Mtge Pass-Through Ctfs Series 2004-LB3A Cl A3 07-10-37 5.09 331,000 341,164 Commercial Mtge Pass-Through Ctfs Series 2004-LB3A Cl A4 07-10-37 5.23 450,000 468,780 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 0.54 175,000(d,i) 151,573 Credit Suisse First Boston Mtge Securities Series 2005-C4 Cl A1 08-15-38 4.77 54,808 54,772 Federal Natl Mtge Assn #735029 09-01-13 5.32 345,151 365,418 GE Capital Commercial Mtge Series 2005-C1 Cl A5 06-10-48 4.77 400,000 397,807 General Electric Capital Assurance Series 2003-1 Cl A4 05-12-35 5.25 324,690(d) 341,615 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 200,000 206,107 GS Mtge Securities II Series 2007-EOP Cl J 03-06-20 1.08 950,000(d,i) 783,631 GS Mtge Securities II Series 2007-GG10 Cl F 08-10-45 6.00 625,000 76,074 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 202,338 208,513 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 71,871 73,736
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 32 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) COMMERCIAL MORTGAGE-BACKED (CONT.) JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77% $750,000 $781,328 JPMorgan Chase Commercial Mtge Securities Series 2004-C2 Cl A2 05-15-41 5.11 351,209 366,009 JPMorgan Chase Commercial Mtge Securities Series 2004-CBX Cl A3 01-12-37 4.18 113,321 113,541 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl ASB 04-15-43 5.49 575,000 603,201 JPMorgan Chase Commercial Mtge Securities Series 2007-CB20 Cl E 02-12-51 6.40 525,000(d) 103,764 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 250,000 245,547 LB-UBS Commercial Mtge Trust Series 2005-C1 Cl A4 02-15-30 4.74 325,000 329,735 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 950,000 945,510 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.97 350,000 377,484 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 350,000 359,072 --------------- Total 8,230,056 ------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE-BACKED (3.1%)(f) Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-14 Cl 2A2 05-25-35 0.50 549,080(i) 308,012 Countrywide Home Loans Collateralized Mtge Obligation Series 2005-R2 Cl 2A1 06-25-35 7.00 305,181(d) 285,571 Federal Home Loan Mtge Corp 04-01-40 6.00 3,000,000(e) 3,217,969 Federal Home Loan Mtge Corp #1G0847 07-01-35 4.72 3,584,436(i) 3,743,288 Federal Home Loan Mtge Corp #B13193 04-01-19 5.50 239,184 258,462 Federal Home Loan Mtge Corp #B15214 06-01-19 5.00 1,320,536 1,407,985 Federal Home Loan Mtge Corp #B16408 09-01-19 5.50 954,969 1,029,550 Federal Home Loan Mtge Corp #C53878 12-01-30 5.50 510,729 542,691 Federal Home Loan Mtge Corp #G12141 09-01-20 4.50 536,245 563,036 Federal Natl Mtge Assn 05-01-40 6.50 2,900,000(e) 3,133,813 Federal Natl Mtge Assn #190353 08-01-34 5.00 265,966 275,546 Federal Natl Mtge Assn #254684 03-01-18 5.00 760,947 812,052 Federal Natl Mtge Assn #254800 07-01-23 5.50 792,555 842,465 Federal Natl Mtge Assn #545874 08-01-32 6.50 599,869 669,926 Federal Natl Mtge Assn #555528 04-01-33 6.00 1,187,263 1,289,868 Federal Natl Mtge Assn #598558 08-01-16 6.00 203,766 222,311 Federal Natl Mtge Assn #661185 06-01-17 7.00 204,094 224,038 Federal Natl Mtge Assn #668824 08-01-32 6.50 872,942 964,477 Federal Natl Mtge Assn #670387 08-01-32 7.00 66,269 74,415 Federal Natl Mtge Assn #671054 01-01-33 7.00 733,898 824,770 Federal Natl Mtge Assn #725232 03-01-34 5.00 1,066,405 1,106,481 Federal Natl Mtge Assn #725424 04-01-34 5.50 2,343,663 2,487,248 Federal Natl Mtge Assn #730153 08-01-33 5.50 662,891 703,503 Federal Natl Mtge Assn #735212 12-01-34 5.00 2,082,706 2,157,721
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 33 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) RESIDENTIAL MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #735224 02-01-35 5.50% $2,023,974 $2,147,973 Federal Natl Mtge Assn #743579 11-01-33 5.50 785,331 833,444 Federal Natl Mtge Assn #785506 06-01-34 5.00 1,980,277 2,051,603 Federal Natl Mtge Assn #786151 07-01-19 5.50 2,000,560 2,168,410 Federal Natl Mtge Assn #791447 10-01-34 6.00 716,001(g) 772,509 Federal Natl Mtge Assn #883201 07-01-36 6.50 751,614(g) 830,052 Federal Natl Mtge Assn #974740 04-01-23 6.00 1,276,717 1,377,351 --------------- Total 37,326,540 ------------------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.1%) TransDigm 07-15-14 7.75 1,000,000(d) 1,020,000 ------------------------------------------------------------------------------------- CHEMICALS (0.1%) INVISTA Sr Unsecured 05-01-12 9.25 1,000,000(d) 1,012,500 MacDermid Sr Sub Nts 04-15-17 9.50 315,000(d) 323,663 --------------- Total 1,336,163 ------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (0.2%) Terex Sr Sub Nts 11-15-17 8.00 1,000,000(o) 972,500 United Rentals North America 06-15-16 10.88 1,000,000(o) 1,087,500 --------------- Total 2,060,000 ------------------------------------------------------------------------------------- CONSUMER CYCLICAL SERVICES (0.1%) West Corp 10-15-14 9.50 1,000,000 1,027,500 ------------------------------------------------------------------------------------- CONSUMER PRODUCTS (0.2%) AAC Group Holding Sr Disc Nts 10-01-12 10.25 850,000(d) 856,375 Jarden 05-01-16 8.00 1,000,000 1,047,500 --------------- Total 1,903,875 ------------------------------------------------------------------------------------- ELECTRIC (0.3%) Indiana Michigan Power Sr Unsecured 03-15-37 6.05 255,000 254,416 Majapahit Holding 08-07-19 8.00 200,000(c,d) 219,750 NRG Energy 01-15-17 7.38 1,000,000 990,000 Power Sector Assets & Liabilities Management 05-27-19 7.25 400,000(c,d) 433,000 Sierra Pacific Power Series M 05-15-16 6.00 1,780,000 1,934,978 --------------- Total 3,832,144 ------------------------------------------------------------------------------------- FOOD AND BEVERAGE (0.3%) Kraft Foods Sr Unsecured 02-19-14 6.75 345,000 388,229 Pinnacle Foods Finance LLC 04-01-15 9.25 1,000,000 1,025,000 SABMiller Sr Unsecured 01-15-14 5.70 2,420,000(c,d) 2,644,024 --------------- Total 4,057,253 ------------------------------------------------------------------------------------- GAMING (0.1%) Boyd Gaming Sr Sub Nts 02-01-16 7.13 1,000,000 835,000 MGM MIRAGE Sr Unsecured 03-01-18 11.38 1,000,000(d,o) 965,000 --------------- Total 1,800,000 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 34 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) GAS PIPELINES (0.6%) CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75% $1,417,000 $1,491,905 Colorado Interstate Gas Sr Unsecured 11-15-15 6.80 1,082,000 1,208,049 Southern Natural Gas Sr Unsecured 04-01-17 5.90 1,800,000(d) 1,874,824 TransCapitalInvest for Transneft Secured 08-07-18 8.70 400,000(c,d,o) 479,846 Transcontinental Gas Pipe Line LLC Sr Unsecured 04-15-16 6.40 1,750,000 1,966,900 --------------- Total 7,021,524 ------------------------------------------------------------------------------------- HEALTH CARE (0.3%) Apria Healthcare Group Sr Secured 11-01-14 12.38 125,000(d) 136,875 DaVita 03-15-15 7.25 1,000,000 1,020,000 HCA Sr Secured Pay-in-kind 11-15-16 9.63 1,000,000(p) 1,071,250 Omnicare 12-15-13 6.75 1,000,000 1,005,000 Select Medical 02-01-15 7.63 1,000,000 952,500 --------------- Total 4,185,625 ------------------------------------------------------------------------------------- HOME CONSTRUCTION (0.1%) K Hovnanian Enterprises Sr Secured 10-15-16 10.63 910,000 969,150 ------------------------------------------------------------------------------------- INDEPENDENT ENERGY (0.3%) Chesapeake Energy 01-15-16 6.63 1,000,000 980,000 PetroHawk Energy 06-01-15 7.88 1,000,000 1,018,750 Quicksilver Resources 08-01-15 8.25 1,000,000 1,020,000 Range Resources 05-15-19 8.00 1,000,000 1,067,500 --------------- Total 4,086,250 ------------------------------------------------------------------------------------- MEDIA CABLE (0.2%) Charter Communications Operating LLC/Capital Secured 04-30-14 8.38 929,000(d) 954,548 Comcast 03-15-37 6.45 640,000 651,754 CSC Holdings LLC Sr Unsecured 04-15-14 8.50 1,000,000(d) 1,066,250 --------------- Total 2,672,552 ------------------------------------------------------------------------------------- MEDIA NON CABLE (0.2%) Nielsen Finance LLC 08-01-14 10.00 1,000,000(o) 1,047,500 RR Donnelley & Sons Sr Unsecured 01-15-17 6.13 1,620,000 1,626,269 --------------- Total 2,673,769 ------------------------------------------------------------------------------------- NON CAPTIVE DIVERSIFIED (0.2%) Ford Motor Credit LLC Sr Unsecured 08-10-11 9.88 1,000,000 1,057,500 GMAC 12-01-14 6.75 1,000,000 995,000 --------------- Total 2,052,500 ------------------------------------------------------------------------------------- OIL FIELD SERVICES (0.1%) Gaz Capital Sr Unsecured 07-31-14 8.13 120,000(c,d,o) 134,761 04-11-18 8.15 350,000(c,d) 394,625 KazMunaiGaz Finance 01-23-15 11.75 500,000(c,d,o) 643,029 Key Energy Services 12-01-14 8.38 90,000 91,013 --------------- Total 1,263,428 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 35 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) PAPER (0.1%) Boise Cascade LLC 10-15-14 7.13% $128,000 $118,400 Georgia-Pacific LLC 05-01-16 8.25 1,000,000(d) 1,090,000 --------------- Total 1,208,400 ------------------------------------------------------------------------------------- TRANSPORTATION SERVICES (0.1%) ERAC USA Finance LLC 10-15-37 7.00 720,000(d) 742,279 ------------------------------------------------------------------------------------- WIRELESS (0.2%) Cricket Communications Sr Secured 05-15-16 7.75 1,000,000(o) 1,037,500 Sprint Nextel Sr Unsecured 08-15-17 8.38 1,000,000 1,005,000 --------------- Total 2,042,500 ------------------------------------------------------------------------------------- WIRELINES (0.7%) AT&T Sr Unsecured 02-15-39 6.55 1,405,000 1,476,995 Cincinnati Bell 10-15-17 8.25 499,000 505,238 Level 3 Financing 02-15-17 8.75 1,000,000 915,000 TELUS Sr Unsecured 06-01-11 8.00 2,319,000(c) 2,495,749 Verizon New York Sr Unsecured Series A 04-01-12 6.88 2,035,000 2,215,810 Windstream 08-01-16 8.63 1,000,000 1,022,500 --------------- Total 8,631,292 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $197,946,558) $205,087,111 ------------------------------------------------------------------------------------- FDIC-INSURED DEBT (0.3%)(n) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) U.S. AGENCIES Citibank FDIC Govt Guaranty 05-07-12 1.88% $4,000,000 $4,051,872 ------------------------------------------------------------------------------------- TOTAL FDIC-INSURED DEBT (Cost: $4,009,831) $4,051,872 -------------------------------------------------------------------------------------
MONEY MARKET FUND (2.2%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 26,106,411(l) $26,106,411 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $26,106,411) $26,106,411 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (11.4%) EFFECTIVE AMOUNT PAYABLE ISSUER YIELD AT MATURITY VALUE(a) ASSET-BACKED COMMERCIAL PAPER (2.4%) Belmont Funding LLC 04-12-10 0.48% $4,997,933 $4,997,933 Elysian Funding LLC 04-19-10 0.55 4,993,125 4,993,125 Grampian Funding LLC 04-15-10 0.25 4,998,993 4,998,993 Hannover Funding Company LLC 04-06-10 0.35 2,999,796 2,999,796 Rheingold Securitization 04-28-10 0.27 5,998,650 5,998,650 Versailles Commercial Paper LLC 04-12-10 0.23 4,999,010 4,999,010 --------------- Total 28,987,507 ------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT (5.4%) Australia and New Zealand Bank Group 05-04-10 0.32 2,500,000 2,500,000 05-24-10 0.31 5,000,000 5,000,000 Banco di Brescia 04-12-10 0.31 1,999,466 1,999,466 Banco Santander Central Hispano 04-06-10 0.30 4,000,000 4,000,000 Banque Federative du Credit Mutuel 06-02-10 0.37 4,995,277 4,995,277
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 36 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (CONTINUED) EFFECTIVE AMOUNT PAYABLE ISSUER YIELD AT MATURITY VALUE(a) CERTIFICATES OF DEPOSIT (CONT.) Caisse Centrale du Credit Immobilier de France 04-30-10 0.35% $2,499,257 $2,499,257 Clydesdale Bank 04-30-10 0.25 2,498,959 2,498,959 Credit Industrial et Commercial 04-26-10 0.32 1,000,251 1,000,251 Dexia Bank 04-26-10 0.33 2,500,000 2,500,000 Macquarie Bank 04-01-10 0.31 4,999,742 4,999,742 Natixis 04-12-10 0.27 4,997,719 4,997,719 Pohjola Bank 06-10-10 0.34 2,000,000 2,000,000 Raiffeisen Zentralbank Oesterreich 04-01-10 0.31 5,000,000 5,000,000 Sumitomo Mitsui Banking 04-26-10 0.29 5,000,000 5,000,000 Ulster Bank Ireland Limited 04-01-10 0.29 4,999,758 4,999,758 Unicredit BK 04-06-10 0.30 5,000,000 5,000,000 United Overseas Bank 05-28-10 0.30 5,000,000 5,000,000 --------------- Total 63,990,429 ------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (3.6%)(r) Banc of America Securities LLC dated 03-31-10, matures 04-01-10, repurchase price $8,790,132 04-01-10 0.05 8,790,119 8,790,119 Cantor Fitzgerald dated 03-31-10, matures 04-01-10, repurchase price $10,000,014 04-01-10 0.05 10,000,000 10,000,000 Morgan Stanley dated 02-23-10, matures 04-30-10, repurchase price $5,001,542 04-30-10 0.37 5,000,000 5,000,000 Morgan Stanley dated 03-04-10, matures 04-30-10, repurchase price $10,003,083 04-30-10 0.37 10,000,000 10,000,000 Pershing LLC dated 03-31-10, matures 04-01-10, repurchase price $10,000,061 04-01-10 0.22 10,000,000 10,000,000 --------------- Total 43,790,119 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $136,768,055) $136,768,055 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,348,491,939)(s) $1,318,046,759 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 37 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT MARCH 31, 2010
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------ S&P 500 Index 5 $1,456,500 June 2010 $30,170 U.S. Treasury Note, 2- year (149) (32,326,016) July 2010 75,760 U.S. Treasury Note, 5- year (15) (1,722,657) July 2010 16,571 U.S. Treasury Note, 10- year 143 16,623,750 June 2010 (126,457) ------------------------------------------------------------------------------------ Total $(3,956) ------------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING AT MARCH 31, 2010 SELL PROTECTION
UNAMORTIZED PERIODIC RECEIVE PREMIUM PAYMENTS REFERENCE EXPIRATION FIXED NOTIONAL MARKET (PAID) RECEIVABLE UNREALIZED COUNTERPARTY ENTITY DATE RATE AMOUNT VALUE RECEIVED (PAYABLE) APPRECIATION ------------------------------------------------------------------------------------------------------------------------- JPMorgan Chase CDX North America June 20, 2014 5.00% $5,500,000 $73,879 $913,744 $8,617 $996,240 Bank High Yield Index ------------------------------------------------------------------------------------------------------------------------- JPMorgan Chase CDX North America June 20, 2014 4.46 10,000,000 134,325 1,329,624 15,666 1,479,615 Bank High Yield Index ------------------------------------------------------------------------------------------------------------------------- Total $208,204 $2,243,368 $24,283 $2,475,855 -------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 38 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT MARCH 31, 2010
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION --------------------------------------------------------------------------------------------- April 6, 2010 223,329 18,103 $27 $-- Mexican Peso U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 5,534,000 5,428,674 -- (20,200) Canadian Dollar U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 1,019,000 13,551,188 17,869 -- European Monetary Unit U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 46,000 61,968 -- (167) European Monetary Unit U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 8,644,000 8,167,331 -- (32,669) Swiss Franc U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 5,402,522 5,922,000 18,040 -- U.S. Dollar Australian Dollar --------------------------------------------------------------------------------------------- April 28, 2010 8,274,750 752,096,000 -- (228,519) U.S. Dollar Japanese Yen --------------------------------------------------------------------------------------------- April 28, 2010 13,579,839 81,118,000 58,801 -- U.S. Dollar Norwegian Krone --------------------------------------------------------------------------------------------- Total $94,737 $(281,555) ---------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt GDR -- Global Depositary Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At March 31, 2010, the value of foreign securities, excluding short- term securities, represented 15.81% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2010, the value of these securities amounted to $26,541,993 or 2.20% of net assets. (e) At March 31, 2010, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $6,323,744. See Note 2 to the financial statements. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 39 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) At March 31, 2010, investments in securities included securities valued at $2,016,486 that were partially pledged as collateral to cover initial margin deposits on open interest rate futures contracts. (h) Identifies issues considered to be illiquid as to their marketability (see Note 2 to the financial statements). The aggregate value of such securities at March 31, 2010 was $265,278, representing 0.02% of net assets. Information concerning such security holdings at March 31, 2010 was as follows:
ACQUISITION SECURITY DATES COST ------------------------------------------------------------------------ BGP Holdings PLC 02-04-09 thru 05-14-09 $-- Reliance Industries Ltd., GDR 11-03-09 88,036 Samsung Electronics Co., Ltd., GDR 11-03-09 thru 02-03-10 132,624
(i) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on March 31, 2010. (j) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only security is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. The interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at March 31, 2010. (k) Inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (l) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at March 31, 2010. (m) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AGM -- Assured Guaranty Municipal Corporation FGIC -- Financial Guaranty Insurance Company
-------------------------------------------------------------------------------- 40 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (n) This debt is guaranteed under the FDIC's Temporary Liquidity Guarantee Program (TLGP) and is backed by the full faith and credit of the United States. (o) At March 31, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (p) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings (q) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (r) The table below represents securities received as collateral subject to repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
BANC OF AMERICA SECURITIES LLC (0.05%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae REMICS $552,021 Freddie Mac REMICS 1,364,205 Government National Mortgage Association 7,049,696 ----------------------------------------------------------- Total market value of collateral securities $8,965,922 ----------------------------------------------------------- CANTOR FITZGERALD (0.05%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Grantor Trust $393 Fannie Mae Interest Strip 26,640 Fannie Mae Pool 7,266,484 Fannie Mae REMICS 423,903 Fannie Mae Whole Loan 7,543 Federal Home Loan Mortgage Corp 226,985 Freddie Mac Non Gold Pool 1,066,973 Freddie Mac Reference REMIC 13,961 Freddie Mac REMICS 159,984 Freddie Mac Strips 14,840 Ginnie Mae I Pool 165,334 Ginnie Mae II Pool 264,405 Government National Mortgage Association 74,481
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 41 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
CANTOR FITZGERALD (0.05%) (CONTINUED) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- United States Treasury Bill $64,079 United States Treasury Inflation Indexed Bonds 11,563 United States Treasury Note/Bond 3 United States Treasury Strip Coupon 357,283 United States Treasury Strip Principal 55,146 ----------------------------------------------------------- Total market value of collateral securities $10,200,000 ----------------------------------------------------------- MORGAN STANLEY (0.37%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Access Group Inc $389,486 Accredited Mortgage Loan Trust 20,876 American Express Credit Account Master Trust 11,286 American Express Issuance Trust 11,612 AmeriCredit Automobile Receivables Trust 13,465 BA Credit Card Trust 97,135 Banc of America Commercial Mortgage Inc 192,572 Banc of America Large Loan Inc 62,318 Bank One Issuance Trust 93,966 BMW Vehicle Lease Trust 66,836 Capital Auto Receivables Asset Trust 125,802 Capital One Multi-Asset Execution Trust 175,709 Chase Issuance Trust 196,649 Citibank Credit Card Issuance Trust 133,126 Citifinancial Mortgage Securities Inc 13,385 Citigroup Commercial Mortgage Trust 102,249 Collegiate Funding Services Education Loan Trust I 65,129 Commercial Mortgage Asset Trust 32,901 Commercial Mortgage Pass Through Certificates 40,124 Credit Suisse First Boston Mortgage Securities Corp 28,777 Credit Suisse Mortgage Capital Certificates 110,074 Daimler Chrysler Auto Trust 176,731 DFR Middle Market CLO Ltd 138,233 Education Funding Capital Trust I 59,177 Fannie Mae REMICS 33,242 Fannie Mae Whole Loan 80,831 Federal National Mortgage Association 18,134 FHLMC Structured Pass Through Securities 12,304 Ford Credit Floorplan Master Owner Trust 104,404 GE Business Loan Trust 16,978 GE Capital Credit Card Master Note Trust 141,478 G-FORCE CDO 31,790 Gramercy Real Estate CDO 203,713
