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: /s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx
Vice President
IDS LIFE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Executive Vice President, Variable Assets
