INVESTMENT SUB-ADVISORY AGREEMENT
This Agreement is effective as of the 7th day of April, 1999 by and between
American Express Financial Corporation ("AEFC"), a Delaware corporation and
Kenwood Capital Management LLC ("Kenwood"), a Delaware limited liability
company.
Each of the Funds and Portfolios listed in Exhibit A (individually a "Fund" and
collectively the "Funds" ), is registered as an investment company under the
Investment Company Act of 1940 (the "1940 Act"); and
Each Fund has entered into an Investment Management Services Agreement with
AEFC, an investment adviser registered under the Investment Advisers Act of 1940
(the "Advisers Act"), under which AEFC provides investment advisory services to
the Fund; and
Kenwood is a registered investment adviser under the Advisers Act and has a
staff of experienced investment personnel and facilities for the kind of
investment portfolio contemplated for the Funds.
Therefore, it is mutually agreed with respect to each Fund:
Part One: Investment Management Services
(1) AEFC retains Kenwood, and Kenwood agrees, with respect to the Fund's assets
allocated to Kenwood by AEFC, to furnish the Fund continuously with suggested
investment planning; to determine, consistent with the Fund's investment
objectives and policies, which securities in Kenwood's discretion shall be
purchased, held or sold and to execute or cause the execution of purchase or
sell orders; to prepare and make available to the Fund all necessary research
and statistical data; subject always to the direction and control of the Board
of Directors (the "Board"), the officers of the Fund and AEFC. AEFC will be
responsible for investing and reinvesting all of the Fund's cash and cash items
held by the Fund's U.S. custodian. Kenwood agrees to maintain an adequate
organization of competent persons to provide the services and to perform the
functions described in this Agreement.
(2) All transactions will be executed in accordance with the procedures and
standards set forth in, or established in accordance with, the Investment
Management Services Agreement between AEFC and the Fund. AEFC will provide
Kenwood with information concerning those procedures and standards and Kenwood
will maintain records to assure that transactions have been executed in
accordance those procedures and standards.
(3) Kenwood agrees that the investment planning and investment decisions will be
in accordance with investment policies and strategies of the Fund as disclosed
to Kenwood from time to time by the Fund and as set forth in its prospectus and
statement of additional information filed with the Securities and Exchange
Commission (the "SEC").
(4) AEFC agrees that it will furnish to Kenwood any information that the latter
may reasonably request with respect to the services performed or to be performed
by Kenwood under this Agreement.
(5) Kenwood agrees to provide the Board and AEFC with information and reports
regarding its activities as deemed appropriate by AEFC or as requested by the
Board and to meet with any persons at the request of the Board or AEFC for the
purpose of reviewing Kenwood's performance under this Agreement.
(6) It is understood and agreed that in furnishing the Fund with advisory
services, neither Kenwood, nor any of its officers, directors or agents will be
held liable to AEFC, the Fund or its creditors or shareholders for errors of
judgment or for anything except willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or reckless disregard of its
obligations and duties under the terms of this Agreement. It is further
understood and agreed that Kenwood may rely upon information furnished to it
reasonably believed to be accurate and reliable and that, except as provided
above, Kenwood will not be accountable for any loss suffered by AEFC or the Fund
by reason of the latter's action or nonaction on the basis of any advice or
recommendation of Kenwood, its officers, directors or agents.
Part Two: Compensation To Kenwood.
As compensation for its services, AEFC will pay Kenwood a fee as described in
Exhibit A. AEFC will pay this fee to Kenwood on a monthly basis in cash within 5
business days after the last day of each month. In the event of the termination
of this Agreement, the fee accrued will be prorated on the basis of the number
of days that this Agreement is in effect during the month.
Part Three: Miscellaneous
(1) Kenwood will be deemed to be an independent contractor and, unless expressly
authorized, will have no authority to act for or represent the Fund.
