Exhibit (d)(3)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated December 31, 2002, between Gabelli
Equity Series Funds, Inc. (the "Company"), a Maryland corporation, and Gabelli
Funds, LLC. (the "Adviser"), a Delaware Corporation.
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. IN GENERAL
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Company with respect to the investment of the assets
of the Company allocated to The Gabelli Woodland Small Cap Value Fund Stock (the
"Fund") and to supervise and arrange the purchase and sale of assets held in the
investment portfolio of the Fund.
2. Duties And Obligations Of The Adviser With Respect To Investments Of
ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this paragraph and subject
to the direction and control of the Company's Board of Directors, the Adviser
shall (i) act as investment adviser for and supervise and manage the investment
and reinvestment of the Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Fund
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Fund; (ii) arrange for the
purchase and sale of securities and other assets held in the investment
portfolio of the Fund and (iii) oversee the administration of all aspects of the
Fund's business and affairs and provide, or arrange for others whom it believes
to be competent to provide, certain services as specified in subparagraph (b)
below. Nothing contained herein shall be construed to restrict the Company's
right to hire its own employees or to contract for administrative services to be
performed by third parties, including but not limited to, the calculation of the
net asset value of the Fund's shares.
(b) The specific services to be provided or arranged for by the Adviser
for the Fund are (i) maintaining the Fund's books and records, such as journals,
ledger accounts and other records in accordance with applicable laws and
regulations to the extent not maintained by the Fund's custodian, transfer agent
and dividend disbursing agent; (ii) transmitting purchase and redemption orders
for Fund shares to the extent not transmitted by the Fund's distributor or
others who purchase and redeem shares; (iii) initiating all money transfers to
the Fund's custodian and from the Fund's custodian for the payment of the Fund's
expenses, investments, dividends and share redemptions; (iv) reconciling account
information and balances among the Fund's custodian, transfer agent,
distributor, dividend disbursing agent and the Adviser; (v) providing the Fund,
upon request, with such office space and facilities, utilities and office
equipment as are adequate for the Fund's needs; (vi) preparing, but not paying
for, all reports by the Company, on behalf of the Fund, to its shareholders and
all reports and filings required to maintain the registration and qualification
of the Fund's shares under federal and state law including periodic updating of
the Company's registration statement and Prospectus (including its Statement of
Additional Information); (vii) supervising the calculation of the net asset
value of the Fund's shares; and (viii) preparing notices and agendas for
meetings of the Fund's shareholders and the Company's Board of Directors as well
as minutes of such meetings in all matters required by applicable law to be
acted upon by the Board of Directors.
(c) In the performance of its duties under this Agreement, the Adviser
shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940 (the "Act"), and of any rules or regulations in
force thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Articles of Incorporation
and By-Laws of the Company, as such documents are amended from time to time;
(iv) the investment objective, policies and restrictions applicable to the Fund
as set forth in the Company's Registration Statement on Form N-lA and (v) any
policies and determinations of the Board of Directors of the Company with
respect to the Fund.
(d) The Adviser will seek to provide qualified personnel to fulfill its
duties hereunder and will bear all costs and expenses (including any overhead
and personnel costs) incurred in connection with its duties hereunder and shall
bear the costs of any salaries or directors fees of any officers or directors of
the Company who are affiliated persons (as defined in the Act) of the Adviser.
