Exhibit 5.1
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT ("Agreement"), made this 30th
day of June, 1995, between EASTCLIFF FUNDS, INC., a Wisconsin corporation
(the "Company"), and RESOURCE CAPITAL ADVISERS, INC., a Minnesota
corporation (the "Adviser").
W I T N E S S E T H :
WHEREAS, the Company is currently registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the
"Act") as an open-end management investment company consisting of one
series, the Eastcliff Total Return Fund (the "Fund");
WHEREAS, the Adviser currently provides investment advisory
services to the Fund pursuant to an Investment Advisory Agreement dated
December 31, 1994; and
WHEREAS, the Company and the Adviser desire to enter into a new
Investment Advisory Agreement providing for, among other things, the
ability of the Adviser to delegate all or a portion of its portfolio
management responsibilities to one or more portfolio managers. NOW,
THEREFORE, the Company and the Adviser do mutually promise and agree as
follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund and to
administer its business and administrative operations, subject to the
direction of the Board of Directors of the Company (the "Board of
Directors") and the officers of the Company, 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 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 Company or the Fund in any way or otherwise be
deemed an agent of the Company or the Fund. However, one or more
shareholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Company, but without compensation or
reimbursement of expenses for such services from the Company. Nothing
herein contained shall be deemed to require the Company to take any action
contrary to its Articles of Incorporation, as amended, restated or
supplemented, or any applicable statute or regulation, or to relieve or
deprive the Board of Directors of its responsibility for and control of
the affairs of the Fund.
3. Obligations of and Services to be Provided by the Adviser.
The Adviser undertakes to provide the services hereinafter set forth and
to assume the following obligations:
A. Management and Administrative Services.
(1) The Adviser shall furnish to the
Company adequate office space, which may be space
within the offices of the Adviser or in such other
place as may be agreed upon from time to time, and all
office furnishings, facilities and equipment as may be
reasonably required for performing services relating
to advisory, research, asset allocation, portfolio
manager selection and evaluation activities and
otherwise managing and administering the business and
operations of the Fund.
(2) The Adviser shall employ or provide and
compensate the executive, administrative, secretarial
and clerical personnel necessary to supervise the
provision of the services set forth in sub-paragraph
3(A)(1) and shall bear the expense of providing such
services, except as provided in Section 4 of this
Agreement. The Adviser shall also compensate all
officers and employees of the Company who are officers
or employees of the Adviser or its affiliated
companies.
B. Investment Management Services.
(1) The Adviser shall, subject to and in
accordance with the investment objective and policies
of the Fund and any directions which the Board of
Directors may issue to the Adviser, have overall
responsibility for the general management and
investment of the assets and securities portfolios of
the Fund.
(2) The Adviser may delegate its investment
responsibilities under sub-paragraph 3(B)(1) with
respect to the Fund or segments thereof to one or more
persons or companies ("Portfolio Manager[s]") pursuant
to an agreement between the Adviser, the Company and
each such Portfolio Manager ("Sub-Advisory
Agreement"). Each Sub-Advisory Agreement may provide
that the Portfolio Manager, subject to the control and
supervision of the Board of Directors and the Adviser,
shall have full investment discretion for the Fund and
shall make all determinations with respect to the
investment of the Fund's assets assigned to the
Portfolio Manager and the purchase and sale of
portfolio securities with those assets, and such steps
as may be necessary to implement its decision. Any
delegation of duties pursuant to this paragraph shall
comply with any applicable provisions of Section 15 of
the Act, except to the extent permitted by any
exemptive order of the Securities and Exchange
Commission or similar relief. Adviser shall not be
responsible or liable for the investment merits of any
decision by a Portfolio Manager to purchase, hold or
sell a security for the Fund's portfolio.
(3) The Adviser shall develop overall
investment programs and strategies for the Fund, or
segments thereof, shall revise such programs as
necessary, and shall monitor and report periodically
to the Board of Directors concerning the
implementation of the programs.
(4) The Adviser shall research and evaluate
Portfolio Managers and shall advise the Board of
Directors of the Company of the Portfolio Managers
which the Adviser believes are best-suited to invest
the assets of the Fund; shall monitor and evaluate the
investment performance of each Portfolio Manager;
shall determine the portion of the Fund's assets to be
managed by each Portfolio Manager; shall recommend
changes or additions of Portfolio Managers when
appropriate; and shall coordinate the investment
activities of the Portfolio Managers.
(5) The Adviser shall be solely responsible
for paying the fees of each Portfolio Manager.
