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EXHIBIT (h)(v)
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement, dated as of date set forth below, is made by and among
AMERICAN AADVANTAGE FUNDS, a Massachusetts business trust, AMERICAN AADVANTAGE
MILEAGE FUNDS, a Massachusetts business trust, AMR INVESTMENT SERVICES TRUST, a
New York common law trust (collectively, the "Trusts"), AMR INVESTMENT SERVICES,
INC., a Texas corporation ("AMR"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company ("State Street").
WHEREAS, AMR serves as the manager and investment adviser to the
Trusts; and
WHEREAS, State Street serves as the custodian to the Trusts under
various Custodian Agreements (as amended from time to time, the "Custodian
Agreements"); and
WHEREAS, AMR desires to invest certain excess cash balances of certain
series of the Trusts (each, a "Fund") in various futures contracts;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. ESTABLISHMENT OF ACCOUNTS. State Street shall establish and
maintain a segregated account or accounts for and on behalf of each Fund listed
on Schedule A hereto (each, an "Account"). All investment transactions governed
herein with respect to a Fund shall flow through that Fund's Account. The rights
and obligations of the parties with respect to the Account shall continue to be
governed by the provisions of the Custodian Agreements between each Trust and
State Street, as amended from time to time, in addition to the provisions of
this Agreement. In the event of a conflict, the provisions herein shall control.
Unless defined herein, all terms used in this Agreement shall have the meaning
assigned to them in the Custodian Agreements.
SECTION 2. SERVICE. State Street is hereby given the following standing
instructions: (i) to transfer all incremental cash flows of each Fund on a daily
basis to such Fund's Account, (ii) to determine the amount of "liquid assets"
held in each Fund's Account consisting of cash, short-term holdings, United
States Treasury securities, investments in the AMR Investment Services Trust
Money Market Portfolios and the American Select Cash Reserve Fund and variation
margin ("Liquid Assets") as of 12 noon on each day the New York Stock Exchange
is open for business,. (iii) to then instruct the futures commission merchant
specified in Schedule A (the "FCM") to purchase the futures contracts on behalf
of a Fund specified in Schedule A in an amount equal to the amount by which
Liquid Assets on such day exceed the outstanding amount of such futures
contracts or to sell such futures contracts in an amount equal to the amount by
which Liquid Assets on such day are less than the outstanding amount of such
futures contracts, as appropriate, (iv) to purchase a United States Treasury
security in the amount of the margin required to be maintained with the FCM with
respect to such futures contract as advised by the FCM and to deliver the same
to the FCM to be held as margin for the futures contracts purchased, and
thereafter to purchase a United States Treasury security in the amount of the
additional margin required to be provided to the FCM with respect to such
futures contract as advised by the FCM, and in each case to deliver such
securities to the FCM to be held as margin under the terms of the relevant
Futures Account Agreement. Each Trust hereby declares that
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each payment or delivery of securities made for its account to an FCM as
contemplated hereby is for a proper trust purpose, and represents and agrees
that the instructions to State Street set forth in this Agreement shall
constitute "Proper Instructions" under its Custodian Agreement.
SECTION 3. LIMITATIONS. All Liquid Assets shall be invested in
accordance with the instructions of AMR as set forth in Schedule A and State
Street is not permitted to substitute other investments for those specified in
this Agreement. Subject to the limitations set forth therein, AMR, in its sole
discretion, may amend from time to time, Schedule A upon notice to State Street.
SECTION 4. STANDARD OF CARE. In performing its obligations hereunder,
State Street shall be subject to the standard of care specified in the relevant
Custodian Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Each party hereto represents
and warrants that (a) it has the power to execute and deliver this Agreement, to
enter into the transactionscontemplated hereby, and to perform its obligations
hereunder; (b) has taken all necessary action to authorize such execution,
delivery, and performance; (c) this Agreement constitutes a legal, valid, and
binding obligation enforceable against it; and (d) the execution, delivery, and
performance by it of this Agreement will at all times comply with all applicable
laws and regulations.
SECTION 6. COMPENSATION. AMR shall pay State Street an annualized fee
equal to 0.05% of the assets invested in futures contracts for domestic equity
funds and 0.10% of the assets invested in futures contracts for international
equity funds. This fee shall be calculated and accrued daily and paid quarterly.
SECTION 7. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT. This Agreement
shall become effective as of its execution and shall continue in full force and
effect until terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or mailing, or such
shorter period as both parties hereto shall agree upon in writing. Except for
Schedule A hereto (which, subject to the limitations set forth therein, can be
amended by written notice from AMR to State Street), this Agreement may be
amended by either party in writing with the consent of both parties.
SECTION 8. GOVERNING LAW. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
SECTION 9. ASSIGNMENT. This Agreement may not be assigned by either
party without the written consent of the other.
SECTION 10. SEVERABILITY. In the event that any provision of this
Agreement is held illegal, void or unenforceable, the balance shall remain in
effect.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of this 29th day of November, 1999.
