SUBADVISORY AGREEMENT
Agreement made as of the 25th day of July, 2003, by and between
American Express Financial Corporation, a Delaware corporation ("AEFC"), and
Xxxxxxx, Xxxxx & Associates ("Subadviser").
WHEREAS each Fund listed in Schedule A is a series of an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act") (each Fund individually referred to throughout as the "Fund").
WHEREAS AEFC has entered into an Investment Management Services
Agreement (the "Advisory Agreement") with the Fund pursuant to which AEFC
provides investment advisory services to the Fund.
WHEREAS AEFC and the Fund desire to retain Subadviser to provide
investment advisory services to the Fund, and Subadviser is willing to render
such investment advisory services.
NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:
1. Subadviser's Duties.
(a) Portfolio Management. Subject to supervision by AEFC and the Fund's
Board of Directors (the "Board"), Subadviser shall manage the
investment operations and the composition of that portion of assets of
the Fund which is allocated to Subadviser from time to time by AEFC
(which portion may include any or all of the Fund's assets), including
the purchase, retention, and disposition thereof, in accordance with
the Fund's investment objectives, policies, and restrictions, and
subject to the following understandings:
(i) Investment Decisions. Subadviser shall determine from time to
time what investments and securities will be purchased, retained,
or sold with respect to that portion of the Fund allocated to it
by AEFC, and what portion of such assets will be invested or held
uninvested as cash. Subadviser is prohibited from consulting with
any other subadviser of the Fund concerning transactions of the
Fund in securities or other assets, other than for purposes of
complying with the conditions of Rule 12d3-1(a) or (b) under the
1940 Act.
(ii) Investment Limits. In the performance of its duties and
obligations under this Agreement, Subadviser shall act in
conformity with applicable limits and requirements, as amended
from time to time, as set forth in the (A) Fund's Prospectus and
Statement of Additional Information ("SAI") as provided by AEFC
to Subadviser from time to time; (B) instructions and directions
of AEFC and of the Board consistent with the Fund's
Prospectus and SAI; (C) requirements of the 1940 Act, the
Internal Revenue Code of 1986, as amended, as applicable to the
Fund, and all other federal and state laws and regulations
applicable to Subadviser; and (D) the procedures and standards
set forth in, or established in accordance with, the Advisory
Agreement and conveyed by AEFC to Subadviser in writing.
(iii) Portfolio Transactions.
(A) Trading. With respect to the securities and other
investments to be purchased or sold for the Fund, Subadviser
shall place orders with or through such persons, brokers,
dealers, or futures commission merchants (including, but not
limited to, broker-dealers that are affiliated with AEFC or
Subadviser) selected by Subadviser; provided, however, that
such orders shall be consistent with the brokerage policy
set forth in the Fund's Prospectus and SAI, or approved by
the Board, and, in each case, delivered in writing to
Subadviser; conform with federal securities laws; and be
consistent with securing the most favorable price and
efficient execution. Within the framework of this policy,
Subadviser may consider the research, investment
information, and other services provided by, and the
financial responsibility of, brokers, dealers, or futures
commission merchants who may effect, or be a party to, any
such transaction or other transactions to which Subadviser's
other clients may be a party.
(B) Aggregation of Trades. On occasions when Subadviser deems
the purchase or sale of a security or futures contract to be
in the best interest of the Fund as well as other clients of
Subadviser, Subadviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities or futures contracts
to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or
futures contracts so purchased or sold, as well as the
expenses incurred in the transaction, will be made by
Subadviser in the manner Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to
the Fund and to such other clients.
(iv) Records and Reports. Subadviser shall maintain such books and
records required under the 1940 Act as shall be agreed upon from
time to time by the parties hereto, shall render to the Board
such periodic and special reports as the Board or AEFC may
reasonably request, and shall meet with any persons at the
request of AEFC or the Board for the purpose of reviewing
Subadviser's performance under this Agreement at reasonable times
and upon reasonable advance written notice.
(v) Transaction Reports. Subadviser shall provide the Fund's
custodian on each business day with information relating to all
transactions concerning the Fund's assets and shall provide AEFC
with such information upon AEFC's request.
