EXHIBIT NO. EX-99.d.6
GAM FUNDS, INC.
October 9, 2002
GAM International Management Limited
00 Xx. Xxxxx'x Xxxxx
Xxxxxx XXXX INX England
Investment Advisory Agreement
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Dear Sirs:
The undersigned, GAM Funds, Inc., a Maryland corporation (the "Fund"), is
an open-end diversified series investment company, registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). This letter (the
"Agreement") confirms your engagement as co-investment adviser to the GAM
American Focus Long/Short Fund series of the Fund's shares ("GAM American Focus
Long/Short Fund") on the terms and subject to the conditions set forth below:
SECTION 1. Investment Management Services
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A. General
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You shall, in cooperation with GAMCO Investors, Inc. (the "Co-Adviser"),
conduct and maintain a continuous review of the portfolio of securities and
investments held by GAM American Focus Long/Short Fund. You may provide the
Co-Adviser from time to time with written recommendations or instructions as to
specific purchases and sales of securities and other investments, provided,
however, that in the absence of written instructions from you or the Fund, the
Co-Adviser shall make all decisions regarding purchases and sales of securities
and other investments on behalf of GAM American Focus Long/Short Fund (such
portfolio review and provision of instructions to the Co-Adviser, the "Advisory
Services").
In performing the Advisory Services, you shall be guided by the investment
objectives, policies and restrictions of GAM American Focus Long/Short Fund as
set forth in the Prospectus and the Statement of Additional Information filed by
the Fund with the Securities and Exchange Commission, as amended from time to
time (the "Disclosure Documents"), and in accordance with such other policies or
limitations adopted by the Board of Directors of the Fund and the provisions of
the 1940 Act and the rules promulgated thereunder. We agree to supply you with
all such relevant documents and to notify you of any relevant changes in the
investment objectives, policies and restrictions of GAM American Focus
Long/Short Fund.
In acting under this Agreement, you shall be an independent contractor and
shall not be an agent of the Fund.
B. Selection and Recommendations of Brokers
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Subject to any written recommendations or instructions you or the Fund may
provide to the Co-Adviser from time to time, the Co-Adviser shall be responsible
for the selection of members of securities exchanges, brokers and dealers for
the execution of the portfolio transactions of GAM American Focus Long/Short
Fund, and, when applicable, negotiating commissions in connection therewith. All
such selections shall be made in accordance with the Fund's policies and
restrictions regarding brokerage allocation set forth in the Disclosure
Documents.
You may, in selecting or recommending brokers, take into account any
services or facilities provided by a broker. You are authorized to select or
recommend a member of a securities exchange or any other securities broker or
dealer which charges an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker or dealer would have charged for effecting that transaction if you
determine in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services (as such services are
defined in Section 28(e) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) provided by such member, broker or dealer, viewed in terms of
either that particular transaction or your overall responsibility with respect
to the accounts as to which you exercise investment discretion (as that term is
defined in Section 3(a)(35) of the 1934 Act).
C. Reports and Summaries
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You shall maintain a continuous record of all the investments and
securities which comprise the portfolio of GAM American Focus Long/Short Fund,
and shall furnish to the Fund or its designee such summaries of the portfolio
GAM American Focus Long/Short Fund and such other reports, evaluations, analyses
and opinions, including statistical reports, relating to your services as
investment adviser hereunder as the Fund may reasonably request at any time or
from time to time or as you may deem helpful to the Fund. All such records shall
be the property of the Fund.
SECTION 2. Expenses
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You shall assume and pay all of your own costs and expenses, including
those for furnishing such office space, office equipment, office personnel and
office services as you may require in the performance of your duties under this
Agreement.
The Fund shall bear all expenses of the organization, operations and
business of GAM American Focus Long/Short Fund not expressly assumed or agreed
to be paid by you under this Agreement. In particular, but without limiting the
generality of the foregoing, the Fund shall pay all interest, taxes,
governmental charges or duties, fees, brokerage and commissions of every kind
arising hereunder or in connection herewith, expenses of issue, repurchase or
redemption of GAM American Focus Long/Short Fund shares, expenses of
registering, qualifying and pricing the GAM American Focus Long/Short Fund
shares for sale, insurance, association membership dues, all charges of
custodians (including fees as custodian and for keeping books, performing
portfolio valuations and rendering other services to the Fund), transfer agents,
registrars, dividend disbursing agents, independent auditors and legal counsel,
expenses of preparing, printing and distributing all prospectuses, proxy
material, reports and notices to stockholders, all distribution expenses under
the plans adopted in accordance with Rule 12b-1 under the 1940 Act, fees and
out-of-pocket expenses of directors, all overhead expenses of GAM American Focus
Long/Short Fund's operations, including office space, office equipment, office
personnel and office services and all other costs incident to the corporate
existence of GAM American Focus Long/Short Fund.
