AMERICAN BEACON FUNDS INVESTMENT ADVISORY AGREEMENT
Exhibit (d)(2)(M)(i)
AGREEMENT made this 12th day of September, 2008 by and between American Beacon
Advisors, Inc., a Delaware Corporation (the “Manager”), and Pzena Investment Management, LLC (the
“Adviser”);
WHEREAS, American Beacon Funds (the “Trust”), a Massachusetts Business Trust, is an open-end,
diversified 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. 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, and, with respect to such assets, to continuously review, supervise, and
administer the investment program of the Portfolios, to determine in the Adviser’s sole 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 concerning the Adviser’s discharge
of the foregoing responsibilities. The Adviser shall discharge the foregoing responsibilities
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 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. 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 any of the Portfolio assets allocated for
management by the Adviser, the Adviser can request that the Manager make the investment decisions
with respect to that portion of 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 Portfolios’ 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).) 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.
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 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. The Adviser shall not consult with any other
investment sub-adviser of the Portfolio concerning transactions for the Portfolio in securities or
other assets.
All portfolio transactions for the Portfolios will be consummated by payment to or delivery by
the custodian for the Trust (the “Custodian”) of all cash and/or securities due to or from the
Portfolios, and the Adviser shall not have possession or custody thereof or any responsibility or
liability with respect to such custody. The Adviser shall advise and confirm in writing to the
Custodian all investment orders for the Portfolios placed by it with brokers and dealers at the
time and in the manner requested by the Custodian.
3. Voting Rights. The Trust will exercise voting rights on any assets held in the
Portfolios.
4. 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(s) 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(s) to the average daily assets
of the specified Portfolios 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).
The Adviser agrees: (1) that the blended fee in basis points charged to the Trust will not
exceed the blended fee in basis points charged hereafter to a mid cap value account of the same or
smaller size; and (2) that the actual annual dollar fee paid by any other client of the same or
larger size for whom the Adviser provides mid cap value investment advisory services will not
hereafter be less than the actual annual dollar fee paid by the Trust. In the event that the fee
charged to the Trust exceeds the fee charged to an account described in (1) or (2) above, the fee
charged to the Trust shall automatically be reduced to match the fee charged to such other account
from the time such fee is charged to such other account.
5. 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.
6. Reports. The Manager (on behalf of the Trust) and the Adviser agree to furnish to
each other, if applicable, current prospectuses, proxy statements, reports to shareholders,
certified copies of their financial statements, and such other information with regard to their
affairs as each may reasonably request.
7. 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 of the Trust.
8. 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.
9. Liability of Adviser. The Adviser shall not be liable for any action taken or
omitted to be taken by it in its reasonable judgment, in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from the Manager. No
provision of this Agreement shall be deemed to protect the Adviser against any liability to the
Trust or its shareholders to which it might otherwise be subject by reason of any willful
misfeasance, bad faith, or gross negligence in the performance of its duties or the reckless
disregard of its obligations under this Agreement.
10. Permissible Interests. To the extent permitted by law, Trustees, agents, and
shareholders of the Trust are or may be interested in 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 in the Trust as Trustees,
shareholders or otherwise; and the Adviser (or any successor thereof) is or may be interested in
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.
11. Duration and Termination. This Agreement, unless sooner terminated as provided
herein, shall continue for two years after its initial approval as to each Portfolio 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 each Portfolio; provided, however, that if the shareholders
of any 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
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 Trust.
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 11, 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.
12. 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.
A copy of the Adviser’s Form ADV has been provided to the Manager.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first written above.
| Pzena Investment Management, LLC. | American Beacon Advisors, Inc. | |||||||||
By:
|
/s/ Xxxxxxx X. Xxxxxx | By: | /s/ Xxxxxxx X. Xxxxx | |||||||
Name:
|
Xxxxxxx X. Xxxxxx | Xxxxxxx X. Xxxxx | ||||||||
Title:
|
Managing Principal | Chairman | ||||||||
Schedule A
to the
American Beacon Funds
Investment Advisory Agreement
between
American Beacon Advisors, Inc.
and
Pzena Investment Management, LLC
to the
American Beacon Funds
Investment Advisory Agreement
between
American Beacon Advisors, Inc.
and
Pzena Investment Management, LLC
American Beacon Advisors, Inc. (“Manager”) shall pay compensation to Pzena Investment
Management, LLC. (“Adviser”) pursuant to section 4 of the Investment Advisory Agreement between
said parties in accordance with the following annual percentage rates for all Mid Cap Value assets
under Adviser’s management:
1.00% per annum on the first $10 million
0.75% per annum on the next $40 million
0.60% per annum on the next $50 million
0.50% per annum on the excess over $100 million
0.75% per annum on the next $40 million
0.60% per annum on the next $50 million
0.50% per annum on the excess over $100 million
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: as of September 12, 2008