(b) Maintenance of Records. Subadviser shall timely furnish to AEFC all
information relating to Subadviser's services hereunder which are
needed by AEFC to maintain the books and records of the Fund required
under the 1940 Act. Subadviser shall maintain for the Fund the records
required by paragraphs (b)(5), (b)(6), (b)(7), (b)(9), (b)(10) and (f)
of Rule 31a-1 under the 1940 Act and any additional records as agreed
upon by Subadviser and AEFC. Subadviser agrees that all records which
it maintains for the Fund are the property of the Fund and Subadviser
will surrender promptly to the Fund any of such records upon the
Fund's request; provided, however, that Subadviser may retain a copy
of such records. Subadviser further agrees to preserve for the periods
prescribed under the 1940 Act any such records as are required to be
maintained by it pursuant to paragraph 1(a) hereof.
(c) Fidelity Bond and Code of Ethics. Subadviser will provide the Fund
with reasonable evidence that, with respect to its activities on
behalf of the Fund, Subadviser is maintaining (i) adequate fidelity
bond insurance and (ii) an appropriate Code of Ethics and related
reporting procedures.
2. AEFC's Duties. AEFC shall continue to have responsibility for all other
services to be provided to the Fund pursuant to the Advisory Agreement and
shall oversee and review Subadviser's performance of its duties under this
Agreement. AEFC shall also retain direct portfolio management
responsibility with respect to any assets of the Fund which are not
allocated by it to the portfolio management of Subadviser as provided in
paragraph 1(a) hereof.
3. Documents Provided to Subadviser. AEFC has delivered or will deliver to
Subadviser current copies and supplements thereto of each of the Prospectus
and SAI pertaining to the Fund, and will promptly deliver to it all future
amendments and supplements, if any.
4. Compensation of Subadviser. For the services provided and the expenses
assumed pursuant to this Agreement, AEFC will pay to Subadviser, effective
from the date of this Agreement, a fee which shall be accrued daily and
paid monthly, on or before the last business day of the next succeeding
calendar month, from the Fund's assets at the annual rates as a percentage
of the Fund's average daily net assets set forth in the attached Schedule
A, which Schedule can be modified from time to time to reflect changes in
annual rates, subject to appropriate approvals required by the 1940 Act, if
any. If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion of the full
month during which this Agreement was effective.
5. Liability of Subadviser. Subadviser agrees to perform faithfully the
services required to be rendered to the Fund under this Agreement, but
nothing herein contained shall make Subadviser or any of its officers,
partners, or employees liable for any loss sustained by the Fund or its
officers, directors, or shareholders, or any other person on account of the
services which Subadviser may render or fail to render under this
Agreement; provided, however, that nothing herein shall protect Subadviser
against liability to the Fund or to any of its shareholders, to which
Subadviser would otherwise be subject, by reason of its willful
misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement. Nothing in this Agreement shall protect
Subadviser from any liabilities which it may have under the 1940 Act.
6. Representations of Subadviser. Subadviser represents and warrants as
follows:
(a) Subadviser (i) is registered as an investment advisor under the
Investment Advisers Act of 1940 (the "Advisers Act") and will continue
to be so registered for so long as this Agreement remains in effect;
(ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement, (iii) has met
and will seek to continue to meet for so long as this Agreement
remains in effect, any other applicable federal or state requirements,
or the applicable requirements of any regulatory or industry
self-regulatory agency necessary to be met in order to perform the
services contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this Agreement;
and (v) will promptly notify AEFC of the occurrence of any event that
would disqualify Subadviser from serving as an investment advisor of
an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) Subadviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide AEFC
with a copy of the code of ethics, together with evidence of its
adoption. Within 45 days of the end of the last calendar quarter of
each year that this Agreement is in effect, a duly authorized officer
of Subadviser shall certify to AEFC that Subadviser has complied with
the requirements of Rule 17j-1 during the previous year and that there
has been no material violation of Subadviser's code of ethics or, if
such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of AEFC,
Subadviser shall permit AEFC, its employees, or its agents to examine
the reports required to be made to Subadviser by Rule 17j-1(c)(1) and
all other records relevant to Subadviser's code of ethics.
