INVESTMENT MANAGEMENT SERVICES AGREEMENT
AGREEMENT made the 1st day of July, 1999, by and between AXP Utilities
Income Fund, Inc. (the "Fund"), a Minnesota corporation, and American
Express Financial Corporation, a Delaware corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains American Express Financial Corporation,
and American Express Financial Corporation hereby agrees, for the
period of this Agreement and under the terms and conditions
hereinafter set forth, to furnish the Fund continuously with
suggested investment planning; to determine, consistent with the
Fund' s investment objectives and policies, which securities in
American Express Financial Corporation' 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 in connection
therewith; to furnish services of whatever nature required in
connection with the management of the Fund 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 Fund. American Express Financial
Corporation agrees to maintain an adequate organization of
competent persons to provide the services and to perform the
functions herein mentioned. American Express Financial Corporation
agrees to meet with any persons at such times as the Board deems
appropriate for the purpose of reviewing American Express
Financial Corporation' s performance under this Agreement.
(2) American Express Financial Corporation agrees that the investment
planning and investment decisions will be in accordance with
general investment policies of the Fund as disclosed to American
Express Financial Corporation from time to time by the Fund and as
set forth in its prospectuses and registration statements filed
with the United States Securities and Exchange Commission (the
"SEC").
(3) American Express Financial Corporation agrees that it will
maintain all required records, memoranda, instructions or
authorizations relating to the acquisition or disposition of
securities for the Fund.
(4) The Fund agrees that it will furnish to American Express Financial
Corporation any information that the latter may reasonably request
with respect to the services performed or to be performed by
American Express Financial Corporation under this Agreement.
(5) American Express Financial Corporation is authorized to select the
brokers or dealers that will execute the purchases and sales of
portfolio securities for the Fund 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 Fund' s Board of appropriate policies and
procedures, and subject to termination at any time by the Board,
American Express Financial Corporation 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 American Express Financial Corporation
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 American Express Financial
Corporation' s overall responsibilities with respect to the Fund
and other funds for which it acts as investment adviser.
(6) It is understood and agreed that in furnishing the Fund with the
services as herein provided, neither American Express Financial
Corporation, nor any officer, director or agent thereof shall be
held liable to 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
American Express Financial Corporation may rely upon information
furnished to it reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Fund agrees to pay to American Express Financial Corporation,
and American Express Financial Corporation covenants and agrees to
accept from the Fund 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 of the full
business day two (2) business days prior to the day for which the
computation is being made. In the case of the suspension of the computation
of net asset value, the asset charge 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 Fund recorded
on the books of the Fund for that day.
(ii) The asset charge shall be based on the net assets of the Fund as set forth
in the following table.
Assets Annual Rate at
(Billions) Each Asset Level
First $0.5 0.610%
Next 0.5 0.585
Next 1.0 0.560
Next 1.0 0.535
Next 3.0 0.510
Over 6.0 0.480
(b) The performance incentive adjustment
(i) The performance incentive adjustment, determined monthly, shall be computed
by measuring the percentage point difference between the performance of one
Class A share of the Fund and the performance of the Lipper Utility Fund
Index (the "Index"). The performance of one Class A share of the Fund shall
be measured by computing the percentage difference, carried to two decimal
places, between the opening net asset value of one share of the Fund and
the closing net asset value of such share as of the last business day of
the period selected for comparison, adjusted for dividends or capital gain
distributions treated as reinvested at the end of the month during which
the distribution was made but without adjustment for expenses related to a
particular class of shares. The performance of the Index will then be
established by measuring the percentage difference, carried to two decimal
places, between the beginning and ending Index for the comparison period,
with dividends or capital gain
distributions on the securities which comprise the Index being treated as
reinvested at the end of the month during which the distribution was made.
(ii) In computing the adjustment, one percentage point shall be deducted from
the difference, as determined in (b) (i) above. The result shall be
converted to a decimal value (e.g., 2.38% to 0.0238), multiplied by .01 and
then multiplied by the Fund's average net assets for the comparison period.
This product next shall be divided by 12 to put the adjustment on a monthly
basis. Where the performance of the Fund exceeds the Index, the amount so
determined shall be an increase in fees as computed under paragraph (a).
Where Fund performance is exceeded by the Index, the amount so determined
shall be a decrease in such fees. The percentage point difference between
the performance of the Fund and that of the Index, as determined above, is
limited to a maximum of 0.0008 per year.
(iii)The 12 month comparison period will roll over with each succeeding month,
so that it always equals 12 months, ending with the month for which the
performance adjustment is being computed.
(iv) If the 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 the adjustment, no adjustment will be made under this
paragraph (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 Fund to
American Express Financial Corporation within five business days after the
last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Fees payable to American Express Financial
Corporation 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 services the Fund requests.
(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 Fund, its directors and
officers, (ii) it employs in conjunction with a claim
asserted by the Board against American Express
Financial Corporation, except that American Express
Financial Corporation shall reimburse the Fund for
such fees and expenses if it is ultimately determined
by a court of competent jurisdiction, or American
Express Financial Corporation agrees, that it is
liable in whole or in part to the Fund, 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 Fund 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 Fund.
(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 Fund will not pay any fees or
expenses of any person who is an officer or employee
of American Express Financial Corporation or its
affiliates.
(k) Filing fees and charges incurred by the Fund 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 Fund.
(m) Expenses incurred in connection with lending
portfolio securities of the Fund.
(n) Expenses properly payable by the Fund, approved by
the Board.
(2) American Express Financial Corporation agrees to pay all expenses
associated with the services it provides under the terms of this
Agreement. Further, American Express Financial Corporation agrees that
if, at the end of any month, the expenses of the Fund under this
Agreement and any other agreement between the Fund and American Express
Financial Corporation, 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 Fund 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 American Express Financial Corporation will assume
all unpaid expenses and xxxx the Fund 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) American Express Financial Corporation 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
Fund.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Fund recognizes that American Express Financial Corporation 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 Fund and
that American Express Financial Corporation manages its own investments
and/or those of its subsidiaries. American Express Financial Corporation
shall be free to render such investment advice and other services and
the Fund 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 Fund are or may be
interested in American Express Financial Corporation or any successor or
assignee thereof, as directors, officers, stockholders or otherwise;
that directors, officers, stockholders or agents of American Express
Financial Corporation are or may be interested in the Fund as directors,
officers, shareholders, or otherwise; or that American Express Financial
Corporation or any successor or assignee, is or may be interested in the
Fund as shareholder or otherwise, provided, however, that neither
American Express Financial Corporation, 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.
(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) American Express Financial Corporation agrees that no officer,
director or employee of American Express Financial Corporation will deal
for or on behalf of the Fund 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 American Express
Financial Corporation from having a financial interest in the
Fund or in American Express Financial Corporation.
(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 American
Express Financial Corporation, 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
American Express Financial Corporation as may be allowed by
rule or order of the SEC, and if made pursuant to procedures
adopted by the Fund' s Board.
(7) American Express Financial Corporation agrees that, except as herein
otherwise expressly provided or as may be permitted consistent with the
use of a broker-dealer affiliate of American Express Financial
Corporation 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.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect until June 30, 2001, or
until a new agreement is approved by a vote of the majority of the
outstanding shares of the Fund 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 of the Fund or by a vote of
the majority of the outstanding shares of the Fund 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 Fund or American
Express Financial Corporation 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 of
the Fund or by a vote of the majority of the outstanding voting shares
of the Fund. The vote of the majority of the outstanding voting shares
of the Fund 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 Fund, 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 UTILITIES INCOME FUND, INC.
By /s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Vice President