SECTION 3. Use of Services of Others
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You may (at your expense except as set forth in Section 2 hereof) employ,
retain or otherwise avail yourself of the services or facilities of other
persons or organizations for the purpose of providing you or GAM American Focus
Long/Short Fund with such statistical or factual information, such advice
regarding economic factors and trends or such other information, advice or
assistance as you may deem necessary, appropriate or convenient for the
discharge of your obligations hereunder or otherwise helpful to GAM American
Focus Long/Short Fund.
SECTION 4. Management Fees
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In consideration of your services hereunder to GAM American Focus
Long/Short Fund, you shall be, subject to Section 4 (d) below, entitled to
one-third (1/3) multiplied by a management fee comprised of two components:
(a) The first component is a monthly base fee ("Base Fee") equal to
one-twelfth of 1.50% of the average daily net assets of GAM
American Focus Long/Short Fund during the month.
(b) The second component is a performance adjustment ("Performance
Adjustment") that either increases or decreases the Base Fee,
depending on how GAM American Focus Long/Short Fund has performed
relative to the Standard & Poor's Composite Stock Price 500 Index
(the "Index"). The maximum performance adjustment upward or
downward is 0.5% annually.
No Performance Adjustment shall be due if the performance of GAM
American Focus Long/Short Fund during the performance period is
less than 3.0% better or 3.0% worse than the performance of the
Index during the performance period. (For example, if the
performance of the Index is +5.0% and the performance of GAM
American Focus Long/Short Fund is better than +2.0% but worse
than +8.0%, then there shall be no Performance Adjustment.)
During the twelve months from the date hereof, the management fee
will equal the Base Fee with no Performance Adjustment.
The Performance Adjustment is 0.125% for each whole percentage point
that GAM American Focus Long/Short Fund's investment performance for the
performance period is more than 2.0% better or worse than the record of the
Index as then constituted. The maximum Performance Adjustment is 0.50%.
(For example, if the performance of the Index is +5.0% and the performance
of the Portfolio is +8.0%, then the Performance Adjustment is +0.125%; and
the sum of the Base Fee and the Performance Adjustment is 1.625%. If the
performance of the Index is +5.0% and the performance of the Portfolio is
+9.5%, then the Performance Adjustment is +0.25%; and the sum of the Base
Fee and the Performance Adjustment is 1.75%)
The performance period will commence on the date of this Agreement.
During the first twelve months of the performance period, there will
be no Performance Adjustment. Starting with the thirteenth month of
the performance period, the Performance Adjustment will take effect.
Each subsequent performance period will consist of the current month
plus the previous eleven months.
GAM American Focus Long/Short Fund's investment performance for the
performance period shall be the cumulative monthly asset-weighted
investment performance of all classes of shares of GAM American Focus
Long/Short Fund over the performance period. The asset-weighted
investment performance for GAM American Focus Long/Short Fund for a
given month will be calculated by multiplying the investment
performance of each class for the month by its average net assets
(determined as of the close of business on each business day of the
month), adding the results together and dividing the sum by the
aggregate net assets of all classes of GAM American Focus Long/Short
Fund for that month. Any class that does not complete a full month of
operations in a given month will be excluded from the calculation of
GAM American Focus Long/Short Fund's investment performance for that
month, and its assets will be excluded from the aggregate net assets
of GAM American Focus Long/Short Fund in determining GAM American
Focus Long/Short Fund's investment performance for that month.
In computing the investment performance of GAM American Focus
Long/Short Fund and the investment record of the Index, distributions
of realized capital gains, the value of capital gains taxes per share
paid or payable on undistributed realized long-term capital gains
accumulated to the end of such period and dividends paid out of
investment income on the part of GAM American Focus Long/Short Fund,
and all cash distributions of the securities included in the Index,
will be treated as reinvested in accordance with Rule 205-1 or any
other applicable rules under the Investment Advisers Act of 1940, as
the same from time to time may be amended.
One twelfth of the annual Performance Adjustment will be applied to
the average of the net assets of GAM American Focus Long/Short Fund
determined as of the close of business on each business day throughout
the month and the performance period.
(c) In case of termination of this Agreement during any month, the
fee for that month shall be reduced proportionately on the basis
of the number of business days during which it is in effect for
that month. The Base Fee will be computed on the basis of and
applied to net assets averaged over that month ending on the last
business day on which this Agreement is in effect. The amount of
the Performance Adjustment will be computed on the basis of and
applied to net assets averaged over the 12-month period ending on
the last business day on which this Agreement is in effect
provided that if this Agreement has been in effect less than 12
months, the computation will be made on the basis of the period
of time during which it has been in effect.
(d) In the event the total management fee for any monthly period is
less than 1.2% annually, the entitlement to you will be 40% of
1/12 of 1.00% of the average daily net assets of the GAM American
Focus Long/Short Fund.
