Exhibit 5.3
SUB-ADVISORY AGREEMENT
EASTCLIFF GROWTH FUND
THIS SUB-ADVISORY AGREEMENT, made this ____ day of _________,
1995, by and among EASTCLIFF FUNDS, INC., a Wisconsin corporation (the
"Company"), RESOURCE CAPITAL ADVISERS, INC., a Minnesota corporation (the
"Adviser"), and XXXXXXX CAPITAL MANAGEMENT, INC., a Minnesota corporation
(the "Portfolio Manager").
W I T N E S S E T H :
The Company is a diversified open-end management investment
company registered as an investment company under the Investment Company
Act of 1940 (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Company's authorized shares of Common Stock
are presently divided into two series designated as Series A and Series B,
respectively, each of which constitutes a separate investment portfolio or
fund with different investment objectives and policies. Each share of a
fund represents an undivided interest in the assets, subject to the
liabilities, allocated to that portfolio. The Series B Common Stock
comprises the Eastcliff Growth Fund (the "Fund").
The Adviser acts as the "investment adviser" to the Fund (as
defined in Section 2(a)(20) of the Act) pursuant to the terms of an
Investment Advisory Agreement. The Adviser is responsible for the day-to-
day management and overall administration of the Fund and the coordination
of investment of the Fund's assets in portfolio securities. However,
specific portfolio purchases and sales for the Fund's investment
portfolio, or a portion thereof, are to be made by advisory organizations
recommended and selected by the Adviser, subject to the approval of the
Board of Directors of the Company.
WHEREAS, the Adviser and the Company desire to retain the
Portfolio Manager as the investment adviser and portfolio manager for the
Fund.
NOW, THEREFORE, the Company, the Adviser and the Portfolio
Manager do mutually promise and agree as follows:
1. Employment. The Adviser being duly authorized hereby
appoints and employs the Portfolio Manager as a discretionary portfolio
manager to the Fund for those assets of the Fund which the Adviser
determines to assign to the Portfolio Manager (those assets being referred
to as the "Fund Account"), for the period and on the terms set forth in
this Agreement. The Portfolio Manager hereby accepts the appointment as a
discretionary portfolio manager and agrees to use its best professional
judgment to make timely investment decisions for the Fund with respect to
the investments of the Fund Account in accordance with the provisions of
this Agreement.
2. Authority of the Portfolio Manager. The Portfolio Manager
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.
3. Portfolio Management Services of Portfolio Manager.
Portfolio Manager is hereby employed and authorized to select portfolio
securities for investment by the Fund, to purchase and sell securities of
the Fund Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
paragraphs 5 and 6 hereof and such operational procedures as may be agreed
to from time to time by the Portfolio Manager and the Company or the
Adviser (the "Operational Procedures"). In providing portfolio management
services to the Fund Account, Portfolio Manager shall be subject to such
investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
the supervision and control of the Board of Directors of the Company, such
specific instructions as the Board of Directors may adopt and communicate
to Portfolio Manager, the investment objectives, policies and restrictions
of the Fund furnished pursuant to paragraph 4, the provisions of Schedule
A hereto and instructions from the Adviser. Portfolio Manger is not
authorized by the Company to take any action, including the purchase or
sale of securities for the Fund Account, in contravention of any
restriction, limitation, objective, policy or instruction described in the
previous sentence. Portfolio Manager shall maintain on behalf of the Fund
the records listed in Schedule A hereto (as amended from time to time).
At the Company's or the Adviser's reasonable request, Portfolio Manager
will consult with Company or with the Adviser with respect to any decision
made by it with respect to the investments of the Fund Account.
4. Investment Objectives, Policies and Restrictions. The
Company will provide Portfolio Manager with a statement of the investment
objectives, policies and restrictions applicable to the Fund and any
specific investment restrictions applicable to the Fund as established by
the Company, including those set forth in its registration statement under
the Act and the Securities Act of 1933. Company retains the right, on
written notice to Portfolio Manager from Company or Adviser, to modify any
such objectives, policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be
consummated by payment to or delivery by Firstar Trust Company (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or
securities due to or from the Fund Account, and Portfolio Manager shall
not have possession or custody thereof or any responsibility or liability
with respect thereto. Portfolio Manager shall advise Custodian and
confirm in writing to Company and to the Fund's administrator, Fiduciary
Management, Inc., or any other designated agent of Company, all
transactions for the Fund Account executed by it with brokers and dealers
at the time and in the manner as set forth in the Operational Procedures.
