Cornerstone Advisors Inc. and The Advisors' Inner Circle Fund; Notice of Application, 3887-3890 [2014-01255]

Download as PDF Federal Register / Vol. 79, No. 15 / Thursday, January 23, 2014 / Notices (a) a rights offering below NAV to holders of the Fund’s common stock; (b) an offering in connection with a dividend reinvestment plan, merger, consolidation, acquisition, spin-off or reorganization of the Fund; or (c) an offering other than an offering described in conditions 6(a) and 6(b) above, provided that, with respect to such other offering: (i) the Fund’s annualized distribution rate for the six months ending on the last day of the month ended immediately prior to the most recent distribution record date,5 expressed as a percentage of NAV as of such date, is no more than 1 percentage point greater than the Fund’s average annual total return for the 5-year period ending on such date; 6 and (ii) the transmittal letter accompanying any registration statement filed with the Commission in connection with such offering discloses that the Fund has received an order under section 19(b) to permit it to make periodic distributions of long-term capital gains with respect to its shares of common stock as frequently as twelve times each year, and as frequently as distributions are specified by or determined in accordance with the terms of any outstanding shares of preferred stock as such Fund may issue. 7. Amendments to Rule 19b–1 The requested order will expire on the effective date of any amendment to rule 19b–1 that provides relief permitting certain closed-end investment companies to make periodic distributions of long-term capital gains with respect to their outstanding common stock as frequently as twelve times each year. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–01254 Filed 1–22–14; 8:45 am] sroberts on DSK5SPTVN1PROD with NOTICES BILLING CODE 8011–01–P 5 If the Fund has been in operation fewer than six months, the measured period will begin immediately following the Fund’s first public offering. 6 If the Fund has been in operation fewer than five years, the measured period will begin immediately following the Fund’s first public offering. VerDate Mar<15>2010 21:50 Jan 22, 2014 Jkt 232001 SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 30884; 812–14060] Cornerstone Advisors Inc. and The Advisors’ Inner Circle Fund; Notice of Application January 16, 2014. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from section 15(a) of the Act and rule 18f–2 under the Act, as well as from certain disclosure requirements. AGENCY: 3887 The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. SUPPLEMENTARY INFORMATION: Applicants’ Representations 1. The Trust is organized as a Massachusetts business trust and is registered under the Act as an open-end management investment company. The Trust is composed of multiple series of shares, each with its own distinct investment objectives, policies and restrictions.1 SUMMARY OF APPLICATION: Applicants request an order that would permit them 2. The Adviser is, and any other to enter into and materially amend Adviser will be, registered as an subadvisory agreements without investment adviser under the shareholder approval and would grant Investment Advisers Act of 1940 relief from certain disclosure (‘‘Advisers Act’’). The Adviser serves as requirements. the investment adviser to series of the APPLICANTS: Cornerstone Advisors Inc. Trust pursuant to an investment (the ‘‘Adviser’’) and The Advisors’ Inner advisory agreement with the Trust (each Circle Fund (the ‘‘Trust’’). an ‘‘Investment Advisory Agreement’’ DATES: Filing Dates: The application was and collectively, the ‘‘Investment filed July 18, 2012, and amended on Advisory Agreements’’).2 Each January 15, 2013, September 30, 2013, Investment Advisory Agreement was December 20, 2013 and January 13, approved or will be approved by the 2014. board of trustees of the Trust (the HEARING OR NOTIFICATION OF HEARING: An ‘‘Board’’), including a majority of the order granting the application will be trustees who are not ‘‘interested issued unless the Commission orders a persons,’’ as defined in section 2(a)(19) hearing. Interested persons may request of the Act, of the Trust or the Adviser a hearing by writing to the (‘‘Independent Trustees’’) and by the Commission’s Secretary and serving shareholders of the relevant Subadvised applicants with a copy of the request, Fund in the manner required by personally or by mail. Hearing requests sections 15(a) and 15(c) of the Act and should be received by the Commission by 5:30 p.m. on February 10, 2014, and 1 Applicants request relief with respect to all should be accompanied by proof of existing and future series of the Trust and any other service on the applicants, in the form of existing or future registered open-end management investment company or series thereof that (a) is an affidavit or, for lawyers, a certificate the Adviser of service. Hearing requests should state advised by by, or under or any entity controlling, controlled common control with the the nature of the writer’s interest, the Adviser or its successors (included in the term reason for the request, and the issues ‘‘Adviser’’); (b) uses the multi-manager structure described in the application (‘‘Manager of Managers contested. Persons who wish to be Structure’’); and (c) complies with the terms and notified of a hearing may request conditions of the application (each a ‘‘Subadvised notification by writing to the Fund’’ and collectively, the ‘‘Subadvised Funds’’). Commission’s Secretary. The only existing registered open-end management investment company that currently intends to rely ADDRESSES: Elizabeth M. Murphy, order is named as an applicant. Secretary, U.S. Securities and Exchange on the requestedthe requested order, ‘‘successor’’ is For purposes of Commission, 100 F Street NE., limited to an entity that results from a Washington, DC 20549–1090. reorganization into another jurisdiction or a change in the type of business organization. If the name of Applicants: Cornerstone Advisors, Inc., any Subadvised Fund contains the name of a c/o SEI Corporation, One Freedom Subadviser (as defined below), the name of the Valley Drive, Oaks, PA 19456. Adviser that serves as the primary adviser to the FOR FURTHER INFORMATION CONTACT: Jean Subadvised Fund, or a trademark or trade name that is owned by the Adviser, will precede the name of E. Minarick, Senior Counsel, at (202) the Subadviser. 