-------------------------------------------------------------------------------- 42 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
MORGAN STANLEY (0.37%) (CONTINUED) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Granite Master Issuer PLC $109,936 Granite Mortgages PLC 14,945 HSBC Home Equity Loan Trust 36,042 Hyundai Floorplan Master Owner Trust 56,965 JP Morgan Chase Commercial Mortgage Securities Corp 205,484 LB-UBS Commercial Mortgage Trust 24,374 MBNA Credit Card Master Note Trust 330,341 Merrill Lynch Mortgage Trust 73,364 Morgan Stanley ABS Capital I 6,081 Nelnet Education Loan Funding Inc 26,960 Nelnet Student Loan Trust 132,857 Nissan Auto Lease Trust 40,104 Northstar Education Finance Inc 46,836 Pennsylvania Higher Education Assistance Agency 19,858 Saxon Asset Securities Trust 17,648 SLC Student Loan Trust 41,467 SLM Student Loan Trust 172,742 Victoria Falls CLO Ltd 347,185 Wachovia Bank Commercial Mortgage Trust 542,069 ----------------------------------------------------------- Total market value of collateral securities $5,245,750 ----------------------------------------------------------- MORGAN STANLEY (0.37%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Access Group Inc $778,973 Accredited Mortgage Loan Trust 41,752 American Express Credit Account Master Trust 22,572 American Express Issuance Trust 23,224 AmeriCredit Automobile Receivables Trust 26,929 BA Credit Card Trust 194,270 Banc of America Commercial Mortgage Inc 385,145 Banc of America Large Loan Inc 124,637 Bank One Issuance Trust 187,931 BMW Vehicle Lease Trust 133,672 Capital Auto Receivables Asset Trust 251,604 Capital One Multi-Asset Execution Trust 351,419 Chase Issuance Trust 393,297 Citibank Credit Card Issuance Trust 266,253 Citifinancial Mortgage Securities Inc 26,770 Citigroup Commercial Mortgage Trust 204,497 Collegiate Funding Services Education Loan Trust I 130,258 Commercial Mortgage Asset Trust 65,803 Commercial Mortgage Pass Through Certificates 80,247
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 43 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
MORGAN STANLEY (0.37%) (CONTINUED) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Credit Suisse First Boston Mortgage Securities Corp $57,553 Credit Suisse Mortgage Capital Certificates 220,148 Daimler Chrysler Auto Trust 353,462 DFR Middle Market CLO Ltd 276,466 Education Funding Capital Trust I 118,353 Fannie Mae REMICS 66,484 Fannie Mae Whole Loan 161,662 Federal National Mortgage Association 36,267 FHLMC Structured Pass Through Securities 24,609 Ford Credit Floorplan Master Owner Trust 208,808 GE Business Loan Trust 33,956 GE Capital Credit Card Master Note Trust 282,957 G-FORCE CDO 63,581 Gramercy Real Estate CDO 407,425 Granite Master Issuer PLC 219,871 Granite Mortgages PLC 29,890 HSBC Home Equity Loan Trust 72,084 Hyundai Floorplan Master Owner Trust 113,931 JP Morgan Chase Commercial Mortgage Securities Corp 410,967 LB-UBS Commercial Mortgage Trust 48,748 MBNA Credit Card Master Note Trust 660,681 Merrill Lynch Mortgage Trust 146,729 Morgan Stanley ABS Capital I 12,163 Nelnet Education Loan Funding Inc 53,920 Nelnet Student Loan Trust 265,713 Nissan Auto Lease Trust 80,208 Northstar Education Finance Inc 93,672 Pennsylvania Higher Education Assistance Agency 39,716 Saxon Asset Securities Trust 35,295 SLC Student Loan Trust 82,935 SLM Student Loan Trust 345,483 Victoria Falls CLO Ltd 694,371 Wachovia Bank Commercial Mortgage Trust 1,084,138 ----------------------------------------------------------- Total market value of collateral securities $10,491,499 -----------------------------------------------------------
-------------------------------------------------------------------------------- 44 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
PERSHING LLC (0.22%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Benchmark REMIC $40,142 Fannie Mae Pool 4,036,983 Fannie Mae REMICS 969,212 Federal Home Loan Banks 15,300 Federal Home Loan Mortgage Corp 56,911 Federal National Mortgage Association 130,241 Freddie Mac Gold Pool 1,843,799 Freddie Mac Non Gold Pool 86,560 Freddie Mac Reference REMIC 24,685 Freddie Mac REMICS 182,764 Ginnie Mae I Pool 282,880 Ginnie Mae II Pool 113,413 Government National Mortgage Association 363,277 United States Treasury Inflation Indexed Bonds 48,192 United States Treasury Note/Bond 1,847,296 United States Treasury Strip Principal 158,345 ----------------------------------------------------------- Total market value of collateral securities $10,200,000 -----------------------------------------------------------
(s) At March 31, 2010, the cost of securities for federal income tax purposes was approximately $1,348,492,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $123,197,000 Unrealized depreciation (153,642,000) ----------------------------------------------------------- Net unrealized depreciation $(30,445,000) -----------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 45 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 46 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of March 31, 2010:
FAIR VALUE AT MARCH 31, 2010 ------------------------------------------------------------------ LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------------------- Equity Securities Common Stocks Real Estate $-- $-- $1 $1 Water Utilities -- 62,560 -- 62,560 All Other Industries(a) 895,877,306 -- -- 895,877,306 Preferred Stocks & Other(a) 69,128 -- -- 69,128 ---------------------------------------------------------------------------------------------- Total Equity Securities 895,946,434 62,560 1 896,008,995 ---------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies -- 11,811,059 -- 11,811,059 U.S. Government Obligations & Agencies 9,811,378 74,135,193 -- 83,946,571 Asset-Backed Securities -- 9,134,681 52,000 9,186,681 Commercial Mortgage- Backed Securities -- 8,230,056 -- 8,230,056 Residential Mortgage- Backed Securities -- 37,326,540 -- 37,326,540 Corporate Debt Securities(a) -- 54,586,204 -- 54,586,204 ---------------------------------------------------------------------------------------------- Total Bonds 9,811,378 195,223,733 52,000 205,087,111 ---------------------------------------------------------------------------------------------- Other Exchange Traded Funds 50,024,315 -- -- 50,024,315 FDIC-Insured Debt Securities -- 4,051,872 -- 4,051,872 Affiliated Money Market Fund(b) 26,106,411 -- -- 26,106,411 Investments of Cash Collateral Received for Securities on Loan(c) -- 136,768,055 -- 136,768,055 ---------------------------------------------------------------------------------------------- Total Other 76,130,726 140,819,927 -- 216,950,653 ---------------------------------------------------------------------------------------------- Investments in Securities 981,888,538 336,106,220 52,001 1,318,046,759 Other Financial Instruments(d) (3,956) 2,289,037 -- 2,285,081 ---------------------------------------------------------------------------------------------- Total $981,884,582 $338,395,257 $52,001 $1,320,331,840 ----------------------------------------------------------------------------------------------
(a) Industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at March 31, 2010. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 47 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) (c) Asset categories for Investments of Cash Collateral are identified in the Portfolio of Investments. (d) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
ASSET- COMMON BACKED STOCKS SECURITIES TOTAL ------------------------------------------------------------------------ Balance as of Sept. 30, 2009 $2 $72,000 $72,002 Accrued discounts/premiums -- (18,494) (18,494) Realized gain (loss) 5,050 -- 5,050 Change in unrealized appreciation (depreciation)* (1) (1,506) (1,507) Net purchases (sales) (5,050) -- (5,050) Transfers in and/or out of Level 3 -- -- -- ------------------------------------------------------------------------ Balance as of March 31, 2010 $1 $52,000 $52,001 ------------------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities held at March 31, 2010 was $(536), which is comprised of Common Stocks of $1 and Asset-Backed Securities of $(537). HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 800.SEC.0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling 800.221.2450. -------------------------------------------------------------------------------- 48 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- MARCH 31, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $1,185,617,473) $1,155,172,293 Affiliated money market fund (identified cost $26,106,411) 26,106,411 Investments of cash collateral received for securities on loan (identified cost $136,768,055) 136,768,055 --------------------------------------------------------------------------------- Total investments in securities (identified cost $1,348,491,939) 1,318,046,759 Foreign currency holdings (identified cost $78,505) 78,578 Capital shares receivable 422,139 Dividends and accrued interest receivable 3,962,462 Receivable for investment securities sold 40,292,358 Variation margin receivable on futures contracts 12,758 Unrealized appreciation on forward foreign currency contracts 94,737 Unrealized appreciation on swap contracts 2,475,855 Cash deposits and collateral held at broker 270,000 --------------------------------------------------------------------------------- Total assets 1,365,655,646 --------------------------------------------------------------------------------- LIABILITIES Premiums received on outstanding credit default swap contracts 2,243,368 Disbursements in excess of cash 15,407 Capital shares payable 3,139,402 Payable for investment securities purchased 18,556,069 Payable upon return of securities loaned 136,768,055 Unrealized depreciation on forward foreign currency contracts 281,555 Accrued investment management services fees 18,731 Accrued distribution fees 508,106 Accrued transfer agency fees 6,058 Accrued administrative services fees 2,523 Accrued plan administration services fees 454 Other accrued expenses 185,589 --------------------------------------------------------------------------------- Total liabilities 161,725,317 --------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $1,203,930,329 --------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 1,322,554 Additional paid-in capital 1,561,523,933 Undistributed net investment income 5,135,735 Accumulated net realized gain (loss) (335,929,402) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (28,122,491) --------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $1,203,930,329 --------------------------------------------------------------------------------- *Value of securities on loan $ 152,355,939 ---------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 49 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- MARCH 31, 2010 (UNAUDITED)
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $1,054,309,485 115,657,140 $9.12(1) Class B $ 105,477,948 11,684,871 $9.03 Class C $ 43,131,508 4,802,647 $8.98 Class I $ 3,954 434 $9.11 Class R2 $ 3,953 434 $9.11 Class R3 $ 3,953 434 $9.11 Class R4 $ 995,574 109,018 $9.13 Class R5 $ 3,954 434 $9.11 --------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $9.68. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 50 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 9,932,980 Interest 6,248,105 Income distributions from affiliated money market fund 16,760 Income from securities lending -- net 329,226 Less foreign taxes withheld (141,170) ------------------------------------------------------------------------------- Total income 16,385,901 ------------------------------------------------------------------------------- Expenses: Investment management services fees 2,990,802 Distribution fees Class A 1,349,654 Class B 548,060 Class C 222,734 Class R2 9 Class R3 5 Transfer agency fees Class A 1,014,869 Class B 110,113 Class C 43,099 Class R2 1 Class R3 1 Class R4 288 Class R5 1 Administrative services fees 469,664 Plan administration services fees Class R2 5 Class R3 5 Class R4 1,439 Compensation of board members 18,501 Custodian fees 59,160 Printing and postage 21,000 Registration fees 36,435 Professional fees 17,146 Other 55,074 ------------------------------------------------------------------------------- Total expenses 6,958,065 ------------------------------------------------------------------------------- Investment income (loss) -- net 9,427,836 -------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 51 STATEMENT OF OPERATIONS (continued) -------------------------------------------- SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED)
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 24,926,352 Foreign currency transactions 1,519,752 Futures contracts 958,821 Swap transactions 633,250 ------------------------------------------------------------------------------- Net realized gain (loss) on investments 28,038,175 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 66,267,186 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 94,305,361 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $103,733,197 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 52 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31, 2010 SEPT. 30, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 9,427,836 $ 21,824,374 Net realized gain (loss) on investments 28,038,175 (356,570,587) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 66,267,186 251,195,052 --------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 103,733,197 (83,551,161) --------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (8,272,948) (16,834,117) Class B (432,675) (994,784) Class C (180,743) (372,611) Class I (38) (67) Class R2 (23) (45) Class R3 (27) (53) Class R4 (8,803) (63,666) Class R5 (37) (66) Net realized gain Class A -- (41,389,405) Class B -- (4,968,746) Class C -- (1,748,006) Class I -- (121) Class R2 -- (121) Class R3 -- (121) Class R4 -- (204,989) Class R5 -- (121) --------------------------------------------------------------------------------------------------- Total distributions (8,895,294) (66,577,039) ---------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 53 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31, 2010 SEPT. 30, 2009 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 27,314,257 $ 103,620,192 Class B shares 2,728,364 15,592,329 Class C shares 2,683,487 7,953,459 Class R4 shares 85,048 337,914 Reinvestment of distributions at net asset value Class A shares 8,058,876 57,145,191 Class B shares 418,209 5,803,404 Class C shares 166,113 1,998,857 Class R4 shares 8,803 268,655 Conversions from Class B to Class A Class A shares 133 17,575,561 Class B shares (133) (17,575,561) Payments for redemptions Class A shares (186,675,767) (364,792,004) Class B shares (21,377,385) (41,694,600) Class C shares (9,647,044) (17,561,521) Class R4 shares (410,706) (5,164,392) --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (176,647,745) (236,492,516) --------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (81,809,842) (386,620,716) Net assets at beginning of period 1,285,740,171 1,672,360,887 --------------------------------------------------------------------------------------------------- Net assets at end of period $1,203,930,329 $1,285,740,171 --------------------------------------------------------------------------------------------------- Undistributed net investment income $ 5,135,735 $ 4,603,193 ---------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 54 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS A MARCH 31, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.44 $9.10 $12.48 $10.78 $9.96 $8.73 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 .14 .24 .22 .18 .15 Net gains (losses) (both realized and unrealized) .68 (.40) (2.71) 1.71 .80 1.22 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .75 (.26) (2.47) 1.93 .98 1.37 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.12) (.23) (.23) (.16) (.14) Distributions from realized gains -- (.28) (.68) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.07) (.40) (.91) (.23) (.16) (.14) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.12 $8.44 $9.10 $12.48 $10.78 $9.96 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.90% (2.33%) (20.90%) 17.97% 9.88% 15.81% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.03%(b) 1.10% 1.02% 1.12% 1.12% 1.09% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.62%(b) 1.82% 2.20% 1.90% 1.84% 1.54% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,054 $1,123 $1,437 $1,872 $1,209 $938 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% 122% 134% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 55 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS B MARCH 31, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.36 $9.01 $12.36 $10.69 $9.88 $8.66 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .08 .15 .13 .10 .07 Net gains (losses) (both realized and unrealized) .67 (.39) (2.67) 1.68 .80 1.22 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .71 (.31) (2.52) 1.81 .90 1.29 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.06) (.15) (.14) (.09) (.07) Distributions from realized gains -- (.28) (.68) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.04) (.34) (.83) (.14) (.09) (.07) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.03 $8.36 $9.01 $12.36 $10.69 $9.88 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.45% (3.00%) (21.50%) 17.02% 9.09% 14.93% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.80%(b) 1.87% 1.78% 1.88% 1.89% 1.86% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .86%(b) 1.05% 1.43% 1.14% 1.09% .78% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $105 $115 $169 $243 $146 $96 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% 122% 134% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 56 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS C MARCH 31, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.32 $8.97 $12.31 $10.66 $9.86 $8.65 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .08 .16 .14 .10 .08 Net gains (losses) (both realized and unrealized) .66 (.39) (2.67) 1.66 .79 1.21 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .70 (.31) (2.51) 1.80 .89 1.29 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.06) (.15) (.15) (.09) (.08) Distributions from realized gains -- (.28) (.68) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.04) (.34) (.83) (.15) (.09) (.08) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.98 $8.32 $8.97 $12.31 $10.66 $9.86 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.38% (2.98%) (21.47%) 16.97% 9.11% 14.92% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.79%(b) 1.86% 1.77% 1.88% 1.89% 1.87% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .87%(b) 1.07% 1.47% 1.16% 1.14% .78% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $43 $47 $59 $67 $23 $7 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% 122% 134% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 57 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS I MARCH 31, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(d) Net asset value, beginning of period $8.43 $9.09 $12.47 $11.52 --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .18 .28 .22 Net gains (losses) (both realized and unrealized) .68 (.41) (2.71) 1.00 --------------------------------------------------------------------------------------------------------- Total from investment operations .77 (.23) (2.43) 1.22 --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.15) (.27) (.27) Distributions from realized gains -- (.28) (.68) -- --------------------------------------------------------------------------------------------------------- Total distributions (.09) (.43) (.95) (.27) --------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.11 $8.43 $9.09 $12.47 --------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.15% (1.88%) (20.60%) 10.70% --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses .58%(b) .65% .63% .73%(b) --------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.08%(b) 2.34% 2.59% 2.33%(b) --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- --------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 58 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS R2 MARCH 31, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(d) Net asset value, beginning of period $8.43 $9.09 $12.47 $11.52 --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .12 .22 .14 Net gains (losses) (both realized and unrealized) .68 (.40) (2.69) 1.00 --------------------------------------------------------------------------------------------------------- Total from investment operations .73 (.28) (2.47) 1.14 --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.10) (.23) (.19) Distributions from realized gains -- (.28) (.68) -- --------------------------------------------------------------------------------------------------------- Total distributions (.05) (.38) (.91) (.19) --------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.11 $8.43 $9.09 $12.47 --------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.71% (2.52%) (20.93%) 10.01% --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.42%(b) 1.42% 1.45% 1.54%(b) --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.42%(b) 1.33% 1.20% 1.54%(b) --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.25%(b) 1.60% 1.98% 1.51%(b) --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- --------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 59 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS R3 MARCH 31, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(d) Net asset value, beginning of period $8.43 $9.09 $12.47 $11.52 --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 .14 .25 .17 Net gains (losses) (both realized and unrealized) .67 (.40) (2.69) 1.00 --------------------------------------------------------------------------------------------------------- Total from investment operations .74 (.26) (2.44) 1.17 --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.12) (.26) (.22) Distributions from realized gains -- (.28) (.68) -- --------------------------------------------------------------------------------------------------------- Total distributions (.06) (.40) (.94) (.22) --------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.11 $8.43 $9.09 $12.47 --------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.83% (2.27%) (20.72%) 10.22% --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.20%(b) 1.16% 1.20% 1.32%(b) --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.20%(b) 1.07% .95% 1.32%(b) --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.52%(b) 1.93% 2.26% 1.75%(b) --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- --------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 60 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS R4 MARCH 31, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.45 $9.10 $12.48 $10.78 $9.96 $8.72 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08 .15 .26 .24 .21 .16 Net gains (losses) (both realized and unrealized) .67 (.40) (2.71) 1.70 .79 1.24 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .75 (.25) (2.45) 1.94 1.00 1.40 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.12) (.25) (.24) (.18) (.16) Distributions from realized gains -- (.28) (.68) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.07) (.40) (.93) (.24) (.18) (.16) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.13 $8.45 $9.10 $12.48 $10.78 $9.96 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.95% (2.11%) (20.71%) 18.08% 10.07% 16.13% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement .89%(b) .94% .93% 1.03% .96% .92% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) .89%(b) .87% .78% 1.00% .96% .92% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.77%(b) 1.97% 2.31% 2.01% 2.07% 1.72% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $7 $17 $14 $4 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% 122% 134% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 61 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPT. 30, CLASS R5 MARCH 31, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(d) Net asset value, beginning of period $8.43 $9.09 $12.47 $11.52 --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .17 .27 .22 Net gains (losses) (both realized and unrealized) .68 (.40) (2.71) .99 --------------------------------------------------------------------------------------------------------- Total from investment operations .77 (.23) (2.44) 1.21 --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.15) (.26) (.26) Distributions from realized gains -- (.28) (.68) -- --------------------------------------------------------------------------------------------------------- Total distributions (.09) (.43) (.94) (.26) --------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.11 $8.43 $9.09 $12.47 --------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.11% (1.90%) (20.66%) 10.65% --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses .66%(b) .68% .70% .80%(b) --------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.01%(b) 2.27% 2.52% 2.27%(b) --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- --------------------------------------------------------------------------------------------------------- Portfolio turnover rate(c) 41% 136% 123% 123% ---------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) Expense ratios include the impact of a performance incentive adjustment, if any. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) Annualized. (c) Includes mortgage dollar rolls. If mortgage dollar roll transactions were excluded, the portfolio turnover would have been 40% for the six months ended March 31, 2010 and 116% and 89% for the years ended Sept. 30, 2009 and 2008, respectively. (d) For the period from Dec. 11, 2006 (when shares became publicly available) to Sept. 30, 2007. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 62 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF MARCH 31, 2010) 1. ORGANIZATION RiverSource Strategic Allocation Fund (the Fund) is a series of RiverSource Strategic Allocation Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation's Board of Directors (the Board). The Fund's assets primarily are allocated among four asset classes: (1) U.S. equities, (2) U.S. and foreign debt securities, (3) foreign equity securities and (4) cash. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares. - Class A shares are offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R2, Class R3, Class R4 and Class R5 shares are offered without a front-end sales charge or CDSC to qualifying institutional investors. At March 31, 2010, RiverSource Investments, LLC* (RiverSource Investments or the Investment Manager) owned 100% of Class I, Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 63 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price from the primary exchange. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. The fair value of a security is likely to be different from the quoted or published price, if available. Swap transactions are valued through an authorized pricing service, broker, or an internal model. -------------------------------------------------------------------------------- 64 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At March 31, 2010, foreign currency holdings consisted of multiple denominations. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. ILLIQUID SECURITIES At March 31, 2010, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at March 31, 2010 was $265,278 representing 0.02% of net assets. Certain illiquid securities may be valued, in good faith, by management at fair value according to procedures approved by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 65 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund on a forward-commitment basis, including when-issued securities and other forward- commitments, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect the Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At March 31, 2010, the Fund has outstanding when-issued securities of $6,323,744. The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. FORWARD SALE COMMITMENTS The Fund may enter into forward sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of forward sale commitments are not received until the contractual settlement date. During the time a forward sale commitment is outstanding, equivalent deliverable securities, or an offsetting forward purchase commitment deliverable on or before the sale commitment date, are used to satisfy the commitment. Unsettled forward sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Valuation of securities" above. The forward sale commitment is "marked-to- market" daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the forward sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss. If the Fund delivers securities under the commitment, the Fund realizes a gain or a loss from the sale of the securities based upon the market price established at the date the commitment was entered into. At March 31, 2010, the Fund had no outstanding forward sale commitments. -------------------------------------------------------------------------------- 66 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 67 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income, if any, is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. -------------------------------------------------------------------------------- 68 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FUTURES TRANSACTIONS The Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange to produce incremental earnings, hedge existing positions or protect against market changes in the value of equities, interest rates or foreign currencies. The Fund may also buy and write put and call options on these futures contracts. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Upon entering into futures contracts, the Fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. CREDIT DEFAULT SWAP TRANSACTIONS The Fund may enter into credit default swap transactions to increase or decrease its credit exposure to an issuer of debt securities, a specific debt security, or an index of issuers or debt securities. Additionally, credit default swaps may be used to hedge the Fund's exposure on a debt security that it owns or in lieu of selling such debt security. As the purchaser of a credit default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as a realized loss upon payment. If the credit event specified in the contract occurs, the Fund will be required to deliver either the reference obligation or an equivalent cash amount to the protection seller and in exchange, the Fund will receive the notional amount from the seller. The difference between the value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss). At March 31, 2010, and for the six months then ended, the Fund had no outstanding credit default swap contracts in which the Fund was the purchaser of protection. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 69 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- As the seller of a credit default swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on the notional amount. The interest amount is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as a realized gain upon receipt of the payment. If the credit event specified in the contract occurs, the Fund will receive the reference obligation or an equivalent cash amount in exchange for the payment of the notional amount to the protection buyer. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. Notional amounts of all credit default swap contracts outstanding for which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments. These potential amounts may be partially offset by any recovery values of the respective reference obligations or premiums received upon entering into the agreement. As a protection seller, the Fund bears the risk of loss from the credit events specified in the contract. Although specified events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract. Market values for credit default swap contracts in which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments. The notional amounts and market values of credit default swap contracts are not recorded in the financial statements. Any premium paid or received by the Fund upon entering into a credit default swap contract is recorded as an asset or liability and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded. Credit default swap contracts can involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging risk, -------------------------------------------------------------------------------- 70 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- correlation risk and liquidity risk. The Fund will enter into credit default swap transactions only with counterparties that meet certain standards of creditworthiness. INTEREST RATE SWAP TRANSACTIONS The Fund may enter into interest rate swap transactions to produce incremental earnings, or to gain exposure to or protect itself from market rate changes, or to synthetically add or subtract principal exposure to a market. Interest rate swaps are agreements between two parties that involve the exchange of one type of interest rate for another type of interest rate cash flow on specified dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby the accrual for the exchange of cash flows does not begin until a specified date in the future (the "effective date"). The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate versus a fixed interest rate. Interest rate swaps are valued daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated. Risks of entering into interest rate swaps include a lack of correlation between the swaps and the portfolio of bonds the swaps are designed to hedge or replicate. A lack of correlation may cause the interest rate swaps to experience adverse changes in value relative to expectations. In addition, interest rate swaps are subject to the risk of default of a counterparty, and the risk of adverse movements in market interest rates relative to the interest rate swap positions taken. The Fund's maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the contract's remaining life to the extent that such amount is positive, plus the cost of entering into a similar transaction with another counterparty. This risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund's exposure to the counterparty. At March 31, 2010, and for the six months then ended, the Fund had no outstanding interest rate swap contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 71 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT MARCH 31, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Credit contracts Unrealized appreciation on swap transactions $2,475,855 N/A N/A ------------------------------------------------------------------------------------------- Equity contracts Net assets -- unrealiz- ed appreciation on investments 30,170* N/A N/A ------------------------------------------------------------------------------------------- Foreign exchange Unrealized Unrealized contracts appreciation on depreciation on forward foreign forward foreign currency contracts 94,737 currency contracts $281,555 ------------------------------------------------------------------------------------------- Interest rate Net contracts assets -- unrealiz- ed depreciation on N/A N/A investments 34,126* ------------------------------------------------------------------------------------------- Total $2,600,762 $315,681 -------------------------------------------------------------------------------------------
* Includes cumulative appreciation (depreciation) of futures contracts as reported in the Futures Contracts Outstanding table following the Portfolio of Investments. Only the current day's variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. -------------------------------------------------------------------------------- 72 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS FUTURES SWAPS TOTAL ------------------------------------------------------------------------------ Credit contracts $ -- $ -- $633,250 $ 633,250 ------------------------------------------------------------------------------ Equity contracts -- 349,082 -- $ 349,082 ------------------------------------------------------------------------------ Foreign exchange contracts 1,514,200 -- -- $1,514,200 ------------------------------------------------------------------------------ Interest rate contracts -- 609,739 -- $ 609,739 ------------------------------------------------------------------------------ Total $1,514,200 $958,821 $633,250 $3,106,271 ------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS FUTURES SWAPS TOTAL ------------------------------------------------------------------------------ Credit contracts $ -- $ -- $894,891 $ 894,891 ------------------------------------------------------------------------------ Equity contracts -- (71,191) -- $ (71,191) ------------------------------------------------------------------------------ Foreign exchange contracts (723,472) -- -- $(723,472) ------------------------------------------------------------------------------ Interest rate contracts -- (134,686) -- $(134,686) ------------------------------------------------------------------------------ Total $(723,472) $(205,877) $894,891 $ (34,458) ------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was $54.5 million at March 31, 2010. The monthly average gross notional amount for these contracts was $56.9 million for the six months ended March 31, 2010. The fair value of such contracts on March 31, 2010 is set forth in the table above. FUTURES The gross notional amount of long and short contracts outstanding was $18.1 million and $34.0 million, respectively, at March 31, 2010. The monthly average gross notional amounts for long and short contracts was $32.7 million and $26.3 million, respectively, for the six months ended March 31, 2010. The fair value of such contracts on March 31, 2010 is set forth in the table above. SWAPS The gross notional amount of contracts outstanding was $15.5 million at March 31, 2010. The monthly average gross notional amount for these contracts -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 73 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- was $15.5 million for the six months ended March 31, 2010. The fair value of such contracts on March 31, 2010 is set forth in the table above. 4. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.57% to 0.39% as the Fund's net assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12- month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Flexible Portfolio Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.08% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $499,362 for the six months ended March 31, 2010. The management fee for the six months ended March 31, 2010 was 0.48% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the six months ended March 31, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended March 31, 2010, other expenses paid to this company were $5,212. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource, Seligman and Threadneedle funds. The Fund's liability for these amounts is adjusted for market -------------------------------------------------------------------------------- 74 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation* (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. The Fund pays the Transfer Agent an annual account- based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for the 12 month period from the date the account becomes inactive. These fees are included in the transfer agency fees in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc.** (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $6,090,000 and $376,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, and may be recovered * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. ** Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 75 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $677,682 for Class A, $48,373 for Class B and $2,828 for Class C for the six months ended March 31, 2010. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations, but including mortgage dollar rolls) aggregated $498,691,723 and $721,384,673, respectively, for the six months ended March 31, 2010. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED MARCH 31, 2010 SEPT. 30, 2009 ----------------------------------------------------------------------- CLASS A Sold 3,125,331 13,986,656 Converted from Class B* 15 2,202,495 Reinvested distributions 906,052 7,593,921 Redeemed (21,383,305) (48,752,943) ----------------------------------------------------------------------- Net increase (decrease) (17,351,907) (24,969,871) ----------------------------------------------------------------------- CLASS B Sold 315,035 2,133,844 Reinvested distributions 47,327 779,494 Converted to Class A* (15) (2,224,798) Redeemed (2,473,344) (5,656,313) ----------------------------------------------------------------------- Net increase (decrease) (2,110,997) (4,967,773) ----------------------------------------------------------------------- CLASS C Sold 311,293 1,094,109 Reinvested distributions 18,909 269,717 Redeemed (1,120,417) (2,379,246) ----------------------------------------------------------------------- Net increase (decrease) (790,215) (1,015,420) -----------------------------------------------------------------------