SECTION 5. Limitation of Liability of Investment Adviser
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You shall be liable for losses resulting from your own acts or
omissions caused by your willful misfeasance, bad faith or gross negligence
in the performance of your duties hereunder or your reckless disregard of
your duties under this Agreement, and nothing herein shall protect you
against any such liability to GAM American Focus Long/Short Fund, the Fund
or its stockholders. You shall not be liable to GAM American Focus
Long/Short Fund, the Fund or to any stockholder thereof for any claim or
loss arising out of any investment or other act or omission, in the
performance of your duties under this Agreement or for any loss or damage
resulting from the imposition by any government of exchange control
restrictions which might affect the liquidity of the assets of GAM American
Focus Long/Short Fund maintained with custodians or securities depositories
in foreign countries or from any political acts of any foreign governments
to which such assets might be exposed.
SECTION 6. Services to Other Clients and the Fund
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Nothing contained in this Agreement shall be deemed to prohibit you or
any of your affiliated persons from acting, and being separately
compensated for acting, in one or more capacities on behalf of the Fund. We
understand that you may act as investment manager or in other capacities on
behalf of other investment companies and clients. While information and
recommendations you supply to GAM American Focus Long/Short Fund and
investments you make on behalf of GAM American Focus Long/Short Fund shall
in your judgment be appropriate under the circumstances in light of the
investment objectives and policies of GAM American Focus Long/Short Fund,
it is understood and agreed that they may be different from the information
and recommendations you or your affiliated persons supply to other clients.
You and your affiliated persons shall supply information, recommendations
and any other services, and shall allocate investment opportunities among
GAM American Focus Long/Short Fund and any other client in an impartial and
fair manner in order to seek good results for all clients involved, but you
shall not be required to give preferential treatment to any one client,
including GAM American Focus Long/Short Fund, as compared with the
treatment given to any other client. Whenever you shall act in multiple
capacities on behalf of the Fund, you shall maintain the appropriate
separate accounts and records for each such capacity. As used herein, the
term "affiliated person" shall have the meaning assigned to it in the 1940
Act.
On occasions when you deem the purchase or sale of a security to be in
the best interest of GAM American Focus Long/Short Fund, one or more of the
other series of the Fund and/or other clients, you may, to the extent
permitted by applicable law, aggregate the securities to be so sold or
purchased in order to obtain the best execution or lower brokerage
commissions, if any. You may also on occasion purchase or sell a particular
security for one or more customers in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by you in the manner you consider
to be the most equitable and consistent with your fiduciary obligations to
GAM American Focus Long/Short Fund and to such other clients.
SECTION 7. Reports and Information
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The Fund shall furnish to you solely for your use such prospectuses, proxy
statements, reports and other information relating to the business and affairs
of the Fund as you may, at any time or from time to time, reasonably require in
order to discharge your duties under this Agreement.
SECTION 8. Term of Agreement
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A. Interim Agreement
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This Agreement shall be effective as an interim agreement as described in
Rule 15a-4 under the 1940 Act commencing on the date hereof, and shall continue
in effect until the earlier of (i) 150 days after the date hereof, (ii)
termination of this Agreement for any reason by the Board of Directors of the
Fund upon notice to you, or (iii) approval of this Agreement by (1) the Board of
Directors of the Fund, including a majority of the directors of the Fund who are
not parties to this Agreement or interested persons (as defined in the 0000 Xxx)
of any such person, and (2) by vote of a majority of the outstanding shares of
GAM American Focus Long/Short Fund.
B. Term
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Upon approval of this Agreement as provided in clause A(iii)(2) of this
Section 8, this Agreement shall continue in effect for consecutive terms of one
year each ending on each anniversary of the date of such approval, subject to
approval annually by the Board of Directors of the Fund or by vote of a majority
of the outstanding shares of GAM American Focus Long/Short Fund and also, in
either event, by the vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the directors of the Fund who are not
parties to this Agreement or interested persons (as defined in the 0000 Xxx) of
any such person.
SECTION 9. Termination of Agreement; Assignment
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This Agreement may be terminated by either party hereto, without the
payment of any penalty, upon 60 days' prior notice in writing to the other
party; provided that, in the case of termination by the Fund, such action shall
have been authorized by resolution of a majority of the directors of the Fund in
office at the time or by vote of a majority of the outstanding shares of GAM
American Focus Long/Short Fund.
This Agreement shall automatically terminate in the event of its assignment
(as defined in the 1940 Act).
Termination of this Agreement for any reason shall not affect rights of the
parties that have accrued prior to such termination.
SECTION 10. Applicable Provisions of Law
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This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the 1940 Act, and to
the extent that any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
If the above terms and conditions are acceptable to you, please so indicate
by signing and returning to us the enclosed copy of this letter, whereupon this
letter shall constitute a binding contract between us.
Very truly yours,
GAM FUNDS, INC.
By: /s/ Xxxxx Xxxxxxxxxxx
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Authorized Signature
Accepted and Agreed:
GAM INTERNATIONAL MANAGEMENT LIMITED
By: /s/ Xxxxxx Xxxxx
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Authorized Signature
