SUBADVISORY AGREEMENT
Agreement made as of the 1st day of October, 2001, by and between
American Express Financial Corporation, a Delaware corporation ("AEFC" or
Adviser), and Royce & Associates, Inc., a New York corporation ("Subadvisor").
RECITALS
1. The Fund listed in Exhibit A is a series of an investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
2. AEFC has entered into an Investment Management Services Agreement dated May
10, 2001 (the "Advisory Agreement") with the Fund pursuant to which AEFC
provides investment advisory services to the Fund.
3. Adviser and the Fund each desire to have the Adviser retain Subadvisor to
provide investment advisory services to the Fund, and Subadvisor is willing
to render such investment advisory services.
NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:
1. Subadvisor's Duties.
(a) Portfolio Management. Subject to supervision by AEFC and the Fund's
Board of Directors, Subadvisor shall manage the investment operations
and the composition of that portion of assets of the Fund which is
allocated to Subadvisor from time to time by AEFC (which portion may
include any or all of the Fund's assets), including the purchase,
retention, and disposition thereof, in accordance with the Fund's
investment objectives, policies, and restrictions set forth in its
Prospectus and Statement of Additional Information ("SAI"), and
subject to the following understandings:
(i) Investment Decisions. Subadvisor shall determine from time to
time what investments and securities will be purchased, retained,
or sold by the Fund, and what portion of such assets will be
invested or held uninvested as cash.
(ii) Investment Limits. In the performance of its duties and
obligations under this Agreement, Subadvisor shall act in
conformity with applicable limits and requirements, as amended
from time to time, as set forth in the (A) Fund's Prospectus and
SAI; (B) written instructions and directions of AEFC and of the
Board of Directors of the Fund; (C) requirements of the 1940 Act,
the Internal Revenue Code of 1986, as amended, as may be
applicable to the assets of the Fund allocated to Subadvisor, and
all other applicable federal and state laws and regulations; and
(D) the procedures and standards set forth in, or established in
accordance with, the Advisory Agreement, a copy of which has been
delivered by AEFC to Subadvisor.
(iii) Portfolio Transactions.
(A) Trading. With respect to the securities and other
investments to be purchased or sold for the Fund, Subadvisor
shall place orders with or through such persons, brokers or
dealers, or futures commission merchants (including, but not
limited to, broker-dealers that are affiliated with AEFC or
Subadvisor) selected by Subadvisor; provided, however, that
such orders shall be consistent with the brokerage policy
set forth in the Fund's Prospectus and SAI, or approved by
the Fund's Board of Directors; conform with federal
securities laws; and be consistent with securing the most
favorable price and efficient execution. Within the
framework of this policy, Subadvisor may consider the
research, investment information, and other services
provided by, and the financial responsibility of, brokers,
dealers, or futures commission merchants who may effect, or
be a party to, any such transaction or other transactions to
which Subadvisor's other clients may be a party.
(B) Aggregation of Trades. Whenever Subadvisor deems the
purchase or sale of a security or futures contract to be in
the best interest of the Fund as well as other clients of
Subadvisor, Subadvisor, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities or futures contracts
sold or purchased or to be sold or purchased in order to
obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event,
allocation of the securities or futures contracts so
purchased or sold, as well as the expenses incurred in the
transaction, will be made by Subadvisor in the manner
Subadvisor considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other
clients.
(iv) Records and Reports. Subadvisor shall maintain such books and
records required under the 1940 Act as shall be agreed upon from
time to time by the parties hereto, shall render to the Fund's
Board of Directors such periodic and special reports as the Board
of Directors of the Fund or AEFC may reasonably request, and
shall meet with any persons at the request of AEFC or the Board
for the purpose of reviewing Subadvisor's performance under this
Agreement at reasonable times and upon reasonable advance written
notice.
(v) Transaction Reports. Subadvisor shall provide the Fund's
custodian on each business day with information relating to all
transactions concerning the Fund's assets and shall provide AEFC
with such information upon AEFC's request.
