AMENDED
INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 1st day of
January, 2005, 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 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.
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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, 2005. 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.
By /s/ Xxxxxx X. X'Xxxxxxx
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Xxxxxx X. X'Xxxxxxx, Chairman
By /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx, Secretary
CAPITAL RESEARCH AND MANAGEMENT COMPANY
By /s/ Xxxxx X. Xxxxxxxxxx
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Xxxxx X. Xxxxxxxxxx, President
By /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Vice President
and Secretary