-------------------------------------------------------------------------------- 76 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31, 2010 SEPT. 30, 2009 ----------------------------------------------------------------------- CLASS R4 Sold 10,124 46,382 Reinvested distributions 991 35,862 Redeemed (46,310) (686,576) ----------------------------------------------------------------------- Net increase (decrease) (35,195) (604,332) -----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At March 31, 2010, securities valued at $152,355,939 were on loan, secured by U.S. government securities valued at $19,839,950 and by cash collateral of $136,768,055 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 77 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- services provided and any other securities lending expenses. Net income of $329,226 earned from securities lending for the six months ended March 31, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $303,784,052 and $288,513,987, respectively, for the six months ended March 31, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at March 31, 2010, can be found in the Portfolio of Investments. 9. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (i) 1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle funds, severally and not jointly, -------------------------------------------------------------------------------- 78 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended March 31, 2010. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments, passive foreign investment company (PFIC) holdings, re-characterization of real estate investment trust (REIT) distributions, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $21,514,298 at Sept. 30, 2009, that if not offset by capital gains will expire in 2017. Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Sept. 30, 2009, the Fund had a post-October loss of $325,336,414 that is treated for income tax purposes as occurring on Oct. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through the date of issuance of the Fund's financial statements. There were no events or -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 79 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 12. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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 -------------------------------------------------------------------------------- 80 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 81 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 82 RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.221.2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 83 RIVERSOURCE STRATEGIC ALLOCATION FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). (C)2010 Columbia Management Investment Advisers, LLC. All (RIVERSOURCE INVESTMENTS LOGO) rights reserved. S-6143 AD (5/10)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED MARCH 31, 2010 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND SEEKS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF CURRENT INCOME WITH CAPITAL GROWTH AS A SECONDARY OBJECTIVE. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 9 Portfolio of Investments........... 11 Statement of Assets and Liabilities...................... 42 Statement of Operations............ 44 Statements of Changes in Net Assets........................... 46 Financial Highlights............... 48 Notes to Financial Statements...... 55 Proxy Voting....................... 72
-------------------------------------------------------------------------------- 2 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Strategic Income Allocation Fund (the Fund) Class A shares gained 5.42% (excluding sales charge) for the six months ended March 31, 2010. > The Fund outperformed the Barclays Capital U.S. Aggregate Bond Index, an unmanaged index representing U.S. taxable investment-grade bonds, which increased 1.99% during the same period. > The Fund underperformed the Lipper Multi-Sector Income Funds Index, representing the Fund's peer group, which advanced 7.08% during the same period. ANNUALIZED TOTAL RETURNS (for period ended March 31, 2010) --------------------------------------------------------------------------------
SINCE INCEPTION 6 MONTHS* 1 YEAR 5/17/07 -------------------------------------------------------------------- RiverSource Strategic Income Allocation Fund Class A (excluding sales charge) +5.42% +28.77% +5.16% -------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index(1) (unmanaged) +1.99% +7.69% +6.35% -------------------------------------------------------------------- Lipper Multi-Sector Income Funds Index(2) +7.08% +31.92% +5.49% --------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 800.221.2450. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Multi-Sector Income Funds Index includes the 10 largest multi- sector income funds tracked by Lipper Inc. The index's returns include net reinvested dividends. -------------------------------------------------------------------------------- 4 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT MARCH 31, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 5/17/07) +5.42% +28.77% +5.16% -------------------------------------------------------------------- Class B (inception 5/17/07) +5.13% +27.94% +4.41% -------------------------------------------------------------------- Class C (inception 5/17/07) +5.14% +27.97% +4.37% -------------------------------------------------------------------- Class R2 (inception 8/1/08) +5.19% +28.22% +9.22% -------------------------------------------------------------------- Class R3 (inception 8/1/08) +5.31% +28.53% +9.49% -------------------------------------------------------------------- Class R4 (inception 8/1/08) +5.46% +28.88% +9.77% -------------------------------------------------------------------- Class R5 (inception 8/1/08) +5.70% +29.32% +10.03% -------------------------------------------------------------------- With sales charge Class A (inception 5/17/07) +0.41% +22.65% +3.39% -------------------------------------------------------------------- Class B (inception 5/17/07) +0.13% +22.94% +3.45% -------------------------------------------------------------------- Class C (inception 5/17/07) +4.14% +26.97% +4.37% --------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R2, Class R3, Class R4 and Class R5 shares. Class R2, Class R3, Class R4 and Class R5 are available to qualifying institutional investors only. * Not annualized. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
DURATION SHORT INT. LONG HIGH X MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS -------------------------------------------------------------------------------- Weighted average life(1) 6.4 years -------------------------------------- Effective duration(2) 4.6 years -------------------------------------- Weighted average loan and bond rating(3) BBB --------------------------------------
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE LOAN AND BOND RATING represents the average credit quality of the underlying loans and bonds in the portfolio. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. -------------------------------------------------------------------------------- 6 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- ASSET ALLOCATION & SECTOR BREAKDOWN(1) (at March 31, 2010) ---------------------------------------------------------------------
BONDS 81.9% ------------------------------------------------ Asset-Backed 0.1% ------------------------------------------------ Commercial Mortgage-Backed 2.2% ------------------------------------------------ Corporate Bonds 46.2% ------------------------------------------------ Foreign Government 25.3% ------------------------------------------------ Residential Mortgage-Backed 1.9% ------------------------------------------------ U.S. Government Obligations & Agencies 6.2% ------------------------------------------------ SENIOR LOANS 15.2% ------------------------------------------------ STOCKS --% ------------------------------------------------ OTHER(2) 2.9% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. Of the 2.9%, 2.5% is due to securities purchased on a forward-commitment basis. QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1) (at March 31, 2010) ---------------------------------------------------------------------
AAA rating 20.1% ------------------------------------------------ AA rating 0.8% ------------------------------------------------ A rating 4.0% ------------------------------------------------ BBB rating 12.6% ------------------------------------------------ BB rating 25.1% ------------------------------------------------ B rating 29.6% ------------------------------------------------ CCC rating 6.5% ------------------------------------------------ CC rating 0.4% ------------------------------------------------ D rating 0.5% ------------------------------------------------ Non-rated 0.4% ------------------------------------------------
(1) Percentages indicated are based upon total fixed income securities (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). Ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 7 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC (the Investment Manager*) rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 1.0% of the bond portfolio assets were determined through internal analysis. * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. -------------------------------------------------------------------------------- 8 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended March 31, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED OCT. 1, 2009 MARCH 31, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,054.20 $5.58 1.09% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.50 $5.49 1.09% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,051.30 $9.46 1.85% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.71 $9.30 1.85% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,051.40 $9.41 1.84% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.76 $9.25 1.84% ------------------------------------------------------------------------------------------- Class R2 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,051.90 $7.98 1.56% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.15 $7.85 1.56% ------------------------------------------------------------------------------------------- Class R3 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,053.10 $6.81 1.33% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.30 $6.69 1.33% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,054.60 $5.28 1.03% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.80 $5.19 1.03% ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,057.00 $4.05 .79% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.99 $3.98 .79% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended March 31, 2010: +5.42% for Class A, +5.13% for Class B, +5.14% for Class C, +5.19% for Class R2, +5.31% for Class R3, +5.46% for Class R4 and +5.70% for Class R5. -------------------------------------------------------------------------------- 10 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- MARCH 31, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (82.5%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FOREIGN AGENCIES (2.9%)(c) Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-16-18 6.37% $500,000(d) $530,000 06-10-19 6.50 700,000(d) 747,276 Ecopetrol Sr Unsecured 07-23-19 7.63 255,000 283,050 Empresa Nacional Del Petroleo Sr Unsecured 07-08-19 6.25 600,000(d) 617,130 Empresas Publicas de Medellin Sr Unsecured 07-29-19 7.63 100,000(d) 110,715 KfW (Japanese Yen) 01-20-14 1.35 54,000,000 597,157 Korea Development Bank Sr Unsecured 01-23-14 8.00 600,000 687,582 Pemex Project Funding Master Trust 03-01-18 5.75 2,050,000 2,109,748 06-15-35 6.63 870,000 857,112 06-15-38 6.63 450,000 436,279 Petrobras Intl Finance 03-15-19 7.88 300,000 350,867 01-20-20 5.75 300,000 307,347 Petroleos de Venezuela 10-28-16 5.13 300,000 179,230 04-12-17 5.25 1,460,000 897,900 Petroleos Mexicanos 05-03-19 8.00 600,000 703,500 TDIC Finance 07-02-14 6.50 600,000(d) 639,427 --------------- Total 10,054,320 ------------------------------------------------------------------------------------- FOREIGN LOCAL GOVERNMENT (2.5%)(c) New South Wales Treasury (Australian Dollar) 05-01-12 6.00 8,910,000 8,284,801 Santa Fe de Bogota (Colombian Peso) Sr Unsecured 07-26-28 9.75 200,000,000(d) 110,966 --------------- Total 8,395,767 ------------------------------------------------------------------------------------- SOVEREIGN (10.7%)(c) Bundesrepublik Deutschland (European Monetary Unit) 01-04-18 4.00 830,000 1,211,317 07-04-34 4.75 55,000 84,540 Federative Republic of Brazil (Brazilian Real) 01-05-16 12.50 650,000 $415,963 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 $550,000 597,575 01-15-19 5.88 1,350,000 1,451,250 Govt of the Cayman Islands Sr Unsecured 11-24-19 5.95 200,000(d) 197,316 Govt of Ukraine 06-26-12 6.39 250,000(d) 248,125 Morgan Stanley (Brazilian Real) Sr Unsecured 05-03-17 10.09 1,050,000(d) 570,042 Peru Enhanced Pass-Thru Sr Secured Zero Coupon 05-31-18 4.42 1,345,078(d,i) 1,065,974 Perusahaan Penerbit SBSN Sr Unsecured 04-23-14 8.80 700,000(d) 820,099 Republic of Argentina Sr Unsecured 09-12-13 7.00 2,340,000 2,085,277 12-15-35 0.00 1,750,000(g) 131,250
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SOVEREIGN (CONT.) Republic of Colombia 09-18-37 7.38% $600,000 $672,000 Republic of Colombia (Colombian Peso) 10-22-15 12.00 585,000,000 372,000 06-28-27 9.85 300,000,000 184,136 Republic of Colombia Sr Unsecured 03-18-19 7.38 1,600,000 1,840,000 Republic of El Salvador 12-01-19 7.38 300,000(d) 327,000 04-10-32 8.25 850,000(d) 940,313 06-15-35 7.65 490,000(d) 515,725 Republic of Indonesia Sr Unsecured 01-17-18 6.88 500,000(d) 556,250 02-17-37 6.63 900,000(d) 918,000 01-17-38 7.75 900,000(d) 1,044,000 Republic of Iraq 01-15-28 5.80 250,000(d) 201,250 Republic of Panama 04-28-34 8.13 100,000 121,000 Republic of Peru Sr Unsecured 05-03-16 8.38 100,000 121,650 03-30-19 7.13 1,150,000 1,329,400 07-21-25 7.35 200,000 232,000 03-14-37 6.55 100,000 107,000 Republic of Philippines Sr Unsecured 10-07-16 8.75 100,000(d) 124,750 01-18-17 9.38 200,000 252,750 01-15-19 9.88 70,000 91,875 06-17-19 8.38 170,000 207,400 01-20-20 6.50 1,000,000 1,078,800 01-14-31 7.75 500,000 572,500 Republic of Turkey 03-15-15 7.25 200,000 224,760 04-03-18 6.75 600,000 654,000 06-05-20 7.00 850,000 935,000 02-14-34 8.00 80,000 91,900 03-17-36 6.88 880,000 888,800 05-30-40 6.75 1,500,000 1,473,750 Republic of Turkey Sr Unsecured 07-14-17 7.50 300,000 342,000 11-07-19 7.50 1,300,000 1,482,000 Republic of Uruguay 05-17-17 9.25 300,000 384,750 11-18-22 8.00 200,000 238,000 Republic of Venezuela 02-26-16 5.75 2,550,000 1,848,750 12-09-20 6.00 250,000 155,000 04-21-25 7.65 150,000 97,875 Republic of Venezuela Sr Unsecured 10-08-14 8.50 640,000 556,800 05-07-23 9.00 1,670,000 1,239,975 Republica Orient Uruguay (Uruguay Peso) 04-05-27 4.25 9,322,297(e) 490,141 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 725,000 821,063 Russian Federation 03-31-30 7.50 2,711,900(d) 3,125,466 State of Qatar Sr Nts 01-20-20 5.25 500,000(d) 517,500 --------------- Total 36,256,057 ------------------------------------------------------------------------------------- SUPRANATIONAL (0.7%)(c) Corp Andina de Fomento Sr Unsecured 06-04-19 8.13 1,400,000 1,639,925 European Investment Bank (Japanese Yen) Sr Unsecured 06-20-17 1.40 46,000,000 504,489 01-18-27 2.15 29,100,000 313,602 --------------- Total 2,458,016 ------------------------------------------------------------------------------------- TREASURY (8.7%)(c) Govt of Canada (Canadian Dollar) 06-01-18 4.25 8,880,000 9,219,461
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 12 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) TREASURY (CONT.) Govt of Indonesia (Indonesian Rupiah) 07-15-22 10.25% 2,900,000,000 $338,120 Govt of Indonesia (Indonesian Rupiah) Series FR34 06-15-21 12.80 17,200,000,000 2,351,236 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR31 11-15-20 11.00 2,000,000,000 246,607 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR36 09-15-19 11.50 2,000,000,000 253,872 Govt of Norway (Norwegian Krone) 05-16-11 6.00 3,837,000 672,168 05-15-13 6.50 17,655,000 3,304,017 Govt of Poland (Polish Zloty) 10-25-17 5.25 3,655,000 1,279,776 Govt of Sweden (Swedish Krona) 05-05-14 6.75 24,000,000 3,915,212 Mexican Fixed Rate Bonds (Mexican Peso) 12-17-15 8.00 14,850,000 1,255,199 Mexican Fixed Rate Bonds (Mexican Peso) Series M-10 12-15-16 7.25 6,590,000 533,285 12-14-17 7.75 9,500,000 783,151 Nota do Tesouro Nacional (Brazilian Real) Series F 01-01-13 10.00 372,000 2,046,921 United Kingdom Treasury (British Pound) 03-07-19 4.50 2,330,000 3,712,208 --------------- Total 29,911,233 ------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (6.2%) U.S. Treasury 07-15-12 1.50 $120,000(p) 120,937 12-31-14 2.63 170,000 171,222 03-31-15 2.50 2,802,000 2,794,126 02-15-20 3.63 7,866,000(p) 7,732,034 08-15-39 4.50 1,235,000 1,192,547 11-15-39 4.38 235,000(p) 222,222 U.S. Treasury Inflation-Indexed Bond 01-15-12 3.38 366,057(e) 391,812 04-15-14 1.25 563,074(e) 582,052 07-15-14 2.00 2,298,860(e) 2,445,847 01-15-15 1.63 1,616,933(e) 1,689,369 01-15-17 2.38 1,681,389(e) 1,815,710 01-15-29 2.50 2,018,300(e) 2,133,638 --------------- Total 21,291,516 ------------------------------------------------------------------------------------- ASSET-BACKED (0.1%) Santander Drive Auto Receivables Trust Series 2007-1 Cl A4 (FGIC) 09-15-14 0.28 483,607(h,r) 478,046 ------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (2.2%)(f) Bear Stearns Commercial Mtge Securities Series 2007-T28 Cl A1 09-11-42 5.42 776,821 803,475 Citigroup/Deutsche Bank Commercial Mtge Trust Series 2007-CD4 Cl A2B 12-11-49 5.21 1,000,000 1,022,960 Credit Suisse First Boston Mtge Securities Series 2004-C2 Cl A1 05-15-36 3.82 881,912 878,301 Greenwich Capital Commercial Funding Series 2003-C2 Cl A3 01-05-36 4.53 2,935,000 2,994,893 Greenwich Capital Commercial Funding Series 2007-GG11 Cl A1 12-10-49 5.36 850,987 884,606 JPMorgan Chase Commercial Mtge Securities Series 2003-CB6 Cl A1 07-12-37 4.39 772,978 785,083 Merrill Lynch Mtge Trust Series 2005-CKI1 Cl A1 11-12-37 5.08 119,145 120,205 TIAA Seasoned Commercial Mtge Trust Series 2007-C4 Cl A3 08-15-39 6.07 50,000 52,303 --------------- Total 7,541,826 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) RESIDENTIAL MORTGAGE-BACKED (1.9%)(f) Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2007-OH3 Cl A3 09-25-47 0.75% $289,828(h) $34,631 Federal Home Loan Mtge Corp #G02757 06-01-36 5.00 369,136 382,201 Federal Natl Mtge Assn 05-01-40 6.50 725,000(m) 783,453 Federal Natl Mtge Assn #702038 05-01-33 5.00 783,623 813,073 Federal Natl Mtge Assn #735224 02-01-35 5.50 708,391 751,791 Federal Natl Mtge Assn #745392 12-01-20 4.50 496,453 521,901 Federal Natl Mtge Assn #766641 03-01-34 5.00 455,589 471,999 Federal Natl Mtge Assn #770439 04-01-34 6.00 47,467 51,213 Federal Natl Mtge Assn #848482 12-01-35 6.00 600,934 643,102 Federal Natl Mtge Assn #909214 07-01-38 7.00 444,958 493,291 Federal Natl Mtge Assn #949320 10-01-37 7.00 712,193(q) 790,591 Lehman XS Trust Series 2006-16N Cl A1B 11-25-46 0.37 92,776(h) 90,454 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-14 Cl 2A1 12-25-35 5.50 794,882 739,891 --------------- Total 6,567,591 ------------------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.4%) TransDigm 07-15-14 7.75 1,500,000 1,533,750 ------------------------------------------------------------------------------------- AUTOMOTIVE (0.4%) American Axle & Mfg Holdings Sr Secured 01-15-17 9.25 85,000(d) 90,313 Delphi 10-06-14 12.00 214 214 Lear 03-15-18 7.88 568,000 572,969 03-15-20 8.13 310,000(p) 314,263 Oshkosh 03-01-17 8.25 289,000(d) 300,560 03-01-20 8.50 211,000(d) 219,440 --------------- Total 1,497,759 ------------------------------------------------------------------------------------- BANKING (0.8%) Alfa MTN Markets for ABH Financial 06-25-12 8.20 150,000(c,d) 156,563 Banco BMG Sr Unsecured 01-15-16 9.15 100,000(c,d) 107,750 Banco de Credito del Peru 10-15-22 7.17 1,000,000(c,d) 357,269 Bank of America Sr Unsecured 05-01-18 5.65 210,000 212,630 Citigroup Sr Unsecured 05-15-18 6.13 120,000 122,615 JPMorgan Chase & Co Sr Unsecured 04-23-19 6.30 440,000 484,052 Morgan Stanley Sr Unsecured 04-01-18 6.63 250,000 266,645 TuranAlem Finance 01-22-37 8.25 150,000(b,c,d,l) 66,563 Wells Fargo & Co Sr Unsecured 12-11-17 5.63 750,000 795,649 --------------- Total 2,569,736 ------------------------------------------------------------------------------------- BROKERAGE (--%) Lehman Brothers Holdings Sr Unsecured 05-02-18 6.88 90,000(b,l) 21,263 ------------------------------------------------------------------------------------- BUILDING MATERIALS (0.8%) Associated Materials LLC/Finance Sr Secured 11-15-16 9.88 747,000 806,760