(b) Subadvisor's Officers and Employees. If requested to do so in the
future, Subadvisor may authorize and permit any of its officers and
employees who may be elected as Directors or officers of the Fund to
serve in the capacities in which they are elected. Services to be
furnished by Subadvisor under this Agreement may be furnished through
any such officers or employees.
(c) Maintenance of Records. Subadvisor shall timely furnish to AEFC all
information relating to Subadvisor's services hereunder which are
needed by AEFC to maintain the books and records of the Fund required
under the 1940 Act. Subadvisor agrees that all records which it
maintains for the Fund are also the property of the Fund and
Subadvisor will surrender promptly to the Fund any of such records
upon the Fund's request; provided, however, that Subadvisor may retain
a copy of such records. Subadvisor further agrees to preserve for the
periods prescribed under the 1940 Act any such records as are required
to be maintained by it pursuant to paragraph 1(a) hereof.
(d) Fidelity Bond and Code of Ethics. Subadvisor will provide the Fund
with reasonable evidence that, with respect to its activities on
behalf of the Fund, Subadvisor is maintaining (i) adequate fidelity
bond insurance, and (ii) an appropriate Code of Ethics and related
reporting procedures.
2. Adviser's Duties. AEFC shall continue to have responsibility for all other
services to be provided to the Fund pursuant to the Advisory Agreement and
shall oversee and review Subadvisor's performance of its duties under this
Agreement. AEFC shall also retain direct portfolio management
responsibility with respect to any assets of the Fund which are not
allocated by it to the portfolio management of Subadvisor as provided in
paragraph 1(a) hereof.
3. Documents Provided to Subadvisor. AEFC has delivered or will deliver to
Subadvisor current copies and supplements thereto of each of the Prospectus
and SAI pertaining to the Fund, and will deliver to it all future
amendments and supplements, if any.
4. Compensation of Subadvisor. For the services provided and the expenses
assumed pursuant to this Agreement, AEFC will pay to Subadvisor, effective
from the date of this Agreement, a fee which shall be accrued daily and
paid monthly, on or before the 15th calendar day of the next succeeding
calendar month, from the Fund's assets at the annual rates as a percentage
of the Fund's average daily net assets set forth in the attached Schedule
A, which Schedule can be modified from time to time to reflect changes in
annual rates, subject to Subadvisor's written approval and to appropriate
approvals required by the 1940 Act, if any. If this Agreement becomes
effective or terminates before the end of any month, the fee for the period
from the effective date to the end of the month or from the beginning of
such month to the date of termination, as the case may be, shall be
prorated according to the proportion that such month bears to the full
month in which such effectiveness or termination occurs.
5. Liability of Subadvisor. Subadvisor agrees to perform faithfully the
services required
to be rendered to the Fund under this Agreement, but nothing herein
contained shall make Subadvisor or any of its officers or employees liable
for any loss sustained by the Fund or its officers, Directors, or
shareholders, or any other person on account of the services which
Subadvisor may render or fail to render under this Agreement; provided,
however, that nothing herein shall protect Subadvisor against liability to
the Fund or to any of its shareholders, to which Subadvisor would otherwise
be subject, by reason of its willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement. Nothing in
this Agreement shall protect Subadvisor from any liabilities which it may
otherwise have under the 1933 Act or the 1940 Act.
6. Representations of Subadvisor. Subadvisor represents and warrants as
follows:
(a) Subadvisor (i) is registered as an investment advisor under the
Advisers Act of 1940 (the "Advisers Act") and will continue to be so
registered for so long as this Agreement remains in effect; (ii) is
not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met and will seek
to continue to met for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency
necessary to be met in order to perform the services contemplated by
this Agreement; (iv) has the authority to enter into and perform the
services contemplated by this Agreement; and (v) will promptly notify
Adviser of the occurrence of any event that would disqualify
Subadvisor from serving as an investment advisor of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise.