Portfolio Manager shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated
by Portfolio Manager. Company shall be responsible for all custodial
arrangements and the payment of all custodial charges and fees, and, upon
giving proper instructions to the Custodian, Portfolio Manager shall have
no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian, except that it
shall be the responsibility of the Adviser to take appropriate action if
the Custodian fails to confirm in writing proper execution of the
instructions.
6. Proxies. The Company or the Adviser will vote all proxies
solicited by or with respect to the issuers of securities in which assets
of the Fund Account may be invested from time to time. At the request of
Company, Portfolio Manager shall provide Company with its recommendations
as to the voting of such proxies.
7. Compensation of the Portfolio Manager. The compensation of
Portfolio Manager for its services under this Agreement shall be
calculated and paid by Adviser in accordance with the attached Schedule B.
Pursuant to the provisions of the Management and Advisory Agreement
between Company and Adviser, Adviser is solely responsible for the payment
of fees to Portfolio Manager, and Portfolio Manager agrees to seek payment
of its fees solely from Adviser.
8. Other Investment Activities of Portfolio Manager. Company
acknowledges that Portfolio Manager or one or more of its affiliates may
have investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that Portfolio Manager, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for
its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 2 hereof, Company agrees that Portfolio Manager or
its affiliates may give advice or exercise investment responsibility and
take such other action with respect to other Affiliated Accounts which may
differ from the advice given or the timing or nature of action taken with
respect to the Fund Account, provided that Portfolio Manager acts in good
faith, and provided further, that it is Portfolio Manager's policy to
allocate, within its reasonable discretion, investment opportunities to
the Fund Account over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the investment
objectives and policies of the Fund and any specific investment
restrictions applicable thereto. Company acknowledges that one or more of
the Affiliated Accounts may at any time hold, acquire, increase, decrease,
dispose of or otherwise deal with positions in investments in which the
Fund Account may have an interest from time to time, whether in
transactions which involve the Fund Account or otherwise. Portfolio
Manager shall have no obligation to acquire for the Fund Account a
position in any investment which any Affiliated Account may acquire, and
Company shall have no first refusal, co-investment or other rights in
respect of any such investment, either for the Fund Account or otherwise.
9. Certificate of Authority. Company, Adviser and Portfolio
Manager shall furnish to each other from time to time certified copies of
the resolutions of their Boards of Directors or executive committees, as
the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of Company, the Fund Account, the
Portfolio Manager and/or Adviser.
10. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Portfolio Manager, Portfolio Manager shall not be
liable 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.
11. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors of the Company, and the Portfolio
Manager, subject to the control and direction of the Board of Directors of
the Company and the Adviser, shall have authority and discretion to select
brokers and dealers to execute portfolio transactions initiated by the
Portfolio Manager for the Fund and for the selection of the markets on or
in which the transactions will be executed. The Adviser or the Portfolio
Manager 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 Manager 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 Portfolio Manager shall
provide such reports as the Board of Directors of the Company or the
Adviser may reasonably request with respect to the Fund's total brokerage
and the manner in which that brokerage was allocated.
12. Confidentiality. Subject to the duty of Portfolio Manager
and Company to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all information pertaining to the Fund Account
and the actions of Portfolio Manager and Company in respect thereto.
13. Representations, Warranties and Agreements of Company.
Company represents, warrants and agrees that:
A. Portfolio Manager has been duly appointed by the
Board of Directors of Company to provide investment services to
the Fund Account as contemplated hereby.
B. Company will deliver to Portfolio Manager a true
and complete copy of its then current prospectus and statement
of additional information as effective from time to time and
such other documents or instruments governing the investment of
the Fund Account and such other information as is necessary for
Portfolio Manager to carry out its obligations under this
Agreement.
14. Representations, Warranties and Agreements of Portfolio
Manager. Portfolio Manager represents, warrants and agrees that:
A. Portfolio Manager is registered as an "investment
adviser" under the Investment Advisers Act of 1940 ("Advisers
Act"); or is a "bank" as defined in Section 202(a)(2) of the
Advisers Act or an "insurance company" as defined in Section
202(a)(2) of the Advisers Act.