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BUILDING MATERIALS (CONT.) Gibraltar Inds Series B 12-01-15 8.00% $1,515,000 $1,484,700 Norcraft LP/Finance Sr Secured 12-15-15 10.50 324,000(d) 343,440 --------------- Total 2,634,900 ------------------------------------------------------------------------------------- CHEMICALS (2.9%) Ashland 06-01-17 9.13 475,000(d) 532,000 Chemtura 06-01-16 6.88 1,280,000(b,l) 1,504,000 Dow Chemical Sr Unsecured 05-15-19 8.55 815,000 985,939 Hexion Finance Escrow LLC Sr Secured 02-01-18 8.88 1,483,000(d) 1,460,755 INVISTA Sr Unsecured 05-01-12 9.25 1,745,000(d) 1,766,812 LBI Escrow Sr Secured 11-01-17 8.00 479,000(d,m) 495,765 MacDermid Sr Sub Notes 04-15-17 9.50 1,640,000(d) 1,685,099 Momentive Performance Materials Pay-in-kind 12-01-14 10.13 441(j) 426 Nalco 11-15-13 8.88 600,000 618,000 Nova Chemicals Sr Unsecured 11-01-16 8.38 435,000(c,d) 446,963 11-01-19 8.63 365,000(c,d) 375,038 --------------- Total 9,870,797 ------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (0.9%) Amsted Inds Sr Notes 03-15-18 8.13 682,000(d) 679,443 Manitowoc 02-15-18 9.50 719,000 744,165 Terex Sr Unsecured 06-01-16 10.88 625,000 698,438 United Rentals North America 06-15-16 10.88 1,000,000 1,087,499 --------------- Total 3,209,545 ------------------------------------------------------------------------------------- CONSUMER CYCLICAL SERVICES (0.4%) West Corp 10-15-14 9.50 1,200,000 1,233,000 10-15-16 11.00 96,000 101,760 --------------- Total 1,334,760 ------------------------------------------------------------------------------------- CONSUMER PRODUCTS (1.6%) AAC Group Holding Sr Disc Notes 10-01-12 10.25 970,000(d) 977,275 American Achievement 04-01-12 8.25 1,000,000(d) 1,002,500 Easton-Bell Sports Sr Secured 12-01-16 9.75 505,000(d) 532,144 Jarden 05-01-16 8.00 280,000 293,300 05-01-17 7.50 625,000 633,594 01-15-20 7.50 151,000 152,510 Libbey Glass Sr Secured 02-15-15 10.00 482,000(d) 503,690 Scotts Miracle-Gro 01-15-18 7.25 296,000 302,290 Visant 10-01-12 7.63 1,070,000 1,072,675 --------------- Total 5,469,978 ------------------------------------------------------------------------------------- DIVERSIFIED MANUFACTURING (0.1%) CPM Holdings Sr Secured 09-01-14 10.63 385,000(d) 410,025 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) ELECTRIC (4.0%) Aes Dominicana Energia Finance 12-13-15 11.00% $200,000(c,d) $209,000 Arizona Public Service Sr Unsecured 08-01-16 6.25 904,000 974,140 CenterPoint Energy Houston Electric LLC Series U 03-01-14 7.00 980,000 1,117,977 Cleveland Electric Illuminating 1st Mtge 11-15-18 8.88 500,000 620,937 Dynegy Holdings Sr Unsecured 05-01-16 8.38 500,000 415,000 Edison Mission Energy Sr Unsecured 06-15-16 7.75 115,000 83,950 05-15-17 7.00 1,875,000 1,307,813 Energy Future Holdings 11-01-17 10.88 1,000,000(p) 742,500 Indiana Michigan Power Sr Unsecured 03-15-37 6.05 200,000 199,542 Majapahit Holding 06-28-17 7.25 562,000(c,d) 596,423 01-20-20 7.75 1,100,000(c,d) 1,193,500 Midwest Generation LLC Pass-Through Ctfs Series B 01-02-16 8.56 224,671 230,019 Natl Power 11-02-16 6.88 300,000(c,d) 326,904 Nevada Power 08-01-18 6.50 720,000 788,332 NiSource Finance 09-15-17 5.25 310,000 311,559 NRG Energy 02-01-16 7.38 1,600,000 1,587,999 PacifiCorp 1st Mtge 09-15-13 5.45 255,000 279,576 Power Sector Assets & Liabilities Management 05-27-19 7.25 410,000(c,d) 443,825 Sierra Pacific Power 09-01-13 5.45 500,000 539,685 Sierra Pacific Power Series M 05-15-16 6.00 415,000 451,132 Texas Competitive Electric Holdings LLC Series A 11-01-15 10.25 1,000,000(p) 695,000 Texas Competitive Electric Holdings LLC Series B 11-01-15 10.25 725,000 503,875 --------------- Total 13,618,688 ------------------------------------------------------------------------------------- ENTERTAINMENT (1.2%) AMC Entertainment 02-01-16 11.00 237,000 254,479 AMC Entertainment Sr Unsecured 06-01-19 8.75 528,000 554,400 Equinox Holdings Sr Secured 02-01-16 9.50 1,274,000(d,p) 1,286,739 Regal Cinemas 07-15-19 8.63 1,220,000 1,284,050 Speedway Motorsports 06-01-16 8.75 645,000 685,313 --------------- Total 4,064,981 ------------------------------------------------------------------------------------- FOOD AND BEVERAGE (1.5%) B&G Foods 01-15-18 7.63 685,000 698,700 Bertin Holding Ltda Sr Unsecured 10-05-16 10.25 220,000(c,d) 245,080 Bumble Bee Foods LLC Sr Secured 12-15-15 7.75 253,000(d) 255,530 Cerveceria Nacional Dominicana 03-27-12 16.00 200,000(c,d) 186,360 Del Monte 10-15-19 7.50 595,000(d) 624,006
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FOOD AND BEVERAGE (CONT.) Kraft Foods Sr Unsecured 08-11-17 6.50% $280,000 $312,915 02-01-18 6.13 1,310,000 1,433,651 Marfrig Overseas 11-16-16 9.63 120,000(c,d) 126,600 MHP Sr Secured 11-30-11 10.25 200,000(c,d) 206,000 Pinnacle Foods Finance LLC 04-01-17 10.63 399,000 421,943 Pinnacle Foods Finance LLC Sr Unsecured 04-01-15 9.25 453,000(d) 466,590 US Foodservice Sr Notes 06-30-15 10.25 301,000(d) 310,783 --------------- Total 5,288,158 ------------------------------------------------------------------------------------- GAMING (2.1%) Boyd Gaming Sr Sub Notes 02-01-16 7.13 1,125,000 939,375 Circus & Eldorado Jt Venture/Silver Legacy Capital 1st Mtge 03-01-12 10.13 325,000 282,750 Firekeepers Development Authority Sr Secured 05-01-15 13.88 855,000(d) 991,800 MGM MIRAGE Sr Secured 11-15-17 11.13 525,000(d) 589,313 03-01-18 11.38 760,000(d,p) 733,400 Pinnacle Entertainment 06-15-15 7.50 285,000 246,525 Pokagon Gaming Authority Sr Notes 06-15-14 10.38 1,511,000(d) 1,586,549 San Pasqual Casino 09-15-13 8.00 76,000(d) 72,200 Seneca Gaming Sr Unsecured 05-01-12 7.25 405,000 399,938 Seneca Gaming Sr Unsecured Series B 05-01-12 7.25 615,000 607,313 Shingle Springs Tribal Gaming Authority Sr Notes 06-15-15 9.38 800,000(d) 664,000 Tunica-Biloxi Gaming Authority Sr Unsecured 11-15-15 9.00 182,000(d) 172,900 --------------- Total 7,286,063 ------------------------------------------------------------------------------------- GAS DISTRIBUTORS (0.2%) Niska Gas Storage LLC/Canada Sr Unsecured 03-15-18 8.88 566,000(d) 581,123 ------------------------------------------------------------------------------------- GAS PIPELINES (2.6%) CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75 375,000 394,823 Colorado Interstate Gas Sr Unsecured 11-15-15 6.80 3,219,000 3,594,000 Crosstex Energy/Finance 02-15-18 8.88 298,000(d) 306,195 El Paso Sr Unsecured 12-12-13 12.00 320,000 373,600 06-15-14 6.88 805,000 821,424 Northwest Pipeline Sr Unsecured 04-15-17 5.95 500,000 543,393 Southern Star Central Sr Notes 03-01-16 6.75 300,000 303,375 TransCapitalInvest for Transneft Secured 03-05-14 5.67 830,000(c,d) 870,832 08-07-18 8.70 400,000(c,d) 479,846 Transcontinental Gas Pipe Line LLC Sr Unsecured Series B 08-15-11 7.00 1,150,000 1,227,856 --------------- Total 8,915,344 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) HEALTH CARE (2.7%) Apria Healthcare Group Sr Secured 11-01-14 11.25% $415,000(d) $451,313 11-01-14 12.38 60,000(d) 65,700 DaVita 03-15-15 7.25 1,250,000 1,275,000 HCA Secured 11-15-16 9.25 950,000 1,009,969 HCA Sr Secured 09-15-20 7.25 1,000,000(d) 1,015,000 Healthsouth 02-15-20 8.13 655,000 655,000 IASIS Healthcare LLC/Capital 06-15-14 8.75 1,035,000 1,054,406 Omnicare 12-15-13 6.75 705,000 708,525 12-15-15 6.88 500,000 490,625 Select Medical 02-01-15 7.63 1,655,000 1,576,387 Vanguard Health Holding II 02-01-18 8.00 1,033,000(d) 1,007,175 --------------- Total 9,309,100 ------------------------------------------------------------------------------------- HOME CONSTRUCTION (0.4%) K Hovnanian Enterprises Sr Secured 10-15-16 10.63 1,135,000 1,208,775 ------------------------------------------------------------------------------------- INDEPENDENT ENERGY (3.1%) Berry Petroleum Sr Unsecured 06-01-14 10.25 550,000 606,375 Chesapeake Energy 01-15-16 6.63 980,000 960,400 Continental Resources Sr Notes 10-01-20 7.38 212,000(d,m) 213,060 Denbury Resources 03-01-16 9.75 715,000 786,500 02-15-20 8.25 348,000 370,185 Forest Oil 02-15-14 8.50 1,120,000 1,181,600 Hilcorp Energy I LP/Finance Sr Unsecured 11-01-15 7.75 800,000(d) 790,000 PetroHawk Energy 07-15-13 9.13 550,000 574,063 06-01-15 7.88 625,000 636,719 Quicksilver Resources 08-01-15 8.25 995,000 1,014,900 Range Resources 05-01-18 7.25 1,250,000 1,278,124 SandRidge Energy 06-01-18 8.00 990,000(d) 940,500 SandRidge Energy Pay-in-kind 04-01-15 8.63 209,000(j) 203,253 Southwestern Energy Sr Notes 02-01-18 7.50 1,000,000 1,085,000 --------------- Total 10,640,679 ------------------------------------------------------------------------------------- INTEGRATED ENERGY (0.5%) Lukoil Intl Finance 11-05-19 7.25 1,100,000(c,d) 1,151,848 TNK-BP Finance 03-13-18 7.88 425,000(c,d) 466,438 --------------- Total 1,618,286 ------------------------------------------------------------------------------------- MEDIA CABLE (1.3%) Charter Communications Operating LLC/Capital Secured 04-30-12 8.00 1,000,000(d) 1,062,500 Comcast 03-15-11 5.50 750,000 781,616 07-01-39 6.55 60,000 62,091 CSC Holdings LLC Sr Unsecured 06-15-15 8.50 500,000(d) 530,625 DISH DBS 02-01-16 7.13 650,000 662,188 Mediacom LLC/Capital Sr Notes 08-15-19 9.13 410,000(d) 424,350
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) MEDIA CABLE (CONT.) Virgin Media Secured Finance Sr Secured 01-15-18 6.50% $1,037,000(c,d) $1,039,166 --------------- Total 4,562,536 ------------------------------------------------------------------------------------- MEDIA NON CABLE (2.0%) Clear Channel Worldwide Holdings Series B 12-15-17 9.25 1,330,000(d) 1,393,174 Intelsat Jackson Holdings 06-15-16 11.25 465,000(c) 503,363 11-01-19 8.50 280,000(c,d) 293,300 Intelsat Subsidiary Holding 01-15-15 8.88 500,000(c,d) 515,000 Interpublic Group of Companies Sr Unsecured 07-15-17 10.00 890,000 1,006,813 Lamar Media 04-01-14 9.75 715,000 781,138 News America 01-09-38 6.75 450,000 471,942 Nielsen Finance LLC 08-01-14 10.00 1,096,000 1,148,060 Reed Elsevier Capital 08-01-11 6.75 300,000 320,000 RR Donnelley & Sons Sr Unsecured 01-15-17 6.13 300,000 301,161 --------------- Total 6,733,951 ------------------------------------------------------------------------------------- METALS (1.6%) Arch Coal 08-01-16 8.75 1,233,000(d) 1,303,898 Consol Energy 04-01-17 8.00 561,000(d,m) 577,129 04-01-20 8.25 229,000(d,m) 235,870 Noranda Aluminum Acquisition Pay-in-kind 05-15-15 5.27 2,215,369(h,j) 1,761,218 POSCO Sr Unsecured 03-26-14 8.75 400,000(c,d) 474,641 Severstal Columbus LLC Sr Secured 02-15-18 10.25 144,000(d) 149,040 United States Steel Sr Notes 04-01-20 7.38 458,000 455,710 Vedanta Resources Sr Unsecured 07-18-18 9.50 600,000(c,d) 657,596 --------------- Total 5,615,102 ------------------------------------------------------------------------------------- NON CAPTIVE CONSUMER (0.7%) American General Finance Sr Unsecured 12-15-17 6.90 2,647,000 2,318,531 ------------------------------------------------------------------------------------- NON CAPTIVE DIVERSIFIED (1.6%) CIT Group Sr Secured 05-01-17 7.00 2,025,000 1,868,062 Ford Motor Credit LLC Sr Unsecured 08-10-11 9.88 1,000,000 1,057,500 General Electric Capital Sr Unsecured 01-10-39 6.88 385,000 415,265 GMAC 12-01-14 6.75 1,140,000 1,134,300 03-15-20 8.00 858,000(d) 879,450 --------------- Total 5,354,577 ------------------------------------------------------------------------------------- OIL FIELD SERVICES (1.6%) Expro Finance Luxembourg Sr Secured 12-15-16 8.50 1,065,000(c,d) 1,075,537 Gaz Capital for Gazprom Sr Unsecured 11-22-16 6.21 400,000(c,d) 411,000 Gaz Capital Sr Unsecured 07-31-14 8.13 380,000(c,d) 426,743 04-11-18 8.15 450,000(c,d) 507,375 03-07-22 6.51 300,000(c,d) 298,140 08-16-37 7.29 300,000(c,d) 301,500
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) OIL FIELD SERVICES (CONT.) Gazstream 07-22-13 5.63% $24,347(c,d,p) $25,168 KazMunaiGaz Finance 01-23-15 11.75 400,000(c,d) 514,423 07-02-18 9.13 850,000(c,d) 1,027,618 McJunkin Red Man Sr Secured 12-15-16 9.50 772,000(d) 779,720 --------------- Total 5,367,224 ------------------------------------------------------------------------------------- OTHER FINANCIAL INSTITUTIONS (0.4%) Cardtronics 08-15-13 9.25 1,169,000 1,209,915 ------------------------------------------------------------------------------------- OTHER INDUSTRY (0.6%) Aquilex Holdings LLC/Finance Sr Notes 12-15-16 11.13 553,000(d) 595,166 Chart Inds 10-15-15 9.13 170,000 170,000 Garda World Security Sr Unsecured 03-15-17 9.75 695,000(c,d) 712,181 Maxim Crane Works LP Sr Secured 04-15-15 12.25 542,000(d,m) 543,355 --------------- Total 2,020,702 ------------------------------------------------------------------------------------- PACKAGING (1.6%) Ball 09-01-16 7.13 145,000 154,063 09-01-19 7.38 650,000 684,938 09-15-20 6.75 461,000 465,610 Crown Americas LLC/Capital II 05-15-17 7.63 1,250,000(d) 1,303,125 Owens-Brockway Glass Container 05-15-16 7.38 1,550,000 1,627,499 Silgan Holdings Sr Unsecured 08-15-16 7.25 1,035,000 1,073,813 --------------- Total 5,309,048 ------------------------------------------------------------------------------------- PAPER (0.9%) Boise Cascade LLC 10-15-14 7.13 220,000 203,500 Cascades Sr Notes 12-15-17 7.75 1,300,000(c,d) 1,313,000 Georgia-Pacific LLC 06-15-15 7.70 950,000 1,007,000 05-01-16 8.25 235,000(d) 256,150 Potlatch 11-01-19 7.50 205,000(d) 210,125 --------------- Total 2,989,775 ------------------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) Valeant Pharmaceuticals Intl 06-15-16 8.38 705,000(d) 736,725 ------------------------------------------------------------------------------------- RAILROADS (--%) CSX Sr Unsecured 03-15-13 5.75 100,000 108,555 ------------------------------------------------------------------------------------- RETAILERS (0.8%) QVC Sr Secured 04-15-17 7.13 468,000(d) 470,925 10-01-19 7.50 560,000(d) 570,500 10-15-20 7.38 468,000(d) 470,340 Toys R Us Property I LLC 07-15-17 10.75 561,000(d) 628,320 Toys R Us Property II LLC Sr Secured 12-01-17 8.50 707,000(d) 731,745 --------------- Total 2,871,830 ------------------------------------------------------------------------------------- TECHNOLOGY (1.2%) First Data 09-24-15 9.88 750,000 646,875 Iron Mountain Sr Sub Notes 08-15-21 8.38 1,010,000 1,047,875 Sorenson Communications Sr Secured 02-01-15 10.50 753,000(d) 726,645
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) TECHNOLOGY (CONT.) SS&C Technologies 12-01-13 11.75% $785,000 $833,081 SunGard Data Systems 08-15-15 10.25 684,000 719,055 --------------- Total 3,973,531 ------------------------------------------------------------------------------------- TRANSPORTATION SERVICES (0.2%) ERAC USA Finance LLC 10-15-37 7.00 755,000(d) 778,362 ------------------------------------------------------------------------------------- WIRELESS (1.4%) CC Holdings GS V LLC/Crown Castle GS III Sr Secured 05-01-17 7.75 277,000(d) 301,930 Clearwire Communications LLC/Finance Sr Secured 12-01-15 12.00 500,000(d) 510,000 Cricket Communications Sr Secured 05-15-16 7.75 375,000 389,063 Crown Castle Intl Sr Unsecured 11-01-19 7.13 535,000 543,025 Nextel Communications Series D 08-01-15 7.38 500,000 475,000 SBA Telecommunications 08-15-16 8.00 780,000(d) 820,950 08-15-19 8.25 280,000(d) 298,200 Sprint Nextel Sr Unsecured 08-15-17 8.38 527,000 529,635 US Cellular Sr Unsecured 12-15-33 6.70 155,000 150,211 Wind Acquisition Finance Secured 07-15-17 11.75 750,000(c,d) 828,750 --------------- Total 4,846,764 ------------------------------------------------------------------------------------- WIRELINES (3.9%) AT&T Sr Unsecured 03-15-11 6.25 5,000 5,256 02-15-39 6.55 930,000 977,655 ITC Deltacom Sr Secured 04-01-16 10.50 878,000(d,m) 873,610 Level 3 Financing 02-15-17 8.75 1,030,000 942,450 New Communications Holdings Sr Notes 04-15-15 7.88 104,000(d,m) 106,600 04-15-17 8.25 260,000(d,m) 262,925 04-15-20 8.50 212,000(d,m) 215,180 PAETEC Holding 06-30-17 8.88 374,000 384,285 PAETEC Holding Sr Secured 06-30-17 8.88 349,000(d) 359,906 Qtel Intl Finance 06-10-19 7.88 600,000(c,d) 695,197 Qwest Sr Unsecured 06-15-15 7.63 1,425,000 1,556,813 Telecom Italia Capital 11-15-13 5.25 360,000(c) 377,073 TELUS Sr Unsecured 06-01-11 8.00 1,385,000(c) 1,490,562 tw telecom holdings Sr Notes 03-01-18 8.00 427,000(d) 434,473 Verizon New York Sr Unsecured Series A 04-01-12 6.88 1,603,000 1,745,426 Verizon New York Sr Unsecured Series B 04-01-32 7.38 1,190,000 1,279,279
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) WIRELINES (CONT.) Windstream 03-15-19 7.00% $1,600,000 $1,492,000 --------------- Total 13,198,690 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $260,741,296) $282,033,900 ------------------------------------------------------------------------------------- SENIOR LOANS (15.3%)(n) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) AEROSPACE & DEFENSE (0.3%) Spirit AeroSystems Holdings Tranche B1 Term Loan 09-30-13 2.00% $199,665 $197,357 TransDigm Term Loan 06-23-13 2.28 500,000 490,695 Wesco Aircraft Hardware 1st Lien Term Loan 09-30-13 2.50 121,424 118,920 Wesco Aircraft Hardware 2nd Lien Term Loan 03-28-14 6.00 125,000 120,834 --------------- Total 927,806 ------------------------------------------------------------------------------------- AIRLINES (0.1%) United Airlines Tranche B Term Loan 02-01-14 2.25 198,566 172,057 ------------------------------------------------------------------------------------- AUTOMOTIVE (0.3%) Chrysler LLC 1st Lien Term Loan TBD TBD 250,000(m,o) 248,750 Cooper-Standard Automotive Debtor In Possession Tranche A Term Loan 08-04-10 8.25 96,429(k) 97,152 Cooper-Standard Automotive Debtor In Possession Tranche B Term Loan 08-04-10 8.25 32,143(k) 32,384 Cooper-Standard Automotive Debtor In Possession Tranche C Term Loan 08-04-10 8.25 32,143(k) 32,384 Delphi Holdings Tranche A Term Loan 10-06-14 5.28 183 163 Delphi Holdings Tranche B Term Loan 10-06-14 5.28 1,851 1,628 Ford Motor Tranche B2 Term Loan TBD TBD 174,561(m,o) 167,385 12-15-13 3.26 124,687 119,560 Goodyear Engineered Product Delayed Draw Term Loan 07-31-14 2.74 6,125 5,402 Goodyear Engineered Product Term Loan 07-31-14 2.74 42,766 37,714 Goodyear Tire & Rubber 2nd Lien Term Loan 04-30-14 2.34 263,297 250,871 Oshkosh Truck Tranche B Term Loan 12-06-13 6.25-6.26 164,442 164,835 --------------- Total 1,158,228 ------------------------------------------------------------------------------------- BROKERAGE (--%) Nuveen Investments 1st Lien Term Loan 11-13-14 3.25-3.32 112,700 103,152 ------------------------------------------------------------------------------------- BUILDING MATERIALS (0.1%) Custom Building Products Term Loan 03-19-15 5.75 100,000 100,188 Springs Window Fashions LLC Tranche B Term Loan 12-31-12 3.06 150,000 139,875 --------------- Total 240,063 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 22 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) CHEMICALS (1.5%) Ashland Tranche B Term Loan 05-13-14 4.65% $39,156 $39,506 Brenntag Holding 2nd Lien Term Loan 06-23-15 4.25 125,000(c) 121,875 Brenntag Holding Acquisition Term Loan 01-20-14 2.00-2.14 39,032(c) 38,056 Brenntag Holding Tranche B2 Term Loan 01-20-14 2.00 159,861(c) 157,463 Celanese US Holdings LLC Credit Linked Deposit 04-02-14 0.23-1.75 525,455 514,767 CF Inds Holdings Bridge Term Loan TBD TBD 2,000,000(m,o) 2,000,000 Chemtura Debtor In Possession Term Loan 02-11-11 6.00 325,000(k) 326,625 Hexion Specialty Chemicals Tranche C1 Term Loan 05-05-13 4.06 131,256 123,606 Hexion Specialty Chemicals Tranche C2 Term Loan 05-05-13 4.06 58,000 54,620 Hexion Specialty Chemicals Tranche C5 Term Loan 05-05-13 4.06 97,500 91,348 Huntsman Intl LLC Tranche B Term Loan 04-21-14 2.00 184,011 176,306 Huntsman Intl LLC Tranche C Term Loan 06-30-16 2.51 148,500 142,931 Kraton Polymers LLC Term Loan 05-12-13 2.25 65,344 62,800 Lyondell Chemical Debtor In Possession Term Loan TBD TBD 8,913(k,m,o) 9,222 06-03-10 5.80-13.00 44,530(k) 46,816 Lyondell Chemical Term Loan TBD TBD 150,000(m,o) 151,454 Lyondell Chemical Tranche B2 Term Loan 12-22-14 7.00 72,359 56,440 Millenium Chemicals 1st Lien Term Loan 05-15-14 2.54 155,791 146,444 Millenium Chemicals 2nd Lien Term Loan 11-15-14 6.04 125,000 116,146 Nalco Term Loan 05-13-16 6.50 174,125 175,649 PQ 1st Lien Term Loan 07-30-14 3.50 73,875 67,637 Rockwood Specialties Group Tranche H Term Loan 05-15-14 6.00 125,000 125,666 Solutia Term Loan 03-17-17 4.75 275,000 277,252 Univar Tranche B Term Loan 10-10-14 3.25 557,245 535,535 --------------- Total 5,558,164 ------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (0.4%) Bucyrus Intl Tranche C Term Loan 02-19-16 4.50 250,000 252,250 Flowserve Term Loan 08-10-12 1.81 614,327 607,158
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) CONSTRUCTION MACHINERY (CONT.) Manitowoc Tranche B Term Loan TBD TBD $350,000(m,o) $345,625 11-06-14 7.50% 69,431 69,493 --------------- Total 1,274,526 ------------------------------------------------------------------------------------- CONSUMER CYCLICAL SERVICES (0.1%) ServiceMaster Delayed Draw Term Loan 07-24-14 2.75 20,377 19,511 ServiceMaster Term Loan 07-24-14 2.73-2.76 204,623 195,927 --------------- Total 215,438 ------------------------------------------------------------------------------------- CONSUMER PRODUCTS (0.2%) Amscan Holdings Term Loan 05-27-13 2.53 160,865 153,224 Fender Musical Instruments Delayed Draw Term Loan 06-09-14 2.51 16,417 14,016 Fender Musical Instruments Term Loan 06-09-14 2.55 32,500 27,747 Jarden Tranche B1 Term Loan 01-24-12 2.04 79,155 78,914 Jarden Tranche B4 Term Loan 01-26-15 3.54 301,268 301,969 Prestige Brands Tranche B Term Loan 03-17-16 4.75 75,000 74,860 --------------- Total 650,730 ------------------------------------------------------------------------------------- DIVERSIFIED MANUFACTURING (0.3%) Contech Construction Products Term Loan 01-31-13 2.24 363,269 328,304 Mueller Water Products Tranche B Term Loan 05-24-14 5.25-5.29 9,708 9,717 N.E.W. Holdings I LLC Secured Term Loan 03-23-16 6.00 300,000 298,563 Rexnord LLC/RBS Global Tranche B2 Term Loan 07-19-13 2.50 159,148 149,731 Sensus Metering Systems Tranche B3 Term Loan 06-03-13 7.00 223,875 224,435 --------------- Total 1,010,750 ------------------------------------------------------------------------------------- ELECTRIC (0.8%) AES Term Loan 08-10-11 3.25-3.33 225,000 223,173 Boston Generating LLC 1st Lien Revolving Credit Term Loan 12-20-13 0.17-2.38 9,769 8,206 Boston Generating LLC 1st Lien Synthetic Letter of Credit 12-20-13 0.17-2.38 34,891 29,308 Boston Generating LLC Tranche B 1st Lien Term Loan 12-20-13 2.54 152,974 128,499 Covanta Energy Letter of Credit 02-10-14 1.50 198,557 191,856 Covanta Energy Term Loan 02-10-14 1.75 392,229 378,991 Dynegy Holdings Letter of Credit 04-02-13 4.00 416,262 409,345 Dynegy Holdings Tranche B Term Loan 04-02-13 4.00 18,626 18,316 FirstLight Power Resources Synthetic Letter of Credit 11-01-13 0.16 3,512 3,278 FirstLight Power Resources Tranche B 1st Lien Term Loan 11-01-13 2.81 34,108 31,834
