INVESTMENT MANAGEMENT SERVICES AGREEMENT
This Agreement dated as of January 12, 2005 is by and between AXP
Variable Portfolio - Investment Series, Inc., (the "Corporation"), a Minnesota
corporation, on behalf of its underlying series AXP Variable Portfolio - Mid Cap
Value 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 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 provided for in
Part Three under this Agreement; 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
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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 the 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 in accordance with
paragraph (ii) 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.
(ii) The asset charge shall be based on the net assets of the
Fund as set forth in the following table.
AXP Variable Portfolio - Mid Cap Value Fund
Asset Charge
Assets Annual Rate At
(Billions) Each Asset Level
First $1.0 0.730%
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Next 1.0 0.705
Next 1.0 0.680
Next 3.0 0.655
Next 6.0 0.630
Next 12.0 0.620
Over 24.0 0.610
(b) The Performance Incentive Adjustment
(i) Calculating the Performance Incentive Adjustment. The
performance incentive adjustment shall be calculated
monthly by:
(A) Determining the difference in performance (the
"Performance Difference") between the Fund and an index of
similar funds (the "Index"), as described in paragraph
(b)(ii). For AXP Variable Portfolio-Mid Cap Value Fund the
Index is the Lipper Mid-Cap Value Funds Index.
(B) Using the Performance Difference calculated under
paragraph (b)(ii) to determine the Adjustment Rate, as
illustrated in paragraph (b)(iii).
(C) Multiplying the current month's Adjustment Rate
by the Fund's average net assets for the comparison
period, then dividing the result by the number of months
in the comparison period to determine the monthly
adjustment. Where the performance of the Fund exceeds the
Index, the amount so determined shall be an increase in
fees as computed under paragraph (1)(a). Where the Fund's
performance is exceeded by the Index, the amount so
determined shall be a decrease in such fees.
(ii) Computing the Performance Difference. The
Performance Difference, calculated monthly, is determined
by measuring the percentage difference between the
performance of one share of the Fund and the performance
of 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 net asset value
as of the last business day of the period selected for
comparison and the net asset value of such share as of the
last business day of the prior period, adjusted for
dividends or capital gain distributions treated as
reinvested immediately. The performance of the Index will
be established by measuring the percentage difference,
carried to two decimal places, between the ending and
beginning Index for the comparison period, with dividends
or capital gain distributions on the securities that
comprise the Index being treated as reinvested
immediately.
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(iii) Determining the Adjustment Rate. The Adjustment
Rate, computed to five decimal places, is determined in
accordance with the following table:
--------------- ----------------------------------------------------------
Performance Adjustment Rate
Difference
--------------- ----------------------------------------------------------
0.00%-0.50% 0
--------------- ----------------------------------------------------------
0.50%-1.00% 6 basis points times the performance difference over 0.50%
(maximum of 3 basis points if a 1% performance difference)
--------------- ----------------------------------------------------------
1.00%-2.00% 3 basis points, plus 3 basis points times the performance
difference over 1.00% (maximum 6 basis points if a 2%
performance difference)
--------------- ----------------------------------------------------------
2.00%-4.00% 6 basis points, plus 2 basis points times the performance
difference over 2.00% (maximum 10 basis points if a 4%
performance difference)
--------------- ----------------------------------------------------------
4.00%-6.00% 10 basis points, plus 1 basis point times the performance
difference over 4.00% (maximum 12 basis points if a 6%
performance difference)
--------------- ----------------------------------------------------------
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.
(iv) The maximum adjustment rate is 0.00120 per year.
(v) The first adjustment will be made on May 2004 and will
cover a six-month period beginning October 2003. The
comparison period will increase by one month until it reaches
12 months. 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.
(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) All fees, costs, expenses and allowances payable to any
person, firm or corporation for services under any
agreement entered into by the
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Corporation on behalf of the Fund covering the offering for
sale, sale and distribution of the Fund's shares.
c) All taxes of any kind payable by the Corporation on behalf
of 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.
e) All custodian or trustee fees, costs and expenses.
f) Costs and expenses in connection with the auditing and
certification of the records and accounts of the Fund by
independent certified public accountants.
g) 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.
h) Postage on all communications, notices and statements to
brokers, dealers, and the Fund's shareholders.
i) All fees and expenses paid to directors of the Corporation,
except that the Corporation will not pay any fees or
expenses of any person who is an officer or employee of
AEFC or its affiliates.
j) Costs of fidelity and surety bonds covering officers,
directors and employees of the Corporation.
k) All fees and expenses of attorneys who are not officers or
employees of AEFC or any of its affiliates.
l) 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 aFund shall be
offered for sale.
m) Cost of printing prospectuses, statements of additional
information and application forms for existing
shareholders, and any supplements thereto.
n) 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.
o) Expenses incurred in connection with lending portfolio
securities of the Fund.
p) 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.
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(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,
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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) 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 September 10, 2005 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 the 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.
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AXP(R) VARIABLE PORTFOLIO - INVESTMENT SERIES, INC.
AXP Variable Portfolio - Mid Cap Value Fund
By /s/ Xxxxxx X. Xxx
--------------------
Xxxxxx X. Xxx
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/ Xxxxx X. Xxxxx
--------------------
Xxxxx X. Xxxxx
Senior Vice President and General Manager- Mutual Funds