(b) Subadvisor has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide Adviser
with a copy of the code of ethics, together with evidence of its
adoption. Within 45 days of the end of the last calendar quarter of
each year that this Agreement is in effect, a duly authorized officer
of Subadvisor shall certify to Adviser that Subadvisor has, to its
knowledge, complied with the requirements of Rule 17j-1 applicable to
the Fund during the previous year and that to Subadvisor's knowledge,
there has been no material violation of Subadvisor's code of ethics
applicable to the Fund or, if such a violation has occurred, that
appropriate action was taken in response to such violation. Upon the
written request of Advisor, Subadvisor shall permit Adviser, its
employees, or its agents to examine the reports required to be made to
Subadvisor by Rule 17j-1(c)(1) and all other records relevant to
Subadvisor's code of ethics.
(c) Subadvisor has provided Adviser with a copy of its Form ADV, which as
of the date of this Agreement is its Form ADV as most recently filed
with the Securities and Exchange Commission ("SEC") and promptly will
furnish a copy of all amendments to Adviser at least annually.
(d) Subadvisor will promptly notify Adviser of any changes in the
controlling shareholder in the key personnel who are either the
portfolio manager(s) responsible for the Fund or senior management of
Subadvisor, or if there is
otherwise an actual change in control or management of Subadvisor.
(e) Subadvisor agrees that neither it nor any of its affiliates will in
any way refer directly or indirectly to its relationship with the Fund
or Adviser, or any of their respective affiliates in offering,
marketing, or other promotional materials without the prior written
consent of Adviser.
7. Liability and Indemnification.
(a) Except as may otherwise be provided by the 1940 Act or any other
federal securities law, Subadvisor, any of its affiliates and any of
the officers, directors, employees, consultants, or agents thereof
shall not be liable for any losses, claims, damages, liabilities, or
litigation (including legal and other expenses) incurred or suffered
by AEFC or the Fund as a result of any ordinary negligence, error of
judgment or mistake of fact or law by Subadvisor with respect to the
Fund, except that nothing in this Agreement shall operate or purport
to operate in any way to exculpate, waive, or limit the liability of
Subadvisor for, and Subadvisor shall indemnify and hold harmless the
Fund, AEFC and all controlling persons (as described in Section 15 of
the Securities Act of 1933, as amended ("1933 Act")) (collectively,
"AEFC Indemnitees") against any and all losses, claims, damages,
liabilities, or litigation (including reasonable legal and other
expenses) to which any of the AEFC Indemnitees may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, or under any other
statute, at common law, or otherwise to the extent arising out of or
based on (i) any willful misconduct, bad faith, reckless disregard, or
gross negligence of Subadvisor in the performance of any of its duties
or obligations hereunder; (ii) any untrue statement of a material fact
contained in the Prospectus and SAI, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to the
Fund or the omission to state therein a material fact known to
Subadvisor which was required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission was made in reliance upon written information furnished to
AEFC or the Fund by the Subadvisor for use therein; or (iii) any
violation of federal or state statutes or regulations by Subadvisor.
It is further understood and agreed that Subadvisor may rely upon
information furnished to it by AEFC that it believes to be accurate
and reliable. The federal securities laws impose liabilities in
certain circumstances on persons who act in good faith, and therefore
nothing herein shall in any way constitute a waiver of limitation of
any rights which AEFC may otherwise have under any securities laws.