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 24 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) ELECTRIC (CONT.) Great Point Power Delayed Draw Term Loan TBD TBD $100,000(m,o) $100,000 NRG Energy Credit Linked Deposit 02-01-13 0.19% 160,950 157,559 NRG Energy Term Loan 02-01-13 2.00-2.04 244,970 239,808 RRI Energy Letter of Credit 06-30-14 0.23-1.75 50,000 47,175 Texas Competitive Electric Holdings LLC Tranche B2 Term Loan 10-10-14 3.73-3.79 492,143 403,764 TPF Generation Holdings LLC 1st Lien Synthetic Letter of Credit 12-15-13 2.10 61,739 59,578 TPF Generation Holdings LLC 1st Lien Term Loan 12-15-13 2.29 159,772 154,180 TPF Generation Holdings LLC Synthetic Revolver Term Loan 12-15-11 0.19-2.10 19,354 18,677 USPF Holdings LLC Term Loan 04-11-14 2.00 84,075 83,129 --------------- Total 2,686,676 ------------------------------------------------------------------------------------- ENTERTAINMENT (0.6%) 24 Hour Fitness Worldwide Tranche B Term Loan 06-08-12 2.75-2.76 97,964 97,475 AMC Entertainment Term Loan 01-28-13 2.00 102,104 99,503 Carmike Cinemas Term Loan 01-27-16 5.50 200,000 199,892 Cedar Fair Tranche B Term Loan TBD TBD 175,000(m,o) 175,110 Cinemark USA Extended Term Loan 04-30-16 3.48-3.52 200,000 199,150 Hit Entertainment 2nd Lien Term Loan 02-26-13 5.75 200,000 118,250 Hit Entertainment Term Loan 03-20-12 2.50 354,652 328,231 Regal Cinemas Term Loan 10-27-13 3.79 525,341 527,310 Six Flags Theme Parks Tranche B Term Loan TBD TBD 325,000(m,o) 321,750 Universal City Development Partners Term Loan 11-06-14 6.50 75,000 75,656 --------------- Total 2,142,327 ------------------------------------------------------------------------------------- ENVIRONMENTAL (0.1%) Synagro Technologies 1st Lien Term Loan 04-02-14 2.23-2.25 200,000 176,626 ------------------------------------------------------------------------------------- FOOD AND BEVERAGE (0.7%) Aramark Letter of Credit 01-26-14 2.03 21,597 21,135 Aramark Term Loan 01-26-14 2.13 328,403 321,378 Constellation Brands Tranche B Term Loan 06-05-13 1.75 413,483 411,193 06-05-15 3.00 203,984 206,126 Dean Foods Tranche B Term Loan 04-02-14 1.68 448,670 440,630 Dole Food Tranche B1 Term Loan 03-02-17 5.00-5.50 28,235 28,509
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 25 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) FOOD AND BEVERAGE (CONT.) Dole Food Tranche C1 Term Loan 03-02-17 5.00-5.50% $70,129 $70,809 Fresh Start Bakeries Tranche B Term Loan 09-29-13 2.50-4.50 383,401 368,065 Michael Foods Tranche B Term Loan 05-01-14 6.50 91,697 92,183 Pierre Foods Term Loan 03-03-16 7.00 100,000 100,332 Wm Wrigley Jr Tranche B1 Term Loan 12-17-12 3.06 50,000 50,301 Wm Wrigley Jr Tranche B2 Term Loan 10-06-14 3.31 50,000 50,292 Wm. Bolthouse Farms 1st Lien Term Loan 02-11-16 5.50 100,000 100,499 Wm. Bolthouse Farms 2nd Lien Term Loan 08-11-16 9.50 200,000 201,312 --------------- Total 2,462,764 ------------------------------------------------------------------------------------- GAMING (0.6%) Ameristar Casinos Term Loan 11-10-12 3.50 311,835 311,445 Cannery Casino Resorts LLC 1st Lien Delayed Draw Term Loan 05-18-13 4.48 238,829 219,424 Cannery Casino Resorts LLC 1st Lien Term Loan 05-17-13 4.49 288,855 265,385 Cannery Casino Resorts LLC 2nd Lien Term Loan 05-18-14 4.49 25,000 19,438 Golden Nugget 2nd Lien Term Loan 12-31-14 3.50 50,000 19,000 Greektown Holdings LLC Tranche B Term Loan 12-03-12 7.00 74,775(b,l) 80,196 Green Valley Ranch Gaming LLC 2nd Lien Term Loan 08-16-14 3.51 300,000 18,600 Harrah's Operating Tranche B1 Term Loan 01-28-15 3.25 300,000 258,126 Seminole Tribe of Florida Tranche B1 Delayed Draw Term Loan 03-05-14 1.81 30,643 29,877 Seminole Tribe of Florida Tranche B2 Delayed Draw Term Loan 03-05-14 1.81 110,428 107,667 Seminole Tribe of Florida Tranche B3 Delayed Draw Term Loan 03-05-14 1.81 84,041 81,940 Venetian Casino Resort Delayed Draw Term Loan 05-23-14 2.05 57,520 52,543 Venetian Casino Resort Tranche B Term Loan 05-23-14 2.05 265,180 242,234 Wembly Term Loan 07-18-11 4.75 262,900 185,344 --------------- Total 1,891,219 ------------------------------------------------------------------------------------- GAS PIPELINES (0.2%) Calumet Lubricants LP Credit Linked Deposit 01-03-15 0.10-4.00 14,368 13,245 Calumet Lubricants LP Term Loan 01-03-15 4.25 106,677 98,343 CGGVeritas Tranche B1 Term Loan 01-12-14 3.29-3.57 311,693(c) 307,018 Coffeyville Resources LLC Tranche D Term Loan 12-30-13 8.50 50,905 51,505
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 26 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) GAS PIPELINES (CONT.) Targa Resources Term Loan 07-05-16 6.00% $100,000 $100,359 --------------- Total 570,470 ------------------------------------------------------------------------------------- HEALTH CARE (1.6%) AGA Medical Tranche B Term Loan 04-28-13 2.00-2.01 100,000 91,500 Alliance HealthCare Services Term Loan 06-01-16 5.50 124,688 124,376 AMN Healthcare Tranche B Term Loan 12-23-13 6.25 75,000 74,063 Ardent Medical Services Term Loan 09-15-15 6.50 200,000 197,626 Biomet Term Loan 03-25-15 3.25-3.28 246,218 242,020 Capella Healthcare 1st Lien Term Loan 02-28-15 5.75 122,813 122,198 Carestream Health 1st Lien Term Loan 04-30-13 2.25 520,770 498,403 Caris Diagnostics Term Loan 01-29-16 7.25 100,000 98,500 Community Health Systems Delayed Draw Term Loan TBD TBD 12,157(m,o) 11,845 07-25-14 2.50 16,682 16,255 Community Health Systems Term Loan TBD TBD 236,777(m,o) 230,334 07-25-14 2.50 326,382 317,501 DaVita Tranche B1 Term Loan 10-05-12 1.73-1.80 280,893 276,360 Emdeon Business Services LLC 1st Lien Term Loan 11-18-13 2.30 167,856 164,499 HCA Tranche A1 Term Loan 11-16-12 1.79 187,614 181,752 HCA Tranche B1 Term Loan 11-18-13 2.54 324,432 316,195 Health Management Associates Tranche B Term Loan 02-28-14 2.04 483,673 468,171 IASIS Healthcare LLC Delayed Draw Term Loan 03-14-14 2.25 469,793 450,856 IASIS Healthcare LLC Synthetic Letter of Credit 03-14-14 0.15-2.10 127,186 122,059 Inverness Medical 1st Lien Term Loan 06-26-14 2.23 48,750 47,084 Inverness Medical 2nd Lien Term Loan 06-26-15 4.50 500,000 490,315 Natl Mentor Holdings Letter of Credit 06-29-13 2.15 7,161 6,623 Natl Mentor Holdings Tranche B Term Loan 06-29-13 2.30 115,741 107,060 Royalty Pharma Finance Trust Tranche B Term Loan 04-16-13 2.54 513,056 506,801 Select Medical Tranche B Term Loan 02-24-12 2.25 52,723 50,851 Select Medical Tranche B1 Term Loan 08-22-14 4.00 150,000 146,438 Vanguard Health Holding II LLC Term Loan 01-29-16 5.00 300,000 300,429 --------------- Total 5,660,114 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 27 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) INDEPENDENT ENERGY (0.1%) Riverside Energy Center Term Loan 06-24-11 4.50% $128,394 $127,752 Rocky Mountain Energy Center LLC Credit Linked Deposit 06-24-11 0.15-4.35 12,737 12,674 Rocky Mountain Energy Center LLC Term Loan 06-24-11 4.50 49,968 49,718 Venoco 2nd Lien Term Loan 05-07-14 4.25 150,000 142,032 --------------- Total 332,176 ------------------------------------------------------------------------------------- MEDIA CABLE (0.7%) Cequel Communications LLC Term Loan 11-05-13 2.25 213,090 207,311 CSC Holdings LLC Incremental B2 Term Loan 03-29-16 1.98 364,780 364,572 Discovery Communications Holding LLC Tranche C Term Loan 05-14-14 5.25 272,938 274,985 Mediacom Communications Tranche D2 Term Loan 01-31-15 1.99 356,793 344,412 NTL Telewest Tranche B10 Term Loan 09-03-12 3.75 665,549(c) 661,668 Telesat Term Loan I 10-31-14 3.25 90,283 88,873 Telesat Term Loan II 10-31-14 3.25 7,755 7,633 UPC Broadband Holding Tranche T Term Loan 12-30-16 3.93 250,000 246,063 Weather Channel Term Loan 09-14-15 5.00 100,000 101,063 Wide Open West Finance LLC Tranche A Term Loan 06-30-14 6.74-6.77 125,000 125,313 --------------- Total 2,421,893 ------------------------------------------------------------------------------------- MEDIA NON CABLE (1.8%) CanWest Mediaworks Tranche D Term Loan 07-10-14 4.25 49,125(c) 46,577 Cengage Learning Acquisitions Term Loan 07-03-14 2.79 550,138 484,523 Citadel Broadcasting Tranche B Term Loan 06-12-14 2.00 51,486 45,908 Clear Channel Communications Tranche B Term Loan 01-29-16 3.90 475,000 384,071 CMP Susquehanna Term Loan 05-05-13 2.25 250,000 210,375 Cumulus Media Term Loan 06-11-14 4.24 104,157 93,351 CW Media Holdings Tranche B Term Loan 02-16-15 3.29-5.25 195,500(c) 183,770 Deluxe Communications Tranche A Credit Linked Deposit 05-11-13 0.19-6.06 13,924 12,566 Deluxe Communications Tranche B Term Loan 05-11-13 6.25 226,826 204,711 Deluxe Communications Tranche C Term Loan 05-11-13 6.25 23,798 21,478 Emmis Operating Tranche B Term Loan 11-01-13 4.25-4.29 224,437 193,465 GateHouse Media Term Loan 08-28-14 2.49 698,528 334,860
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 28 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) MEDIA NON CABLE (CONT.) Gray Television Tranche B Term Loan 12-31-14 3.75% $117,916 $113,578 Intelsat Jackson Holdings Term Loan 02-01-14 2.73-3.23 625,000 562,813 Intelsat Tranche B2A Term Loan 01-03-14 2.73 162,093 157,616 Intelsat Tranche B2B Term Loan 01-03-14 2.73 162,044 157,568 Intelsat Tranche B2C Term Loan 01-03-14 2.73 162,044 157,568 Lodgenet Entertainment Term Loan 04-04-14 2.30 238,568 224,254 MediaNews Group Tranche C Term Loan 08-02-13 4.73 163,676 77,419 Newsday LLC Term Loan 08-01-13 6.50 25,000 25,156 Nielsen Finance LLC Tranche B Term Loan 05-01-16 3.98 249,372 244,591 Penton Media 1st Lien Term Loan 08-01-14 5.00 486,187 354,917 Quebecor Media Tranche B Term Loan 01-17-13 2.25 119,769 116,701 Revolution Studios Tranche B Term Loan 12-21-14 4.00 271,589 247,146 Sinclair Television Group Tranche B Term Loan 10-29-15 6.50 150,000 151,782 Spanish Broadcasting System 1st Lien Term Loan 06-10-12 2.05 369,984 337,610 Tribune Company Tranche B Term Loan 06-04-14 5.25 98,750(b,l) 62,953 Tribune Company Tranche X Term Loan 06-04-09 0.00 17,067(b,l) 10,624 Univision Communications Term Loan 09-29-14 2.54 800,000 712,031 World Color Press and World Color Term Loan 07-23-12 9.00 199,278 201,021 Zuffa LLC Incremental Term Loan 06-19-15 7.50 149,625 150,373 Zuffa LLC Term Loan 06-19-15 2.31 74,375 70,526 --------------- Total 6,351,902 ------------------------------------------------------------------------------------- METALS (0.2%) Aleris Intl Pay-in-Kind Debtor In Possession Term Loan 05-13-10 12.50 128,204(j,k) 56,730 Aleris Intl Term Loan TBA TBA 56,749(m,o) 57,494 05-13-10 13.00 51,980 52,663 Aleris Intl Tranche B1 Term Loan 12-19-13 4.25 59,257(b,l) 296 Aleris Intl Tranche C1 Term Loan 12-19-13 0.00 82,187(b,l) 46,024 John Maneely Term Loan 12-09-13 3.50 97,797 92,767 Noranda Aluminum Acquisition Tranche B Term Loan 05-18-14 2.25 18,448 17,571
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 29 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) METALS (CONT.) Novelis Term Loan 07-06-14 2.25% $91,597(c) $88,547 07-06-14 2.25-2.30 201,522 194,812 --------------- Total 606,904 ------------------------------------------------------------------------------------- OIL FIELD SERVICES (0.5%) Dresser 2nd Lien Term Loan 05-04-15 6.00 1,650,000 1,565,025 Dresser Tranche B Term Loan 05-04-14 2.50 175,000 167,937 --------------- Total 1,732,962 ------------------------------------------------------------------------------------- OTHER INDUSTRY (--%) ATI Schools Tranche B Term Loan 12-30-14 8.25 75,000 72,875 ------------------------------------------------------------------------------------- OTHER UTILITY (--%) BRSP LLC Term Loan 06-04-14 7.50 97,676 97,676 ------------------------------------------------------------------------------------- PACKAGING (0.5%) Anchor Glass Container 1st Lien Term Loan 03-02-16 6.00 75,000 74,719 Berry Plastics Holding Tranche C Term Loan 04-03-15 2.26 500,000 469,655 BWay Tranche B Term Loan 07-17-13 2.06 156,429 155,256 Consolidated Container LLC 2nd Lien Term Loan TBD TBD 350,000(m,o) 308,875 Graham Packaging LP Tranche B Term Loan 10-07-11 2.50 33,989 33,769 Graham Packaging LP Tranche C Term Loan 04-05-14 6.75 321,156 324,246 Graphic Packaging Intl Incremental Term Loan 05-16-14 3.00 395,643 394,013 Reynolds Group Holdings Term Loan 11-05-15 6.25 75,000 75,687 --------------- Total 1,836,220 ------------------------------------------------------------------------------------- PAPER (0.5%) Domtar Tranche B Term Loan 03-07-14 1.61 322,246(c) 319,471 Georgia-Pacific LLC Tranche B Term Loan 12-23-12 2.29 227,876 226,388 Georgia-Pacific LLC Tranche C Term Loan 12-23-14 3.50 141,243 141,918 Smurfit-Stone Container Enterprises Letter of Credit 11-01-10 4.50 53,021 52,671 Smurfit-Stone Container Enterprises Term Loan TBA TBA 350,000(m,o,v) 350,088 11-02-09 0.20-5.00 87,614 87,034 Smurfit-Stone Container Enterprises Tranche B Term Loan 11-01-11 2.50 324,306 322,162 Smurfit-Stone Container Enterprises Tranche C Term Loan 11-01-11 2.50 113,730 112,979 Smurfit-Stone Container Enterprises Tranche C1 Term Loan 11-01-11 2.50 34,386 34,158 --------------- Total 1,646,869 ------------------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) Catalent Pharma Solutions Term Loan 04-10-14 2.50 664,176 624,326 Warner Chilcott LLC Tranche A Term Loan 10-30-14 5.50 33,898(c) 33,928
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 30 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) PHARMACEUTICALS (CONT.) Warner Chilcott LLC Tranche B1 Term Loan 04-30-15 5.75% $16,949(c) $16,975 Warner Chilcott LLC Tranche B2 Term Loan 04-30-15 5.75 37,288(c) 37,346 --------------- Total 712,575 ------------------------------------------------------------------------------------- REFINING (0.1%) Big West Oil LLC Term Loan TBD TBD 75,000(m,o) 75,812 Western Refining Term Loan 05-30-14 10.75 126,717 121,738 Wynnewood Refining Term Loan 09-30-14 11.75 73,125(s) 65,813 --------------- Total 263,363 ------------------------------------------------------------------------------------- RESTAURANTS (0.2%) Arby's Restaurant Group Term Loan 07-25-12 7.25 237,435 238,798 Buffets 2nd Lien Letter of Credit 05-01-13 7.60 275,823 270,306 Buffets 2nd Lien Term Loan 05-01-13 17.75 127,962 125,403 Dennys Credit Linked Deposit 03-31-12 0.25-2.00 100,000 98,000 --------------- Total 732,507 ------------------------------------------------------------------------------------- RETAILERS (1.0%) Claire's Stores Tranche B Term Loan 05-29-14 3.04 488,491 429,735 David's Bridal Term Loan 01-31-14 2.25-2.29 521,190 499,038 Dollar General Tranche B1 Term Loan 07-07-14 2.99-3.00 64,349 63,603 General Nutrition Centers Term Loan 09-16-13 2.49-2.54 193,835 187,375 Gregg Appliances Term Loan 07-25-13 2.25 22,085 21,423 Michaels Stores Tranche B2 Term Loan 07-31-16 4.75-4.81 224,420 218,201 Neiman Marcus Group Term Loan 04-06-13 2.23-2.25 200,000 189,288 Pep Boys-Manny Moe & Jack Term Loan 10-27-13 2.25 237,982 221,324 PETCO Animal Supplies Term Loan 10-26-13 2.50-2.54 150,000 147,329 Pilot Travel Centers LLC Tranche B Term Loan TBD TBD 100,000(m,o) 100,767 Rent-A-Center Tranche B Term Loan 06-30-12 1.98-2.01 303,073 297,012 03-31-15 3.27 55,208 54,794 Rite Aid Tranche 4 Term Loan 06-10-15 9.50 350,000 365,313 Sally Holdings LLC Tranche B Term Loan 11-16-13 2.50 138,738 136,549 Sports Authority Term Loan 05-03-13 2.50-4.00 448,384 405,787 The Pantry Term Loan 05-15-14 2.00 148,733 141,297 --------------- Total 3,478,835 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 31 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) SUPERMARKETS (0.1%) Supervalu Advance A Term Loan 06-02-11 1.17% $50,000 $49,593 Supervalu Advance B Term Loan 06-02-12 1.50 138,376 137,791 --------------- Total 187,384 ------------------------------------------------------------------------------------- TECHNOLOGY (0.5%) Asurion 1st Lien Term Loan 07-03-14 3.23-3.25 99,750 98,504 Brocade Communications Systems Term Loan 10-07-13 7.00 295,173 297,142 Fidelity Natl Information Services Tranche C Term Loan 01-18-12 4.48 2,231 2,247 Freescale Semiconductor Term Loan 12-01-16 4.48 233,492 218,997 Infor Enterprise Solutions Holdings Delayed Draw Term Loan 07-30-12 6.00 85,658 82,612 Infor Enterprise Solutions Holdings Term Loan 07-30-12 4.00 164,171 158,333 Intergraph Incremental B1 Term Loan 05-29-14 6.00 75,000 75,070 Lender Processing Services Tranche B Term Loan 07-01-14 2.75 278,560 279,605 Metavante Term Loan 11-03-14 3.50 32,484 32,687 Sabre Term Loan TBD TBD 250,000(m,o) 232,742 09-30-14 2.25 297,268 276,747 Spansion LLC Term Loan 02-09-15 7.75 50,000 50,375 Verint Systems Term Loan 05-25-14 3.54 23,282 22,060 --------------- Total 1,827,121 ------------------------------------------------------------------------------------- TEXTILE (0.1%) Hanesbrands Term Loan 12-10-15 5.25 100,000 101,056 Levi Strauss & Co Term Loan 03-27-14 2.50 100,000 92,938 William Carter Term Loan 07-14-12 1.75 73,287 72,463 --------------- Total 266,457 ------------------------------------------------------------------------------------- TRANSPORTATION SERVICES (0.1%) Hertz Letter of Credit 12-21-12 0.27 125,971 124,377 Hertz Tranche B Term Loan 12-21-12 1.98-2.00 84,458 83,389 --------------- Total 207,766 ------------------------------------------------------------------------------------- WIRELESS (0.2%) Crown Castle Operating Tranche B Term Loan 03-06-14 1.75 52,435 51,446 Hawaiian Telecom Communications Tranche C Term Loan 05-30-14 4.75 28,767 23,531 MetroPCS Wireless Tranche B Term Loan 11-03-13 2.50 326,471 318,989 Ntelos Advance B Term Loan 08-07-15 5.75 124,688 125,519 --------------- Total 519,485 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 32 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) WIRELINES (0.6%) Alaska Communications Systems Holdings Term Loan 02-01-12 2.04% $398,120 $387,669 FairPoint Communications Tranche B Term Loan 03-31-15 0.00 1,206,000 991,260 Iowa Telecommunications Services Tranche B Term Loan 11-23-11 1.99-2.04 500,000 497,345 Time Warner Telecom Holdings Tranche B Term Loan 01-07-13 2.00 221,836 218,546 --------------- Total 2,094,820 ------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $52,728,485) $52,290,900 -------------------------------------------------------------------------------------
COMMON STOCKS (--%) ISSUER SHARES VALUE(a) AUTO COMPONENTS (--%) Delphi Corp. 1(b) $18,417 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (--%) First Horizon National Corp. --(b,t) 3 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (--%) Buffets Restaurants Holdings, Inc. 1,852(b) 5,556 ------------------------------------------------------------------------------------- IT SERVICES (--%) Advanstar Communications, Inc. 315(b) 3,504 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $33,471) $27,480 ------------------------------------------------------------------------------------- OTHER (--%) ISSUER SHARES VALUE(a) OTHER INDUSTRY Cumulus Media, Inc., Class A Warrants 692(b,s) $2,248 ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $2,248 ------------------------------------------------------------------------------------- MONEY MARKET FUND (2.9%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 9,882,377(u) $9,882,377 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $9,882,377) $9,882,377 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (1.4%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 4,754,635 $4,754,635 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $4,754,635) $4,754,635 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $328,140,264)(w) $348,991,540 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 33 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ SUMMARY OF INVESTMENTS IN SECURITIES BY COUNTRY The following table represents the portfolio investments of the Fund by county as a percentage of net assets at March 31, 2010.
PERCENTAGE OF COUNTRY NET ASSETS ----------------------------------------------------------------- Argentina 0.6% Australia 2.5% Bermuda 0.4% Brazil 2.1% Canada 4.0% Cayman Islands 0.5% Chile 0.2% Colombia 1.0% Dominican Republic 0.2% El Salvador 0.5% France 0.1% Germany 0.7% Indonesia 1.9% Iraq 0.1% Italy 0.1% Kazakhstan 0.3% Luxembourg 1.1% Mexico 1.9% Netherlands 1.1% Norway 1.2% Panama --% Peru 0.6% Philippine Islands 0.9% Poland 0.4% Qatar 0.4% Russia 1.5% South Korea 0.3% Supra-National 0.7% Sweden 1.1% Turkey 1.8% Ukraine 0.1% United Arab Emirates 0.2% United Kingdom 1.8% Uruguay 0.6% Venezuela 1.4% ----------------------------------------------------------------- Total Foreign Securities 32.3% ----------------------------------------------------------------- United States 69.8% -----------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 34 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT MARCH 31, 2010
