INVESTMENT MANAGEMENT SERVICES AGREEMENT
AMENDED AND RESTATED
This Agreement dated as of May 1, 2006, is by and between RiverSource
Investments, LLC (the "Investment Manager"), a Minnesota limited liability
company and RiverSource Investment Series, Inc. (the "Registrant"), a
Minnesota corporation, on behalf of its underlying series listed in Schedule A
(the term "Fund" or "Funds" is used to refer to either the Registrant or its
underlying series, as context requires).
PART ONE: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains the Investment Manager, and the Investment
Manager hereby agrees, for the period of this Agreement and under the
terms and conditions hereinafter set forth, to furnish the Fund
continuously with investment advice; to determine, consistent with the
Fund's investment objectives and policies, which securities in the
Investment Manager'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 all other 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") and the authorized officers of
the Fund. The Investment Manager agrees to maintain an adequate
organization of competent persons to provide the services and to perform
the functions herein mentioned and to maintain adequate oversight over
any service providers including subadvisers hired to provide services
and to perform the functions herein mentioned. The Investment Manager
agrees to meet with any persons at such times as the Board deems
appropriate for the purpose of reviewing the Investment Manager's
performance under this Agreement. The Fund agrees that the Investment
Manager may subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution in
the quality or level of services and also with the understanding, that
the Investment Manager shall obtain such approval from the Fund's Board
and/or its shareholders as is required by law, rules and regulations
promulgated thereunder, terms of the Agreement, resolutions of the Board
and commitments of the Investment Manager.
(2) The Investment Manager agrees that the investment advice and investment
decisions will be in accordance with general investment policies of the
Fund as disclosed to the Investment Manager from time to time by the
Fund and as set forth in the prospectus and registration statement filed
with the United States Securities and Exchange Commission (the "SEC").
(3) The Investment Manager agrees to provide such support as required or
requested by the Board in conjunction with voting proxies solicited by
or with respect to the issuers of securities in which the Fund's assets
may be invested from time to time, it
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being understood that the Board has sole voting power with respect to
all such proxies.
(4) The Investment Manager agrees that it will maintain all required
records, memoranda, instructions or authorizations relating to the
management of the assets for the Fund including the acquisition or
disposition of securities, proxy voting and safekeeping of assets.
(5) The Fund agrees that it will furnish to the Investment Manager any
information that the latter may reasonably request with respect to the
services performed or to be performed by the Investment Manager under
this Agreement.
(6) In selecting broker-dealers for execution, the Investment Manager will
seek to obtain best execution for securities transactions on behalf of
the Fund, except where otherwise directed by the Board. In selecting
broker-dealers to execute transactions, the Investment Manager will
consider not only available prices (including commissions or xxxx-up),
but also other relevant factors such as, without limitation, the
characteristics of the security being traded, the size and difficulty of
the transaction, the execution, clearance and settlement capabilities as
well as the reputation, reliability, and financial soundness of the
broker-dealer selected, the broker-dealer's risk in positioning a block
of securities, the broker-dealer's execution service rendered on a
continuing basis and in other transactions, the broker-dealer's
expertise in particular markets, and the broker-dealer's ability to
provide research services. To the extent permitted by law, and
consistent with its obligation to seek best execution, the Investment
Manager may execute transactions or pay a broker-dealer a commission or
markup in excess of that which another broker-dealer might have charged
for executing a transaction provided that the Investment Manager
determines, in good faith, that the execution is appropriate or the
commission or markup is reasonable in relation to the value of the
brokerage and/or research services provided, viewed in terms of either
that particular transaction or the Investment Manager's overall
responsibilities with respect to the Fund and other clients for which it
acts as investment adviser. The Investment Manager shall not consider
the sale or promotion of shares of the Fund, or other affiliated
products, as a factor in the selection of broker-dealers through which
transactions are executed.
