INVESTMENT MANAGEMENT SERVICES AGREEMENT
This Agreement dated as of December 1, 2002, is by and between Growth
and Income Trust (the Trust), a Massachusetts business trust, on behalf of its
underlying series portfolios, Balanced Portfolio, Equity Portfolio, Equity
Income Portfolio and Total Return Portfolio (the "Portfolios") and American
Express Financial Corporation ("the Advisor"), a Delaware corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Trust hereby retains the Advisor, and the Advisor hereby
agrees, for the period of this Agreement and under the terms and conditions
hereinafter set forth, to furnish the Portfolios continuously with suggested
investment planning; to determine, consistent with the Portfolio's investment
objectives and policies, which securities in the Advisor'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 Portfolios 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
Portfolios 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 Trustees (the "Board"), the Executive Committee and the authorized
officers of the Trust. The Advisor agrees to maintain an adequate organization
of competent persons to provide the services and to perform the functions herein
mentioned. The Advisor agrees to meet with any persons at such times as the
Board deems appropriate for the purpose of reviewing the Advisor's performance
under this Agreement.
(2) The Advisor agrees that the investment planning and investment
decisions will be in accordance with general investment policies of the
Portfolios as disclosed to the Advisor from time to time by the Portfolios and
as set forth in their prospectuses and registration statements filed with the
United States Securities and Exchange Commission (the "SEC").
(3) The Advisor agrees that it will maintain all required records,
memoranda, instructions or authorizations relating to the acquisition or
disposition of securities for the Portfolios.
(4) The Trust agrees that it will furnish to the Advisor any
information that the latter may reasonably request with respect to the services
performed or to be performed by the Advisor under this Agreement.
(5) The Advisor is authorized to select the brokers or dealers that
will execute the purchases and sales of portfolio securities for the Portfolios
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, the Advisor 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 the Advisor 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 the Advisor's overall responsibilities with respect to the
Portfolios and other funds for which it acts as investment adviser.
(6) It is understood and agreed that in furnishing the Portfolios with
the services as herein provided, neither the Advisor, nor any officer, director
or agent thereof shall be held liable to the Trust, the Portfolios or their
creditors or unitholders 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 the Advisor may rely upon
information furnished to it reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Trust agrees to pay to the Advisor on behalf of each Portfolio,
and the Advisor covenants and agrees to accept from each Portfolio 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 Portfolio
recorded on the books of the Portfolio for that day. The asset
charge shall be based on the net assets of the Portfolio set
forth in the following table.
Balanced Portfolio
Asset Charge
Assets Annual Rate At
(Billions) Each Asset Level
First $1.00 0.530%
Next 1.00 0.505
Next 1.00 0.480
Next 3.00 0.455
Over 6.00 0.430
Equity Portfolio
Equity Income Portfolio
Total Return Portfolio
Asset Charge
Assets Annual Rate At
(Billions) Each Asset Level
First $0.50 0.530%
Next 0.50 0.505
Next 1.00 0.480
Next 1.00 0.455
Next 3.00 0.430
Over 6.00 0.400
(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 that invests in
the Portfolio ("the comparison fund") and an index of
similar funds (the "Index"), as described in paragraph
(b)(ii). The comparison funds and Indexes for the
Portfolios are as set forth below:
------------------------ ---------------------------------- -----------------------------------------
Portfolio Comparison fund Index
------------------------ ---------------------------------- -----------------------------------------
Balanced Portfolio AXP Mutual Lipper Balanced Funds Index
------------------------ ---------------------------------- -----------------------------------------
Equity Portfolio AXP Stock Fund Lipper Large-Cap Core Funds Index
------------------------ ---------------------------------- -----------------------------------------
Equity Income Portfolio AXP Diversified Equity Income Fund Lipper Equity Income Funds Index
------------------------ ---------------------------------- -----------------------------------------
Total Return Portfolio AXP Managed Allocation Fund Lipper Flexible Portfolio 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 Fund
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 Class A
share of the Fund and the performance of the Index. The
performance of one Class
A 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.
(iii) Determining the Adjustment Rate. The Adjustment Rate
for AXP Diversified Equity Income Fund and AXP Stock Fund,
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
--------------- ----------------------------------------------------------------
The Adjustment Rate for AXP Mutual and AXP Managed Allocation Fund, 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%-3.00% 6 basis points, plus 2 basis points times the performance
difference over 2.00% (maximum 8 basis points if a 3%
performance difference)
--------------- ----------------------------------------------------------------
3.00% or more 8 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 for AXP Diversified
Equity Income Fund and AXP Stock Fund is 0.00120 per year. The
maximum adjustment rate for AXP Mutual and AXP Managed
Allocation Fund is 0.00080 per year.