(c) Subadviser has provided AEFC with a copy of its Form ADV, which as of
the date of this Agreement is its Form ADV as most recently filed with
the Securities and Exchange Commission ("SEC") and promptly will
furnish a copy of all amendments to AEFC at least annually.
(d) Subadviser will promptly notify AEFC of any changes in the controlling
shareholder(s) or in the key personnel who are either the portfolio
manager(s) responsible for the Fund or senior management of
Subadviser, or if there is otherwise an actual or expected change in
control or management of Subadviser.
(e) Subadviser agrees that neither it nor any of its affiliates will in
any way refer directly or indirectly to its relationship with the Fund
or AEFC, or any of their respective affiliates, in offering,
marketing, or other promotional materials without the prior written
consent of AEFC.
7. Representations of AEFC. AEFC represents and warrants as follows:
(a) AEFC (i) is registered as an investment advisor under the Advisers Act
and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this
Agreement, (iii) has met and will seek to continue to meet for so long
as this Agreement remains in effect, any other applicable federal or
state requirements, or the applicable requirements of any regulatory
or industry self-regulatory agency necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by this
Agreement and to engage Subadviser pursuant to this Agreement on
behalf of the Fund; and (v) will promptly notify Subadviser of the
occurrence of any event that would disqualify AEFC from serving as an
investment advisor of an investment company pursuant to Section 9(a)
of the 1940 Act or otherwise.
(b) AEFC agrees that neither it nor any of its affiliates will in any way
refer directly or indirectly to its relationship with Subadviser, or
any of its affiliates in offering, marketing, or other promotional
materials without the prior written consent of Subadviser.
(c) AEFC's retention of Subadviser pursuant to this Agreement is
consistent with the Fund's public disclosures and disclosures in the
Fund's filings with the SEC concerning the investment advisory
services provided to the Fund.
8. Liability and Indemnification.
(a) Except as may otherwise be provided by the 1940 Act or any other
federal securities law, Subadviser, any of its affiliates and any of
the officers, directors, employees, consultants, or agents thereof
shall not be liable for any loses, claims, damages, liabilities, or
litigation (including legal and other expenses) incurred or suffered
by AEFC or the Fund as a result of any error of judgment or mistake of
law by Subadviser with respect to the Fund, except that nothing in
this Agreement shall operate or purport to operate in any way to
exculpate, waive, or limit the liability of Subadviser for, and
Subadviser shall indemnify and hold harmless the Fund, AEFC, all
affiliated persons thereof (within the meaning of Section 2(a)(3) of
the 0000 Xxx) and all controlling persons (as described in Section 15
of the Securities Act of 1933, as amended ("1933 Act")) (collectively,
"AEFC
Indemnitees") against any and all losses, claims, damages,
liabilities, or litigation (including reasonable legal and other
expenses) to which any of the AEFC Indemnitees may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, or under any other
statute, at common law, or otherwise arising out of or based on (i)
any willful misconduct, bad faith, reckless disregard, or gross
negligence of Subadviser in the performance of any of its duties or
obligations hereunder; (ii) any untrue statement of a material fact
contained in the Prospectus and SAI, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to the
Fund or the omission to state therein a material fact known to
Subadviser which was required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission was made in reliance upon written information furnished to
AEFC or the Fund by the Subadviser Indemnitees (as defined below) for
use therein; or (iii) any violation of federal or state statutes or
regulations by Subadviser. It is further understood and agreed that
Subadviser may rely upon information furnished to it by AEFC that it
reasonably believes to be accurate and reliable. The federal
securities laws impose liabilities in certain circumstances on persons
who act in good faith, and therefore nothing herein shall in any way
constitute a waiver of limitation of any rights which AEFC may have
under any securities laws.