(7) Except for bad faith, intentional misconduct or negligence in regard to
the performance of its duties under this Agreement, neither the
Investment Manager, nor any of its respective directors, officers,
partners, principals, employees, or agents shall be liable for any acts
or omissions or for any loss suffered by the Fund or its shareholders or
creditors. Each of the Investment Manager, and its respective directors,
officers, partners, principals, employees and agents, shall be entitled
to rely, and shall be protected from liability in reasonably relying,
upon any information or instructions furnished to it (or any of them as
individuals) by the Fund or its agents which is believed in good faith
to be accurate and reliable. The Fund understands and acknowledges that
the Investment Manager does not warrant
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any rate of return, market value or performance of any assets in the
Fund. Notwithstanding the foregoing, the federal securities laws impose
liabilities under certain circumstances on persons who act in good faith
and, therefore, nothing herein shall constitute a waiver of any right
which the Fund may have under such laws or regulations.
PART TWO: COMPENSATION TO THE INVESTMENT MANAGER
(1) The Fund agrees to pay to the Investment Manager, and the Investment
Manager covenants and agrees to accept from the Fund in full payment for
the services furnished, a fee as set forth in Schedule A.
(2) The fee shall be paid on a monthly basis and, in the event of the
termination of this Agreement, in whole or in part with respect to any
Fund, 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 the
Investment Manager 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 the Investment Manager 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) Premium on the bond required by Rule 17g-1 under the Investment
Company Act of 1940.
(f) 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 Board members and officers, (ii) it employs in conjunction
with a claim asserted by the Board against the Investment Manager,
except that the Investment Manager shall reimburse the Fund for such
fees and expenses if it is ultimately determined by a court of
competent jurisdiction, or the Investment Manager agrees, that it is
liable in whole or in part to the Fund, (iii) it employs to assert a
claim against a third party, and (iv) it or the Investment Manager
employs, with the approval of the
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Board, to assist in the evaluation of certain investments or other
matters related to the management of the Fund.
(g) 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.
(h) Fees of consultants employed by the Fund.
(i) Board member, officer and employee expenses which shall include
fees, salaries, memberships, dues, travel, seminars, pension, profit
sharing, and all other benefits paid to or provided for Board
members, officers and employees, directors and officers liability
insurance, errors and omissions liability insurance, worker's
compensation insurance and other expenses applicable to the Board
members, officers and employees, except the Fund will not pay any
fees or expenses of any person who is an officer or employee of the
Investment Manager or its affiliates.
(j) Filing fees and charges incurred by the Fund in connection with
filing any amendment to its organizational documents, or incurred in
filing any other document with the state where the Fund is organized
or its political subdivisions.
(k) Organizational expenses of the Fund.
(l) Expenses incurred in connection with lending portfolio securities of
the Fund.
(m) Expenses properly payable by the Fund, approved by the Board.
(n) Other expenses payable by the Fund pursuant to separate agreement of
the Fund and any of its service providers.
(2) Unless the Fund is obligated to pay an expense pursuant to Part Three,
Section I, above, the Investment Manager agrees to pay all expenses
associated with the services it provides under the terms of this
Agreement.
PART FOUR: MISCELLANEOUS
(1) The Investment Manager 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 of the Fund.
(3) The Fund acknowledges that the Investment Manager and its affiliates may
perform investment advisory services for other clients, so long as the
Investment Manager's services to the Fund under this Agreement are not
impaired thereby. The Investment
Page 5
Manager and its affiliates may give advice or take action in the
performance of duties to other clients that may differ from advice
given, or the timing and nature of action taken, with respect to the
Fund, and that the Investment Manager and its affiliates may trade and
have positions in securities of issuers where the Fund may own
equivalent or related securities, and where action may or may not be
taken or recommended for the Fund. Nothing in this Agreement shall be
deemed to impose upon the Investment Manager or any of its affiliates
any obligation to purchase or sell, or recommend for purchase or sale
for the Fund, any security or any other property that the Investment
Manager or any of its affiliates may purchase, sell or hold for its own
account or the account of any other client. Notwithstanding any of the
foregoing, the Investment Manager shall allocate investment
opportunities among its clients, including the Fund, in an equitable
manner, consistent with its fiduciary obligations. By reason of their
various activities, the Investment Manager and its affiliates may from
time to time acquire information about various corporations and their
securities. The Fund recognizes that the Investment Manager and its
affiliates may not always be free to divulge such information, or to act
upon it.
