SUB-ADVISORY AGREEMENT
EASTCLIFF EMERGING GROWTH FUND
THIS SUB-ADVISORY AGREEMENT, made this 1st day of October, 1999, by and
among EASTCLIFF FUNDS, INC., a Wisconsin corporation (the "Company"), RESOURCE
CAPITAL ADVISERS, INC., a Minnesota corporation (the "Adviser"), and KB GROWTH
ADVISORS, LLC, a Minnesota limited liability company (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 five
series designated as Series A, Series B, Series C, Series D and Series E,
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 E Common Stock comprises the Eastcliff
Emerging 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
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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
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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 Bank Milwaukee, N.A. (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 Portfolio Manager to take appropriate action if the
Custodian fails to confirm in writing proper execution of the instructions.
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6. Proxies. The Portfolio Manager 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.
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 Investment 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 3 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
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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
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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:
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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.
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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
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for an initial period beginning as of the date hereof and ending October 1, 2001
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")
By:_________________________________
Xxxxxx Xxxxxx, Xx., President
RESOURCE CAPITAL ADVISERS, INC.
(the "Adviser")
By:_________________________________
Xxxx X. Xxxxxx, President
KB GROWTH ADVISORS, LLC
(the "Portfolio Manager")
By:_________________________________
Xxxx X. Xxxxxxxxxxxxx
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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.
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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
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.
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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).
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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.