The Company shall be responsible for the payment of all the Fund's other
expenses, including (i) payment of the fees payable to the Adviser under
paragraph 4 hereof; (ii) organizational expenses; (iii) brokerage fees and
commissions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
liability insurance or fidelity bond coverage for the Company officers and
employees, and directors' and officers' errors and omissions insurance coverage;
(vii) legal, auditing and accounting fees and expenses; (viii) charges of the
Fund's custodian, transfer agent and dividend disbursing agent; (ix) the Fund's
pro rata portion of dues, fees and charges of any trade association of which the
Company is a member; (x) the expenses of printing, preparing and mailing
proxies, stock certificates and reports, including the Fund's prospectuses and
statements of additional information, and notices to shareholders; (xi) filing
fees for the registration or qualification of the Fund and its shares under
federal or state securities laws; (xii) the fees and expenses involved in
registering and maintaining registration of the Fund's shares with the
Securities and Exchange Commission; (xiii) the expenses of holding shareholder
meetings; (xiv) the compensation, including fees, of any of the Company's
directors, officers or employees who are not affiliated persons of the Adviser;
(xv) all expenses of computing the Fund's net asset value per share, including
any equipment or services obtained solely for the purpose of pricing shares or
valuing the Fund's investment portfolio; (xvi) expenses of personnel performing
shareholder servicing functions and all other distribution expenses payable by
the Company; and (xvii) litigation and other extraordinary or non-recurring
expenses and other expenses properly payable by the Fund.
(e) The Adviser shall give the Fund the benefit of its professional
judgment and effort in rendering services hereunder, but neither the Adviser nor
any of its officers, directors, employees, agents or controlling persons shall
be liable for any act or omission or for any loss sustained by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Company may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Adviser or any
director, officer, employee or other affiliate thereof from acting as investment
adviser for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Adviser or any
of its directors, officers, employees or agents from buying, selling or trading
any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting.
3. PORTFOLIO TRANSACTIONS
In the course of the Adviser's execution of portfolio transactions for
the Fund, it is agreed that the Adviser shall employ securities brokers and
dealers which, in its judgment, will be able to satisfy the policy of the Fund
to seek the best execution of its portfolio transactions at reasonable expenses.
For purposes of this agreement, "best execution" shall mean prompt, efficient
and reliable execution at the most favorable price obtainable. Under such
conditions as may be specified by the Company's Board of Directors in the
interest of its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale of the
Fund's portfolio securities with its affiliate, Gabelli & Company, Inc.; (b) pay
commissions to brokers other than its affiliate which are higher than might be
charged by another qualified broker to obtain brokerage and/or research services
considered by the Adviser to be useful or desirable in the performance of its
duties hereunder and for the investment management of other advisory accounts
over which it or its affiliates exercise investment discretion; and (c) consider
sales by brokers (other than its affiliate distributor) of shares of the Fund
and any other mutual fund for which it or its affiliates act as investment
adviser, as a factor in its selection of brokers and dealers for Fund portfolio
transactions.
4. COMPENSATION OF THE ADVISER
(a) Subject to paragraph 2(b), the Company agrees to pay to the Adviser
out of the Fund's assets and the Adviser agrees to accept as full compensation
for all services rendered by or through the Adviser (other than any amounts
payable to the Adviser pursuant to paragraph 4(b)) a fee computed and payable
monthly in an amount equal on an annualized basis to 1.0% of the Fund's daily
average net asset value. For any period less than a month during which this
Agreement is in effect, the fee shall be prorated according to the proportion
which such period bears to a full month of 28, 29, 30 or 31 days, as the case
may be.
(b) The Company will pay the Adviser separately for any costs and
expenses incurred by the Adviser in connection with distribution of the Fund's
shares in accordance with the terms (including proration or nonpayment as a
result of allocations of payments) of one or more Plans of Distribution (the
"Plans") adopted for the Fund pursuant to Rule 12b-l under the Act as such Plans
may be in effect from time to time; provided, however, that no payments shall be
due or paid to the Adviser hereunder unless and until this Agreement shall have
been approved by Director Approval and Disinterested Director Approval (as such
terms are defined in such Plans). The Company reserves the right to modify or
terminate such Plans at any time as specified in the Plans and Rule 12b-l, and
this subparagraph shall thereupon be modified or terminated to the same extent
without further action of the parties. The persons authorized to direct the
payment of the funds pursuant to this Agreement and the Plans shall provide to
the Company's Board of Directors, and the Directors shall review, at least
quarterly a written report of the amount so paid and the purposes for which such
expenditures were made.