(v) For a period of six months beginning Dec. 1, 2002, the
adjustment will be calculated based on the lesser of the
amount due under the adjustment described above or under the
adjustment used prior to Dec. 1, 2002. The comparison period
will increase by one month until it reaches 12 months. The 12
month comparison period will then roll over with each
succeeding month, so that it always equals 12 months, ending
with the month for which the performance incentive adjustment
is being computed.
(vi) If an 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
Portfolios to the Advisor within five business days after the last day of each
month.
Part Three: ALLOCATION OF EXPENSES
(1) The Trust, on behalf of the Portfolios, agrees to pay:
(a) Fees payable to the Advisor 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 Trust or Portfolios request.
(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 Trust, a Portfolio, the trustees and officers, (ii) it
employs in conjunction with a claim asserted by the Board
against the Advisor, except that the Advisor shall reimburse
the Trust for such fees and expenses if it is ultimately
determined by a court of competent jurisdiction, or the
Advisor agrees, that it is liable in
whole or in part to the Trust, 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 Portfolios 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 Trust.
(j) Trustees, 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
trustees, officers and employees, trustees and officers
liability insurance, errors and omissions liability insurance,
worker's compensation insurance and other expenses applicable
to the trustees, officers and employees, except the Trust will
not pay any fees or expenses of any person who is an officer
or employee of the Advisor or its affiliates.
(k) Filing fees and charges incurred by the Trust in connection
with filing any amendment to its agreement or declaration of
Trust, or incurred in filing any other document with the State
of Massachusetts or its political subdivisions.
(l) Organizational expenses of the Trust.
(m) Expenses incurred in connection with lending portfolio
securities of the Portfolios.
(n) Expenses properly payable by the Trust on behalf of the
Portfolios, approved by the Board.
(2) The Advisor agrees to pay all expenses associated with the services
it provides under the terms of this Agreement.
Part Four: MISCELLANEOUS
(1) The Advisor 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 Trust.
(2) A "full business day" shall be as defined in the By-laws of the
Trust.
(3) The Trust recognizes that the Advisor 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 Portfolios and that the Advisor manages its own investments and/or
those of its subsidiaries. The Advisor shall be free to render such investment
advice and other services and the Trust 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 trustees, officers,
agents and/or unitholders of the Trust are or may be interested in the Advisor
or any successor or assignee thereof, as directors, officers,
stockholders or otherwise; that directors, officers, stockholders or agents of
the Advisor are or may be interested in the Trust or Portfolios as trustees,
officers, unitholders, or otherwise; or that the Advisor or any successor or
assignee, is or may be interested in the Portfolios as unitholder or otherwise,
provided, however, that neither the Advisor, nor any officer, trustee or
employee thereof or of the Trust, shall sell to or buy from the Portfolios any
property or security other than units issued by the Portfolios, 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 Advisor agrees that no officer, director or employee of the
Advisor will deal for or on behalf of the Trust 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 Advisor from having
a financial interest in the Portfolios, the Trust or in the
Advisor.
(b) The purchase of securities for the Portfolios, or the sale
of securities owned by the Portfolios, through a security
broker or dealer, one or more of whose partners, officers,
directors or employees is an officer, director or employee
of the Advisor, 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 Portfolios by a broker-dealer
affiliate of the Advisor as may be allowed by rule or order
of the SEC and if made pursuant to procedures adopted by the
Board.
(7) The Advisor agrees that, except as herein otherwise expressly
provided or as may be permitted consistent with the use of a broker-dealer
affiliate of the Advisor 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 Portfolios) or
other assets by or for the Trust or Portfolios.
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
units of each
Portfolio and by vote of the Trust'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 units of the relevant Portfolios and (b) by the vote
of a majority of the trustees 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 Trust, on behalf of
a Portfolio, or the Advisor 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 units of the respective Portfolio. The vote of the
majority of the outstanding voting units of a Portfolio for the purpose of this
Part Five shall be the vote at a unitholders' regular meeting, or a special
meeting duly called for the purpose, of 67% or more of the Portfolio's shares
present at such meeting if the holders of more than 50% of the outstanding
voting units are present or represented by proxy, or more than 50% of the
outstanding voting units of the Portfolio, 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.
GROWTH & INCOME TRUST
Balanced Portfolio
Equity Portfolio
Equity Income Portfolio
Total Return Portfolio
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
