AMENDED
INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 1st day of January, 2000, 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.
For the services to be rendered and/or the facilities to be furnished as
provided in Sections 1, 2 and 3, the Fund shall pay and the Adviser shall be
entitled to receive an aggregate fee as follows:
(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
Such fee shall be computed and accrued daily at one three-hundred-
sixty-fifth (1/365th) of the applicable annual rate 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. The amounts thus computed and accrued during each calendar month
shall be paid to the Adviser on or before the tenth (10th) day of the
succeeding calendar month, provided, however, that in the event of any
termination of this Agreement, such fee shall be computed and paid to the date
of such 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, 2000. 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.
AMERICAN BALANCED FUND, INC.
By /s/ Xxxxxx X. X'Xxxxxxx
Xxxxxx X. X'Xxxxxxx, President
By /s/ Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx, Secretary
CAPITAL RESEARCH AND MANAGEMENT
COMPANY
By /s/ Xxxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxxxxxxx, President
By /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx, Secretary
