FORM OF AMERICAN BEACON FUNDS INVESTMENT ADVISORY AGREEMENT
Exhibit (d)(ii)(L)
AGREEMENT made this 12th day of September, 2008 by and between American Beacon
Advisors, Inc., a Delaware Corporation (the “Manager”), and Xxxxxx Xxxxxxx Investment Management
Inc. (the “Adviser”);
WHEREAS, American Beacon Funds (the “Trust”), a Massachusetts Business Trust, is an open-end
management investment company registered under the Investment Company Act of 1940, as amended,
consisting of several series (portfolios) of shares, each having its own investment policies; and
WHEREAS, the Trust has retained the Manager to provide the Trust with business and asset
management services, subject to the control of the Board of Trustees;
WHEREAS, the Trust’s agreement with the Manager permits the Manager to delegate to other
parties certain of its asset management responsibilities; and
WHEREAS, the Manager desires to retain the Adviser to render investment management services to
the Trust with respect to certain of its investment portfolios and such other investment portfolios
as the Trust and the Adviser may agree upon and so specify in the Schedule(s) attached hereto
(collectively the “Portfolios”) and as described in the Trust’s registration statement on Form N-1A
as amended from time to time, and the Adviser is willing to render such services;
NOW, THEREFORE, in consideration of mutual covenants herein contained, the parties hereto
agree as follows:
1. (a) Duties of the Adviser. The Manager employs the Adviser to manage the investment
and reinvestment of such portion, if any, of the Portfolios’ assets as is designated by the Manager
from time to time (“Assets”), and, with respect to such Assets, to continuously review, supervise,
and administer the investment program of the Portfolios, to determine in the Adviser’s discretion
the securities to be purchased or sold, to provide the Manager and the Trust with records
concerning the Adviser’s activities which the Trust is required to maintain, and to render regular
reports to the Manager and to the Trust’s officers and Trustees, in such form as may be mutually
agreed upon by the parties, concerning the Adviser’s discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities with respect to the Assets subject to
the Manager’s oversight and the control of the officers and the Trustees of the Trust and in
compliance with such policies as the Trustees may from time to time establish and provide to the
Adviser in writing, and in compliance with the objectives, policies, and limitations for each such
Portfolio set forth in the Trust’s current registration statement, as amended from time to time,
and applicable laws and regulations. In the event that other investment advisers are retained to
render investment management services to a Portfolio in addition to the Adviser, the Manager
acknowledges and agrees that the Adviser will not be held responsible for such other investment
advisers’ compliance with policies and limitations applicable to the Portfolio. The Adviser
accepts such employment and agrees to render the services for the compensation specified herein and
to provide at its own expense the office space, furnishings and equipment and the personnel
required by it to perform the services on the terms and for the compensation provided herein.
(With respect to the Assets allocated for management by the Adviser, the Adviser can request that
the Manager make the investment decisions with respect to that portion of the Assets, which the
Adviser deems should be invested in short-term money market instruments. The Manager agrees to
provide this service.) The Manager will instruct the Trust’s Custodian(s) to hold and/or transfer
the Assets in accordance with Proper Instructions received from the Adviser. (For this purpose,
the term “Proper Instructions” shall have the meaning(s) specified in the applicable agreement(s)
between the Trust and its custodian(s), a copy of which, and any subsequent modifications thereto,
shall be timely provided to the Adviser.) The Adviser will not be responsible for the cost of
securities or brokerage commissions or any other Trust expenses except as specified in this
Agreement. The Adviser shall provide to the Manager a copy of Part II of its current Form ADV as
filed with the Securities and Exchange Commission, and such other information and reports related
to the Adviser’s management of the Assets as may reasonably be requested by the Manager from time
to time. The Manager acknowledges and agrees that the Adviser may perform the services required
under this Agreement through the Adviser’s employees, officers and/or agents.
