AMENDED INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 1st day of March, 2000, is made
and entered into by and between THE AMERICAN FUNDS TAX-EXEMPT SERIES II, 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 The
Tax-Exempt Fund of California (the "Fund"). The 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 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 nor 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.
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 or insurance contracts 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 or insurance contracts 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 the expense reimbursement fee agreement described in section 8 below or the
expense limitation described in section 9 below, 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: registration and filing fees with federal and state agencies, blue
sky expenses, expenses of shareholders' meetings, the expense of reports to
existing shareholders, expenses of printing proxies and prospectuses, insurance
premiums, legal and auditing fees; dividend disbursement expenses; the expense
of the issuance, transfer, and redemption of its shares; custodian fees;
printing and preparation of registration statements; taxes; the Fund's
distribution expenses pursuant to the Plan of Distribution; compensation of
Trustees who are not interested persons of the Trust; association dues; and
costs of stationery, forms and certificates prepared exclusively for the Trust.
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 the 1940
Act except for the costs of any share certificates and transfer agent fees and
costs.
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:
(a) 0.3% per annum of the Fund's average daily net assets during the month
("Net Asset Portion"); plus
(b) 0.21% per annum on such net assets in excess of $60 million; plus
(c) 3% of the Fund's gross investment income for such period ("Investment
Income Portion").
The Net Asset Portion shall be accrued daily at 1/365th of the applicable
annual rate set forth above. 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 Investment Income Portion shall be accrued daily and "gross investment
income" for this purpose shall be determined in accordance with Generally
Accepted Accounting Principles, but shall not include net gains 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 Adviser agrees to pay the expenses of the Fund referred to in section 5
above (with the exclusion of interest, taxes, brokerage costs and extraordinary
expenses such as litigation and acquisitions) for a period ending not later
than October 17, 1996, all subject to reimbursement by the Fund. To accomplish
such reimbursement, the Fund shall pay the Adviser an expense reimbursement fee
which on an annual basis is equivalent to the difference between the fees of
the Adviser described in section 7 above and 1% of the average daily net assets
of the Fund. The expense reimbursement fees are for reimbursement of actual
expenses incurred by or on behalf of the Fund and have the effect of assuring
that the total normal operating of the Fund during the expense reimbursement
period will not exceed 1%. Such expense reimbursement fee agreement will
terminate either (1) when all of such reimbursable expenses of the Trust which
have been paid by the Adviser pursuant thereto have been reimbursed by the
Trust, or (2) on October 17, 1996, whichever is earlier.
9. The fee payable pursuant to section 7 with respect to the Fund will be
reduced by the amount that the Fund's annual ordinary net operating expenses
for any fiscal year 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 which are not subject to this limitation include, interest,
taxes, distribution expenses, 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.
10. The expense limitation described in section 9 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 9 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.
11. 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.
12. 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.
13. This Agreement shall continue in effect until the close of business on May
31, 2000. 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.
14. The obligations of the Trust under this Agreement are not binding upon any
of the Trustees, officers, 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, agents or shareholders, or any of
them, or any of their personal assets for such satisfaction.
15. 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.
16. 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 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).
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 CAPITAL RESEARCH AND
TAX-EXEMPT SERIES II MANAGEMENT COMPANY
By /s/Xxxx X. Xxxxx, Xx. By: /s/Xxxxx X. Xxxxxxxxxx
Xxxx X. Xxxxx, Xx. Xxxxx X. Xxxxxxxxxx
Chairman of the Board President
By /s/Xxxxx X. Xxxxxxxx By: /s/Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxx
Secretary Secretary