551–6811, or Daniele Marchesani, 2 Each other Subadvised Fund will enter into an Branch Chief, at (202) 551–6821 investment advisory agreement with its Adviser (Division of Investment Management, (included in the term ‘‘Investment Advisory Agreement’’). Chief Counsel’s Office). PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 E:\FR\FM\23JAN1.SGM 23JAN1 3888 Federal Register / Vol. 79, No. 15 / Thursday, January 23, 2014 / Notices sroberts on DSK5SPTVN1PROD with NOTICES rule 18f–2 under the Act.3 Applicants are not seeking any exemption from the provisions of the Act with respect to the Investment Advisory Agreement. 3. Under the terms of the Investment Advisory Agreement, the Adviser, subject to the oversight of the Board, furnishes a continuous investment program for each Subadvised Fund and determines the investments to be purchased, held, sold or exchanged by each Subadvised Fund and the portion, if any, of the assets of the Subadvised Fund to be held uninvested. For its services to each Subadvised Fund, the Adviser receives an investment advisory fee from that Subadvised Fund as specified in the Investment Advisory Agreement calculated based on that Subadvised Fund’s average daily net assets. The terms of the Investment Advisory Agreements also permit the Adviser, subject to the approval of the Board, including a majority of the Independent Trustees, and the shareholders of the applicable Subadvised Fund (if required by applicable law), to delegate portfolio management responsibilities of all or a portion of the assets of the Subadvised Fund to one or more subadvisers (‘‘Subadvisers’’). The Adviser evaluates, selects and recommends Subadvisers to manage the assets (or portion thereof) of Subadvised Funds, monitors and reviews the Subadvisers and their performance and their compliance with that Subadvised Fund’s investment policies and restrictions. The Adviser has entered into subadvisory agreements (‘‘Subadvisory Agreements’’) with various Subadvisers to serve as Subadvisers to the Subadvised Funds.4 Each Subadviser is, and each future Subadviser will be, an ‘‘investment adviser,’’ as defined in section 2(a)(20) of the Act, and is registered, or will 3 The term ‘‘Board’’ also includes the board of trustees or directors of a future Subadvised Fund, if different. 4 All existing Subadvisory Agreements comply with sections 15(a) and (c) of the Act and rule 18f– 2 thereunder. The Adviser has entered into Subadvisory Agreements with the following Subadvisers: (i) Cornerstone Advisors Global Public Equity Fund—Parametric Portfolio Associates, LSV Asset Management, Harris Associates LP, Thornburg Investment Management, Marsico Capital Management, LLC, Turner Investments, L.P., Cramer Rosenthal McGlynn LLC, Fairpointe Capital LLC, Phocas Financial Corporation, Numeric Investors LLC, Allianz Global Investors, Acadian Asset Management LLC and Driehaus Capital Management LLC; (ii) Cornerstone Advisors Income Opportunities Fund—OFI SteelPath, Inc. and Strategic Income Management, LLC; (iii) Cornerstone Advisors Public Alternatives Fund— AQR Capital Management, LLC, AlphaSimplex Group, LLC, Turner Investments, L.P. and ClariVest Asset Management LLC; and (iv) Cornerstone Advisors Real Assets Fund—Kayne Anderson Capital Advisors and BlackRock Investment Management LLC. VerDate Mar<15>2010 21:50 Jan 22, 2014 Jkt 232001 register, as an investment adviser under the Advisers Act, or not subject to such registration. The Adviser may compensate each Subadviser out of the advisory fees paid to the Adviser under the Investment Advisory Agreement, or Subadvised Funds may compensate the Subadvisers directly. 4. Applicants request an order to permit the Adviser, subject to Board approval, to select Subadvisers to manage all or a portion of the assets of a Subadvised Fund pursuant to a Subadvisory Agreement and materially amend Subadvisory Agreements without obtaining shareholder approval. The requested relief will not extend to any Subadviser that is an ‘‘affiliated person,’’ as defined in section 2(a)(3) of the Act, of the Trust or a Subadvised Fund or the Adviser, other than by reason of solely serving as a Subadviser to a Subadvised Fund or as an investment adviser or subadviser to any series of the Trust other than the series of the Trust advised by the Adviser (‘‘Affiliated Subadviser’’). 5. Applicants also request an order exempting each Subadvised Fund from certain disclosure provisions described below that may require the Subadvised Funds to disclose fees paid to each Subadviser by the Adviser or a Subadvised Fund. Applicants seek an order to permit each Subadvised Fund to disclose (as a dollar amount and a percentage of each Subadvised Fund’s net assets) only: (a) the aggregate fees paid to the Adviser and any Affiliated Subadviser; and (b) the aggregate fees paid to Subadvisers other than Affiliated Subadvisers (collectively, the ‘‘Aggregate Fee Disclosure’’). A Subadvised Fund that employs an Affiliated Subadviser will provide separate disclosure of any fees paid to the Affiliated Subadviser. 