INVESTMENT MANAGEMENT SERVICES AGREEMENT
This Agreement dated as of December 1, 2002, is by and between AXP
Market Advantage Series, Inc., (the "Corporation"), a Minnesota corporation, on
behalf of its underlying series AXP Small Company Index Fund, (the "Fund") and
American Express Financial Corporation ("AEFC"), a Delaware corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Corporation hereby retains AEFC, and AEFC hereby agrees, for
the period of this Agreement and under the terms and conditions hereinafter set
forth, to furnish the Corporation continuously with suggested investment
planning; to determine, consistent with the Fund's investment objectives and
policies, which securities in AEFC'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"), the Executive Committee and the authorized officers of the
Corporation. AEFC agrees to maintain an adequate organization of competent
persons to provide the services and to perform the functions herein mentioned.
AEFC agrees to meet with any persons at such times as the Board deems
appropriate for the purpose of reviewing AEFC's performance under this
Agreement.
(2) AEFC agrees that the investment planning and investment decisions
will be in accordance with general investment policies of the Fund as disclosed
to AEFC from time to time by the Fund and as set forth in its prospectus and
registration statement filed with the United States Securities and Exchange
Commission (the "SEC").
(3) AEFC 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 Corporation agrees that it will furnish to AEFC any information
that the latter may reasonably request with respect to the services performed or
to be performed by AEFC under this Agreement.
(5) AEFC 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 Board of appropriate policies and procedures, and subject to termination
at any time by the Board, AEFC 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 AEFC
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
AEFC'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 AEFC, nor any officer, director or agent
thereof shall be held liable to the Fund, shareholders, the Corporation or its
creditors 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 AEFC may rely upon information furnished to
it reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Corporation agrees to pay to AEFC on behalf of each Fund, and
AEFC covenants and agrees to accept from the Corporation 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 as shown below. The computation
shall be made for each calendar day on the basis of net assets
as of the close of the preceding business 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 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. The asset charge shall be based on the net assets of the
Fund as set forth in the following table.
AXP Small Company Index Fund
Asset Charge
Assets Annual Rate At
(Billions) Each Asset Level
First $0.25 0.380%
Next 0.25 0.370
Next 0.25 0.360
Next 0.25 0.350
Over 1.00 0.340
(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
Corporation to AEFC within five business days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Corporation agrees to pay:
(a) Fees payable to AEFC 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 service the Corporation or a 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
Corporation, its directors and officers, (ii) it employs in
conjunction with a claim asserted by the Board against AEFC,
except that AEFC shall reimburse the Corporation for such fees and
expenses if it is ultimately determined by a court of competent
jurisdiction, or AEFC agrees, that it is liable in whole or in
part to the Corporation, 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 Corporation.
(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 Corporation will
not pay any fees or expenses of any person who is an officer or
employee of AEFC or its affiliates.
(k) Filing fees and charges incurred by the Corporation 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 Corporation.
(m) Expenses incurred in connection with lending portfolio securities
of the Funds.
(n) Expenses properly payable by the Corporation on behalf of the
Fund, approved by the Board.
(2) AEFC agrees to pay all expenses associated with the services it
provides under the terms of this Agreement.
Part Four: MISCELLANEOUS
(1) AEFC 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 Corporation.
(2) A "full business day" shall be as defined in the By-laws of the
Corporation.
(3) The Corporation recognizes that AEFC 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 AEFC manages its own investments and/or those of its
subsidiaries. AEFC shall be free to render such investment advice and other
services and the Corporation 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 Corporation are or may be interested
in AEFC or any successor or assignee thereof, as directors, officers,
stockholders or otherwise; that directors, officers, stockholders or agents of
AEFC are or may be interested in the Fund or the Corporation as directors,
officers, shareholders, or otherwise; or that AEFC or any successor or assignee,
is or may be interested in the Fund as shareholder or otherwise, provided,
however, that neither AEFC, nor any officer, director or employee thereof or of
the Corporation, 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) AEFC agrees that no officer, director or employee of AEFC 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 AEFC from having a
financial interest in the Fund or in AEFC.
(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 AEFC,
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
AEFC as may be allowed by rule or order of the SEC and if
made pursuant to procedures adopted by the Board.
(7) AEFC agrees that, except as herein otherwise expressly provided or
as may be permitted consistent with the use of a broker-dealer affiliate of AEFC
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 Funds) or other assets by or for the
Funds.
(8) 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 November 30, 2004 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 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 Corporation, on
behalf of a Fund, or AEFC 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. 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 MARKET ADVANTAGE SERIES, INC.
AXP Small Company Index Fund
By /s/ Xxxxxx X. Xxx
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Xxxxxx X. Xxx
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
Senior Vice President and General Manager- Mutual Funds