(b) Except as may otherwise be provided by the 1940 Act or any other
federal securities law, AEFC and the Fund shall not be liable for any
losses, claims, damages, liabilities, or litigation (including legal
and other expenses) incurred or suffered by Subadvisor as a result of
any ordinary negligence, error of judgment or mistake of fact or law
by AEFC with respect to the Fund, except that nothing in this
Agreement shall operate or purport to operate in any way to exculpate,
waive, or limit the liability of AEFC for, and AEFC shall indemnify
and hold harmless
Subadvisor and all controlling persons (as described in Section 15 of
the 1933 Act) (collectively, "Subadvisor Indemnitees") against any and
all losses, claims, damages, liabilities, or litigation (including
reasonable legal and other expenses) to which any of the Subadvisor
Indemnitees may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, or under any other statute, at common law, or otherwise
to the extent arising out of or based on (i) any willful misconduct,
bad faith, reckless disregard, or gross negligence of AEFC in the
performance of any of its duties or obligations hereunder or under the
Advisory agreement; (ii) any untrue statement of a material fact
contained in the Prospectus and SAI, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to the
Fund or the omission to state therein a material fact known to AEFC
which was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission
was made in reliance upon written information furnished to AEFC or the
Fund by Subadvisor for use therein, or (iii) any violation of federal
or state statutes or regulations by AEFC or the Fund.
(c) After receipt by AEFC or Subadvisor, its affiliates, or any partner,
officer, director, employee, or agent of any of the foregoing,
entitled to indemnification as stated in (a) or (b) above
("Indemnified Party") of notice of the commencement of any action or
other proceeding, if a claim in respect thereof is to be made against
any person obligated to provide indemnification under this section
("Indemnifying Party"), such Indemnified Party shall notify the
Indemnifying Party in writing of the commencement thereof as soon as
practicable after the summons or other first written notification
giving information of the nature of the claim has been served upon the
Indemnified Party; provided that the failure to so notify the
Indemnifying Party will not relieve the Indemnifying Party from any
liability under this section, except to the extent that the omission
results in a failure of actual notice to the Indemnifying Party and
such Indemnifying Party is damaged as a result of the failure to give
such notice. The Indemnifying Party, upon the request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party in the
proceeding, and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Party unless (1) the Indemnifying Party and the Indemnified Party
shall have mutually agreed to the retention of such counsel, or (2)
the named parties to any such proceeding (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not be liable for any settlement of
any proceeding effected without its written consent, which consent
shall not be unreasonably delayed or withheld, but if settled with
such consent , the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of
such settlement.
8. Duration and Termination.
(a) Unless sooner terminated as provided herein, this Agreement shall
continue in
effect for a period of more than two years from the date written above
only so long as such continuance is specifically approved at least
annually in conformity with the requirements of the 1940 Act.
Thereafter, if not terminated, this Agreement shall continue
automatically for successive periods of 12 months each, provided that
such continuance is specifically approved at least annually (i) by a
vote of a majority of the Fund's directors who are not parties to this
Agreement or interested persons (as defined in the 0000 Xxx) of any
such party, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Fund's Board of Directors or
by a vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund.
(b) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by the Fund's Board of
Directors or by vote of a majority of the outstanding voting
securities (as defined in the 0000 Xxx) of the Fund on 60 days'
written notice to Subadvisor. This Agreement may also be terminated,
without the payment of any penalty, by Adviser (i) upon 60 days'
written notice to Subadvisor; (ii) upon material breach by Subadvisor
of any representations and warranties set forth in this Agreement, if
such breach has not been cured within 20 days after written notice of
such breach; or (iii) immediately if, in the reasonable judgment of
Adviser, Subadvisor becomes unable to discharge its duties and
obligations under this Agreement, including circumstances such as the
insolvency of Subadvisor or other circumstances that could materially
and adversely affect the Fund. Subadvisor may terminate this Agreement
at any time, without payment of any penalty, on 60 days' written
notice to Adviser. This Agreement shall terminate automatically in the
event of its assignment (as defined in the 0000 Xxx) or upon the
termination of the Advisory Agreement.
(c) This Agreement shall become effective on the date above written,
following the automatic termination of the Subadvisory Agreement made
as of June 7, 2001 by and between AEFC and Subadvisor as a result of
the sale of all of Subadvisor's outstanding voting securities to Xxxx
Xxxxx, Inc.