6. The Funds will inform shareholders of the hiring of a new Subadviser pursuant to the following procedures (‘‘Modified Notice and Access Procedures’’): (a) within 90 days after a new Subadviser is hired for any Subadvised Fund, that Subadvised Fund will send its shareholders either a Multi-manager Notice or a Multimanager Notice and Multi-manager Information Statement; 5 and (b) the Subadvised Fund will make the Multimanager Information Statement available on the Web site identified in the Multi-manager Notice no later than when the Multi-manager Notice (or Multi-manager Notice and Multimanager Information Statement) is first sent to shareholders, and will maintain it on that Web site for at least 90 days. 5 A ‘‘Multi-manager Notice’’ will be modeled on a Notice of Internet Availability as defined in rule 14a–16 under the Securities Exchange Act of 1934 (‘‘Exchange Act’’), and specifically will, among other things: (a) summarize the relevant information regarding the new Subadviser; (b) inform shareholders that the Multi-manager Information Statement is available on a Web site; (c) provide the Web site address; (d) state the time period during which the Multi-manager Information Statement will remain available on that Web site; (e) provide instructions for accessing and printing the Multi- manager Information Statement; and (f) instruct the shareholder that a paper or email copy of the Multimanager Information Statement may be obtained, without charge, by contacting the Subadvised Funds. A ‘‘Multi-manager Information Statement’’ will meet the requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the Exchange Act for an information statement, except as modified by the requested order to permit Aggregate Fee Disclosure. Multi-manager Information Statements will be filed electronically with the Commission via the EDGAR system. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 Applicants’ Legal Analysis 1. Section 15(a) of the Act provides, in relevant part, that it is unlawful for any person to act as an investment adviser to a registered investment company except pursuant to a written contract that has been approved by the vote of a majority of the company’s outstanding voting securities. Rule 18f– 2 under the Act provides that each series or class of stock in a series investment company affected by a matter must approve that matter if the Act requires shareholder approval. 2. Form N–1A is the registration statement used by open-end investment companies. Item 19(a)(3) of Form N–1A requires disclosure of the method and amount of the investment adviser’s compensation. 3. Rule 20a–1 under the Act requires proxies solicited with respect to a registered investment company to comply with Schedule 14A under the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, require a proxy statement for a shareholder meeting at which the advisory contract will be voted upon to include the ‘‘rate of compensation of the investment adviser,’’ the ‘‘aggregate amount of the investment adviser’s fees,’’ a description of the ‘‘terms of the contract to be acted upon,’’ and, if a change in the advisory fee is proposed, the existing and proposed fees and the difference between the two fees. 4. Regulation S–X sets forth the requirements for financial statements required to be included as part of a registered investment company’s registration statement and shareholder reports filed with the Commission. Sections 6–07(2)(a), (b), and (c) of Regulation S–X require a registered investment company to include in its E:\FR\FM\23JAN1.SGM 23JAN1 Federal Register / Vol. 79, No. 15 / Thursday, January 23, 2014 / Notices sroberts on DSK5SPTVN1PROD with NOTICES financial statement information about the investment advisory fees. 5. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions from any provision of the Act, or from any rule thereunder, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Applicants state that the requested relief meets this standard for the reasons discussed below. 6. Applicants assert that the shareholders expect the Adviser, subject to the review and approval of the Board, to select the Subadvisers who are best suited to achieve the Subadvised Fund’s investment objective. Applicants assert that, from the perspective of the shareholder, the role of the Subadviser is substantially equivalent to the role of the individual portfolio managers employed by an investment adviser to a traditional investment company. Applicants state that requiring shareholder approval of each Subadvisory Agreement would impose unnecessary delays and expenses on the Subadvised Funds and may preclude the Subadvised Funds from acting promptly when the Board and the Adviser believe that a change would benefit a Fund and its shareholders. Applicants note that the Investment Advisory Agreements and any subadvisory agreement with an Affiliated Subadviser (if any) will continue to be subject to the shareholder approval requirements of section 15(a) of the Act and rule 18f–2 under the Act. 7. Applicants assert that the requested disclosure relief would benefit shareholders of the Subadvised Funds because it would improve the Adviser’s ability to negotiate the fees paid to Subadvisers. Applicants state that the Adviser may be able to negotiate rates that are below a Subadviser’s ‘‘posted’’ amounts if the Adviser is not required to disclose the Subadvisers’ fees to the public. Applicants submit that the requested relief will encourage Subadvisers to negotiate lower subadvisory fees with the Adviser if the lower fees are not required to be made public. Applicants’ Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions: 6 6 Applicants will comply with conditions 6, 8, 11, and 13 only if they rely on the relief that would allow them to provide Aggregate Fee Disclosure. VerDate Mar<15>2010 21:50 Jan 22, 2014 Jkt 232001 1. Before a Subadvised Fund may rely on the order, the operation of the Subadvised Fund in the manner described in the application will be approved by a majority of the Subadvised Fund’s outstanding voting securities as defined in the Act or, in the case of a Subadvised Fund whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 2 below, by the initial shareholder before such Subadvised Fund’s shares are offered to the public. 