(b) Duties of the Manager. The Manager shall provide (or cause the Trust’s
Custodian(s) to provide) timely information to the Adviser regarding such matters as the
composition of assets of the Portfolios, cash requirements and cash available for investment in the
Portfolios, and all other information as may be reasonably necessary for the Adviser to perform its
responsibilities hereunder. The Manager has furnished the Adviser with a copy of the current
prospectus and statement of additional information of each Portfolio and agrees during the
continuance of this Agreement to furnish the Adviser with copies of any revisions or supplements
relating to the Portfolios or the management thereof at, or, if practicable, before the time such
revisions or supplements become effective. No revisions shall be made, nor supplements issued,
regarding a Portfolio or the Adviser without the prior review of the Adviser. No written
disclosure materials naming or relating to the Adviser or its employees other than materials
provided or approved by the Adviser shall be used by the Manager, the Trust or their affiliates in
offering or marketing shares of the Trust or the Portfolios; provided, however, that the Manager
shall not be required to obtain prior approval for materials in which the Adviser is merely
referenced by name, along with the names of other sub-advisers for the Portfolio(s), with no
further description of the Adviser. The Manager agrees to notify the Adviser of any decisions of
the Trustees of the Trust applicable to the Portfolio that may affect the duties of the Adviser
under this Agreement, and to furnish the Adviser with copies of any financial statements or reports
made by a Portfolio to its shareholders and any further materials or information which the Adviser
may reasonably request to enable it to perform its duties under this Agreement.
2. Portfolio Transactions. The Adviser is authorized to select the brokers or dealers
(including, to the extent permitted by law and applicable Trust guidelines, the Adviser or any of
its affiliates) that will execute the purchases and sales of portfolio securities for the
Portfolios
and is directed to use its best efforts to obtain the best net results with respect to brokers’
commissions and discounts as described in the Trust’s current registration statement as amended
from time to time. In selecting brokers or dealers, the Adviser may give consideration to factors
other than price, including, but not limited to, research services and market information. Any
such services or information which the Adviser receives in connection with activities for the Trust
may also be used for the benefit of other clients and customers of the Adviser or any of its
affiliates. The Adviser will promptly communicate to the Manager and to the officers and the
Trustees of the Trust such information relating to portfolio transactions as they may reasonably
request. The Adviser shall not, without the prior approval of the Manager, effect any transactions
which would cause the portion of the Portfolio’s assets designated to the Adviser (“Adviser’s
Assets”) to be out of compliance with any restrictions or policies of the Portfolio established by
the Manager or set forth in the Portfolio’s registration statement as applied solely to the
Adviser’s Assets. The Adviser shall not consult with any other investment sub-adviser of the
Portfolio or a sub-adviser to a portfolio that is under common control with the Portfolio
concerning transactions for the Portfolio in securities or other assets, except as permitted by
Rule 12d3-1 of the Investment Company Act of 1940, as amended.
3. Compensation of the Adviser. For the services to be rendered by the Adviser as
provided in Sections 1 and 2 of this Agreement, the Manager shall pay to the Adviser compensation
at the rate specified in Schedule A attached hereto and made a part of this Agreement. Such
compensation shall be paid to the Adviser quarterly in arrears, and shall be calculated by applying
the annual percentage rate(s) as specified in the attached Schedule A to the average daily assets
of the specified portfolios as provided by the Manager during the relevant quarter. Solely for the
purpose of calculating the applicable annual percentage rates specified in the attached
Schedule(s), there shall be included such other assets as are specified in said Schedule(s).
Although the Manager may from time to time waive the compensation it is entitled to receive from
the Trust or the Portfolio(s), any such waiver will have no effect on the Manager’s obligation to
pay the Adviser the compensation set forth in the Schedule(s) attached hereto.
