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 Variable Portfolio - 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
Page 3
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
Page 4
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 VARIABLE PORTFOLIO - 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
------------
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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ANNUAL RATE AT
FUND NET ASSETS (BILLIONS) EACH ASSET LEVEL
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RiverSource Variable Portfolio - Emerging Markets Fund First $0.25 1.100%
Next $0.25 1.080%
Next $0.25 1.060%
Next $0.25 1.040%
Next $1.0 1.020%
Next $5.5 1.000%
Next $2.5 0.985%
Next $5.0 0.970%
Next $5.0 0.960%
Next $4.0 0.935%
Next $26.0 0.920%
Over $50.0 0.900%
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RiverSource Variable Portfolio - Growth Fund First $1.0 0.600%
RiverSource Variable Portfolio - Large Cap Equity Fund Next $1.0 0.575%
RiverSource Variable Portfolio - Large Cap Value Fund 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 Variable Portfolio - International Opportunity First $0.25 0.800%
Fund Next $0.25 0.775%
Next $0.25 0.750%
Next $0.25 0.725%
Next $1.0 0.700%
Next $5.5 0.675%
Next $2.5 0.660%
Next $5.0 0.645%
Next $5.0 0.635%
Next $4.0 0.610%
Next $26.0 0.600%
Over $50.0 0.570%
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RiverSource Variable Portfolio - Mid Cap Growth Fund First $1.0 0.700%
RiverSource Variable Portfolio - Mid Cap Value Fund 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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ANNUAL RATE AT
FUND NET ASSETS (BILLIONS) EACH ASSET LEVEL
-----------------------------------------------------------------------------------------------------------
RiverSource Variable Portfolio - S&P 500 Index Fund First $1.0 0.220%
Next $1.0 0.210%
Next $1.0 0.200%
Next $4.5 0.190%
Next $2.5 0.180%
Next $5.0 0.170%
Next $9.0 0.160%
Next $26.0 0.140%
Over $50.0 0.120%
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RiverSource Variable Portfolio - Small Cap Advantage Fund First $0.25 0.790%
Next $0.25 0.765%
Next $0.25 0.740%
Next $0.25 0.715%
Next $1.0 0.690%
Over $2.0 0.665%
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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 RiverSource Variable Portfolio -
Growth Fund, RiverSource Variable - International Opportunity Fund,
RiverSource Variable Portfolio - Large Cap Equity Fund, RiverSource Variable
Portfolio - Large Cap Value Fund, and RiverSource Variable Portfolio - Small
Cap Advantage 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
-----------------------------------------------------------------------------------------------------------
RiverSource Variable Portfolio - Emerging Markets Fund Lipper Emerging Markets Funds Index
-----------------------------------------------------------------------------------------------------------
RiverSource Variable Portfolio - Growth Fund Lipper Large-Cap Growth Funds Index
-----------------------------------------------------------------------------------------------------------
RiverSource Variable Portfolio - International Opportunity Fund Lipper International Funds Index
-----------------------------------------------------------------------------------------------------------
RiverSource Variable Portfolio - Large Cap Equity Fund Lipper Large-Cap Core Funds Index
-----------------------------------------------------------------------------------------------------------
RiverSource Variable Portfolio - Large Cap Value Fund Lipper Large-Cap Value Funds Index
-----------------------------------------------------------------------------------------------------------
RiverSource Variable Portfolio - Small Cap Advantage Fund Lipper Small-Cap Core Funds Index
-----------------------------------------------------------------------------------------------------------
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
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PERFORMANCE DIFFERENCE ADJUSTMENT RATE
--------------------------------------------------------------------------------------------------------
0.00%-0.50% 0
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6 basis points times the performance difference over 0.50%, times 100
0.50%-1.00% (maximum of 3 basis points if a 1% performance difference)
--------------------------------------------------------------------------------------------------------
3 basis points, plus 3 basis points times the performance difference
over 1.00%, times 100 (maximum 6 basis points if a 2% performance
1.00%-2.00% difference)
--------------------------------------------------------------------------------------------------------
6 basis points, plus 2 basis points times the performance difference
over 2.00%, times 100 (maximum 10 basis points if a 4% performance
2.00%-4.00% difference)
--------------------------------------------------------------------------------------------------------
10 basis points, plus 1 basis point times the performance difference
over 4.00%, times 100 (maximum 12 basis points if a 6% performance
4.00%-6.00% difference)
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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. 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.
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.