(b) Except as may otherwise be provided by the 1940 Act or any other
federal securities law, AEFC and the Fund shall not be liable for any
losses, claims, damages, liabilities, or litigation (including legal
and other expenses) incurred or suffered by Subadviser as a result of
any error of judgment or mistake of law by AEFC with respect to the
Fund, except that nothing in this Agreement shall operate or purport
to operate in any way to exculpate, waive, or limit the liability of
AEFC for, and AEFC shall indemnify and hold harmless Subadviser, all
affiliated persons thereof (within the meaning of Section 2(a)(3) of
the 0000 Xxx) and all controlling persons (as described in Section 15
of the 1933 Act) (collectively, "Subadviser Indemnitees") against any
and all losses, claims, damages, liabilities, or litigation (including
reasonable legal and other expenses) to which any of the Subadviser
Indemnitees may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, or under any other statute, at common law, or otherwise
arising out of or based on (i) any willful misconduct, bad faith,
reckless disregard, or gross negligence of AEFC in the performance of
any of its duties or obligations hereunder; (ii) any untrue statement
of a material fact contained in the Prospectus and SAI, proxy
materials, reports, advertisements, sales literature, or other
materials pertaining to the Fund or the omission to state therein a
material fact known to AEFC which was required to be stated therein or
necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon written information
furnished to AEFC or the Fund by a Subadviser Indemnitee for use
therein, or (iii) any violation of federal or state statutes or
regulations by AEFC or the Fund.
(c) After receipt by AEFC or Subadviser, its affiliates, or any officer,
director, employee, or agent of any of the foregoing, entitled to
indemnification as stated in (a) or (b) above ("Indemnified Party") of
notice of the commencement of any action, if a claim in respect
thereof is to be made against any person obligated to provide
indemnification under this section ("Indemnifying Party"), such
Indemnified Party shall notify the Indemnifying Party in writing of
the commencement thereof as soon as practicable after the summons or
other first written notification giving information of the nature of
the claim that has been served upon the Indemnified Party; provided
that the failure to so notify the Indemnifying Party will not relieve
the Indemnifying Party from any liability under this section, except
to the extent that the omission results in a failure of actual notice
to the Indemnifying Party and such Indemnifying Party is damaged
solely as a result of the failure to give such notice. The
Indemnifying Party, upon the request of the Indemnified Party, shall
retain counsel satisfactory to the Indemnified Party to represent the
Indemnified Party in the proceeding, and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (1) the Indemnifying Party
and the Indemnified Party shall have mutually agreed to the retention
of such counsel, or (2) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation by both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. The Indemnifying Party shall not be
liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, but
if settled with such consent or if there be a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified
Party from and against any loss or liability by reason of such
settlement or judgment.
9. Duration and Termination.
(a) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for a period of more than two years from the date
written above only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the
1940 Act. Thereafter, if not terminated, this Agreement shall continue
automatically for successive periods of 12 months each, provided that
such continuance is specifically approved at least annually (i) by a
vote of a majority of the Board members who are not parties to this
Agreement or interested persons (as defined in the 0000 Xxx) of any
such party, and (ii) by the Board or by a vote of the holders of a
majority of the outstanding voting securities (as defined in the 1940
Act) of the Fund.
(b) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by the Board or by vote of a
majority of the outstanding voting securities (as defined in the 0000
Xxx) of the Fund on 60 days' prior written notice to Subadviser. This
Agreement may also be terminated, without the payment of any penalty,
by AEFC (i) upon 60 days' prior written notice to Subadviser; (ii)
upon material breach by Subadviser of any representations and
warranties set forth in this Agreement, if such breach has not been
cured within 20 days after written notice of such breach; or (iii)
immediately if, in the reasonable judgment of AEFC, Subadviser becomes
unable to discharge its duties and obligations under this Agreement,
including circumstances such as the insolvency of Subadviser or other
circumstances that could adversely affect the Fund. Subadviser may
terminate this Agreement at any time, without payment of any penalty,
on 60 days' prior written notice to AEFC. This Agreement shall
terminate automatically in the event of its assignment (as defined in
the 0000 Xxx) or upon the termination of the Advisory Agreement.
10. Subadviser's Services Are Not Exclusive. Nothing in this Agreement shall
limit or restrict the right of Subadviser and any of Subadviser's partners,
directors, officers, or employees, whether or not they may also be a
director, officer, or employee of the Fund, to engage in any other business
or to devote time and attention to the management or other aspects of any
business, whether of a similar or a dissimilar nature to that of AEFC or
the Fund (including, without limitation, any business that competes
directly with AEFC or the Fund), or limit or restrict Subadviser's right to
engage in any other business or to render services of any kind to any other
corporation, firm, individual, or association.