If, in the future, another investment adviser (“Fund Client”) retains the Adviser to
sub-advise a portfolio (or portion thereof) registered under the Investment Company Act of 1940
(“Fund Account”), and (i) such Fund Client has a substantially similar business relationship with
the Adviser, (ii) such Fund Account has assets equal to or less than the Assets designated to the
Adviser, (iii) such Fund Account is managed in a substantially similar manner with similar
investment policies and guidelines as the applicable Portfolio, and (iv) such Fund Client receives
a fee schedule that would result in a lower fee than the fee provided for such Portfolio hereunder,
then the Adviser will timely notify the Manager of such lower fee arrangement. The following
client accounts shall not be considered for purposes of this paragraph: (i) accounts that pay
incentive fees (i.e., fees that are based all or in part on the performance of a client’s account
against any benchmark or on capital appreciation or total returns of such account), (ii) clients
that maintain multiple accounts with the Adviser, (iii) clients that are affiliates of the Adviser,
and (iv) accounts that the Adviser has been retained to replace an existing investment adviser.
4. Other Services. At the request of the Trust or the Manager, the Adviser in its
discretion may make available to the Trust office facilities, equipment, personnel, and other
services. Such office facilities, equipment, personnel and services shall be provided for or
rendered by the Adviser and billed to the Trust or the Manager at a price to be agreed upon by the
Adviser and the Trust or the Manager.
5. Status of Adviser. The services of the Adviser to the Trust are not to be deemed
exclusive, and the Adviser and its directors, officers, employees and affiliates shall be free to
render similar services to others so long as its services to the Trust are not impaired thereby.
The Adviser shall be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Manager or the Trust in any
way or otherwise be deemed an agent to the Manager or the Trust.
6. Certain Records. Any records required to be maintained and preserved pursuant to
the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Investment Company Act of 1940,
which are prepared or maintained by the Adviser on behalf of the Manager or the Trust, are the
property of the Manager or the Trust and will be surrendered promptly to the Manager or Trust on
request; provided, however, that the Adviser may retain a copy of such records.
7. (a) Standard of Care. Except as may otherwise be provided by applicable laws and
regulations, neither the Adviser nor any of its affiliates or its or their officers, directors,
employees or agents shall be subject to any liability to the Manager, the Trust, the Portfolios or
any shareholder of a Portfolio or the Trust for any error of judgment or any loss arising out of
any investment or other act or omission in the course of, connected with, or arising out of any
service to be rendered under this Agreement, except by reason of willful misfeasance, bad faith or
gross negligence in the performance of the Adviser’s duties hereunder or by reason of the Adviser’s
reckless disregard of its obligations and duties hereunder. The Manager acknowledges and agrees
that the Adviser makes no representation or warranty, express or implied, that any level of
performance or investment results will be achieved by the Portfolios or the Assets designated by
the Manager to the Adviser, or that the Portfolios or such Assets will perform comparably with any
standard or index, including other clients of the Adviser, whether public or private.
(b) Indemnification. The Manager shall hold harmless and indemnify the Adviser for
any and all claims, losses, liabilities, costs, damages or expenses (including reasonable attorneys
fees) (“Losses”) incurred by the Adviser in connection with the performance of its duties
hereunder; provided, however, that nothing contained herein shall require that the Adviser be
indemnified for Losses resulting from willful misfeasance, bad faith or gross negligence in the
performance of the Adviser’s duties hereunder or by reason of the Adviser’s reckless disregard of
its obligations and duties hereunder.
The Adviser shall hold harmless and indemnify the Manager for any and all Losses incurred by
the Manager that arise from the Adviser’s willful misfeasance, bad faith or gross negligence in the
performance of its duties hereunder or by reason of the Adviser’s reckless disregard of its
obligations and duties hereunder; provided, however, that nothing contained herein shall require
that the Manager be indemnified for Losses resulting from willful
misfeasance, bad faith or gross negligence in the performance of the Manager’s duties hereunder or
by reason of the Manager’s reckless disregard of its obligations and duties hereunder.
8. Permissible Interests. To the extent permitted by law, Trustees, agents, and
shareholders of the Trust are or may be interested persons of the Adviser (or any successor
thereof) as directors, partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Adviser are or may be interested persons of the Trust as
Trustees, shareholders or otherwise; and the Adviser (or any successor thereof) is or may be
interested persons of the Trust as a shareholder or otherwise; provided that all such “interests”
shall be fully disclosed between the parties on an ongoing basis and in the Trust’s registration
statement as required by law.
