INVESTMENT MANAGEMENT SERVICES AGREEMENT
This Agreement dated as of July 11, 2002, is by and between AXP
Partners International Series, Inc., a Minnesota Corporation, (the
"Corporation") on behalf of its underlying series AXP Partners International
Core Fund and AXP Partners International Small Cap Fund, (the "Funds") and
American Express Financial Corporation, a Delaware corporation ("AEFC").
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Corporation hereby retains AEFC, and AEFC hereby agrees, for
the period of this Agreement and under the terms and conditions hereinafter set
forth, to furnish the Corporation continuously with suggested investment
planning; to determine, consistent with the Fund's investment objectives and
policies, which securities in AEFC'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 Funds all necessary research and statistical
data in connection therewith; to furnish all other services of whatever nature
required in connection with the management of the Funds as provided under this
Agreement; and to pay such expenses as may be provided for in Part Three;
subject always to the direction and control of the Board of Directors (the
"Board"), the Executive Committee and the authorized officers of the
Corporation. AEFC agrees to maintain an adequate organization of competent
persons to provide the services and to perform the functions herein mentioned.
AEFC agrees to meet with any persons at such times as the Board deems
appropriate for the purpose of reviewing AEFC's performance under this
Agreement.
(2) AEFC agrees that the investment planning and investment decisions
will be in accordance with general investment policies of the Funds as disclosed
to AEFC from time to time by the Funds and as set forth in its prospectus and
registration statement filed with the United States Securities and Exchange
Commission (the "SEC").
(3) AEFC agrees that it will maintain all required records, memoranda,
instructions or authorizations relating to the acquisition or disposition of
securities for the Funds.
(4) The Corporation agrees that it will furnish to AEFC any information
that the latter may reasonably request with respect to the services performed or
to be performed by AEFC under this Agreement.
(5) AEFC is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Funds and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. Subject to prior authorization
by the Board of appropriate policies and procedures, and subject to termination
at any time by the Board, AEFC may also be authorized to effect individual
securities transactions at commission rates in excess of the minimum commission
rates available, to the extent authorized by law, if AEFC
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or
AEFC's overall responsibilities with respect to the Funds and other funds for
which it acts as investment adviser.
(6) It is understood and agreed that in furnishing the Funds with the
services as herein provided, neither AEFC, nor any officer, director or agent
thereof shall be held liable to the Funds 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 AEFC may rely upon information furnished to it
reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Funds agree to pay to AEFC, and AEFC covenants and agrees to
accept from the Funds in full payment for the services furnished, a fee composed
of an asset charge and a performance incentive adjustment.
(a) The asset charge
(i) The asset charge for each calendar day of each
year shall be equal to the total of 1/365th (1/366th in each
leap year) of the amount computed in accordance with paragraph
(ii) below. The computation shall be made for each day on the
basis of net assets as of the close of business. In the case
of the suspension of the computation of net asset value, the
fee for each day during such suspension shall be computed as
of the close of business on the last full business day on
which the net assets were computed. Net assets as of the close
of a full business day shall include all transactions in
shares of the Funds recorded on the books of the Funds for
that day.
(ii) The asset charge shall be based on the net
assets of the Funds as set forth in the following table.
AXP Partners International Core Fund
Asset Charge
Assets Annual Rate At
(Billions) Each Asset Level
First $0.25 0.970%
Next 0.25 0.945
Next 0.25 0.920
Next 0.25 0.895
Next 1.0 0.870
Over 2.0 0.845
AXP Partners International Small Cap Fund
Asset Charge
Assets Annual Rate At
(Billions) Each Asset Level
First $0.25 1.120%
Next 0.25 1.095
Next 0.25 1.070
Next 0.25 1.045
Next 1.0 1.020
Over 2.0 0.995
(b) The performance incentive adjustment
(i) The performance incentive adjustment shall
be based on the Fund's performance compared to an index of
similar funds. The performance incentive adjustment is
determined by measuring the percentage difference over a
rolling 12-month period between the performance of one Class
A share of the Fund and the change in performance of the
Lipper International Funds Index (the "Index") for AXP
Partners International Core Fund and the Lipper
International Small Cap Funds Index (the "Index") for AXP
Partners International Small Cap Fund. The performance
difference will then be used to determine the adjustment
rate.