(6) The Adviser shall render to the Board
of Directors such periodic reports concerning the
business and investments of the Fund as the Board of
Directors shall reasonably request.
C. Provision of Information Necessary for
Preparation of Securities Registration Statements, Amendments
and Other Materials.
The Adviser will make available and provide financial,
accounting and statistical information required by the Fund for
the preparation of registration statements, reports and other
documents required by federal and state securities laws, and
with such information as the Fund may reasonably request for use
in the preparation of such documents or of other materials
necessary or helpful for the underwriting and distribution of
the Fund's shares.
D. Provision of Personnel.
The Adviser shall make available its officers and
employees to the Board of Directors and officers of the Company
for consultation and discussions regarding the administration
and management of the Company and its investment activities.
4. Expenses. The Adviser shall not be required to pay any
expenses of the Fund except as provided herein; provided, however, that if
the aggregate annual operating expenses, including the Adviser's fee and
the fees paid to the Fund's Administrator but excluding all federal, state
and local taxes, interest, brokerage commissions and other costs incurred
in connection with the purchase or sale of portfolio securities and
extraordinary items, in any year exceed that percentage of the average net
assets of the Fund for such year, as determined by valuations made as of
the close of each business day of the year, which is the most restrictive
percentage provided by the state laws of the various states in which the
Fund's shares are qualified for sale or, if the states in which the Fund's
shares are qualified for sale impose no such restrictions, 2%, then the
Adviser's fee shall be reduced as hereinafter provided. Notwithstanding
the foregoing, if the laws of any such state require that fees paid
pursuant to the Company's Distribution Plan be included in the calculation
of the expense limitation percentage, the Fund shall (a) not qualify its
shares for sale in such state, (b) withdraw or rescind its qualification
for sale in such state, or (c) take such other actions which result in
payments made pursuant to the Distribution Plan not being included in the
calculation of the expense limitation percentage. The expenses of the
Fund's operations borne by the Fund include by way of illustration and not
limitation, directors fees paid to those directors who are not officers of
the Company, the costs of preparing and printing 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 shareholders, the
cost of stock certificates (if any), director and officer liability
insurance, reports to shareholders, 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, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser in the amount of such excess. In such
a situation the monthly payment of the Adviser's fee will be reduced by
the amount of such excess, subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses thereafter fall
below the expense limitation.
5. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company, through and on behalf of
the Fund, shall pay to the Adviser an advisory fee, paid monthly, 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 1.0% of the average daily net asset value of the Fund up to
$30,000,000 and 1/12 of 0.75% of the average daily net asset value of the
Fund over $30,000,000. 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.
6. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, 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 or in connection with the initial
capitalization of the Fund.
7. 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 agreed to permit the
Company to use the name "Eastcliff", if it so desires, 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. During the period that this Agreement is in effect, and except
as herein provided, the Adviser shall be the Fund's sole investment
adviser.
8. 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 shareholder 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.
9. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors, and any Portfolio Managers,
subject to the control and direction of the Board of Directors and the
Adviser, shall have authority and discretion to select brokers and dealers
to execute portfolio transactions for the Fund and for the selection of
the markets on or in which the transactions will be executed. The Adviser
or the Portfolio Managers 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 or the Portfolio Managers a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser or the
Portfolio Manager 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). The Adviser shall provide such
reports as the Board of Directors may reasonably request with respect to
each Fund's total brokerage and the manner in which that brokerage was
allocated.
10. Code of Ethics. The Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the Act and has
provided the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Adviser shall
permit the Company to examine the reports required to be made by the
Adviser pursuant to Rule 17j-1(c)(1).
11. 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 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.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the Board of Directors 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 Company. 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 an
initial period beginning as of July 1, 1995 and ending June 30, 1997 and
indefinitely thereafter, but only so long as the continuance after such
initial period is specifically approved annually (i) by the Board of
Directors or by the vote of a majority of the outstanding voting
securities of the Company, as defined in the Act, and (ii) the Board of
Directors 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.
RESOURCE CAPITAL ADVISERS, INC.
(the "Adviser")
Attest:________________________ By:_________________________________
Xxxx X. Xxxxxx, Chief E. Xxxxxx Xxxxx, Chief
Investment Officer Administrative Officer
EASTCLIFF FUNDS, INC.
(the "Company")
Attest:_________________________ By:________________________________
Xxxxxx X. Xxxxxx, Secretary Xxxxxx Xxxxxx, Xx., President
