Exhibit D
AMENDED INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 1st day of June,
2004, is made and entered into by and between THE AMERICAN FUNDS INCOME SERIES,
a Massachusetts business trust, (hereinafter called the "Trust"), and CAPITAL
RESEARCH AND MANAGEMENT COMPANY, a Delaware corporation, (hereinafter called the
"Adviser"). The parties agree as follows:
1. The Trust is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets, and intends initially to offer shares of a single
series designated U.S. Government Securities Fund (the "Fund" or the "Government
Fund"). The Government Fund and all other series subsequently established by the
Trust with respect to which the Adviser has been appointed to render services
hereunder pursuant to this section are collectively referred to herein as the
"Funds."
In the event the Trust establishes one or more series other
than the Government Fund with respect to which it desires to retain the Adviser
to render services hereunder, it shall notify the Adviser in writing, such
writing to specify the compensation with respect to such services pursuant to
section 7 hereof, as well as any other terms or conditions with respect to such
series which shall differ from those set forth herein. Upon acceptance of such
appointment by the Adviser and approval thereof by the vote of a majority of the
outstanding voting securities (as defined in the Investment Company Act of 1940,
as amended, (the "1940 Act")) of such series and by the Board of Trustees of the
Trust, including a majority of the Trustees who are not parties to this
Agreement or interested persons (as defined in the 0000 Xxx) of any such party
(the "non-interested Trustees") such series shall become a Fund hereunder.
2. The Trust hereby employs the Adviser to furnish advice to
the Trust with respect to the investment and reinvestment of the assets of the
Fund(s). The Adviser hereby accepts such employment and agrees to render the
services and to assume the obligations to the extent herein set forth, for the
compensation herein provided. The Adviser shall, for all purposes herein, be
deemed an independent contractor and not an agent of the Trust or the Fund(s).
3. The Adviser agrees to provide supervision of the portfolio
of the Fund(s) and to determine what securities or other property shall be
purchased or sold by the Fund(s), giving due consideration to the policies of
the Fund(s) as expressed in the Trust's Declaration of Trust, Registration
Statement under the 1940 Act, Registration Statement under the Securities Act of
1933, as amended (the "1933 Act"), and prospectus as in use from time to time,
as well as to the factors affecting the Trust's status as a regulated investment
company under the Internal Revenue Code of 1986, as amended.
1
The Adviser shall provide adequate facilities and qualified
personnel for the placement of orders for the purchase, or other acquisition,
and sale, or other disposition, of portfolio securities for the Fund(s). With
respect to such transactions, the Adviser may place orders with broker-dealer
firms which have sold shares of the Fund(s) or of other mutual funds for which
American Funds Distributors, Inc. serves as underwriter or which furnish
statistical and other information to the Adviser. Neither receipt by the Adviser
of any such statistical and other information or services, nor any consideration
given to sales of shares of the Fund(s) or such other mutual funds in selecting
broker-dealer firms, shall be deemed to give rise to any requirement for
abatement of the advisory fee payable pursuant to section 7 hereof.
4. The Adviser shall (a) furnish to the Trust the services of
qualified personnel (i) to manage the investments of the Fund(s) (ii) to perform
the executive and related administrative functions of the Trust and (iii) if
desired by the Trust, to serve as Trustees of the Trust, in all cases without
additional compensation of such persons by the Trust; (b) pay the expenses of
all persons whose services are to be furnished by the Adviser under this
section; (c) provide necessary office space, furniture, small office equipment,
and telephone facilities and utilities, all of which may be the same as are
occupied or used by the Adviser relating to the services to be furnished by the
Adviser under this section and sections 2 and 3 hereof; and (d) provide general
purpose forms, supplies, stationery and postage used at the offices of the Trust
relating to the services to be furnished by the Adviser under this section and
sections 2 and 3 hereof.
5. Except to the extent expressly assumed by the Adviser
herein, and subject to sections 8 and 9 hereof, the Trust shall pay all costs
and expenses in connection with its operations. Without limiting the generality
of the foregoing, such costs and expenses shall include the following:
compensation and expenses of the Trustees who are not affiliated persons of the
Adviser, fees and expenses of the transfer agent, dividend disbursing agent,
legal counsel and independent public accountants and custodian, including
charges of such custodian for the preparation and maintenance of the books of
account and records of the Trust and the daily determination of the Fund(s)' net
asset values per share, costs of designing, printing, and mailing reports,
prospectuses, proxy statements and notices to shareholders; fees and expenses of
sale (including federal and state registration and qualification), issuance
(including costs of any share certificates) and redemption of shares;
association dues; interest; and taxes.
6. The Adviser agrees to pay the expenses incurred in
connection with the organization of the Trust, its qualification to do business
as a foreign corporation in the State of California, and its registration as an
investment company under the 1940 Act, and all fees and expenses including fees
of legal counsel to the Trust which would otherwise be required to be paid by
the Trust pursuant to section 5 and which are incurred by the Trust prior to the
initial effective date of its Registration Statements under the 1933 Act and
1940 Act except for the costs of any share certificates and transfer agent fees
and costs. The Adviser shall not be required under this section 6 to pay any
expenses incurred in connection with the organization and registration of any
Fund other than the Government Fund.
7. The Trust shall pay to the Adviser on or before the tenth
(10th) day of each month, as compensation for the services rendered by the
Adviser during the preceding month, the sum of the following amounts:
2
(a) 0.30% per annum on the first $60 million of the Fund's
average daily net assets during the month; plus 0.21%
per annum on such net assets in excess of $60 million
but not exceeding $1 billion; plus 0.18% per annum on
such net assets in excess of $1 billion but not
exceeding $3 billion; plus 0.15% on such net assets in
excess of $3 billion ("Net Asset Portion"), plus
(b) 3% of the Fund's first $3,333,333 of monthly gross
income; plus 2.25% of such income between $3,333,333
and $8,333,333; plus 2% of such income in excess of
$8,333,333 ("Income Portion").
