FEE WAIVER AGREEMENT

American Express Financial Corporation ("AEFC") and American Express Client
Service Corporation ("AECSC") agree to waive fees and reimburse certain expenses
and AXP Diversified Bond Fund (the "Fund"), a series of AXP Fixed Income Series,
Inc., agrees to accept those waivers and reimbursements, as described below:

     1.   Applicable  Agreements.  To the extent that the Fund's total  expenses
          exceed the expense ratios set out in paragraph 2, AEFC and AECSC agree
          to waive  fees and  reimburse  certain  expenses  under the  following
          agreements:

          o    Investment  Management  Services  Agreement  between the Fund and
               AEFC dated March 20, 1995.

          o    Administrative Services Agreement between the Fund and AEFC dated
               March 20, 1995.

          o    Transfer Agency Agreement between the Fund and AECSC dated May 1,
               2003.

AEFC also agrees to pay certain non-advisory expenses of the Fund if necessary
to meet the expense ratio limits set out in paragraph 2. AEFC will determine the
allocation of fee waivers and expense reimbursements among the applicable
agreements.

     2.   Fee Caps.  AEFC and AECSC  agree to waive fees and  reimburse  certain
          expenses  to the extent  that  total  expenses  exceed  the  following
          expense ratios:

          ---------------- -------- -------- -------- -------- --------
          Fund             Class A  Class B  Class C  Class I  Class Y
          ---------------- -------- -------- -------- -------- --------
          AXP Diversified  0.945%   1.695%   1.695%   0.735%   0.775%
          Bond Fund
          ---------------- -------- -------- -------- -------- --------


     3.   Termination.  This  agreement will terminate on August 31, 2004 unless
          extended by written agreement of the Fund and AEFC.



     This agreement is dated as of the 1st day of June, 2004.


     AXP Fixed Income Series, Inc.
         AXP Diversified Bond Fund



         By: /s/  Leslie L. Ogg
             ---------------------
                  Leslie L. Ogg
                  Vice President


     AMERICAN EXPRESS FINANCIAL CORPORATION



         By: /s/  Paula R. Meyer
             ---------------------
                  Paula R. Meyer
                  Senior Vice President and General Manager- Mutual Funds


     AMERICAN EXPRESS CLIENT SERVICE CORPORATION



         By: /s/  Bridget Sperl
             ---------------------
                  Bridget Sperl
                  Senior Vice President