2. The prospectus for each Subadvised Fund will disclose the existence, substance, and effect of any order granted pursuant to the application. In addition, each Subadvised Fund will hold itself out to the public as employing a Manager of Managers Structure. The prospectus will prominently disclose that the Adviser has the ultimate responsibility, subject to oversight by the Board, to oversee the Subadvisers and recommend their hiring, termination, and replacement. 3. A Subadvised Fund will inform shareholders of the hiring of a new Subadviser within 90 days after the hiring of the new Subadviser pursuant to the Modified Notice and Access Procedures. 4. The Adviser will not enter into a Subadvisory Agreement with any Affiliated Subadviser without that agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Subadvised Fund. 5. At all times, at least a majority of the Board will be Independent Trustees, and the selection and nomination of new or additional Independent Trustees will be placed within the discretion of the then-existing Independent Trustees. 6. Independent legal counsel, as defined in rule 0–1(a)(6) under the Act, has been and will continue to be engaged to represent the Independent Trustees. The selection of such counsel will be within the discretion of the thenexisting Independent Trustees. 7. Whenever a Subadviser change is proposed for a Subadvised Fund with an Affiliated Subadviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that the change is in the best interests of the Subadvised Fund and its shareholders, and does not involve a conflict of interest from which the Adviser or the Affiliated Subadviser derives an inappropriate advantage. 8. Whenever a Subadviser is hired or terminated, the Adviser will provide the Board with information showing the PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 3889 expected impact on the profitability of the Adviser. 9. The Adviser will provide general management services to each Subadvised Fund, including overall supervisory responsibility for the general management and investment of the Subadvised Fund’s assets and, subject to review and approval of the Board, will: (i) set the Subadvised Fund’s overall investment strategies; (ii) evaluate, select, and recommend Subadvisers to manage all or a portion of the Subadvised Fund’s assets; (iii) allocate and, when appropriate, reallocate the Subadvised Fund’s assets among Subadvisers; (iv) monitor and evaluate the Subadvisers’ performance; and (v) implement procedures reasonably designed to ensure that Subadvisers comply with the Subadvised Fund’s investment objective, policies and restrictions. 10. No Trustee or officer of the Trust or of a Subadvised Fund or director or officer of the Adviser will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person) any interest in a Subadviser except for (i) ownership of interests in the Adviser or any entity that controls, is controlled by or is under common control with the Adviser; or (ii) ownership of less than 1% of the outstanding securities of any class of equity or debt of any publicly traded company that is either a Subadviser or an entity that controls, is controlled by or is under common control with a Subadviser. 11. Each Subadvised Fund will disclose in its registration statement the Aggregate Fee Disclosure. 12. In the event the Commission adopts a rule under the Act providing substantially similar relief to that in the order requested in the Application, the requested order will expire on the effective date of that rule. 13. The Adviser will provide the Board, no less frequently than quarterly, with information about the profitability of the Adviser on a per Subadvised Fund basis. The information will reflect the impact on profitability of the hiring or termination of any Subadviser during the applicable quarter. 14. For Subadvised Funds that pay fees to a Subadviser directly from Fund assets, any changes to a Subadvisory Agreement that would result in an increase in the total management and advisory fees payable by a Subadvised Fund will be required to be approved by the shareholders of the Subadvised Fund. E:\FR\FM\23JAN1.SGM 23JAN1 3890 Federal Register / Vol. 79, No. 15 / Thursday, January 23, 2014 / Notices For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–01255 Filed 1–22–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 30885; 812–14181] American Pension Investors Trust, et al.; Notice of Application January 16, 2014. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the ‘‘Act’’) for exemptions from sections 12(d)(1)(A), (B), and (C) of the Act, under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act, and under section 6(c) of the Act for an exemption from rule 12d1– 2(a) under the Act. sroberts on DSK5SPTVN1PROD with NOTICES AGENCY: SUMMARY OF THE APPLICATION: Applicants request an order that would (a) permit certain registered open-end management investment companies that operate as ‘‘funds of funds’’ to acquire shares of certain registered open-end management investment companies, registered closed-end management investment companies, ‘‘business development companies,’’ as defined by section 2(a)(48) of the Act, and registered unit investment trusts that are within or outside the same group of investment companies as the acquiring investment companies and (b) permit certain registered open-end management investment companies relying on rule 12d1–2 under the Act to invest in certain financial instruments. APPLICANTS: American Pension Investors Trust (‘‘Trust’’’) and Yorktown Management & Research Company, Inc. (‘‘Adviser’’). DATES: Filing Dates: The application was filed on July 19, 2013 