The Net Asset Portion shall be accrued daily based on the
number of days per year. The net assets of the Fund shall be determined in the
manner and on the dates set forth in the prospectus of the Trust, and on days on
which the net assets are not determined, shall be as of the last preceding day
on which the net assets shall have been determined.
The Income Portion shall be accrued daily and "gross income"
for this purpose shall be determined in the same manner as gross income is
determined for and reported in financial statements and shall not include gains
or losses from the sale of securities.
Upon any termination of this Agreement on a day other than the
last day of the month the fee for the period from the beginning of the month in
which termination occurs to the date of termination shall be prorated according
to the proportion which such period bears to the full month.
8. The fee payable pursuant to section 7 with respect to the
Fund will be reduced (a) by the amount that the Fund's annual ordinary net
operating expenses for any fiscal year exceed 1.0% of the average month-end net
assets of the Fund for such fiscal year and (b) by any additional amount
necessary to assure that such expenses do not exceed the most restrictive
applicable expense limitation (if any) in those states in which the Fund's
shares currently are being offered for sale. Expenses that are not subject to
this limitation include interest, taxes, extraordinary items such as litigation
and, with respect to state expense limitation provisions, any items excludable
under such provisions. Expenditures, including costs incurred in connection with
the purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, are accounted for as capital items and not as expenses.
9. The expense limitation described in section 8 shall apply
only to Class A shares of beneficial interest in the Fund and shall not apply to
any other class(es) of shares the Trust may issue in the future. Any new
class(es) of shares issued by the Trust will not be subject to an expense
limitation. However, notwithstanding the foregoing, to the extent the Adviser is
required to reduce its fee pursuant to provisions contained in section 8 due to
the expenses of the Class A shares of beneficial interest in the Fund exceeding
the stated limit, the Adviser will either (i) reduce its fee similarly for other
classes of shares of beneficial interest in the Fund, or (ii) reimburse the
Trust on behalf of the Fund for other expenses to the extent necessary to result
in an expense reduction only for Class A shares of beneficial interest in the
Fund.
10. Nothing contained in this Agreement shall be construed to
prohibit the Adviser from performing investment advisory, management, or
distribution services for other investment companies and other persons or
companies, nor to prohibit affiliates of the Adviser from engaging in such
businesses or in other related or unrelated businesses.
3
11. The Adviser shall have no liability to the Trust, or its
shareholders or creditors, for any error of judgment, mistake of law, or for any
loss arising out of any investment, or for any other act or omission in the
performance of its obligations to the Trust not involving willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties
hereunder.
12. This Agreement shall continue in effect until the close of
business on May 31, 2005. It may thereafter be renewed from year to year with
respect to each Fund by mutual consent, provided that such renewal shall be
specifically approved at least annually (i) by the Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
0000 Xxx) of each Fund with respect to which renewal is to be effected, and (ii)
by a majority of the non-interested Trustees by vote cast in person at a meeting
called for the purpose of voting on such renewal. Any approval of this Agreement
or the renewal thereof with respect to a Fund by the vote of a majority of the
outstanding voting securities of that Fund, by the Trustees of the Trust or by a
majority of the non-interested Trustees, shall be effective to continue this
Agreement with respect to that Fund notwithstanding (A) that this Agreement or
the renewal thereof has not been so approved as to any other Fund or (B) that
this Agreement or the renewal thereof has not been approved by the vote of a
majority of the outstanding voting securities of the Trust as a whole.
13. The obligations of the Trust under this Agreement are not
binding upon any of the Trustees, officers, employees, agents or shareholders of
the Trust individually, but bind only the Trust estate. The Adviser agrees to
look solely to the assets of the Trust or each Fund for the satisfaction of any
liability in respect of the Trust or such Fund under this Agreement and will not
seek recourse against such Trustees, officers, employees, agents or
shareholders, or any of them, or any of their personal assets for such
satisfaction.
14. It is understood that the name "American Funds" or any
derivative thereof or logo associated with that name is the valuable property of
the Adviser and its affiliates, and that the Trust and/or the Fund(s) have the
right to use such name (or derivative or logo) only so long as this Agreement
shall continue with respect to the Trust and/or each such Fund. Upon termination
of this Agreement with respect to the Trust or any Fund the Trust and each such
Fund shall forthwith cease to use such name (or derivative or logo) and, in the
case of the Trust, shall promptly amend its Declaration of Trust to change its
name.
15. This Agreement may be terminated at any time as to a Fund
(or the Trust), without payment of any penalty, by the Trustees or by the vote
of a majority of the outstanding voting securities (as defined in the 0000 Xxx)
of such Fund (or the Trust), on sixty (60) days' written notice to the Adviser,
or by the Adviser on like notice to the Trust. This Agreement shall
automatically terminate in the event of its assignment (as defined in the 1940
Act).
4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate originals by their officers thereunto duly
authorized as of the day and year first above written.
THE AMERICAN FUNDS INCOME CAPITAL RESEARCH AND
SERIES MANAGEMENT COMPANY
By /s/ Xxxx X. Xxxxx, Xx. By /s/ Xxxxx X. Xxxxxxxxxx
-------------------------------- --------------------------------------
Xxxx X. Xxxxx, Xx., Chairman Xxxxx X. Xxxxxxxxxx, President
By /s/ Xxxxx X. Xxxxxxxx By /s/ Xxxxxxx X. Xxxxxx
-------------------------------- --------------------------------------
Xxxxx X. Xxxxxxxx, Secretary Xxxxxxx X. Xxxxxx, Vice President
and Secretary
5