9. Duration and Termination. This Agreement, unless sooner terminated as provided
herein, shall continue as to each Portfolio for two years after the Portfolio’s initial approval
and thereafter for periods of one year for so long as such continuance thereafter is specifically
approved at least annually (a) by the vote of a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Trustees of the Trust or by vote
of a majority of the outstanding voting securities of the applicable Portfolio; provided, however,
that if the shareholders of the applicable Portfolio fail to approve the Agreement as provided
herein, the Adviser may continue to serve hereunder in the manner and to the extent permitted by
the Investment Company Act of 1940 and rules thereunder. The foregoing requirement that
continuance of this Agreement be “specifically approved at least annually” shall be construed in a
manner consistent with the Investment Company Act of 1940 and the rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time, without the payment of any
penalty, by the Manager, by vote of a majority of the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the applicable Portfolio on not less than 30 days
nor more than 60 days written notice to the Adviser, or by the Adviser at any time without the
payment of any penalty, on 60 days written notice to the Manager. This Agreement will
automatically and immediately terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed postpaid, to the other
party at the primary office of such party, unless such party has previously designated another
address.
As used in this Section 9, and Section 8 above, the terms “assignment”, “interested persons”,
and a “vote of a majority of the outstanding voting securities” shall have the respective meanings
set forth in the Investment Company Act of 1940 and the rules and regulations thereunder, subject
to such exemptions as may be granted by the Securities and Exchange Commission under said Act.
10. Severability. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected
thereby.
A copy of the Declaration of Trust of the Trust is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument is not binding upon
any of the Trustees, officers, or shareholders of the Trust individually.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first written above.
| Xxxxxx Xxxxxxx Investment Management Inc. | American Beacon Advisors, Inc. | |||||||||||
By
|
By | |||||||||||
| Name: | Xxxxxxx X. Xxxxx | |||||||||||
| Title: | Chairman | |||||||||||
FORM OF
Schedule A
to the
American Beacon Funds
Investment Advisory Agreement
between
American Beacon Advisors, Inc.
and
Xxxxxx Xxxxxxx Investment Management Inc.
to the
American Beacon Funds
Investment Advisory Agreement
between
American Beacon Advisors, Inc.
and
Xxxxxx Xxxxxxx Investment Management Inc.
American Beacon Advisors, Inc. shall pay compensation to Xxxxxx Xxxxxxx Investment Management
Inc. (the “Adviser”) pursuant to section 3 of the Investment Advisory Agreement between said
parties for rendering investment sub-advisory services with respect to the Emerging Markets Fund
(the “Portfolio”) of the American Beacon Funds based on the following calculation:
| (a) | X.XX% on the first $10 million in Combined Assets, | ||
| X.XX% on the next $140 million in Combined Assets, | |||
| X.XX% on the next $50 million in Combined Assets, plus | |||
| X.XX% on Combined Assets above $200 million, | |||
| multiplied by | |||
| (b) | the ratio of the Portfolio’s Assets over the Combined Assets |
For purpose of the above calculation, the “Combined Assets” shall include: (i) the assets of
the Portfolio, (ii) the assets of the American Airlines, Inc. Master Fixed Benefits Pension Trust
invested in the Xxxxxx Xxxxxxx Investment Management Emerging Markets Trust, a commingled trust
vehicle sponsored and managed by the Adviser (the “EM Pooled Trust”), pursuant to an Adoption
Agreement dated January 10, 2003, as may be amended thereafter, and (iii) the assets of the
American Airlines, Inc. Pilots Variable Benefits Trust invested in the EM Pooled Trust, pursuant to
an Adoption Agreement dated January 10, 2003, as may be amended thereafter.
In calculating the amount of assets under management solely for the purpose of determining the
applicable percentage rate, there shall be included all other assets or trust assets of American
Airlines, Inc. also under management by the Investment Manager.
If the management of the accounts commences or terminates at any time other than the beginning
or end of a calendar quarter, the fee shall be prorated based on the portion of such calendar
quarter during which the Agreement was in force.
DATED: September 12, 2008
