1
Exhibit 99.b.5.b.ii
AMERICAN AADVANTAGE FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1 day of November , 1995 by and between AMR
Investment Services, Inc., a Delaware Corporation, (the "Manager") and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Asset Management Inc. (the "Adviser");
WHEREAS, American AAdvantage 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 Advisers 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
2
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. 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 agreements(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.
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(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 month- end assets of the specified portfolios during the relevant
quarter. Solely for the purpose of calculating the applicable annual percentage
rates specified
3
in the attached Schedule(s), there shall be included such other assets as are
specified in said Schedule(s).
The Adviser agrees that the fee charged to the Manager will be no more
than that charged for any other client of similar size receiving comparable
services. 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 size
which is lower than the fee paid by the Manager.
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. 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.
6. 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.
7. 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.
8. LIABILITY OF ADVISER. 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.
4
9. 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.
10. 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 10, 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
11. 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.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Management AMR INVESTMENT SERVICES INC.
Inc.
By /s/ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇.▇. ▇▇▇▇▇
---------------------------- ------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Managing Director Its President
---------------------------- -----------------------------
6
Schedule A
to the
American AAdvantage Funds
Investment Advisory Agreement
between
AMR Investment Services, Inc.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Management Inc.
AMR Investment Services, Inc. shall pay compensation to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Asset Management Inc. pursuant to section 3 of the Investment Advisory
Agreement between said parties in accordance with the following annual
percentage rates:
0.80% per annum on the first $25 million
0.60% per annum on the next $25 million
0.50% per annum on the next $25 million
0.40% per annum on all excess assets
In calculating the amount of assets under management solely for the
purposes of determining the applicable percentage rate, there should be
included all American Airlines Trust Funds under management by the Adviser.
DATED: November 1, 1995