(4) Neither this Agreement nor any transaction pursuant hereto shall be
invalidated or in any way affected by the fact that Board members,
officers, agents and/or shareholders of the Fund are or may be
interested in the Investment Manager or any successor or assignee
thereof, as directors, officers, stockholders or otherwise; that
directors, officers, stockholders or agents of the Investment Manager
are or may be interested in the Fund as Board members, officers,
shareholders, or otherwise; or that the Investment Manager or any
successor or assignee, is or may be interested in the Fund as
shareholder or otherwise, provided, however, that neither the Investment
Manager, nor any officer, Board member 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) The Investment Manager agrees that no officer, director or employee of
the Investment Manager 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 the Investment Manager from
having a financial interest in the Fund or in the Investment
Manager.
(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 the
Page 6
Investment Manager, 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 the
Investment Manager as may be allowed by rule or order of the U.S.
Securities and Exchange Commission and if made pursuant to
procedures adopted by the Board.
(7) The Investment Manager agrees that, except as herein otherwise expressly
provided or as may be permitted consistent with the use of a
broker-dealer affiliate of the Investment Manager 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.
(8) All information and advice furnished by the Investment Manager to the
Fund under this Agreement shall be confidential and shall not be
disclosed to third parties, except as required by law, order, judgment,
decree, or pursuant to any rule, regulation or request of or by any
government, court, administrative or regulatory agency or commission,
other governmental or regulatory authority or any self-regulatory
organization. All information furnished by the Fund to the Investment
Manager under this Agreement shall be confidential and shall not be
disclosed to any unaffiliated third party, except as permitted or
required by the foregoing, where it is necessary to effect transactions
or provide other services to the Fund, or where the Fund requests or
authorizes the Investment Manager to do so. The Investment Manager may
share information with its affiliates in accordance with its privacy
policies in effect from time to time.
(9) This 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 April 30, 2008 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 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 Fund
and (b) by the 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" shall
have the same meaning as set forth in the Investment Company Act of
1940, as amended, and the rules promulgated thereunder (the "1940
Page 7
Act"). As used in this agreement, the term "majority of the outstanding
shares of the Fund" shall have the same meaning as set forth in the 1940
Act.
(2) This Agreement may be terminated, with respect to each underlying series
of the Fund, by either the Fund or the Investment Manager 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 Fund.
(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.
(4) Non-material amendments or modifications to this Agreement as may be
permitted by the 1940 Act will only be made effective upon written
agreement executed by the Investment Manager and the Board.
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement
as of the day and year first above written.
RIVERSOURCE INVESTMENT SERIES, INC.
By: /s/ Xxxxxx X. Xxx
-----------------
Xxxxxx X. Xxx
Vice President
RIVERSOURCE INVESTMENTS, LLC
By: /s/ Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx
Senior Vice President
SCHEDULE A
ASSET CHARGE
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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 the fee schedule in the table, below:
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FUND NET ASSETS (BILLIONS) ANNUAL RATE AT EACH
ASSET LEVEL
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RiverSource Balanced Fund First $1.0 0.530%
Next $1.0 0.505%
Next $1.0 0.480%
Next $3.0 0.455%
Next $1.5 0.430%
Next $2.5 0.410%
Next $5.0 0.390%
Next $9.0 0.370%
Over $24.0 0.350%
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RiverSource Diversified Equity Income Fund First $1.0 0.600%
Next $1.0 0.575%
Next $1.0 0.550%
Next $3.0 0.525%
Next $1.5 0.500%
Next $2.5 0.485%
Next $5.0 0.470%
Next $5.0 0.450%
Next $4.0 0.425%
Next $26.0 0.400%
Over $50.0 0.375%
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RiverSource Mid Cap Value Fund First $1.0 0.700%
Next $1.0 0.675%
Next $1.0 0.650%
Next $3.0 0.625%
Next $1.5 0.600%
Next $2.5 0.575%
Next $5.0 0.550%
Next $9.0 0.525%
Next $26.0 0.500%
Over $50.0 0.475%
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The computation shall be made for each calendar day on the basis of net assets
as of the close of the preceding day. In the case of the suspension of the
computation of net asset value, the fee for each calendar day during such
suspension shall be computed as of the close of business on the last full day
on which the net assets were computed. Net assets as of the close of a full
day shall include all transactions in shares of the Fund recorded on the books
of the Fund for that day.
