INVESTMENT MANAGEMENT SERVICES AGREEMENT
AGREEMENT made the 13th day of September, 1999, by and between AXP
Variable Portfolio - Managed Series, Inc. (the "Corporation"), a Minnesota
corporation, on behalf of its underlying series fund AXP Variable Portfolio -
Diversified Equity Income Fund (the "Fund"), and IDS Life Insurance Company
("IDS Life"), a Minnesota corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains IDS Life, and IDS Life 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 IDS Life'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 services of whatever nature required in connection
with the management of the Fund including transfer agent and dividend-disbursing
agent services; to furnish or pay for all supplies, printed material, office
equipment, furniture and office space as the Fund may require; and to pay or
reimburse such expenses of the Fund 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. IDS
Life agrees to maintain (directly or through the contract described in paragraph
(7) of this Part One) an adequate organization of competent persons to provide
the services and to perform the functions herein mentioned. IDS Life agrees to
meet with any persons at such times as the Board deems appropriate for the
purpose of reviewing IDS Life's performance under this Agreement.
(2) IDS Life agrees that the investment planning and investment
decisions will be in accordance with general investment policies of the Fund as
disclosed to IDS Life 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) IDS Life 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 IDS Life any information
that the latter may reasonably request with respect to the services performed or
to be performed by IDS Life under this Agreement.
(5) IDS Life 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, IDS Life 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 IDS Life
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 ("AEFC") or IDS Life'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 IDS Life, 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 IDS Life may rely upon information furnished to it
reasonably believed to be accurate and reliable.
(7) The existence of an investment advisory agreement between IDS Life
and AEFC is specifically acknowledged and approved.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Fund agrees to pay to IDS Life, and IDS Life 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.
AXP Variable Portfolio - Diversified Equity Income Fund
Assets Annual rate at
(billions) each asset level
---------- ----------------
First $0.50 0.560%
Next 0.50 0.545
Next 1.00 0.530
Next 1.00 0.515
Next 3.00 0.500
Over 6.00 0.470
(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 share of the Fund and the performance of the Lipper Equity Income Fund Index
(the "Index"). The performance of one 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
IDS Life 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 IDS Life for the latter's services under
this Agreement.
(b) All fees, costs, expenses and allowances payable to any
person, firm or corporation for services under any agreement entered into by the
Fund covering the offering for sale, sale and distribution of the Fund's shares.
(c) All taxes of any kind payable by the Fund other than
federal original issuance taxes on shares issued by the Fund.
(d) All brokerage commissions and charges in the purchase and
sale of assets.
(2) The Fund agrees to reimburse IDS Life or its affiliates for the
aggregate cost of the services listed below incurred by IDS Life in its
operation of the Funds.
(a) All custodian or trustee fees, costs and expenses.
(b) Costs and expenses in connection with the auditing and
certification of the records and accounts of the Fund by independent certified
public accountants.
(c) Costs of obtaining and printing of dividend checks,
reports to shareholders, notices, proxies, proxy statements and tax notices to
shareholders, and also the cost of envelopes in which such are to be mailed.
(d) Postage on all communications, notices and statements to
brokers, dealers, and the Funds' shareholders.
(e) All fees and expenses paid to directors of the Funds;
however, IDS Life will pay fees to directors who are officers or employees of
IDS Life or its affiliated companies.
(f) Costs of fidelity and surety bonds covering officers,
directors and employees of the Fund.
(g) All fees and expenses of attorneys who are not officers or
employees of IDS Life or any of its affiliates.
(h) All fees paid for the qualification and registration for
public sales of the securities of the Fund under the laws of the United States
and of the several states of the United States in which the securities of the
Fund shall be offered for sale.
(i) Cost of printing prospectuses, statements of additional
information and application forms for existing shareholders, and any supplements
thereto.
(j) Any losses due to theft and defalcation of the assets of
the Fund, or due to judgments or adjustments not covered by surety or fidelity
bonds, and not covered by agreement or obligation.
(k) Expenses incurred in connection with lending portfolio
securities of the Fund.
(l) Expenses properly payable by the Fund, approved by the
Board.
Part Four: MISCELLANEOUS
(1) IDS Life 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 AEFC and IDS Life now render 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 AEFC and IDS Life manage their
own investments and/or those of their subsidiaries. AEFC and IDS Life 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
AEFC or IDS Life or any successor or assignee thereof, as directors, officers,
stockholders or otherwise; that directors, officers, stockholders or agents of
AEFC or IDS Life are or may be interested in the Fund as directors, officers,
shareholders, or otherwise; or that AEFC or IDS Life or any successor or
assignee, is or may be interested in the Fund as shareholder or otherwise,
provided, however, that neither AEFC or IDS Life, 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) IDS Life agrees that no officer, director or employee of IDS Life
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 IDS Life from having a
financial interest in the Fund or in IDS Life.
(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 IDS Life, 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
IDS Life as may be allowed by rule or order of the SEC, and if made pursuant to
procedures adopted by the Fund's Board.
(7) IDS Life agrees that, except as herein otherwise expressly provided
or as may be permitted consistent with the use of a broker-dealer affiliate of
IDS Life 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 for two years from the date
of this Agreement, 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 IDS Life 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 VARIABLE PORTFOLIO - MANAGED SERIES, INC.
AXP Variable Portfolio - Diversified Equity Income Fund
By
Xxxxxx X. Xxx
Vice President
IDS LIFE INSURANCE COMPANY
By
Xxxxxx X. Xxxxx
Executive Vice President, Variable Assets
