CLASS Y SHAREHOLDER SERVICE AGREEMENT
This agreement, dated as of January 10, 2002, is by and between AXP(R) Federal
Income Fund, Inc., a Minnesota corporation, on behalf of its underlying series
AXP(R) U.S. Government Mortgage Fund (the "Fund"), and American Express
Financial Advisors Inc. ("AEFA"), the principal underwriter of the Fund, for
services to be provided to shareholders of Class Y of the Fund by AEFA and
other servicing agents.
AEFA represents that shareholders consider personal service a significant
factor in their satisfaction with their investment. AEFA represents that fees
paid by the Fund will be used to help shareholders thoughtfully consider their
investment goals and objectively monitor how well the goals are being achieved.
The Fund agrees to pay AEFA 0.10 percent of the net asset value of Class Y. The
Fund agrees to pay AEFA in cash within five (5) business days after the last
day of each month.
AEFA agrees to provide the Fund annually a budget covering its expected costs
and a quarterly report of its actual expenditures. AEFA agrees to meet with
representatives of the Fund at their request to provide information as may be
reasonably necessary to evaluate its performance under the terms of this
agreement.
This agreement shall continue in effect for a period of more than one year so
long as it is reapproved at least annually at a meeting called for the purpose
of voting on the agreement by a vote, in person, of the members of the Board
who are not interested persons of the Fund and have no financial interest in
the operation of the agreement, and of all the members of the Board.
This agreement may be terminated at any time without payment of any penalty by
a vote of a majority of the members of the Board who are not interested persons
of the Fund and have no financial interest in the operation of the agreement,
or by AEFA. The agreement will terminate automatically in the event of its
assignment, as that term is defined in the Investment Company Act of 1940. This
agreement may be amended at any time provided the amendment is approved in the
same manner the agreement was initially approved and the amendment is agreed to
by AEFA.
This agreement shall be governed by the laws of the State of Minnesota.
AXP FEDERAL INCOME FUND, INC. AMERICAN EXPRESS
AXP U.S. Government Mortgage Fund FINANCIAL ADVISORS INC.
/s/ Xxxxxx X. Xxx /s/ Xxxx X. Xxxxxxxxx
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Xxxxxx X. Xxx Xxxx X. Xxxxxxxxx
Vice President Senior Vice President --
Retirement Services