and amended on November 21, 2013. HEARING OR NOTIFICATION OF HEARING: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on February 10, 2014, and should be accompanied by proof of VerDate Mar<15>2010 21:50 Jan 22, 2014 Jkt 232001 service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer’s interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Adviser and Trust, 2303 Yorktown Avenue, Lynchburg, VA 24501. FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, (202) 551– 6870, or Mary Kay Frech, Branch Chief, at (202) 551–6821 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or for an applicant using the ‘‘Company’’ name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. Applicants’ Representations 1. The Trust is an open-end management company registered under the Act and organized as a Massachusetts business trust. The Trust has multiple series which pursue distinct investment objectives and strategies.1 2. The Adviser, a Delaware limited liability company, is a registered investment adviser under the Investment Advisers Act of 1940 and serves as the investment adviser to each of the Funds of Funds (as defined below).2 3. Applicants request relief to the extent necessary to permit: (a) A Fund that operates as a ‘‘fund of funds’’ (each, a ‘‘Fund of Funds,’’ and collectively, the ‘‘Funds of Funds’’) to acquire shares of registered open-end management 1 Applicants request that the order apply to each existing and each future series of the Trust, and to each existing and future registered open-end management investment company or series thereof which is advised by the Adviser or any entity controlling, controlled by or under common control with the Adviser and which is part of the ‘‘same group of investment companies’’ (as defined in section 12(d)(1)(G)(ii) of the Act) as the Trust (each a ‘‘Fund’’ and collectively, ‘‘Funds’’). All entities that currently intend to rely on the requested order are named as applicants. Any other entity that relies on the order in the future will comply with the terms and conditions of the application. 2 All references to the term ‘‘Adviser’’ include successors-in-interest to the Adviser. A successorin-interest is limited to an entity that results from a reorganization into another jurisdiction or a change in the type of business organization. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 investment companies (each an ‘‘Unaffiliated Open-End Investment Company’’), registered closed-end management investment companies, ‘‘business development companies’’ as defined by section 2(a)(48) of the Act (‘‘business development companies’’) (each registered closed-end management investment company and each business development company, an ‘‘Unaffiliated Closed-End Investment Company’’ and, together with the Unaffiliated Open-End Investment Companies, the ‘‘Unaffiliated Investment Companies’’), and registered unit investment trusts (‘‘UITs’’) (the ‘‘Unaffiliated Trusts,’’ and together with the Unaffiliated Investment Companies, the ‘‘Unaffiliated Funds’’), in each case, that are not part of the same ‘‘group of investment companies’’ as the Funds of Funds; 3 (b) the Unaffiliated Funds, their principal underwriters and any broker or dealer registered under the Securities Exchange Act of 1934 (the ‘‘1934 Act’’) (‘‘Broker’’) to sell shares of such Unaffiliated Funds to the Funds of Funds; (c) the Funds of Funds to acquire shares of other registered investment companies, including open-end management investment companies and series thereof, closed-end management investment companies and UITs, as well as business development companies (if any), in the same group of investment companies as the Funds of Funds (collectively, the ‘‘Affiliated Funds,’’ and, together with the Unaffiliated Funds, the ‘‘Underlying Funds’’); 4 and (d) the Affiliated Funds, their principal underwriters and any Broker to sell shares of the Affiliated Funds to the 3 For purposes of the request for relief, the term ‘‘group of investment companies’’ means any two or more registered investment companies, including closed-end investment companies, that hold themselves out to investors as related companies for purposes of investment and investor services. 4 Certain of the Underlying Funds may be registered under the Act as either UITs or open-end management investment companies and have obtained exemptions from the Commission necessary to permit their shares to be listed and traded on a national securities exchange at negotiated prices and, accordingly, to operate as exchange-traded funds (collectively, ‘‘ETFs’’ and each, an ‘‘ETF’’). In addition, certain of the Underlying Funds currently pursue, or may in the future pursue, their investment objectives through a master-feeder arrangement in reliance on section 12(d)(1)(E) of the Act. In accordance with condition 11, a Fund of Funds may not invest in an Underlying Fund that operates as a feeder fund unless the feeder fund is part of the same ‘‘group of investment companies’’ as its corresponding master fund or the Fund of Funds. If a Fund of Funds invests in an Affiliated Fund that operates as a feeder fund and the corresponding master fund is not within the same ‘‘group of investment companies’’ as the Fund of Funds and Affiliated Fund, the master fund would be an Unaffiliated Fund for purposes of the application and its conditions. E:\FR\FM\23JAN1.SGM 23JAN1

Agencies

[Federal Register Volume 79, Number 15 (Thursday, January 23, 2014)]
[Notices]
[Pages 3887-3890]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01255]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30884; 812-14060]


Cornerstone Advisors Inc. and The Advisors' Inner Circle Fund; 
Notice of Application

January 16, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 15(a) of 
the Act and rule 18f-2 under the Act, as well as from certain 
disclosure requirements.

