AMERICAN BEACON FUNDS INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 24th day of June, 2011 by and between American Beacon Advisors, Inc., a
Delaware Corporation (the “Manager”), and Brandywine Global Investment Management LLC, a wholly
owned subsidiary of Xxxx Xxxxx, Inc. (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. (a) Duties and Powers 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 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 Manager will make the investment decisions with respect to
1
that
portion of assets which the Adviser deems should be invested in short-term money market
instruments.) 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 is authorized on behalf of the Portfolios, and consistent with the investment
discretion delegated to, and in connection with the services performed by, the Adviser herein, to:
(i) enter into agreements and execute any documents, including without limitation, futures and
options transactions, brokerage agreements, clearing agreements, account documentation, futures and
option agreements, swap agreements, and other investment related agreements required to meet the
obligations of the Trust with respect to any investments made for the Portfolios. Such
documentation includes but may not be limited to any market and/or industry standard documentation
and the standard representations contained therein. Adviser is authorized on behalf of Manager to
make all elections required in such agreements, instruments and documentation and make and to
receive all related notices from brokers or other counterparties. Manager also authorizes Adviser
as agent and attorney-in-fact to make transactions in futures contracts and options on futures
contracts on margin, for the Portfolio, and authorizes each broker with whom Adviser makes such
transactions to follow its’ instructions with respect to such transactions. Manager understands
and agrees that Adviser will determine that such transactions are permitted before instructing a
broker to enter into such transactions and that any broker receiving an order for any such
transaction will have no independent obligation to ensure that the transactions are consistent with
the Trust’s registration statement of the Portfolio’s investment guidelines; and (ii) acknowledge
the receipt of brokers’ risk disclosure statements, electronic trading disclosure statements and
similar disclosures, provided, however, that (a) the Adviser shall be responsible for ensuring that
any such representations are accurate and consistent with the relevant Portfolio’s investment
policies and other governing documents; (b) the Adviser shall be responsible for providing all
notifications and delivering all documents required to be provided or delivered by a Portfolio
under such documentation; and (c) the Adviser shall immediately notify the Manager of any event of
default, potential event of default or termination event affecting a Portfolio under such
documentation. The Adviser further shall have the authority to instruct the custodian to: (i) pay
cash for securities and other property delivered for the Portfolios, (ii) deliver or accept
delivery of, upon receipt of payment or payment upon receipt of, securities, commodities or other
property underlying any futures or options contracts, and other property purchased or sold for the
Portfolios; (iii) deposit of margin or collateral which shall include the transfer of money,
securities or other property to the extent necessary to meet the obligations of a Portfolio with
respect to any of its investments made pursuant to the Trust’s registration statement, provided,
however, that unless otherwise approved by the Manager, any such deposit margin or collateral shall
be effected by transfer or segregation within an account maintained for the Portfolios by its
custodian subject to a control agreement, acceptable in form and substance to the Manager, pursuant
to which such custodian agrees and accepts entitlement orders or instructions from the secured
party with respect to such margin or collateral. The Adviser shall not have the authority to cause
the Manager or the Trust to deliver securities or other property, or pay cash to the Adviser other
than payment of the management
fee provided for in this Agreement. 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
(b) Valuation. In accordance with procedures and methods established by the Board,
which may be amended from time to time, the Adviser will provide assistance to the Manager in
determining the fair value of all securities and other investments owned by the Portfolios, and use
reasonable efforts to arrange for the provision of valuation information or prices from parties
independent of the Adviser with respect to the securities or other investments owned by the
Portfolios for which market prices are not readily available. The Adviser will monitor the
securities and other investments owned by the Portfolios for potential significant events that
could affect their values and notify the Manager when, in its opinion, a significant event has
occurred that may not be reflected in the market values of such securities.
(c) Compliance Matters. The Adviser, at its expense, will provide the Manager
with such compliance reports and certifications relating to its duties under this Agreement and the
federal securities laws as may be agreed upon by such parties from time to time. The Adviser also
shall: (i) cooperate with and provide reasonable assistance to the Manager, the Trust’s
administrator, custodian, transfer agent and pricing agents and all other agents and
representatives of the Portfolios, the Trust and the Manager; (ii) keep all such persons fully
informed as to such material matters as they may reasonably deem necessary to the performance of
their obligations to the Portfolios, the Trust and the Manager; (iii) provide prompt responses to
reasonable requests made by such persons; and (iv) to promote the efficient exchange of
information.
