INVESTMENT MANAGEMENT SERVICES AGREEMENT
This Agreement dated as of January 10, 2002, is by and between AXP(R) Partners
Series, Inc., a Minnesota Corporation, (the "Corporation") on behalf of its
underlying series AXP(R) Partners Select Value Fund and AXP(R) Partners Small
Cap Core Fund (individually a "Fund" and collectively the "Funds"), and American
Express Financial Corporation, a Delaware corporation ("AEFC").
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 Funds' 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 Funds 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 Funds 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 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 Funds as disclosed to AEFC
from time to time by the Funds 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 Funds.
(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 Funds 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, 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 Funds and other funds for which it acts as investment
adviser.
(6) It is understood and agreed that in furnishing the Funds with the services
as herein provided, neither AEFC, 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 AEFC may rely upon information furnished to it
reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Fund agrees to pay to AEFC, and AEFC 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
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 tables.
AXP Partners Select Value Fund AXP Partners Small Cap Core Fund
Assets Annual Rate At Assets Annual Rate At
(Billions) Each Asset Level (Billions) Each Asset Level
First $0.50 0.780% First $0.25 0.970%
Next 0.50 0.755 Next 0.25 0.945
Next 1.00 0.730 Next 0.25 0.920
Next 1.00 0.705 Next 0.25 0.895
Next 3.00 0.680 Over 1.00 0.870
Over 6.00 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
Class A share of the Fund and the performance of an Index (the "Index"). The
Index for AXP Partners Select Value Fund is Lipper Multi-Cap Value Funds Index.
The Index for AXP Partners Small Cap Core Fund is Lipper Small-Cap Core Funds
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
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, 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.
(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 Funds exceed the Index, the amount so determined shall be an
increase in fees as computed under paragraph (a). Where Funds 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 Funds and
that of the Index, as determined above, is limited to a maximum of 0.0012 per
year.
(iii) The first adjustment will be made on October 1, 2002, and will cover the
six-month period beginning
April 1, 2002. The comparison period will increase by one month each month,
until it reaches 12 months. 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 AEFC
within five business days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Corporation agrees to pay:
Fees payable to AEFC for its services under the terms of this Agreement.
Taxes.
Brokerage commissions and charges in connection with the purchase and sale of
assets.
Custodian fees and charges.
Fees and charges of its independent certified public accountants for services
the Funds request. Premium on the bond required by Rule 17g-1 under the
Investment Company Act of 1940. Fees and expenses of attorneys (i) it employs in
matters not involving the assertion of a claim by a third party against the
Corporation, its directors and officers, (ii) it employs in conjunction with a
claim asserted by the Board against AEFC, except that AEFC shall reimburse the
Corporation for such fees and expenses if it is ultimately determined by a court
of competent jurisdiction, or AEFC agrees, that it is liable in whole or in part
to the Corporation, and (iii) it employs to assert a claim against a third
party.
Fees paid for the qualification and registration for public sale of the
securities of the Funds under the laws of the United States and of the several
states in which such securities shall be offered for sale.
Fees of consultants employed by the Funds.
Directors, 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 directors, officers and employees, directors
and officers liability insurance, errors and omissions liability insurance,
worker's compensation insurance and other expenses applicable to the directors,
officers and employees, except the Corporation will not pay any fees or expenses
of any person who is an officer or employee of AEFC or its affiliates.
Filing fees and charges incurred by the Corporation in connection with filing
any amendment to its articles of incorporation, or incurred in filing any other
document with the State of Minnesota or its political subdivisions.
Organizational expenses of the Corporation.
Expenses incurred in connection with lending portfolio securities of the Funds.
Expenses properly payable by the Funds, approved by the Board.
(2) AEFC agrees to pay all expenses associated with the services it provides
under the terms of this Agreement. Further, AEFC agrees that if, at the end of
any month, the expenses of the Fund under this Agreement and any other agreement
between the Fund and AEFC, but excluding those expenses set forth in (1)(b) and
(1)(c) of this Part Three, exceed the most restrictive applicable state expenses
limitation, the Fund shall not pay those expenses set forth in (1)(a) and (d)
through (n) of this Part Three to the extent necessary to keep the Fund's
expenses from exceeding the limitation, it being understood that AEFC will
assume all unpaid expenses and xxxx the Fund for them in subsequent months but
in no event can the accumulation of unpaid expenses or billing be carried past
the end of the Fund's fiscal year.
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 Funds.
(2) A "full business day" shall be as defined in the By-laws of the
Corporation.
(3) The Fund 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 Funds 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 Fund hereby consents thereto.
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 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 Funds as directors, officers, shareholders, or otherwise;
or that AEFC or any successor or assignee, is or may be interested in the Funds
as shareholder or otherwise, provided, however, that neither AEFC, 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) AEFC agrees that no officer, director or employee of AEFC 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:
Officers, directors or employees of AEFC from having a financial interest in the
Funds or in AEFC.
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 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.
Transactions with the Funds 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.
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, 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
Funds.
The 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 January 9, 2004, 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 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 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 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.
AXP PARTNERS SERIES, INC.
AXP Partners Select Value Fund
AXP Partners Small Cap Core Fund
By /s/ Xxxxxx X. Xxx
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Xxxxxx X. Xxx
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
Vice President- Mutual Funds
