Exhibit 3
INVESTMENT ADVISORY AGREEMENT
Agreement made this ______ day of 1997 between
Alamo Growth Fund, Inc., a Maryland corporation (the "Fund"), and Alamo
Advisers, Inc., a Texas corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS the Fund is in the process of registering with the Securities
and Exchange Commission as an open-end management investment company under the
Investment Company Act of 1940 (the "Act");
WHEREAS upon so registering with the Securities and Exchange
Commission, the Fund will be a registered investment company satisfying the
conditions of Section 10(d) of the Act; and
WHEREAS the Fund desires to retain the Adviser, which is an investment
adviser registered under the Investment Advisers Act of 1940 and which is
engaged principally in the business of rendering investment supervisory services
within the meaning of Section 202(a)(13) of the Investment Advisers Act of 1940,
as its investment adviser.
NOW, THEREFORE, the Fund and the Adviser agree as follows:
1. Employment. The Fund hereby employs the Adviser to manage the
investment and reinvestment of the assets of the Fund for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
for the compensation herein provided and agrees during such period to render the
services and to assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies as
the board of directors of the Fund may determine, direct the purchase and sale
of investment securities in the day to day management of the Fund. The Adviser
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund. However, one or more stockholders, officers, directors or employees of the
Adviser may serve as directors and/or officers of the Fund, but without compen-
sation or reimbursement of expenses for such services from the Fund. Nothing
herein contained shall be deemed to require the Fund to take any action contrary
to its Articles of Incorporation or any applicable statute or regulation, or to
relieve or deprive the board of directors of the Fund of its responsibility for,
and control of, the affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the invest-
ments of the Fund. The Adviser shall pay the salaries and fees of all officers
and directors of the Fund (except the fees paid to those directors who are not
interested persons of the Adviser, as defined in the Act, and who are not
officers or employees of the Fund). The Adviser also shall bear all sales and
promotional expenses of the Fund, except for expenses incurred in complying with
laws regulating the issue or sale of securities. Fees paid for attendance at
meetings of the Fund's board of directors to directors of the Fund who are not
interested persons of the Adviser, as defined in the Act, as amended, shall be
borne by the Fund. The Fund shall bear all other expenses initially incurred by
it, provided that the total expenses borne by the Fund, including the Adviser's
fee but excluding all federal, state and local taxes, interest, brokerage
commissions and extraordinary items, shall not in any year exceed that
percentage of the average net asset value of the Fund for such year, as
determined by valuations made as of the close of each business day, which is the
most restrictive percentage provided by the state laws of the various states in
which the Fund's common stock is qualified for sale. The expenses of the Fund's
operations borne by the Fund include by way of illustration and not limitation,
the costs of preparing and printing its registration statements required under
the Securities Act of 1933 and the Act (and amendments thereto), the expense of
registering its shares with the Securities and Exchange Commission and in the
various states, the printing and distribution cost of prospectuses mailed to
existing stockholders, the cost of stock certificates, director and officer
liability insurance, reports to stockholders, reports to government authorities
and proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues, auditing and
accounting services, insurance premiums, brokerage and other expenses connected
with the execution of portfolio securities transactions, fees and expenses of
the custodian of the Fund's assets, expenses of calculating the net asset value
and repurchasing and redeeming shares, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of keeping
all necessary stockholder records and accounts.
4. Compensation of the Adviser. For the services and facilities
to be rendered and the charges and expenses to be assumed by the Adviser
hereunder, the Fund shall pay the Adviser an advisory fee, paid monthly in
arrears, based on the average net asset value of the Fund, as determined by
valuations made as of the close of each business day of the month. The advisory
fee shall be 1/12 of 1% of such net asset value. For any month in which this
Agreement is not in effect for the entire month, such fee shall be reduced
proportionately on the basis of the number of calendar days during which it
is in effect and the fee computed upon the average net asset value of the
business days during which it is so in effect.
5. Ownership of Shares of the Fund. Except in connection with the
initial capitalization of the Fund, the Adviser shall not take, and shall not
permit any of its stockholders, officers, directors or employees to take, a long
or short position in the shares of the Fund, except for the purchase of shares
of the Fund for investment purposes at the same price as that available to the
public at the time of purchase.
6. Exclusivity. The services of the Adviser to the Fund hereunder
are not to be deemed exclusive and the Adviser shall be free to furnish similar
services to others as long as the services hereunder are not impaired thereby.
Although the Adviser has permitted and is permitting the Fund to use the name
"Alamo", it is understood and agreed that the Adviser reserves the right to use
and to permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund will not use such name if the
Adviser ceases to be the Fund's sole investment adviser. During the period that
this Agreement is in effect, the Adviser shall be the Fund's sole investment
adviser.
7. Liability. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Adviser, the Adviser shall not be subject to liability to the Fund
or to any stockholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder, or for any losses that may be
sustained in the purchase, holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to pay
a broker-dealer which provides brokerage and research services, as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934 (the
"Exchange Act"), to the Adviser a commission for effecting a securities trans-
action in excess of the amount another broker-dealer would have charged for
effecting such transaction, if the Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of brokerage and
research services provided by the executing broker-dealer viewed in terms of
either that particular transaction or his overall responsibilities with respect
to the accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act).
9. Amendments. This Agreement may be amended by the mutual consent
of the parties; provided, however, that in no event may it be amended without
the approval of the board of directors of the Fund in the manner required by the
Act, and by the vote of the majority of the outstanding voting securities of the
Fund, as defined in the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the Fund or by
a vote of the majority of the outstanding voting securities of the Fund, as
defined in the Act, upon giving sixty (60) days' written notice to the Adviser.
This Agreement may be terminated by the Adviser at any time upon the giving of
sixty (60) days' written notice to the Fund. This Agreement shall terminate
automatically in the event of its assignment (as defined in Section 2(a)(4) of
the Act). Subject to prior termination as hereinbefore provided, this Agreement
shall continue in effect for two (2) years from the date hereof and indefinitely
thereafter, but only so long as the continuance after such two (2) year period
is specifically approved annually by (i) of the board of directors of the Fund
or by the vote of the majority of the outstanding voting securities of the Fund,
as defined in the Act, and (ii) the board of directors of the Fund in the manner
required by the Act, provided that any such approval may be made effective not
more than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day first above written.
ALAMO ADVISERS, INC.
By: By:
Secretary President
ALAMO GROWTH FUND, INC.
By: By:
Secretary President