11. References to Subadviser. During the term of this Agreement, AEFC agrees to
furnish to Subadviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to sales personnel, shareholders of the Fund or
the public, which refer to Subadviser or its clients in any way, prior to
use thereof and not to use such material if Subadviser reasonably objects
in writing five business days (or such other time as may be mutually agreed
upon) after receipt thereof. Sales literature may be furnished to
Subadviser hereunder by first-class or overnight mail, electronic or
facsimile transmission, or hand delivery.
12. Notices. Any notice under this Agreement must be given in writing as
provided below or to another address as either party may designate in
writing to the other.
Subadviser:
Xxxxxxx, Xxxxx & Associates
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: G. Xxxxxx Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Dhiya El-Saden
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
AEFC:
Vice President - Product Development and Research
American Express Financial Corporation
435 AXP Financial Center
Xxxxxxxxxxx, XX 00000
Fax: 000-000-0000
with a copy to:
H. Xxxxx xxx Xxxxx
Vice President and Group Counsel
American Express Financial Advisors Inc.
50606 AXP Financial Center
Xxxxxxxxxxx, XX 00000
Fax: 000-000-0000
13. Amendments. This Agreement may be amended only by mutual consent,
subject to approval by the Board and the Fund's shareholders to the
extent required by the 1940 Act.
14. Assignment. No assignment (as defined in the 0000 Xxx) shall be made by
AEFC without the prior written consent of the Fund and AEFC.
Notwithstanding the foregoing, no assignment shall be deemed to result
from any changes in the directors, officers, or employees of AEFC
except as may be provided to the contrary in the 1940 Act or the rules
and regulations thereunder.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Minnesota, without giving effect to the conflicts of laws
principles thereof, or any applicable provisions of the 1940 Act. To
the extent that the laws of the State of Minnesota, or any of the
provision of this Agreement, conflict with applicable provisions of the
1940 Act, the latter shall control.
16. Entire Agreement. This Agreement embodies the entire agreement and
understanding among the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof.
17. Severability. Should any part of this Agreement be held invalid by a
court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors.
18. Interpretation. Any questions of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be resolved by
reference to such term or provision in the 1940 Act and to
interpretation thereof, if any, by the federal courts or, in the
absence of any controlling decision of any such court, by rules,
regulations, or orders of the SEC validly issued pursuant to the 1940
Act. Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation, or order
of the SEC, whether of special or general application, such provision
shall be deemed to incorporate the effect of such rule, regulation, or
order.
19. Headings. The headings in this Agreement are intended solely as a
convenience and are not intended to modify any other provision herein.
20. Authorization. Each of the parties represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action by such party and when so executed
and delivered, this Agreement will be the valid and binding obligation
of such party in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
AMERICAN EXPRESS XXXXXXX, XXXXX & ASSOCIATES
FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxx III
-------------------------------- ----------------------------
Signature Signature
Name: Xxxxx X. Xxxxx Name: Xxxx X. Xxxxx III
---------------------------
Printed
Senior Vice President and
Title: General Manager-Mutual Funds Title: Sr. Ex. VP. C.I.O.
---------------------------
SUBADVISORY AGREEMENT
SCHEDULE A
Compensation pursuant to Paragraph 4 of Subadvisory Agreement shall be
calculated in accordance with the following schedule:
Average Daily Net Assets* Rate
First $10 million 80bp
Next $15 million 70bp
Next $25 million 65bp
Thereafter 60bp
------------------------
* When average daily net assets exceed the first breakpoint, multiple rates will
apply, resulting in a blended rate, e.g. if average daily net assets are $15
million, a rate of 80bp would apply to $10 million and a rate of 70bp would
apply to $5 million.
The rates set forth above apply to average daily net assets that are subject to
the Subadviser's investment discretion in the following fund:
AXP Partners Small Cap Growth Fund, a series or AXP Strategy Series, Inc.
