Inno Setup 6.0.3 recursesubdirs can't handle chain of subdirectories without standalone files

Question

Source: "C:\folder1\*"; DestDir: "C:\folder1"; Flags: recursesubdirs;

The above line can't handle the following file structure:

C:\
   folder1\
         folder2\
                folder3\

in each subdirectory, there is no standalone files, except a subdirectory. In Inno Setup, it gives the following error:

No files found matching "C:\folder1\*"