(2) AEFC agrees that Kenwood may render investment advice and other services to
other persons that may or may not have investment policies and investments
similar to those of the Fund, and that Kenwood may manage its own investments,
provided that these activities do not impair Kenwood's ability to render
services under this Agreement.
(3) Neither this Agreement nor any transaction under this Agreement will be
invalidated or in any way affected by the fact that directors, officers, agents
and/or shareholders of the Fund are or may be interested in Kenwood or any
successor or assignee, as directors, officers, stockholders or otherwise; that
directors, officers, stockholders or agents of Kenwood are or may be interested
in the Fund as directors, officers, shareholders, or otherwise; or that Kenwood
or any successor or assignee, is or may be interested in the Fund as shareholder
or otherwise, provided, however, that neither Kenwood, nor any officer, director
or employee thereof or of the Fund, shall sell to or buy from the Fund any
property or security other than shares issued by the Fund, except in accordance
with applicable regulations or orders of the SEC.
(4) Any notice under this Agreement must be given in writing delivered to the
party's principal place of business in Minneapolis, Minnesota, or to another
address as either party may designate in writing to the other.
(5) Kenwood agrees that no officer, director or employee of Kenwood will deal
for or on behalf of the Fund with himself or herself as principal or agent, or
with any corporation or partnership in which he or she may have a financial
interest, except that this shall not prohibit:
(a) Officers, directors or employees of Kenwood from having a financial
interest in the Fund or in Kenwood.
(b) The purchase of securities for the Fund, or the sale of securities
owned by the Fund, through a security broker or dealer, one or more of whose
partners, officers, directors or employees is an officer, director or employee
of Kenwood, provided such transactions are handled in the capacity of broker
only and provided commissions charged do not exceed customary brokerage charges
for such services.
(c) Transactions with the Fund by a broker-dealer affiliate of Kenwood
as may be allowed by rule or order of the SEC, and if made pursuant to
procedures adopted by the Fund's Board.
(6) Kenwood agrees that, except as herein otherwise expressly provided or as may
be permitted consistent with the use of a broker-dealer affiliate of Kenwood
under applicable provisions of the federal securities laws, neither it nor any
of its officers, directors or employees shall at any time during the period of
this Agreement, make, accept or receive, directly or indirectly, any fees,
profits or emoluments of any character in connection with the purchase or sale
of securities (except shares issued by the Fund) or other assets by or for the
Fund.
(7) Kenwood agrees to protect the confidentiality of any non-public information
provided to it by AEFC or the Fund.
Part Four: Renewal And Termination
(1) This Agreement, unless terminated under paragraph 2,3, or 4 below, will
continue in effect from year to year, provided its continued applicability is
specifically approved at least annually (i) by the Board of the Fund or by a
vote of the holders of a majority of the outstanding votes of the Fund and (ii)
by vote of a majority of the Board members who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. As used in this paragraph, the term
"interested person" has the same meaning as set forth in the 1940 Act, as
amended.
(2) This Agreement may be terminated at any time, without penalty, by the Board
of the Fund or by vote of the holders of a majority of the Fund's outstanding
shares, on 60 days' written notice to AEFC or to Kenwood.
(3) AEFC or Kenwood may terminate this Agreement by giving sixty days written
notice to the other party.
(4) This Agreement will terminate in the event of its assignment, the term
"assignment" for this purpose having the same meaning set forth in the 1940 Act,
as amended.
In Witness Thereof, the parties hereto have executed this Agreement as of the
day and year first above written.
AMERICAN EXPRESS FINANCIAL CORPORATION
By:__________________________
Senior Vice President -
Investment Operations
Kenwood Capital Management LLC
By: _________________________
President
EXHIBIT A
With respect to the Fund's assets allocated to Kenwood, AEFC will pay Kenwood a
fee equal on an annual basis as follows:
Fund Fee
AXP Small Cap Advantage Fund 0.35% of average daily net assets