B. Portfolio Manager will maintain, keep current and
preserve on behalf of Company, in the manner required or
permitted by the Act, the records identified in Schedule A.
Portfolio Manager agrees that such records (unless otherwise
indicated on Schedule A) are the property of Company, and will
be surrendered to the Company promptly upon request.
C. Portfolio Manager will complete such reports
concerning purchases or sales of securities on behalf of the
Fund Account as the Adviser or Company may from time to time
require to ensure compliance with the Act, the Internal Revenue
Code and applicable state securities laws.
D. Portfolio Manager will adopt a written code of
ethics complying with the requirements of Rule 17j-1 under the
act and will provide Company with a copy of the code of ethics
and evidence of its adoption. Upon the written request of
Company, Portfolio Manager shall permit Company, its employees
or its agents to examine the reports required to be made to
Portfolio Manager by Rule 17j-1(c)(1).
E. Portfolio Manager will promptly after filing with
the Securities and Exchange Commission an amendment to its Form
ADV furnish a copy of such amendment to each Company and the
Adviser.
F. Portfolio Manager will immediately notify Company
and the Adviser of the occurrence of any event which would
disqualify Portfolio Manager from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the
Act or otherwise.
15. 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.
16. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by any party hereto immediately upon
written notice to the others in the event of a breach of any provision
hereof by the party so notified, or otherwise, upon giving thirty (30)
days' written notice to the others, but any such termination shall not
affect the status, obligations or liabilities of any party hereto to the
others. 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 the date hereof and ending
______________________, 1997 and indefinitely thereafter, but only so long
as the continuance after such initial period is specifically approved
annually by the Board of Directors of the Company in the manner required
by the Act.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
EASTCLIFF FUNDS, INC.
(the "Company")
Attest:_______________________ By: _________________________________
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx, Xx.
Secretary President
RESOURCE CAPITAL ADVISERS,
INC.
(the "Adviser")
Attest: ________________________ By: _________________________________
Xxxx X. Xxxxxx E. Xxxxxx Xxxxx
Chief Investment Officer Chief Administrative Officer
XXXXXXX CAPITAL MANAGEMENT, INC.
(the "Portfolio Manager")
Attest: ________________________ By: _________________________________
________________________ Xxxxx Xxxxxx Xxxxxxx
President
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (1940 Act Rule 31a-1(b)(5) and (6)). A record of each brokerage
order, and all other portfolio purchases and sales, given by the
Portfolio Manager on behalf of the Fund for, or in connection with,
the purchase or sale of securities, whether executed or unexecuted.
Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications
or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the
Fund.
2. (1940 Act Rule 31a-1(b)(9)). A record for each fiscal quarter,
completed within ten (10) days after the end of the quarter, showing
specifically the basis or bases upon which the allocation of orders
for the purchase and sale of portfolio securities to named brokers or
dealers was effected, and the division of brokerage commissions or
other compensation on such purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers
to:
(a) The Fund,
(b) The Adviser,
(c) The Portfolio Manager, and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the determination
of such allocation and such division of brokerage commissions or
other compensation.
3. (1940 Act Rule 31a-1(b)(10)). A record in the form of an appropriate
memorandum identifying the person or persons, committees or groups
authorizing the purchase or sale of portfolio securities. Where an
authorization is made by a committee or group, a record shall be kept
of the names of its members who participate in the authorization.
There shall be retained as part of this record: any memorandum,
recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is
appropriate to support the authorization.1/
____________
1/ Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation; i.e., buy, sell, hold) or any
internal reports or portfolio adviser reviews).
4. (1940 Act Rule 31a-1(f)). Such accounts, books and other documents
as are required to be maintained by registered investment advisers by
rule adopted under Section 204 of the Investment Advisers Act of
1940, to the extent such records are necessary or appropriate to
record the Portfolio Manager's transactions with respect to the Fund
Account.
SCHEDULE B
FEE SCHEDULE
For its services to the Fund, the Adviser shall pay the
Portfolio Manager a 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 fee shall be 1/12 of 0.6% of the
average daily net asset value of the Fund.
The fee shall be pro-rated for any month during which the
Agreement is in effect for only a portion of the month.