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------ U.S. Long Bond, 20-year 19 $2,206,375 June 2010 $(29,122) U.S. Treasury Note, 2- year (177) (38,400,704) July 2010 90,030 U.S. Treasury Note, 10- year (64) (7,440,000) June 2010 72,904 U.S. Treasury Ultra Bond, 30-year 126 15,116,062 June 2010 (200,494) ------------------------------------------------------------------------------------ Total $(66,682) ------------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT MARCH 31, 2010
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION --------------------------------------------------------------------------------------------- April 6, 2010 1,217,766 98,712 $147 $-- Mexican Peso U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 2,781,000 2,728,059 -- (10,163) Canadian Dollar U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 5,023,000 6,793,854 8,959 -- European Monetary Unit U.S. Dollar --------------------------------------------------------------------------------------------- April 28 2010 35,000 47,149 -- (127) European Monetary Unit U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 4,343,000 4,103,463 -- (16,459) Swiss Franc U.S. Dollar --------------------------------------------------------------------------------------------- April 28, 2010 2,714,945 2,976,000 9,065 -- U.S. Dollar Australian Dollar --------------------------------------------------------------------------------------------- April 28, 2010 4,157,876 377,927,000 -- (114,658) U.S. Dollar Japanese Yen --------------------------------------------------------------------------------------------- April 28, 2010 6,823,862 40,762,000 29,590 -- U.S. Dollar Norwegian Krone --------------------------------------------------------------------------------------------- Total $47,761 $(141,407) ---------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At March 31, 2010, the value of foreign securities, excluding short- term securities, represented 32.34% of net assets. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 35 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2010, the value of these securities amounted to $76,720,611 or 22.44% of net assets. (e) Inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) This is a variable rate security that entitles holders to receive only interest payments. Interest is paid annually. The interest payment is based on the Gross Domestic Product (GDP) level of the previous year for the respective country. To the extent that the previous year's GDP exceeds the 'base case GDP', an interest payment is made equal to 0.012225 of the difference. (h) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on March 31, 2010. (i) For zero coupons, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (j) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (k) The borrower filed for protection under Chapter 11 of the U.S. Federal Bankruptcy Code. (l) This position is in bankruptcy. (m) At March 31, 2010, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $9,081,668. See Note 2 to the financial statements. (n) Senior loans have rates of interest that float periodically based primarily on the London Interbank Offered Rate ("LIBOR") and other short-term rates. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. -------------------------------------------------------------------------------- 36 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (o) Represents a senior loan purchased on a when-issued or delayed-delivery basis. Certain details associated with this purchase are not known prior to the settlement date of the transaction. In addition, senior loans typically trade without accrued interest and therefore a weighted average coupon rate is not available prior to settlement. At settlement, if still unknown, the borrower or counterparty will provide the Fund with the final weighted average coupon rate and maturity date. (p) At March 31, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (q) At March 31, 2010, investments in securities included securities valued at $520,490 that were partially pledged as collateral to cover initial margin deposits on open interest rate futures contracts. (r) The following abbreviation is used in the portfolio security description to identify the insurer of the issue: FGIC -- Financial Guaranty Insurance Company
(s) Identifies issues considered to be illiquid as to their marketability (See Note 2 to the financial statements). The aggregate value of such securities at March 31, 2010 was $68,061, representing less than 0.02% of net assets. Information concerning such security holdings at March 31, 2010 was as follows:
ACQUISITION SECURITY DATES COST ------------------------------------------------------------ Cumulus Media, Inc., Class A Warrants 11-05-09 $-- Wynnewood Refining Term Loan 10-14-09 65,708
(t) Represents fractional shares. (u) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at March 31, 2010. (v) At March 31, 2010, the Fund had unfunded senior loan commitments pursuant to the terms of the loan agreement. The Fund receives a stated coupon rate until the borrower draws on the loan commitment, at which time the rate will become the stated rate in the loan agreement.
UNFUNDED BORROWER COMMITMENT ---------------------------------------------------------- Smurfit-Stone Container Enterprises $346,500
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 37 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (w) At March 31, 2010, the cost of securities for federal income tax purposes was approximately $328,140,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $24,299,000 Unrealized depreciation (3,447,000) ----------------------------------------------------------- Net unrealized appreciation $20,852,000 -----------------------------------------------------------
-------------------------------------------------------------------------------- 38 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 39 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ FAIR VALUE MEASUREMENTS (CONTINUED) The following table is a summary of the inputs used to value the Fund's investments as of March 31, 2010:
FAIR VALUE AT MARCH 31, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $86,009,419 $1,065,974 $87,075,393 U.S. Government Obligations & Agencies 12,233,088 9,058,428 -- 21,291,516 Asset-Backed Securities -- 478,046 -- 478,046 Commercial Mortgage- Backed Securities -- 7,541,826 -- 7,541,826 Residential Mortgage- Backed Securities -- 6,567,591 -- 6,567,591 Corporate Debt Securities Automotive -- 1,497,545 214 1,497,759 Banking -- 2,212,467 357,269 2,569,736 Food and Beverage -- 5,101,798 186,360 5,288,158 All Other Industries(a) -- 149,723,875 -- 149,723,875 ----------------------------------------------------------------------------------------------- Total Bonds 12,233,088 268,190,995 1,609,817 282,033,900 ----------------------------------------------------------------------------------------------- Equity Securities Common Stocks Auto Components -- 18,417 -- 18,417 IT Services -- 3,504 -- 3,504 All Other Industries(a) 5,559 -- -- 5,559 Other Other Industry -- 2,248 -- 2,248 ----------------------------------------------------------------------------------------------- Total Equity Securities 5,559 24,169 -- 29,728 ----------------------------------------------------------------------------------------------- Other Senior Loans Chemicals -- 5,442,018 116,146 5,558,164 Food and Beverage -- 2,370,581 92,183 2,462,764 Metals -- 560,880 46,024 606,904 Refining -- 197,550 65,813 263,363 All Other Industries(a) -- 43,399,705 -- 43,399,705 Affiliated Money Market Fund(b) 9,882,377 -- -- 9,882,377 Investments of Cash Collateral Received for Securities on Loan(c) 4,754,635 -- -- 4,754,635 ----------------------------------------------------------------------------------------------- Total Other 14,637,012 51,970,734 320,166 66,927,912 ----------------------------------------------------------------------------------------------- Investments in Securities 26,875,659 320,185,898 1,929,983 348,991,540 Other Financial Instruments(d) (66,682) (93,646) -- (160,328) ----------------------------------------------------------------------------------------------- Total $26,808,977 $320,092,252 $1,929,983 $348,831,212 -----------------------------------------------------------------------------------------------
(a) Industry classifications are identified in the Portfolio of Investments. -------------------------------------------------------------------------------- 40 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) (b) Money market fund that is a sweep investment for cash balances in the Fund at March 31, 2010. (c) Asset categories for Investments of Cash Collateral are identified in the Portfolio of Investments. (d) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
FOREIGN GOVERNMENT OBLIGATIONS & CORPORATE DEBT SENIOR AGENCIES SECURITIES LOANS TOTAL ------------------------------------------------------------------------------------------ Balance as of Sept. 30, 2009 $1,077,337 $169,000 $249,266 $1,495,603 Accrued discounts/premiums 19,958 (647) 5,654 24,965 Realized gain (loss) 13,617 69 436 14,122 Change in unrealized appreciation (depreciation)* 9,123 26,580 6,951 42,654 Net purchases (sales) (54,061) 348,841 57,859 352,639 Transfers in and/or out of Level 3 -- -- -- -- ------------------------------------------------------------------------------------------ Balance as of March 31, 2010 $1,065,974 $543,843 $320,166 $1,929,983 ------------------------------------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities held at Jan. 31, 2010 was $36,584, which is comprised of Foreign Government Obligations & Agencies $9,123, Corporate Debt Securities $20,441 and Senior Loans $7,020. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 800.SEC.0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling 800.221.2450. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 41 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- MARCH 31, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $313,503,252) $334,354,528 Affiliated money market fund (identified cost $9,882,377) 9,882,377 Investments of cash collateral received for securities on loan (identified cost $4,754,635) 4,754,635 ------------------------------------------------------------------------------- Total investments in securities (identified cost $328,140,264) 348,991,540 Foreign currency holdings (identified cost $330,394) 332,069 Capital shares receivable 860,400 Dividends and accrued interest receivable 5,217,075 Receivable for investment securities sold 3,072,113 Variation margin receivable on futures contracts 71,500 Unrealized appreciation on forward foreign currency contracts 47,761 ------------------------------------------------------------------------------- Total assets 358,592,458 ------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 1,994 Dividends payable to shareholders 408,549 Capital shares payable 454,574 Payable for investment securities purchased 10,699,403 Payable upon return of securities loaned 4,754,635 Unrealized depreciation on forward foreign currency contracts 141,407 Accrued investment management services fees 5,073 Accrued distribution fees 142,171 Accrued transfer agency fees 1,134 Accrued administrative services fees 654 Accrued plan administration services fees 91 Other accrued expenses 73,746 ------------------------------------------------------------------------------- Total liabilities 16,683,431 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $341,909,027 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 348,395 Additional paid-in capital 327,547,783 Undistributed net investment income 77,303 Accumulated net realized gain (loss) (6,761,308) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 20,696,854 ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $341,909,027 ------------------------------------------------------------------------------- *Value of securities on loan $ 10,763,926 -------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 42 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $296,718,222 30,234,154 $9.81 Class B $ 26,704,402 2,720,532 $9.82 Class C $ 18,023,735 1,837,667 $9.81 Class R2 $ 5,270 537 $9.81 Class R3 $ 5,270 537 $9.81 Class R4 $ 189,259 19,294 $9.81 Class R5 $ 262,869 26,780 $9.82 ------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.30. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 4.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 43 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Interest 11,242,922 Income distributions from affiliated money market fund 7,962 Income from securities lending -- net 14,073 Less foreign taxes withheld (21,240) ------------------------------------------------------------------------------ Total income 11,243,717 ------------------------------------------------------------------------------ Expenses: Investment management services fees 868,394 Distribution fees Class A 346,387 Class B 128,651 Class C 78,978 Class R2 13 Class R3 7 Transfer agency fees Class A 169,201 Class B 16,872 Class C 9,909 Class R2 2 Class R3 2 Class R4 38 Class R5 37 Administrative services fees 111,631 Plan administration services fees Class R2 7 Class R3 7 Class R4 188 Compensation of board members 4,842 Custodian fees 34,400 Printing and postage 41,469 Registration fees 49,915 Professional fees 12,847 Other 16,966 ------------------------------------------------------------------------------ Total expenses 1,890,763 ------------------------------------------------------------------------------ Investment income (loss) -- net 9,352,954 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 44 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 6,774,784 Foreign currency transactions 326,326 Futures contracts (1,218,717) ------------------------------------------------------------------------------ Net realized gain (loss) on investments 5,882,393 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,751,886 ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 7,634,279 ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $16,987,233 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 45 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED MARCH 31, 2010 YEAR ENDED (UNAUDITED) SEPT. 30, 2009 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 9,352,954 $ 12,399,408 Net realized gain (loss) on investments 5,882,393 (11,382,698) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,751,886 34,872,367 --------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 16,987,233 35,889,077 --------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (8,662,664) (10,424,678) Class B (708,152) (1,122,318) Class C (431,362) (410,442) Class R2 (151) (267) Class R3 (157) (279) Class R4 (4,653) (793) Class R5 (4,592) (296) Net realized gain Class A -- (245,703) Class B -- (29,726) Class C -- (9,677) Class R2 -- (8) Class R3 -- (8) Class R4 -- (8) Class R5 -- (8) --------------------------------------------------------------------------------------------------- Total distributions (9,811,731) (12,244,211) ---------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 46 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2010 YEAR ENDED (UNAUDITED) SEPT. 30, 2009 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 63,705,509 $144,803,885 Class B shares 4,329,718 15,610,233 Class C shares 5,142,220 8,277,241 Class R4 shares 194,015 68,867 Class R5 shares 249,274 -- Reinvestment of distributions at net asset value Class A shares 7,807,333 9,173,037 Class B shares 627,337 1,019,611 Class C shares 343,872 341,747 Class R4 shares 4,321 443 Class R5 shares 4,086 -- Conversions from Class B to Class A Class A shares 99 4,264,765 Class B shares (99) (4,264,765) Payments for redemptions Class A shares (36,218,881) (71,294,338) Class B shares (4,526,604) (7,360,890) Class C shares (1,153,462) (2,181,930) Class R4 shares (80,765) (8,675) --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 40,427,973 98,449,231 --------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 47,603,475 122,094,097 Net assets at beginning of period 294,305,552 172,211,455 --------------------------------------------------------------------------------------------------- Net assets at end of period $341,909,027 $294,305,552 --------------------------------------------------------------------------------------------------- Undistributed net investment income $ 77,303 $ 536,080 ---------------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 47 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED SEPT. 30, CLASS A SIX MONTHS ENDED ------------------------------- PER SHARE MARCH 31, 2010 2009 2008 2007(a) (UNAUDITED) Net asset value, beginning of period $9.60 $8.93 $9.84 $9.99 -------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .29 .55 .46 .18 Net gains (losses) (both realized and unrealized) .22 .66 (.91) (.15) -------------------------------------------------------------------------------------------------------- Total from investment operations .51 1.21 (.45) .03 -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.30) (.52) (.46) (.18) Distributions from realized gains -- (.02) (.00)(b) -- -------------------------------------------------------------------------------------------------------- Total distributions (.30) (.54) (.46) (.18) -------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.81 $9.60 $8.93 $9.84 -------------------------------------------------------------------------------------------------------- TOTAL RETURN 5.42% 14.60% (4.74%) .40% -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.09%(d) 1.13% 1.13% 1.27%(d) -------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.09%(d) 1.13% 1.13% 1.16%(d) -------------------------------------------------------------------------------------------------------- Net investment income (loss) 5.96%(d) 6.40% 4.83% 5.12%(d) -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $297 $255 $148 $112 -------------------------------------------------------------------------------------------------------- Portfolio turnover rate(f) 47% 143% 137% 70% --------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 48 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED SEPT. 30, CLASS B SIX MONTHS ENDED ------------------------------- PER SHARE MARCH 31, 2010 2009 2008 2007(a) (UNAUDITED) Net asset value, beginning of period $9.60 $8.93 $9.84 $9.99 -------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .25 .48 .38 .16 Net gains (losses) (both realized and unrealized) .23 .66 (.90) (.15) -------------------------------------------------------------------------------------------------------- Total from investment operations .48 1.14 (.52) .01 -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.45) (.39) (.16) Distributions from realized gains -- (.02) (.00)(b) -- -------------------------------------------------------------------------------------------------------- Total distributions (.26) (.47) (.39) (.16) -------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.82 $9.60 $8.93 $9.84 -------------------------------------------------------------------------------------------------------- TOTAL RETURN 5.13% 13.74% (5.47%) .13% -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.85%(d) 1.89% 1.90% 2.09%(d) -------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.85%(d) 1.89% 1.90% 1.92%(d) -------------------------------------------------------------------------------------------------------- Net investment income (loss) 5.21%(d) 5.65% 4.04% 4.42%(d) -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $27 $26 $18 $7 -------------------------------------------------------------------------------------------------------- Portfolio turnover rate(f) 47% 143% 137% 70% --------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 49 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED SEPT. 30, CLASS C SIX MONTHS ENDED ------------------------------- PER SHARE MARCH 31, 2010 2009 2008 2007(a) (UNAUDITED) Net asset value, beginning of period $9.59 $8.92 $9.84 $9.99 -------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .25 .48 .38 .15 Net gains (losses) (both realized and unrealized) .23 .66 (.91) (.15) -------------------------------------------------------------------------------------------------------- Total from investment operations .48 1.14 (.53) .00 -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.45) (.39) (.15) Distributions from realized gains -- (.02) (.00)(b) -- -------------------------------------------------------------------------------------------------------- Total distributions (.26) (.47) (.39) (.15) -------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.81 $9.59 $8.92 $9.84 -------------------------------------------------------------------------------------------------------- TOTAL RETURN 5.14% 13.76% (5.57%) .10% -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.84%(d) 1.87% 1.90% 2.06%(d) -------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.84%(d) 1.87% 1.90% 1.92%(d) -------------------------------------------------------------------------------------------------------- Net investment income (loss) 5.20%(d) 5.64% 4.06% 4.21%(d) -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $18 $13 $6 $2 -------------------------------------------------------------------------------------------------------- Portfolio turnover rate(f) 47% 143% 137% 70% --------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 50 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