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Summary of Application:  Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval and would grant relief from certain disclosure 
requirements.

Applicants:  Cornerstone Advisors Inc. (the ``Adviser'') and The 
Advisors' Inner Circle Fund (the ``Trust'').

DATES: Filing Dates: The application was filed July 18, 2012, and 
amended on January 15, 2013, September 30, 2013, December 20, 2013 and 
January 13, 2014.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on February 10, 2014, and should be accompanied by proof of 
service on the applicants, in the form of an affidavit or, for lawyers, 
a certificate of service. Hearing requests should state the nature of 
the writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: 
Cornerstone Advisors, Inc., c/o SEI Corporation, One Freedom Valley 
Drive, Oaks, PA 19456.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811, or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at https://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is organized as a Massachusetts business trust and is 
registered under the Act as an open-end management investment company. 
The Trust is composed of multiple series of shares, each with its own 
distinct investment objectives, policies and restrictions.\1\
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    \1\ Applicants request relief with respect to all existing and 
future series of the Trust and any other existing or future 
registered open-end management investment company or series thereof 
that (a) is advised by the Adviser or any entity controlling, 
controlled by, or under common control with the Adviser or its 
successors (included in the term ``Adviser''); (b) uses the multi-
manager structure described in the application (``Manager of 
Managers Structure''); and (c) complies with the terms and 
conditions of the application (each a ``Subadvised Fund'' and 
collectively, the ``Subadvised Funds''). The only existing 
registered open-end management investment company that currently 
intends to rely on the requested order is named as an applicant. For 
purposes of the requested order, ``successor'' is limited to an 
entity that results from a reorganization into another jurisdiction 
or a change in the type of business organization. If the name of any 
Subadvised Fund contains the name of a Subadviser (as defined 
below), the name of the Adviser that serves as the primary adviser 
to the Subadvised Fund, or a trademark or trade name that is owned 
by the Adviser, will precede the name of the Subadviser.
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    2. The Adviser is, and any other Adviser will be, registered as an 
investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). The Adviser serves as the investment adviser to 
series of the Trust pursuant to an investment advisory agreement with 
the Trust (each an ``Investment Advisory Agreement'' and collectively, 
the ``Investment Advisory Agreements'').\2\ Each Investment Advisory 
Agreement was approved or will be approved by the board of trustees of 
the Trust (the ``Board''), including a majority of the trustees who are 
not ``interested persons,'' as defined in section 2(a)(19) of the Act, 
of the Trust or the Adviser (``Independent Trustees'') and by the 
shareholders of the relevant Subadvised Fund in the manner required by 
sections 15(a) and 15(c) of the Act and

[[Page 3888]]

rule 18f-2 under the Act.\3\ Applicants are not seeking any exemption 
from the provisions of the Act with respect to the Investment Advisory 
Agreement.
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    \2\ Each other Subadvised Fund will enter into an investment 
advisory agreement with its Adviser (included in the term 
``Investment Advisory Agreement'').
    \3\ The term ``Board'' also includes the board of trustees or 
directors of a future Subadvised Fund, if different.
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    3. Under the terms of the Investment Advisory Agreement, the 
Adviser, subject to the oversight of the Board, furnishes a continuous 
investment program for each Subadvised Fund and determines the 
investments to be purchased, held, sold or exchanged by each Subadvised 
Fund and the portion, if any, of the assets of the Subadvised Fund to 
be held uninvested. For its services to each Subadvised Fund, the 
Adviser receives an investment advisory fee from that Subadvised Fund 
as specified in the Investment Advisory Agreement calculated based on 
that Subadvised Fund's average daily net assets. The terms of the 
Investment Advisory Agreements also permit the Adviser, subject to the 
approval of the Board, including a majority of the Independent 
Trustees, and the shareholders of the applicable Subadvised Fund (if 
required by applicable law), to delegate portfolio management 
responsibilities of all or a portion of the assets of the Subadvised 
Fund to one or more subadvisers (``Subadvisers''). The Adviser 
evaluates, selects and recommends Subadvisers to manage the assets (or 
portion thereof) of Subadvised Funds, monitors and reviews the 
Subadvisers and their performance and their compliance with that 
Subadvised Fund's investment policies and restrictions. The Adviser has 
entered into subadvisory agreements (``Subadvisory Agreements'') with 
various Subadvisers to serve as Subadvisers to the Subadvised Funds.\4\ 
Each Subadviser is, and each future Subadviser will be, an ``investment 
adviser,'' as defined in section 2(a)(20) of the Act, and is 
registered, or will register, as an investment adviser under the 
Advisers Act, or not subject to such registration. The Adviser may 
compensate each Subadviser out of the advisory fees paid to the Adviser 
under the Investment Advisory Agreement, or Subadvised Funds may 
compensate the Subadvisers directly.