(ii) The adjustment rate, computed to five decimal
places, is determined in accordance with the following
table:
---------------------- ---------------------------------------------------------
Performance Adjustment Rate
Difference
0.00%-0.50% 0
0.50%-1.00% 6 basis points times the performance difference over
0.50% (maximum of 3 basis points if a 1% performance
difference)
1.00%-2.00% 3 basis points, plus 3 basis points times the performance
difference over 1.00% (maximum 6 basis points if a 2%
performance difference)
2.00%-4.00% 6 basis points, plus 2 basis points times the performance
difference over 2.00% (maximum 10 basis points if a 4%
performance difference)
4.00%-6.00% 10 basis points, plus 1 basis point times the performance
difference over 4.00% (maximum 12 basis points if a 6%
performance difference)
6.00% or more 12 basis points
---------------------- ---------------------------------------------------------
For example, if the performance difference is 2.38%, the
adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038
[the 0.38% performance difference over 2.00%] x 0.0002[2 basis
points] x 100 (0.000076)). Rounded to five decimal places, the
adjustment rate is 0.00068. The maximum adjustment rate for each
Fund is 0.00120% per year. Where a Fund's performance is better
than the Index, the fee paid to AEFC will increase. Where a Fund's
performance is worse than the Index, the fee paid to AEFC will
decrease.
(iii) The first adjustment will be made on May 1,
2003 and will cover the six-month period beginning November
1, 2002. The comparison period will increase by one month
each month until it reaches 12 months.
(iv) If an Index ceases to be published for a period
of more than 90 days, changes in any material respect or
otherwise becomes impracticable to use for purposes of a
performance incentive adjustment, no adjustment will be made
under (b) until such time as the Board approves a substitute
index.
(2) The fee shall be paid on a monthly basis and, in the event of the
termination of this Agreement, the fee accrued shall be prorated on the basis of
the number of days that this Agreement is in effect during the month with
respect to which such payment is made.
(3) The fee provided for hereunder shall be paid in cash by the Funds
to AEFC within five business days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Corporation agrees to pay:
(a) Fees payable to AEFC for its services under the terms of
this Agreement.
(b) Taxes.
(c) Brokerage commissions and charges in connection with the
purchase and sale of assets.
(d) Custodian fees and charges.
(e) Fees and charges of its independent certified public
accountants for service the Funds request.
(f) Premium on the bond required by Rule 17g-1 under the
Investment Company Act of 1940.
(g) Fees and expenses of attorneys (i) it employs in matters not
involving the assertion of a claim by a third party against
the Corporation, its directors and officers, (ii) it employs
in conjunction with a claim asserted by the Board against
AEFC, except that AEFC shall reimburse the Corporation for
such fees and expenses if it is ultimately determined by a
court of competent jurisdiction, or AEFC agrees, that it is
liable in whole or in part to the Corporation, and (iii) it
employs to assert a claim against a third party.
(h) Fees paid for the qualification and registration for public
sale of the securities of the Funds under the laws of the
United States and of the several states in which such
securities shall be offered for sale.
(i) Fees of consultants employed by the Funds.
(j) Directors, officers and employees expenses which shall
include fees, salaries, memberships, dues, travel, seminars,
pension, profit sharing, and all other benefits paid to or
provided for directors, officers and employees, directors
and officers liability insurance, errors and omissions
liability insurance, worker's compensation insurance and
other expenses applicable to the directors, officers and
employees, except the Corporation will not pay any fees or
expenses of any person who is an officer or employee of AEFC
or its affiliates.
(k) Filing fees and charges incurred by the Corporation in
connection with filing any amendment to its articles of
incorporation, or incurred in filing any other document with
the State of Minnesota or its political subdivisions.
(l) Organizational expenses of the Corporation.
(m) Expenses incurred in connection with lending portfolio
securities of the Funds.
(n) Expenses properly payable by the Funds, approved by the
Board.
(2) AEFC agrees to pay all expenses associated with the services it
provides under the terms of this Agreement. Further, AEFC agrees that if, at the
end of any month, the expenses of the Funds under this Agreement and any other
agreement between the Funds and AEFC, but excluding those expenses set forth in
(1)(b) and (1)(c) of this Part Three, exceed the most restrictive applicable
state expenses limitation, the Funds shall not pay those expenses set forth in
(1)(a) and (d) through (n) of this Part Three to the extent necessary to keep
the Fund's expenses from exceeding the limitation, it being understood that AEFC
will assume all unpaid expenses and xxxx the Funds for them in subsequent months
but in no event can the accumulation of unpaid expenses or billing be carried
past the end of the Fund's fiscal year.
