Annual Report - American Balanced Fund - American Funds

4. Ancillary benefitsThe board and the committee considered a variety of other benefits that CRMC and itsaffiliates receive as a result of CRMC’s relationship with the fund and the other AmericanFunds, including fees for administrative services provided to certain share classes; feespaid to CRMC’s affiliated transfer agent; sales charges and distribution fees receivedand retained by the fund’s principal underwriter, an affiliate of CRMC; and possibleancillary benefits to CRMC and its institutional management affiliates in managingother investment vehicles. The board and the committee reviewed CRMC’s portfoliotrading practices, noting that while CRMC received the benefit of research provided bybroker-dealers executing portfolio transactions on behalf of the fund, it did not obtainthird-party research or other services in return for allocating brokerage to such brokerdealers.The board and the committee took these ancillary benefits into account inevaluating the reasonableness of the advisory fees and other amounts paid to CRMCby the fund.5. Adviser financial informationThe board and the committee reviewed information regarding CRMC’s costs ofproviding services to the American Funds, including personnel, systems and resourcesof investment, compliance, trading, accounting and other administrative operations.They considered CRMC’s costs and willingness to invest in technology, infrastructureand staff to maintain and expand services and capabilities, respond to industry andregulatory developments, and attract and retain qualified personnel. They notedinformation regarding the compensation structure for CRMC’s investment professionals.The board and the committee also compared CRMC’s profitability and compensationdata to the reported results and data of several large, publicly held investmentmanagement companies. The board and the committee noted the competitiveness andcyclicality of both the mutual fund industry and the capital markets, and the importancein that environment of CRMC’s long-term profitability for maintaining its independence,company culture and management continuity. They further considered the breakpointdiscounts in the fund’s advisory fee structure. The board and the committee concludedthat the fund’s advisory fee structure reflected a reasonable sharing of benefits betweenCRMC and the fund’s shareholders.34 American Balanced Fund