AMERICAN AADVANTAGE FUNDS
AMERICAN AADVANTAGE MILEAGE
FUNDS AMR INVESTMENT
SERVICES TRUST, and AMR
INVESTMENT SERVICES, INC.
By:
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Xxxxxxx X. Xxxxx
President
STATE STREET BANK AND TRUST COMPANY
By:
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Name:
Title:
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SCHEDULE A
TO THE
ADMINISTRATIVE SERVICES AGREEMENT
STATEMENT OF INTENT/OPERATING PROCEDURES
State Street Bank and Trust Company ("State Street") shall fulfill its
duties set forth in Section 2 and Section 3 of the Administrative Services
Agreement in accordance with the following:
I. SCOPE OF THE ENGAGEMENT.
AMR is seeking to equitize the cash balances of certain mutual fund
portfolios. AMR will manage the underlying cash balances and will direct State
Street to purchase the futures contract to maintain appropriate equity exposure.
AMR anticipates maintaining a 5% equity (10% for small cap) exposure on a daily
basis.
The mutual funds to be equitized, the equitized amounts and the futures
contracts used are listed below. AMR may in its judgement direct State Street to
implement the equitization using futures contracts other than those listed
below.
II. IMPLEMENTATION.
AMR will direct State Street to equitize the initial portfolio
balances, and State Street will buy and or sell the appropriate number of
approved contracts to reflect changes in the underlying cash balances using the
procedures listed in Section III. Such procedures may be modified by the mutual
consent of AMR and State Street. With respect to the International Equity
Portfolio of the AMR Investment Services Trust, AMR hereby instructs that
contracts to be purchased from the list set forth in Section VI be purchased
substantially in proportion to the capitalization weights of the nine countries
as they comprise the Xxxxxx Xxxxxxx Capital International Europe, Asia and Far
East Index.
III. DAILY OPERATING PROCEDURES
Noon State Street's Mutual Fund Custody Group (MFG)
transfers appropriate cash into AMR's STIF account.
MFG e-mails activity spreadsheet to State Street's
investment group (SSgA) and AMR.
12:00pm MFG calls SSgA if spreadsheet will be delayed.
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12:00-1:00pm AMR and SSgA Operational Procedures followed:
o Values on spreadsheet are validated.
o Consistency Checks conducted.
o Confirm if special notice re-balancing is
requested.
Action steps if validity questioned:
o Assumptions checked.
o Designated MFG team notified - problem
logged.
1:00pm SSgA Operations forwards activity spreadsheet to
Portfolio Management Team.
1:00-1:30pm Portfolio Manager loads cash balance data into
trading system. Futures volume is determined by
asset pool.
1:30pm Portfolio Manager sends trades to broker
4:45pm Porfolio Manager electronically receives trade
confirmation data. Prices are confirmed. Trades are
sent to custody.
8:00am(next day) SSgA Operations sends daily Margin Calculation to
MFG who conduct a second reconciliation.
IV. TRUST FUND
AMR INVESTMENT SERVICES TRUST Balanced Portfolio
Large Cap Value Portfolio
International Equity Portfolio
Small Cap Value Portfolio
AMERICAN AADVANTAGE FUNDS* Balanced Fund
Large Cap Value Fund
International Equity Fund
Small Cap Value Fund
AMERICAN AADVANTAGE MILEAGE FUNDS* Balanced Mileage Fund
Large Cap Value Mileage Fund
International Equity Mileage Fund
Small Cap Value Mileage Fund
*Inactive for purposes of this Agreement. To be activated upon prior notice
from Trust.
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V. APPROVED FUTURES CONTRACTS
PORTFOLIO FUTURES CONTRACT USED FCM
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Balanced S&P 500 Xxxxxxx Sachs & Co.
Large Cap Value S&P 500 Xxxxxxx Sachs& Co.
International Equity Approved List of CFTC Futures
Contracts - Xxxxxxx Sachs& Co.
See Section VI
Small Cap Equity Xxxxxxx 2000 Xxxxxxx Sachs& Co.
VI. LIST OF APPROVED FUTURES CONTRACTS FOR INTERNATIONAL EQUITY PORTFOLIO
Country Contract Name
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U.K. FTSE
Germany DAX
France CAC 40
Sweden OMX
Italy MIB 30
Spain IBEX 35
Japan TOPIX
Nikkei 300
Hong Kong Hang Seng
Australia All Ords
Canada TSE 35
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ACCEPTED AND APPROVED BY:
AMERICAN AADVANTAGE FUNDS
AMERICAN AADVANTAGE MILEAGE
FUNDS AMR INVESTMENT
SERVICES TRUST, and AMR
INVESTMENT SERVICES, INC.
By:
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Xxxxxxx X. Xxxxx
President
ACCEPTED AND APPROVED BY:
STATE STREET BANK AND TRUST COMPANY
By:
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Name:
Title:
DATED: November 29, 1999
