INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 1st day of April, 1996, is
made and entered into by and between THE INCOME FUND OF AMERICA, INC., a
Maryland corporation (hereinafter called the "Fund"), and CAPITAL RESEARCH AND
MANAGEMENT COMPANY, a Delaware corporation (hereinafter called the "Adviser").
The parties agree as follows:
1. The Fund hereby employs the Adviser to determine what securities shall
be purchased or sold by the Fund with respect to the investment and
reinvestment of the assets of the Fund. The Adviser hereby accepts such
employment and agrees to render the services and to assume the obligation 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 Fund.
2. The Adviser agrees to provide supervision of the portfolio of the Fund
and to determine what securities or other property shall be purchased or sold
by the Fund, giving due consideration to the policies of the Fund as expressed
in the Fund's Articles of Incorporation, By-Laws, Registration Statement under
the Investment Company Act of 1940 (the "1940 Act"), Registration Statement
under the Securities Act of 1933 (the "1933 Act"), and prospectus as in use
from time to time, as well as to the factors affecting the Fund's status as a
regulated investment company under the Internal Revenue Code.
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. With respect to such
transactions, the Adviser, subject to such directions as may be furnished from
time to time by the Board of Directors of the Fund, shall endeavor as the
primary objective to obtain the most favorable prices and executions of orders.
Subject to such primary objective, the Adviser may place orders with brokerage
firms which have sold shares of the Fund or which furnish statistical and other
information to the Adviser, taking into account the value and quality of the
brokerage services of such broker-dealers, including the availability and
quality of such statistical and other information. Receipt by the Adviser of
any such statistical and other information and services shall not be deemed to
give rise to any requirement for abatement of the advisory fee payable pursuant
to Section 5 hereof.
3. The Adviser shall furnish the services of persons to perform the
executive, administrative, clerical, and bookkeeping functions of the Fund,
including the daily determination of net asset value and offering price per
share. The Adviser shall pay the compensation and travel expenses of all such
persons, and they shall serve without additional compensation from the Fund.
The Adviser shall also, at its expense, provide the Fund with suitable office
space (which may be in the offices of the Adviser); all necessary small office
equipment and utilities; and general purpose accounting forms, supplies, and
postage used at the offices of the Fund.
4. The Fund shall pay all its expenses not assumed by the Adviser as
provided herein. Such expenses shall include, but shall not be limited to,
custodian, stock transfer and dividend disbursing fees and expenses; costs of
the designing, printing and mailing of reports, prospectuses, proxy statements,
and notices to its shareholders; taxes; expenses of the issuance and redemption
of shares of the Fund (including stock certificates, registration and
qualification fees and expenses); legal and auditing expenses; compensation,
fees, and expenses paid to directors; association dues; costs of stationery and
forms prepared exclusively for the Fund; and costs of assembling and storing
shareholder account data.
5. The Fund shall pay to the Investment Adviser on or before the tenth
(10th) day of each month, as compensation for the services rendered by the
Investment Adviser during the preceding month, the sum of the following
amounts:
(a) 0.24% per annum on the first $1 billion of the Fund's net
assets; 0.20% per annum on the portion of such net assets from $1 billion to $2
billion; 0.18% per annum on the portion of such net assets from $2 billion to
$3 billion; 0.165% per annum on the portion of such net assets from $3 billion
to $5 billion; 0.155% per annum on the portion of such net assets from $5
billion to $8 billion; 0.15% per annum on the portion of such net assets from
$8 billion to $13 billion; and 0.147% thereafter ("Net Asset Portion"); plus
(b) 2.25% of the Fund's gross investment income for the preceding
month ("Investment Income Portion").
Net Asset Portion shall be accrued daily at the applicable rates set forth
above. The net asset value of the Fund shall be determined in the manner set
forth in the Articles of Incorporation and prospectus of the Fund as of the
close of the New York Stock Exchange on each day on which said Exchange is
open, and in the case of Saturdays, Sundays, and other days on which said
Exchange shall not be open, as at the close of the last preceding day on which
said Exchange shall have been open.
Upon any termination of this agreement on a day other than the last day of
the semi-annual fiscal period of the Fund, the fee for the period from the
beginning of the semi-annual fiscal period in which termination occurs to the
date of termination shall be prorated according to the proportion which such
period bears to the full semi-annual fiscal period of the Fund.
6. The Adviser agrees to reduce the fee payable to it under this
Agreement by the amount by which the ordinary operating expenses of the Fund
for any fiscal year of the Fund, excluding interest, taxes and extraordinary
expenses, shall exceed one and one-half percent (1-1/2%) of the first $30
million of average net assets of the Fund determined pursuant to Section 5,
plus one percent (1%) of such average net assets in excess thereof. Costs
incurred in connection with the purchase or sale of portfolio securities,
including brokerage fees and commissions, which are capitalized in accordance
with generally accepted accounting principles applicable to investment
companies, shall be accounted for as capital items and not as expenses. Proper
accruals shall be made by the Fund for any projected reduction hereunder and
corresponding amounts shall be withheld from the fees paid by the Fund to the
Adviser. Any additional reduction computed at the end of the fiscal year shall
be deducted from the fee for the last month of such fiscal year, and any excess
shall be paid to the Fund immediately after the fiscal year end, and in any
event prior to publication of the Fund's annual report, as a reduction of the
fees previously paid during the fiscal year.
7. 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, or to
prohibit affiliates of the Adviser from engaging in such businesses or in other
related or unrelated businesses.
8. The Adviser shall have no liability to the Fund, or its shareholders,
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 Fund not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder.
9. This Agreement shall continue in effect until the close of business on
November 30, 1996. It may thereafter be renewed from year to year by mutual
consent, provided that such renewal shall be specifically approved at least
annually by either (i) the Board of Directors of the Fund, or by the vote of a
majority (as defined in the 0000 Xxx) of the outstanding voting securities of
the Fund, and (ii) a majority of those 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.
Such mutual consent to renewal shall not be deemed to have been given unless
evidenced by a writing signed by both parties hereto.
10. This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Fund or by the vote of a majority (as
defined in the 0000 Xxx) of the outstanding voting securities of the Fund, on
sixty (60) days' written notice to the Adviser, or by the Adviser on like
notice to the Fund. 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.
CAPITAL RESEARCH AND MANAGEMENT
THE INCOME FUND OF AMERICA, INC. COMPANY
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxxxxxxx Xxxxxx X.
Xxxxx, Chairman Xxxxx X. Xxxxxxxxxx, President
By: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxx, Secretary Xxxxxxx X. Xxxxxx, Secretary
