INVESTMENT MANAGEMENT SERVICES AGREEMENT
AGREEMENT made the 13th day of September, 1999, by and between AXP Variable
Portfolio - Investment Series, Inc. (the "Corporation"), a Minnesota
corporation, on behalf of its underlying series funds: AXP Variable Portfolio -
Blue Chip Advantage Fund, AXP Variable Portfolio - Growth Fund and AXP Variable
Portfolio - Small Cap Advantage Fund (individually a "Fund" and collectively the
"Funds"), and IDS Life Insurance Company ("IDS Life") a Minnesota corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Corporation 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 Corporation continuously with suggested
investment planning; to determine, consistent with the Funds' 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 Funds 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 Funds 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
Corporation and its underlying 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 Funds 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 Funds.
(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 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 Funds and other funds for which they act as investment adviser.
(6) It is understood and agreed that in furnishing the Funds with the services
as herein provided, neither IDS Life, nor any officer, director or agent
thereof shall be held liable to a Funds 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 Corporation agrees to pay to IDS Life, and IDS Life 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 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 Funds recorded on the books of the
Funds for that day.
(ii) The asset charge shall be based on the net assets of each Fund as
set forth in the following table.
AXP Variable Portfolio - Blue Chip Advantage Fund
Assets Annual rate at
(billions) each asset level
---------- ----------------
First $0.25 0.540%
Next 0.25 0.515
Next 0.25 0.490
Next 0.25 0.465
Next 1.00 0.440
Next 1.00 0.410
Next 3.00 0.380
Next 6.00 0.350
AXP Variable Portfolio - Growth Fund
Assets Annual rate at
(billions) each asset level
First $1.00 0.630%
Next 1.00 0.615
Next 1.00 0.600
Next 3.00 0.585
Over 6.00 0.570
AXP Variable Portfolio - Small Cap Advantage Fund
Assets Annual rate at
(billions) each asset level
First $0.25 0.790%
Next 0.25 0.770
Next 0.25 0.750
Next 0.25 0.730
Next 1.00 0.710
Over 2.00 0.650
(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
an Index (the "Index"). The Index for AXP Variable Portfolio -
Blue Chip Advantage Fund and AXP Variable Portfolio - Growth Fund
is the Lipper Growth and Income Fund Index. The Index for AXP
Variable Portfolio - Small Cap Advantage Fund is the Lipper Small
Cap Fund Index. The performance of one share of a 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 Funds'
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 for AXP Variable Portfolio - Blue Chip
Advantage Fund and AXP Variable Portfolio - Growth Fund, and
0.0012 per year for AXP Variable Portfolio - Small Cap Advantage
Fund.
(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 Funds to IDS
Life 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 IDS Life for the latter's 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
Fund covering the offering for sale, sale and distribution of the
Fund's shares.
(c) All taxes of any kind payable by the Funds 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 Corporation 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 Fund.
(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 Fund's 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 Funds, 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 Funds.
(l) Expenses properly payable by the Funds, 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) Each 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 Funds 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 each 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 Funds 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 Funds as directors,
officers, shareholders, or otherwise; or that AEFC or IDS Life or any
successor or assignee, is or may be interested in the Funds as shareholder
or otherwise, provided, however, that neither AEFC or IDS Life, nor any
officer, director or employee thereof or of the Funds, shall sell to or buy
from the Funds any property or security other than shares issued by the
Funds, 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 Funds 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 Funds or in IDS Life.
(b) The purchase of securities for the Funds, or the sale of securities
owned by the Funds, 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 Funds 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 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 Funds) or other assets by or for the Funds.
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 each 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
Funds 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 a 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 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 - INVESTMENT SERIES, INC.
AXP Variable Portfolio - Blue Chip Advantage Fund
AXP Variable Portfolio - Growth Fund
AXP Variable Portfolio - Small Cap Advantage 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
