FORM OF
SHAREHOLDER SERVICES AGREEMENT
1. The parties to this Agreement, which is effective as of July 31, 1998, are
Endowments, a Delaware business trust (the Trust"), and American Funds Service
Company, a California corporation ("AFS"). The Trust is a management
investment company with different series of shares representing interests in
separate investment portfolios. The two initial series are the Growth and
Income Portfolio and the Bond Portfolio. The Trustees of the Trust may
designate additional series of shares from time to time. AFS is a wholly owned
subsidiary of Capital Research and Management Company ("CRMC"). This Agreement
will continue in effect with respect to each series of the Trust, including
those designated after the date of this Agreement, until amended or terminated
in accordance with its terms. Series of the Trust for which services are
rendered hereunder are referred to as "participating series".
2. The Trust, on behalf of each participating series, hereby employs AFS, and
AFS hereby accepts such employment by the Trust, as the transfer agent for each
such series. In such capacity AFS will provide the services of stock transfer
agent, dividend disbursing agent, redemption agent, and such additional related
services as the Trust, on behalf of each participating series, may from time to
time require, all of which services are sometimes referred to herein as
"shareholder services."
3. AFS has entered into substantially identical agreements with other
investment companies for which CRMC serves as investment adviser. (For the
purposes of this Agreement, such investment companies are called "participating
investment companies.")
4. AFS has entered into an agreement with DST Systems, Inc. (hereinafter
called "DST"), to provide AFS with electronic data processing services
sufficient for the performance of the shareholder services referred to in
paragraph 2.
5. The participating investment companies will maintain a Review and Advisory
Committee, which Committee will review and may make recommendations to the
boards of the participating investment companies regarding all fees and charges
provided for in this Agreement, as well as review the level and quality of the
shareholder services rendered to the participating investment companies and
their shareholders. Each participating investment company may select one
director or trustee who is not affiliated with CRMC, or any of its affiliated
companies, or with Washington Management Corporation or any of its affiliated
companies, to serve on the Review and Advisory Committee.
6. AFS will provide to the Trust, on behalf of the participating series, the
shareholder services referred to herein in return for the fees specified on
Schedule A hereto (which, in the case of the Trust and other series investment
companies, shall be computed for, and constitute an obligation in respect of,
each such series individually). For this purpose, "transactions" shall include
all types of transactions included in an "activity index" as reported to the
Review and Advisory Committee at least annually. AFS will xxxx the Trust, in
respect of each participating series, monthly, on or shortly after the first of
each calendar month, and the Trust, on behalf of each participating series,
will pay to AFS within five business days of such billing. Any revision of the
schedule of charges set forth on Schedule A shall require the affirmative vote
of a majority of the members of the Board of Trustees of the Trust.
7. All fund-specific charges from third parties -- including DST charges,
payments described in the next sentence, postage, NSCC transaction charges and
similar out-of-pocket expenses -- will be passed through directly to each
participating series of the Trust or other participating investment companies,
as applicable. AFS, subject to approval of its board of directors, is
authorized in its discretion to negotiate payments to third parties for account
maintenance and/or transaction processing services provided such payments do
not exceed the anticipated savings to each participating series of the Trust,
either in fees payable to AFS hereunder or in other direct expenses of the
series that AFS reasonably anticipates would be realized by the Trust from
using the services of such third party, rather than maintaining the accounts
directly on AFS' books and/or processing non-automated transactions.
8. It is understood that AFS may have income in excess of its expenses and may
accumulate capital and surplus. AFS is not, however, permitted to distribute
any net income or accumulated surplus to its parent, CRMC, in the form of a
dividend without the affirmative vote of a majority of the members of the
boards of directors/trustees of the Trust and all participating investment
companies.
9. This Agreement may be amended at any time by mutual agreement of the
parties, with agreement of the Trust, on behalf of each participating series,
to be evidenced by affirmative vote of a majority of the members of the Board
of Trustees of the Trust.
10. This Agreement may be terminated on 180 days' written notice by either
party. In the event of a termination of this Agreement, AFS and the Trust will
each extend full cooperation in effecting a conversion to whatever successor
shareholder service provider(s) the Trust, on behalf of any series, may select,
it being understood that all records relating to the Trust and its shareholders
are property of the Trust.
11. In the event of a termination of this Agreement by the Trust, the Trust
will pay, on behalf of each affected series, to AFS as a termination fee the
series' proportionate share of any costs of conversion of the series'
shareholder service from AFS to a successor. In the event of termination of
this Agreement and all corresponding agreements with all of the participating
investment companies, all assets of AFS will be sold or otherwise converted to
cash, with a view to the liquidation of AFS when it ceases to provide
shareholder services for the participating investment companies. To the extent
any such assets are sold by AFS to CRMC and/or any of its affiliates, such
sales shall be at fair market value at the time of sale as agreed upon by AFS,
the purchasing company or companies, and the Review and Advisory Committee.
After all assets of AFS have been converted to cash and all liabilities of AFS
have been paid or discharged, an amount equal to any capital or paid-in surplus
of AFS that shall have been contributed by CRMC or its affiliates shall be set
aside in cash for distribution to CRMC upon liquidation of AFS. Any other
capital or surplus and any assets of AFS remaining after the foregoing
provisions for liabilities and return of capital or paid-in surplus to CRMC
shall be distributed to the participating investment companies (including any
series thereof) in such proportions as may be determined by the Review and
Advisory Committee.
12. In the event of disagreement between the Trust and AFS, or between the
Trust and other participating investment companies as to any matter arising
under this Agreement, which the parties to the disagreement are unable to
resolve, the question shall be referred to the Review and Advisory Committee
for resolution. If the Review and Advisory Committee is unable to resolve the
question to the satisfaction of both parties, either party may elect to submit
the question to arbitration; one arbitrator to be named by each party to the
disagreement and a third arbitrator to be selected by the two arbitrators named
by the original parties. The decision of a majority of the arbitrators shall
be final and binding on all parties to the arbitration. The expenses of such
arbitration shall be paid by the party electing to submit the question to
arbitration.
13. The obligations of the Trust under this Agreement are not binding upon any
of the directors, trustees, officers, employees, agents or shareholders of the
Trust individually, but bind only the Trust itself. AFS agrees to look solely
to the assets of the Trust for the satisfaction of any liability of the Trust
under this Agreement and will not seek recourse against such directors,
trustees, officers, employees, agents or shareholders, or any of them or their
personal assets for such satisfaction. AFS further agrees to look solely to
the assets attributable to a series of the Trust for the satisfaction of any
liability arising from services rendered on behalf of such series.
AMERICAN FUNDS SERVICE COMPANY ENDOWMENTS
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SCHEDULE A
to the Shareholder Services Agreement, dated July 31, 1998
between
American Funds Service Company ("AFS") and Endowments (the "Trust")
Due to the fact that there are relatively few shareholders of each
participating series of the Trust, and because many of the functions related to
transfer agency matter are performed by or under the direction of an officer of
the Trust, thus reducing the level of activities performed by AFS, no fees
shall be payable by the Trust on behalf of any participating series for
services rendered to such series by AFS under the Agreement. In addition, AFS
shall not seek reimbursement for, and will not pass through to the Trust, any
fund-specific charges described in paragraph 7 of the Agreement.
AMERICAN FUNDS SERVICE COMPANY ENDOWMENTS
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