9. Subadvisor's Services Are Not Exclusive. Nothing in this Agreement shall
limit or restrict the right of any of Subadvisor's officers or employees
who may also be a director, officer, or employee of the Fund to engage in
any other business or to devote his or her time and attention in part to
the management or other aspects of any business, whether of a similar or a
dissimilar nature, or limit or restrict Subadvisor's right to engage in any
other business or to render services of any kind to any other corporation,
firm, individual, or association.
10. References to Subadvisor. During the term of this Agreement, AEFC agrees to
furnish to Subadvisor at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to sales personnel, shareholders of the Fund or
the public, which refer to Subadvisor or its clients in any way, prior to
use thereof and not to use such material if Subadvisor reasonably objects
in writing five business days (or such other time as may be mutually agreed
upon) after receipt thereof. Sales literature may be furnished to
Subadvisor hereunder by first-class or overnight mail, facsimile
transmission, or hand delivery.
11. Notices. Any notice under this Agreement must be given in writing as
provided below or to another address as either party may designate in
writing to the other.
Subadvisor:
Royce & Associates, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxx,
President
with a copy to:
Xxxxxx X. Xxxxxxx
General Counsel
Royce & Associates, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
AEFC:
Vice President, Investment Administration
American Express Financial Corporation
53600 AXP Financial Center
Xxxxxxxxxxx, XX 00000 fax:
000-000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx
Vice President and Group Counsel
American Express Financial Advisors Inc.
50606 AXP Financial Center
Xxxxxxxxxxx, XX 00000
Fax: 000-000-0000
12. Amendments. This Agreement may be amended by mutual consent, subject to
approval by the Fund's Board of Directors and the Fund's shareholders to
the extent required by the 1940 Act.
13. Assignment. No assignment (as defined in the 0000 Xxx) shall be made by
Advisor without the prior written consent of the Fund and AEFC.
Notwithstanding the foregoing, no assignment shall be deemed to result from
any changes in the directors, officers, or
employees of Advisr except as may be provided to the contrary in the 1940
Act or the rules and regulations thereunder.
14. Governing Law. This Agreement shall be governed by the laws of the State of
Minnesota, without giving effect to the conflicts of laws principles
thereof, or any applicable provisions of the 1940 Act. To the extent that
the laws of the State of Minnesota, or any of the provision of this
Agreement, conflict with applicable provisions of the 1940 Act, the latter
shall control.
15. Entire Agreement. This Agreement embodies the entire agreement and
understanding among the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof.
16. Severability. Should any part of this Agreement be held invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors.
17. Interpretation. Any questions of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision in the 1940 Act and to interpretation thereof, if any, by the
federal courts or, in the absence of any controlling decision of any such
court, by rules, regulations, or orders of the SEC validly issued pursuant
to the 1940 Act. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is altered by a rule,
regulation, or order of the SEC, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation, or order.
18. Headings. The headings in this Agreement are intended solely as a
convenience and are not intended to modify any other provision herein.
19. Authorization. Each of the parties represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action by such party and when so executed and
delivered, this Agreement will be the valid and binding obligation of such
party in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
American Express Financial Corporation Royce & Associates, Inc.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxx
--------------------- ---------------------
Xxxxx X. Xxxxx Xxxxxxx X. Xxxxx
Vice President- President
Mutual Funds
SUBADVISORY AGREEMENT
SCHEDULE A
Compensation pursuant to Paragraph 4 of Subadvisory Agreement shall be
calculated in accordance with the following schedule:
Average Daily Net Assets* Rate
$0-$50 million .80%
$50-$100 million .75%
$100-$150 million .70%
$150-$200 milliion .65%
$200 + .50%
Dated: October 1, 2001
* Applies to average daily ne assets that are subject to the Subadvisor's
investment discretion.
Exhibit A
AXP(R) Partners Small Cap Value Fund