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 best execution 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.
3. Voting Rights. For domestic securities, the Trust will exercise voting rights on
any assets held in the Portfolios. For international securities, unless otherwise directed by the
Manager, the Adviser shall receive and automatically exercise the voting rights with respect to any
and all proxies regarding the assets in the Portfolios in accordance with the Adviser’s proxy
voting policy and procedures, a current copy of which has been provided to the Manager.
3
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 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 as specified in the attached Schedule A to the average daily assets of
the specified Portfolios during the relevant quarter. Solely for the purpose of calculating the
applicable annual percentage rate specified in the attached Schedule A, there shall be included
such other assets as are specified in said Schedule.
The Adviser agrees that the fee charged to the Manager will be no more than that charged for
any other client of similar type, with similar asset level, within the same strategy and obtained
after the date of this Agreement. Furthermore, the Adviser agrees to notify the Manager on a
timely basis of any fee schedule it enters into with any other client of similar type, with similar
asset level, within the same strategy and obtained after the date of this Agreement which is lower
than the fee paid by Manager. In the event that the fee charged to the Manager exceeds the fee
charged to such an account, the fee charged to the Manager 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. Legal Matters. The Adviser will not take any action or render advice involving legal
action on behalf of the Manager with respect to securities or other investments held in the
Portfolios or the issuers thereof, which become the subject of legal notices or proceedings,
including securities class actions and bankruptcies.
6. Electronic Delivery. Manager authorizes Adviser to electronically offer and/or
deliver its current Form ADV Part II as well as any other documents required by law or rule. Upon
written request, Manager may receive hard copy versions.
7. 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.
8. 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.
9. 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.
4
10. 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.
11. Liability of Adviser. The Adviser shall have no liability to the Trust, its
shareholders or any third party arising out of or related to this Agreement except with respect to
claims which occur due to any willful misfeasance, bad faith, or gross negligence in the
performance of its duties or the reckless disregard of its obligations under this Agreement.
12. 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.
13. 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 13, 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.
5
14. 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.
15. Amendments. This Agreement may be amended by mutual consent, subject to
approval by the Board and the Portfolios’ shareholders to the extent required by the 1940 Act.
16. Governing Law. This Agreement shall be governed by the laws of Texas.
17. Trust and Shareholder Liability. The Adviser is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the Declaration of Trust and
agrees that obligations assumed by the Trust pursuant to this Agreement shall be limited in all
cases to the Trust and its assets, and if the liability relates to one or more Portfolio, the
obligations hereunder shall be limited to the respective assets of that Portfolio. The Adviser
further agrees that they shall not seek satisfaction of any such obligation from the shareholders
or any individual shareholder of the Portfolio, nor from the Trustees or any individual Trustee of
the Trust.
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.
| Brandywine Global Investment Management, LLC | American Beacon Advisors, Inc. | |||||||
By: |
/s/ Xxxx X. Xxxxxxxx | By: | /s/ Xxxx X. Needles, Jr. | |||||
Name: |
Xxxx X. Xxxxxxxx | Xxxx X. Needles, Jr. | ||||||
Its: |
C.A.O. | President & CEO | ||||||
6
Schedule A
To the
American Beacon Funds
Investment Advisory Agreement
between
American Beacon Advisors, Inc.
and
Brandywine Global Investment Management LLC
To the
American Beacon Funds
Investment Advisory Agreement
between
American Beacon Advisors, Inc.
and
Brandywine Global Investment Management LLC
American Beacon Advisors, Inc. (“Manager”) shall pay compensation to Brandywine Global
Investment Management LLC (“Adviser”) pursuant to Section 4 of the Investment Advisory Agreement
between said parties for rendering investment management services with respect to the American
Beacon Flexible Bond Fund (the “Fund”) a fee of 0.55 of 1% for all Fund assets under Adviser’s
management.
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 June 24th, 2011
| Brandywine Global Investment Management LLC | American Beacon Advisors, Inc. | |||||||
By: |
/s/ Xxxx X. Xxxxxxxx | By: | /s/ Xxxx X. Needles, Jr. | |||||
Name:
|
Xxxx X. Xxxxxxxx | Xxxx X. Needles, Jr. | ||||||
Title:
|
Chief Admin. Officer | President & CEO | ||||||
7