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    \4\ All existing Subadvisory Agreements comply with sections 
15(a) and (c) of the Act and rule 18f-2 thereunder. The Adviser has 
entered into Subadvisory Agreements with the following Subadvisers: 
(i) Cornerstone Advisors Global Public Equity Fund--Parametric 
Portfolio Associates, LSV Asset Management, Harris Associates LP, 
Thornburg Investment Management, Marsico Capital Management, LLC, 
Turner Investments, L.P., Cramer Rosenthal McGlynn LLC, Fairpointe 
Capital LLC, Phocas Financial Corporation, Numeric Investors LLC, 
Allianz Global Investors, Acadian Asset Management LLC and Driehaus 
Capital Management LLC; (ii) Cornerstone Advisors Income 
Opportunities Fund--OFI SteelPath, Inc. and Strategic Income 
Management, LLC; (iii) Cornerstone Advisors Public Alternatives 
Fund--AQR Capital Management, LLC, AlphaSimplex Group, LLC, Turner 
Investments, L.P. and ClariVest Asset Management LLC; and (iv) 
Cornerstone Advisors Real Assets Fund--Kayne Anderson Capital 
Advisors and BlackRock Investment Management LLC.
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    4. Applicants request an order to permit the Adviser, subject to 
Board approval, to select Subadvisers to manage all or a portion of the 
assets of a Subadvised Fund pursuant to a Subadvisory Agreement and 
materially amend Subadvisory Agreements without obtaining shareholder 
approval. The requested relief will not extend to any Subadviser that 
is an ``affiliated person,'' as defined in section 2(a)(3) of the Act, 
of the Trust or a Subadvised Fund or the Adviser, other than by reason 
of solely serving as a Subadviser to a Subadvised Fund or as an 
investment adviser or subadviser to any series of the Trust other than 
the series of the Trust advised by the Adviser (``Affiliated 
Subadviser'').
    5. Applicants also request an order exempting each Subadvised Fund 
from certain disclosure provisions described below that may require the 
Subadvised Funds to disclose fees paid to each Subadviser by the 
Adviser or a Subadvised Fund. Applicants seek an order to permit each 
Subadvised Fund to disclose (as a dollar amount and a percentage of 
each Subadvised Fund's net assets) only: (a) the aggregate fees paid to 
the Adviser and any Affiliated Subadviser; and (b) the aggregate fees 
paid to Subadvisers other than Affiliated Subadvisers (collectively, 
the ``Aggregate Fee Disclosure''). A Subadvised Fund that employs an 
Affiliated Subadviser will provide separate disclosure of any fees paid 
to the Affiliated Subadviser.
    6. The Funds will inform shareholders of the hiring of a new 
Subadviser pursuant to the following procedures (``Modified Notice and 
Access Procedures''): (a) within 90 days after a new Subadviser is 
hired for any Subadvised Fund, that Subadvised Fund will send its 
shareholders either a Multi-manager Notice or a Multi-manager Notice 
and Multi-manager Information Statement; \5\ and (b) the Subadvised 
Fund will make the Multi-manager Information Statement available on the 
Web site identified in the Multi-manager Notice no later than when the 
Multi-manager Notice (or Multi-manager Notice and Multi-manager 
Information Statement) is first sent to shareholders, and will maintain 
it on that Web site for at least 90 days.
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    \5\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Securities 
Exchange Act of 1934 (``Exchange Act''), and specifically will, 
among other things: (a) summarize the relevant information regarding 
the new Subadviser; (b) inform shareholders that the Multi-manager 
Information Statement is available on a Web site; (c) provide the 
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web 
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that 
a paper or email copy of the Multi-manager Information Statement may 
be obtained, without charge, by contacting the Subadvised Funds. A 
``Multi-manager Information Statement'' will meet the requirements 
of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under 
the Exchange Act for an information statement, except as modified by 
the requested order to permit Aggregate Fee Disclosure. Multi-
manager Information Statements will be filed electronically with the 
Commission via the EDGAR system.
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Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to a registered investment company to comply with Schedule 14A under 
the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 
22(c)(9) of Schedule 14A, taken together, require a proxy statement for 
a shareholder meeting at which the advisory contract will be voted upon 
to include the ``rate of compensation of the investment adviser,'' the 
``aggregate amount of the investment adviser's fees,'' a description of 
the ``terms of the contract to be acted upon,'' and, if a change in the 
advisory fee is proposed, the existing and proposed fees and the 
difference between the two fees.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require 
a registered investment company to include in its

[[Page 3889]]

financial statement information about the investment advisory fees.