Year ended Sept. 30, CLASS R2 SIX MONTHS ENDED ------------------- PER SHARE MARCH 31, 2010 2009 2008(g) (Unaudited) Net asset value, beginning of period $9.60 $8.93 $9.32 -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .27 .51 .08 Net gains (losses) (both realized and unrealized) .22 .67 (.42) -------------------------------------------------------------------------------------------- Total from investment operations .49 1.18 (.34) -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.28) (.49) (.05) Distributions from realized gains -- (.02) -- -------------------------------------------------------------------------------------------- Total distributions (.28) (.51) (.05) -------------------------------------------------------------------------------------------- Net asset value, end of period $9.81 $9.60 $8.93 -------------------------------------------------------------------------------------------- TOTAL RETURN 5.19% 14.22% (3.64%) -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.56%(d) 1.58% 1.63%(d) -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.56%(d) 1.47% 1.63%(d) -------------------------------------------------------------------------------------------- Net investment income (loss) 5.49%(d) 6.07% 4.49%(d) -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------- Portfolio turnover rate(f) 47% 143% 137% --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 51 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
Year ended Sept. 30, CLASS R3 SIX MONTHS ENDED ------------------- PER SHARE MARCH 31, 2010 2009 2008(g) (Unaudited) Net asset value, beginning of period $9.60 $8.93 $9.32 -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .28 .54 .08 Net gains (losses) (both realized and unrealized) .22 .66 (.41) -------------------------------------------------------------------------------------------- Total from investment operations .50 1.20 (.33) -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.29) (.51) (.06) Distributions from realized gains -- (.02) -- -------------------------------------------------------------------------------------------- Total distributions (.29) (.53) (.06) -------------------------------------------------------------------------------------------- Net asset value, end of period $9.81 $9.60 $8.93 -------------------------------------------------------------------------------------------- TOTAL RETURN 5.31% 14.51% (3.59%) -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.33%(d) 1.32% 1.36%(d) -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.33%(d) 1.21% 1.36%(d) -------------------------------------------------------------------------------------------- Net investment income (loss) 5.72%(d) 6.32% 4.75%(d) -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------- Portfolio turnover rate(f) 47% 143% 137% --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 52 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
Year ended Sept. 30, CLASS R4 SIX MONTHS ENDED ------------------- PER SHARE MARCH 31, 2010 2009 2008(g) (Unaudited) Net asset value, beginning of period $9.60 $8.93 $9.32 -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .29 .57 .08 Net gains (losses) (both realized and unrealized) .22 .65 (.41) -------------------------------------------------------------------------------------------- Total from investment operations .51 1.22 (.33) -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.30) (.53) (.06) Distributions from realized gains -- (.02) -- -------------------------------------------------------------------------------------------- Total distributions (.30) (.55) (.06) -------------------------------------------------------------------------------------------- Net asset value, end of period $9.81 $9.60 $8.93 -------------------------------------------------------------------------------------------- TOTAL RETURN 5.46% 14.81% (3.56%) -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.03%(d) .99% 1.12%(d) -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.03%(d) .95% 1.12%(d) -------------------------------------------------------------------------------------------- Net investment income (loss) 5.98%(d) 6.45% 4.88%(d) -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------- Portfolio turnover rate(f) 47% 143% 137% --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 53 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
Year ended Sept. 30, CLASS R5 SIX MONTHS ENDED ------------------- PER SHARE MARCH 31, 2010 2009 2008(g) (Unaudited) Net asset value, beginning of period $9.60 $8.93 $9.32 -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .30 .57 .09 Net gains (losses) (both realized and unrealized) .23 .66 (.41) -------------------------------------------------------------------------------------------- Total from investment operations .53 1.23 (.32) -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.31) (.54) (.07) Distributions from realized gains -- (.02) -- -------------------------------------------------------------------------------------------- Total distributions (.31) (.56) (.07) -------------------------------------------------------------------------------------------- Net asset value, end of period $9.82 $9.60 $8.93 -------------------------------------------------------------------------------------------- TOTAL RETURN 5.70% 14.95% (3.51%) -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Total expenses .79%(d) .82% .88%(d) -------------------------------------------------------------------------------------------- Net investment income (loss) 6.18%(d) 6.72% 5.21%(d) -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------- Portfolio turnover rate(f) 47% 143% 137% --------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (b) Rounds to zero. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (d) Annualized. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Includes mortgage dollar rolls. If mortgage dollar roll transactions were excluded, the portfolio turnover would have been 46% for the six months ended March 31, 2010, and 112% and 82% for the years ended Sept. 30, 2009 and 2008, respectively. (g) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 54 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF MARCH 31, 2010) 1. ORGANIZATION RiverSource Strategic Income Allocation Fund (the Fund) is a series of RiverSource Strategic Allocation Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation's Board of Directors (the Board). The Fund invests primarily in high yield bonds, emerging markets bonds, bank loans, government and corporate bonds, mortgage- and asset-backed securities, Treasury inflation protected securities, international bonds and cash or cash equivalents. A smaller portion of the Fund may be allocated to real estate investment trusts (REITs) and U.S. and international equity securities. The Fund offers Class A, Class B, Class C, Class R2, Class R3, Class R4 and Class R5 shares. - Class A shares are offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class R2, Class R3, Class R4 and Class R5 shares are offered without a front- end sales charge or CDSC to qualifying institutional investors. At March 31, 2010, RiverSource Investments, LLC* (RiverSource Investments or the Investment Manager) owned 100% of Class R2 and Class R3 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 55 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- investments are allocated to each class of shares based upon its relative net assets. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price from the primary exchange. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market -------------------------------------------------------------------------------- 56 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- conditions as of the close of the NYSE. The fair value of a security is likely to be different from the quoted or published price, if available. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At March 31, 2010, foreign currency holdings consisted of multiple denominations. ILLIQUID SECURITIES At March 31, 2010, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at March 31, 2010 was $68,061 representing 0.02% of net assets. Certain illiquid securities may be valued, in good faith, by management at fair value according to procedures approved by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. INVESTMENTS IN LOANS The senior loans acquired by the Fund typically take the form of a direct lending relationship with the borrower acquired through an assignment of another lender's interest in a loan. The lead lender in a typical corporate loan syndicate administers the loan and monitors collateral. In the event that the lead lender -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 57 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- becomes insolvent, enters FDIC receivership, or, if not FDIC insured, enters into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest. Loans are typically secured but may be unsecured. The primary risk arising from investing in subordinated loans or in unsecured loans is the potential loss in the event of default by the issuer of the loans. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS AND UNFUNDED LOAN COMMITMENTS Delivery and payment for securities that have been purchased by the Fund on a forward-commitment basis, including when-issued securities and other forward- commitments, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect the Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At March 31, 2010, the Fund has outstanding when-issued securities of $8,445,632 and other forward-commitments of $636,036. The Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrower's discretion. These commitments are disclosed in the Portfolio of Investments. At March 31, 2010, the Fund has entered into unfunded loan commitments of $346,500. The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. -------------------------------------------------------------------------------- 58 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared daily and payable monthly, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income, if any, is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 59 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. FUTURES TRANSACTIONS The Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange to produce incremental earnings, hedge existing positions or protect against market changes in the value of equities, interest rates or foreign currencies. The Fund may also buy and write put and call options on these futures contracts. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the -------------------------------------------------------------------------------- 60 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Upon entering into futures contracts, the Fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT MARCH 31, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Foreign exchange Unrealized Unrealized contracts appreciation on depreciation on forward foreign forward foreign currency contracts $47,761 currency contracts $141,407 ------------------------------------------------------------------------------------------- Interest rate Net assets -- contracts unrealized depreciation on N/A N/A investments 66,682* ------------------------------------------------------------------------------------------- Total $47,761 $208,089 -------------------------------------------------------------------------------------------
* Includes cumulative appreciation (depreciation) of futures contracts as reported in the Futures Contracts Outstanding table following the Portfolio of Investments. Only the current day's variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 61 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS FUTURES TOTAL ----------------------------------------------------------------------------- Foreign exchange contracts $251,485 $ -- $ 251,485 ----------------------------------------------------------------------------- Interest rate contracts -- (1,218,717) $(1,218,717) ----------------------------------------------------------------------------- Total $251,485 $(1,218,717) $ (967,232) -----------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME -------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS FUTURES TOTAL -------------------------------------------------------------------------- Foreign exchange contracts $(204,730) $ -- $(204,730) -------------------------------------------------------------------------- Interest rate contracts -- (363,789) $(363,789) -------------------------------------------------------------------------- Total $(204,730) $(363,789) $(568,519) --------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was $27.5 million at March 31, 2010. The monthly average gross notional amount for these contracts was $19.9 million for the six months ended March 31, 2010. The fair value of such contracts on March 31, 2010 is set forth in the table above. FUTURES The gross notional amount of long and short contracts outstanding was $17.3 million and $45.8 million, respectively, at March 31, 2010. The monthly average gross notional contract amount for long and short contracts was $21.1 million and $68.4 million, respectively, for the six months ended March 31, 2010. The fair value of such contracts on March 31, 2010 is set forth in the table above. 4. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is an annual fee that is equal to a percentage of the Fund's average daily net -------------------------------------------------------------------------------- 62 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- assets that declines from 0.55% to 0.475% as the Fund's net assets increase. The management fee for the six months ended March 31, 2010 was 0.55% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.07% to 0.04% as the Fund's net assets increase. The fee for the six months ended March 31, 2010 was 0.07% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended March 31, 2010, other expenses paid to this company were $1,274. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource, Seligman and Threadneedle funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation* (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. The Fund pays the Transfer Agent an annual account- based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for the 12 month period from the date the account becomes inactive. These fees are included in the transfer agency fees in the Statement of Operations. * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 63 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc.* (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at the annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $1,272,000 and $118,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges, including front-end sand CDSCs, received by the Distributor for distributing Fund shares were $374,930 for Class A, $4,654 for Class B and $1,283 for Class C for the six months ended March 31, 2010. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Nov. 30, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses * Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Distributors, Inc. -------------------------------------------------------------------------------- 64 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- of acquired funds*), will not exceed the following percentage of the class' average daily net assets: Class A.............................................. 1.13% Class B.............................................. 1.89 Class C.............................................. 1.88 Class R2............................................. 1.58 Class R3............................................. 1.33 Class R4............................................. 1.08 Class R5............................................. 0.83
For the six months ended March 31, 2010, the waiver was not invoked because the Fund's expenses were below the cap. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations, but including mortgage dollar rolls) aggregated $184,850,801 and $144,887,403, respectively, for the six months ended March 31, 2010. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED MARCH 31, 2010 SEPT. 30, 2009 ----------------------------------------------------------------------- CLASS A Sold 6,584,946 17,012,975 Converted from Class B* 10 462,049 Reinvested distributions 806,605 1,071,413 Redeemed (3,740,283) (8,557,743) ----------------------------------------------------------------------- Net increase (decrease) 3,651,278 9,988,694 ----------------------------------------------------------------------- CLASS B Sold 446,796 1,853,491 Reinvested distributions 64,823 120,063 Converted to Class A* (10) (462,049) Redeemed (467,921) (871,359) ----------------------------------------------------------------------- Net increase (decrease) 43,688 640,146 -----------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 65 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31, 2010 SEPT. 30, 2009 ----------------------------------------------------------------------- CLASS C Sold 531,907 958,837 Reinvested distributions 35,556 39,918 Redeemed (119,106) (260,117) ----------------------------------------------------------------------- Net increase (decrease) 448,357 738,638 ----------------------------------------------------------------------- CLASS R4 Sold 20,076 7,526 Reinvested distributions 447 47 Redeemed (8,353) (986) ----------------------------------------------------------------------- Net increase (decrease) 12,170 6,587 ----------------------------------------------------------------------- CLASS R5 Sold 25,822 -- Reinvested distributions 421 -- ----------------------------------------------------------------------- Net increase (decrease) 26,243 -- -----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At March 31, 2010, securities valued at $10,763,926 were on loan, secured by U.S. government securities valued at $6,156,859 and by cash collateral of $4,754,635 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the -------------------------------------------------------------------------------- 66 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $14,073 earned from securities lending for the six months ended March 31, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $92,472,983 and $88,893,107, respectively, for the six months ended March 31, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at March 31, 2010, can be found in the Portfolio of Investments. 9. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 67 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- borrowings at a rate equal to the sum of the federal funds rate plus (i) 1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended March 31, 2010. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments, re-characterization of REIT distributions, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $631,381 at Sept. 30, 2009, that if not offset by capital gains will expire in 2017. Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Sept. 30, 2009, the Fund had a post-October loss of $10,705,520 that is treated for income tax purposes as occurring on Oct. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There -------------------------------------------------------------------------------- 68 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 12. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 69 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into -------------------------------------------------------------------------------- 70 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates 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. -------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT 71 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.221.2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 72 RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND -- 2010 SEMIANNUAL REPORT RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). (C)2010 Columbia Management Investment Advisers, LLC. All (RIVERSOURCE INVESTMENTS LOGO) rights reserved. S-6288 D (5/10)
Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) The complete schedule of investments is included in Item 1 of this Form N-CSR. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Strategic Allocation Series, Inc. By /s/ J. Kevin Connaughton --------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date June 2, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ J. Kevin Connaughton --------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date June 2, 2010 By /s/ Jeffrey P. Fox --------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date June 2, 2010