AMENDED INVESTMENT ADVISORY AND SERVICE AGREEMENT
AMENDED
THIS
AGREEMENT,
dated and effective as of the 1st day of January, 2006, is made and entered
into
by and between AMERICAN BALANCED FUND, 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 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)
|
0.42%
of net
assets of the Fund up to $500 million per
annum
|
|
(b)
|
0.324%
of net
assets of the Fund over $500 million to $1 billion per
annum
|
|
(c)
|
0.30%
of net
assets of the Fund over $1 billion to $1.5 billion per
annum
|
|
(d)
|
0.282%
of net
assets of the Fund over $1.5 billion to $2.5 billion per
annum
|
|
(e)
|
0.27%
of net
assets of the Fund over $2.5 billion to $4 billion per
annum
|
|
(f)
|
0.262%
of net
assets of the Fund over $4 billion to $6.5 billion per
annum
|
|
(g)
|
0.255%
of net
assets of the Fund over $6.5 billion to $10.5 billion per
annum
|
|
(h)
|
0.25%
of net
assets of the Fund over $10.5 billion to $13 billion per
annum
|
|
(i)
|
0.245%
of net
assets of the Fund over $13 billion to $17 billion per
annum
|
|
(j)
|
0.24%
of net
assets of the Fund over $17 billion to $21 billion per
annum
|
|
(k)
|
0.235%
of net
assets of the Fund over $21 billion to $27 billion per
annum
|
|
(l)
|
0.230%
of net
assets of the Fund over $27 billion to $34 billion per
annum
|
|
(m)
|
0.225%
of net
assets of the Fund over $34 billion to $44 billion per
annum
|
|
(n)
|
0.220%
of net
assets of the Fund over $44 billion to $55 billion per
annum
|
|
(o)
|
0.215%
of net
assets of the Fund over $55 billion to $71 billion per
annum
|
|
(p)
|
0.210%
of net
assets of the Fund over $71 billion per
annum
|
Such
fee 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 Fund, 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.
In
the event of termination other than at the end of a calendar month, the monthly
fee shall be prorated for the portion of the month prior to termination and
paid
on or before the tenth (10th) day subsequent to termination.
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 per-cent (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.
The
expense
limitation described in Section 6 shall apply only to Class A shares issued
by
the Fund and shall not apply to any other class(es) of shares the Fund may
issue
in the future. Any new class(es) of shares issued by the Fund will not be
subject to an expense limitation. However, notwithstanding the foregoing, to
the
extent the Investment Adviser is required to reduce its management fee pursuant
to provisions contained in Section 6 due to the expenses of the Class A shares
exceeding the stated limit, the Investment Adviser will either (i) reduce
its management fee similarly for other classes of shares, or (ii) reimburse
the Fund for other expenses to the extent necessary to result in an expense
reduction only for Class A shares of the Fund.
8.
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.
9.
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.
10.
This
Agreement
shall continue in effect until the close of business on December 31, 2006.
It
may thereafter be renewed from year to year by mutual consent, provided that
such renewal shall be specifically approved at least annually by (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.
11.
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.
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AMERICAN
BALANCED FUND, INC.
|
|
/s/
Xxxxxx
X. X’Xxxxxxx
|
|
Xxxxxx
X.
X’Xxxxxxx, Vice Chairman
|
|
and
Principal
Executive Officer
|
|
/s/
Xxxxxxx X. Xxxx
|
|
Xxxxxxx
X.
Xxxx, Secretary
|
|
CAPITAL
RESEARCH AND MANAGEMENT COMPANY
|
|
|
|
/s/
Xxxxx
X. Xxxxxxxxxx
|
|
Xxxxx
X.
Xxxxxxxxxx, President
|
|
/s/
Xxxxxxx X. Xxxxxx
|
|
Xxxxxxx
X.
Xxxxxx, Vice President
|
|
and
Secretary
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