PERFORMANCE INCENTIVE ADJUSTMENT
--------------------------------
In addition to an asset charge, the fee for the Fund shall include a
performance incentive adjustment.
The performance incentive adjustment shall be based on the Fund's performance
compared to an index of similar funds (the "Index"). Current Indexes are shown
below. These Indexes may change as set forth below.
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FUND LIPPER INDEX INVESTMENT
CATEGORY
---------------------------------------------------------------------------------------------------
RiverSource Balanced Fund Lipper Balanced Funds Balanced
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RiverSource Diversified Equity Income Fund Lipper Equity Income Funds Equity
---------------------------------------------------------------------------------------------------
RiverSource Mid Cap Value Fund Lipper Mid Cap Value Funds Equity
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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 Index. The
performance difference will then be used to determine the adjustment rate.
The adjustment rate, computed to five decimal places, is determined in
accordance with the table below, and is applied against average daily net
assets for the applicable rolling 12-month period.
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EQUITY FUNDS BALANCED FUNDS
------------------------------------------------------------------------------------------------------------
PERFORMANCE ADJUSTMENT RATE PERFORMANCE ADJUSTMENT RATE
DIFFERENCE DIFFERENCE
------------------------------------------------------------------------------------------------------------
0.00%-0.50% 0 0.00%-0.50% 0
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0.50%-1.00% 6 basis points times the 0.50%-1.00% 6 basis points times the
performance difference over performance difference over 0.50%,
0.50%, times 100 (maximum of 3 times 100 (maximum of 3 basis
basis points if a 1% performance points if a 1% performance
difference) difference)
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1.00%-2.00% 3 basis points, plus 3 basis 1.00%-2.00% 3 basis points, plus 3 basis
points times the performance points times the performance
difference over 1.00%, times 100 difference over 1.00%, times 100
(maximum 6 basis points if a 2% (maximum 6 basis points if a 2%
performance difference) performance difference)
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2.00%-4.00% 6 basis points, plus 2 basis 2.00%-3.00% 6 basis points, plus 2 basis
points times the performance points times the performance
difference over 2.00%, times 100 difference over 2.00%, times 100
(maximum 10 basis points if a 4% (maximum 8 basis points if a 3%
performance difference) performance difference)
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4.00%-6.00% 10 basis points, plus 1 basis 3.00% or more 8 basis points
point times the performance
difference over 4.00%, times
100 (maximum 12 basis points
if a 6% performance difference)
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6.00% or more 12 basis points
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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. Where the Fund's Class A
performance exceeds that of the Index, the fee paid to the Investment Manager
will increase by the adjustment rate. Where the performance of the Index
exceeds the performance of the Fund's Class A shares, the fee paid to the
Investment Manager will decrease by the adjustment rate.
Where the performance of the Index exceeds the performance of the Fund's
Class A shares, the fee paid to the Investment Manager will decrease by the
adjustment rate.
The 12-month comparison period rolls over with each succeeding month, so that
it always equals 12 months, ending with the month for which the performance
adjustment is being computed.
CHANGE IN INDEX
If an Index ceases to be published for a period of more than 90 days, changes
in any material respect, otherwise becomes impracticable or, at the discretion
of the Board, is no longer appropriate to use for purposes of a performance
incentive adjustment, for example, if Lipper reclassifies the Fund from one
peer group to another, the Board may take action it deems appropriate and in
the best interests of shareholders, including: (1) discontinuance of the
performance incentive adjustment until such time as it approves a substitute
index, or (2) adoption of a methodology to transition to a substitute index it
has approved.