Part Four: MISCELLANEOUS
(1) AEFC shall be deemed to be an independent contractor and, except as
expressly provided or authorized in this Agreement, shall have no authority to
act for or represent the Funds.
(2) A "full business day" shall be as defined in the By-laws of the
Corporation.
(3) The Funds recognizes that AEFC now renders and may continue to
render investment advice and other services to other investment companies and
persons which may or may not have investment policies and investments similar to
those of the Funds and that AEFC manages its own investments and/or those of its
subsidiaries. AEFC shall be free to render such investment advice and other
services and the Funds hereby consents thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto
shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Funds are
or may be interested in AEFC or any successor or assignee
thereof, as directors, officers, stockholders or otherwise; that
directors, officers, stockholders or agents of AEFC are or may be
interested in the Funds as directors, officers, shareholders, or
otherwise; or that AEFC or any successor or assignee, is or may
be interested in the Funds as shareholder or otherwise, provided,
however, that neither AEFC, nor any officer, director or employee
thereof or of the Funds, shall sell to or buy from the Funds any
property or security other than shares issued by the Funds,
except in accordance with applicable regulations or orders of the
SEC.
(5) Any notice under this Agreement shall be given in writing,
addressed, and delivered, or mailed postpaid, to the party to this Agreement
entitled to receive such, at such party's principal place of business in
Minneapolis, Minnesota, or to such other address as either party may designate
in writing mailed to the other.
(6) AEFC agrees that no officer, director or employee of AEFC will deal
for or on behalf of the Funds with himself as principal or agent, or with any
corporation or partnership in which he may have a financial interest, except
that this shall not prohibit:
(a) Officers, directors or employees of AEFC from having a
financial interest in the Funds or in AEFC.
(b) The purchase of securities for the Funds, or the sale of
securities owned by the Funds, through a security broker or
dealer, one or more of whose partners, officers, directors
or employees is an officer, director or employee of AEFC,
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 Funds by a broker-dealer affiliate of
AEFC as may be allowed by rule or order of the SEC and if
made pursuant to procedures adopted by the Board.
(7) AEFC agrees that, except as herein otherwise expressly provided
or as may be permitted consistent with the use of a broker-dealer
affiliate of AEFC 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
Funds) or other assets by or for the Funds.
(8) The Agreement shall be governed by the laws of the State of
Minnesota.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect until July 10, 2004 or
until a new agreement is approved by a vote of the majority of the outstanding
shares of the Funds and by vote of the Fund's Board, including the vote required
by (b) of this paragraph, and if no new agreement is so approved, this Agreement
shall continue from year to year thereafter unless and until terminated by
either party as hereinafter provided, except that such continuance shall be
specifically approved at least annually (a) by the Board or by a vote of the
majority of the outstanding shares of the Funds and (b) by the vote of a
majority of the directors who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. As used in this paragraph, the term "interested person"
shall have the same meaning as set forth in the Investment Company Act of 1940,
as amended (the "1940 Act").
(2) This Agreement may be terminated by either the Funds or AEFC at any
time by giving the other party 60 days' written notice of such intention to
terminate, provided that any termination shall be made without the payment of
any penalty, and provided further that termination may be effected either by the
Board or by a vote of the majority of the outstanding voting shares of the
Funds. The vote of the majority of the outstanding voting shares of the Funds
for the purpose of this Part Five shall be the vote at a shareholders' regular
meeting, or a special meeting duly called for the purpose, of 67% or more of the
Fund's shares present at such meeting if the holders of more than 50% of the
outstanding voting shares are present or represented by proxy, or more than 50%
of the outstanding voting shares of the Funds, whichever is less.
(3) This Agreement shall terminate in the event of its assignment, the
term "assignment" for this purpose having the same meaning as set forth in the
1940 Act.
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as
of the day and year first above written.
AXP PARTNERS INTERNATIONAL SERIES, INC.
AXP Partners International Core Fund
AXP Partners International Small Cap Fund
By /s/ Xxxxxx X. Xxx
------------------
Xxxxxx X. Xxx
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/ Xxxxx X. Xxxxxx
---------------------
Xxxxx X. Xxxxx
Senior Vice President and General Manager- Mutual Funds