(c) For purposes of this Agreement, the net assets of the Fund shall be
calculated pursuant to the procedures adopted by resolutions of the Directors of
the Company for calculating the net asset value of the Fund's shares.
5. INDEMNITY
(a) The Company hereby agrees to indemnify the Adviser and each of the
Adviser's directors, officers, employees, and agents (including any individual
who serves at the Adviser's request as director, officer, partner, trustee or
the like of another corporation) and controlling persons (each such person being
an "indemnitee) against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees (all as provided in accordance with applicable corporate law) reasonably
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which he may be or may have been
involved as a party or otherwise or with which he may be or may have been
threatened, while acting in any capacity set forth above in this paragraph or
thereafter by reason of his having acted in any such capacity, except with
respect to any matter as to which he shall have been adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the Company and furthermore, in the case of any criminal proceeding,
so long as he had no reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no indemnitee shall be indemnified hereunder against
any liability to the Company or its shareholders or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii)
gross negligence (iv) reckless disregard of the duties involved in the conduct
of his position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee, pursuant
to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless there has been a determination
that such settlement or compromise is in the best interests of the Company and
that such indemnitee appears to have acted in good faith in the reasonable
belief that his action was in the best interest of the Company and did not
involve disabling conduct by such indemnitee and (3) with respect to any action,
suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such indemnitee was authorized by a majority of the full
Board of the Company. Notwithstanding the foregoing the Company shall not be
obligated to provide any such indemnification to the extent such provision would
waive any right which the Company cannot lawfully waive.
(b) The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Company receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Company
unless it is subsequently determined that he is entitled to such indemnification
and if the directors of the Company determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Company shall be insured against losses arising by reason
of any lawful advances, or (C) a majority of a quorum of directors of the
Company who are neither "interested persons" of the Company (as defined in
Section 2(a)(19) of the Act) nor parties to the proceeding ("Disinterested
Non-Party Directors") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification hereunder shall
be made (1) by a final decision on the merits by a court or other body before
whom the proceeding was brought that such indemnitee is not liable by reason of
disabling conduct or, (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-party Directors of the Company, or
(ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
The rights accruing to any indemnitee under these provisions shall not
exclude any other right to which he may be lawfully entitled.
6. DURATION AND TERMINATION
This Agreement shall become effective upon on the date hereof and shall
continue in effect for a period of two years and thereafter from year to year,
but only so long as such continuation is specifically approved at least annually
in accordance with the requirements of the Act. This Agreement may be amended
upon approval by a majority of the Directors of the Company in office at the
time and by a majority of the Directors of the Company who are not "interested
persons" of the Company and who have no financial interest in the operation of
this Agreement; provided, that any increase in the rate of compensation payable
pursuant to Section 4(a) must be approved by a "majority of the voting
securities" (as defined in the Act) of the Fund.
This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Company sixty days written notice (which notice may be
waived by the Company) and may be terminated by the Company at any time without
penalty upon giving the Adviser sixty days notice (which notice may be waived by
the Adviser), provided that such termination by the Company shall be directed or
approved by the vote of a majority of the Directors of the Company in office at
the time or by the vote of the holders of a "majority of the voting securities"
(as defined in the Act) of the Fund at the time outstanding and entitled to vote
or, with respect to paragraph 4(b), by a majority of the Directors of the
Company who are not "interested persons" of the Company and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plans. This Agreement shall terminate automatically in the event
of its assignment (as "assignment" is defined in the Act and the rules
thereunder.)
7. NOTICES
Any notice under this Agreement shall be in writing to the other party
at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
8. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
GABELLI EQUITY SERIES FUNDS, INC.
By: /S/ XXXXX X. XXXXXX
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Name: Xxxxx Xxxxxx
Title: Vice President and Treasurer
GABELLI FUNDS, LLC
By: /S/ XXXXX X. XXXXX
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Name: Xxxxx X. XxXxx
Title: Secretary