    5. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction, or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants state that the requested relief meets this standard for 
the reasons discussed below.
    6. Applicants assert that the shareholders expect the Adviser, 
subject to the review and approval of the Board, to select the 
Subadvisers who are best suited to achieve the Subadvised Fund's 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Subadviser is substantially equivalent 
to the role of the individual portfolio managers employed by an 
investment adviser to a traditional investment company. Applicants 
state that requiring shareholder approval of each Subadvisory Agreement 
would impose unnecessary delays and expenses on the Subadvised Funds 
and may preclude the Subadvised Funds from acting promptly when the 
Board and the Adviser believe that a change would benefit a Fund and 
its shareholders. Applicants note that the Investment Advisory 
Agreements and any subadvisory agreement with an Affiliated Subadviser 
(if any) will continue to be subject to the shareholder approval 
requirements of section 15(a) of the Act and rule 18f-2 under the Act.
    7. Applicants assert that the requested disclosure relief would 
benefit shareholders of the Subadvised Funds because it would improve 
the Adviser's ability to negotiate the fees paid to Subadvisers. 
Applicants state that the Adviser may be able to negotiate rates that 
are below a Subadviser's ``posted'' amounts if the Adviser is not 
required to disclose the Subadvisers' fees to the public. Applicants 
submit that the requested relief will encourage Subadvisers to 
negotiate lower subadvisory fees with the Adviser if the lower fees are 
not required to be made public.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions: \6\
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    \6\ Applicants will comply with conditions 6, 8, 11, and 13 only 
if they rely on the relief that would allow them to provide 
Aggregate Fee Disclosure.
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    1. Before a Subadvised Fund may rely on the order, the operation of 
the Subadvised Fund in the manner described in the application will be 
approved by a majority of the Subadvised Fund's outstanding voting 
securities as defined in the Act or, in the case of a Subadvised Fund 
whose public shareholders purchase shares on the basis of a prospectus 
containing the disclosure contemplated by condition 2 below, by the 
initial shareholder before such Subadvised Fund's shares are offered to 
the public.
    2. The prospectus for each Subadvised Fund will disclose the 
existence, substance, and effect of any order granted pursuant to the 
application. In addition, each Subadvised Fund will hold itself out to 
the public as employing a Manager of Managers Structure. The prospectus 
will prominently disclose that the Adviser has the ultimate 
responsibility, subject to oversight by the Board, to oversee the 
Subadvisers and recommend their hiring, termination, and replacement.
    3. A Subadvised Fund will inform shareholders of the hiring of a 
new Subadviser within 90 days after the hiring of the new Subadviser 
pursuant to the Modified Notice and Access Procedures.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Subadvised Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the selection and nomination of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, has been and will continue to be engaged to represent the 
Independent Trustees. The selection of such counsel will be within the 
discretion of the then-existing Independent Trustees.
    7. Whenever a Subadviser change is proposed for a Subadvised Fund 
with an Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board minutes, that the change is in the best interests of the 
Subadvised Fund and its shareholders, and does not involve a conflict 
of interest from which the Adviser or the Affiliated Subadviser derives 
an inappropriate advantage.
    8. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    9. The Adviser will provide general management services to each 
Subadvised Fund, including overall supervisory responsibility for the 
general management and investment of the Subadvised Fund's assets and, 
subject to review and approval of the Board, will: (i) set the 
Subadvised Fund's overall investment strategies; (ii) evaluate, select, 
and recommend Subadvisers to manage all or a portion of the Subadvised 
Fund's assets; (iii) allocate and, when appropriate, reallocate the 
Subadvised Fund's assets among Subadvisers; (iv) monitor and evaluate 
the Subadvisers' performance; and (v) implement procedures reasonably 
designed to ensure that Subadvisers comply with the Subadvised Fund's 
investment objective, policies and restrictions.
    10. No Trustee or officer of the Trust or of a Subadvised Fund or 
director or officer of the Adviser will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person) any interest in a Subadviser except for (i) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by or is under common control with the Adviser; or (ii) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of any publicly traded company that is either a Subadviser or an 
entity that controls, is controlled by or is under common control with 
a Subadviser.
    11. Each Subadvised Fund will disclose in its registration 
statement the Aggregate Fee Disclosure.
    12. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the Application, the requested order will expire on the effective 
date of that rule.
    13. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per Subadvised Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any Subadviser during the 
applicable quarter.
    14. For Subadvised Funds that pay fees to a Subadviser directly 
from Fund assets, any changes to a Subadvisory Agreement that would 
result in an increase in the total management and advisory fees payable 
by a Subadvised Fund will be required to be approved by the 
shareholders of the Subadvised Fund.


[[Page 3890]]


    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01255 Filed 1-22-14; 8:45 am]
BILLING CODE 8011-01-P
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