KKR Series Trust and Prisma Capital Partners LP; Notice of Application, 7719-7722 [2014-02766]

Download as PDF 7719 Federal Register / Vol. 79, No. 27 / Monday, February 10, 2014 / Notices Form No. Annual responses Time (minutes) Burden (hours) G–19–F ........................................................................................................................................ 900 8 120 Additional Information or Comments: Copies of the forms and supporting documents can be obtained from Dana Hickman at (312) 751–4981 or Dana.Hickman@RRB.GOV. Comments regarding the information collection should be addressed to Charles Mierzwa, Railroad Retirement Board, 844 North Rush Street, Chicago, Illinois, 60611–2092 or Charles.Mierzwa@RRB.GOV and to the OMB Desk Officer for the RRB, Fax: 202–395–6974, Email address: OIRA_ Submission@omb.eop.gov. Charles Mierzwa, Chief of Information Resources Management. [FR Doc. 2014–02805 Filed 2–7–14; 8:45 am] BILLING CODE 7905–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 30905; File No. 812–14124] KKR Series Trust and Prisma Capital Partners LP; Notice of Application Securities and Exchange 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. mstockstill on DSK4VPTVN1PROD with NOTICES AGENCY: Summary of Application: Applicants request an order that would permit them to enter into and materially amend subadvisory agreements with WhollyOwned Sub-Advisers (as defined below) and non-affiliated sub-advisers without shareholder approval and would grant relief from certain disclosure requirements. Applicants: KKR Series Trust (the ‘‘Trust’’), and Prisma Capital Partners LP (‘‘Prisma’’). Filing Dates: The application was filed on February 15, 2013, and amended on June 25, 2013, and November 6, 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 VerDate Mar<15>2010 19:25 Feb 07, 2014 Jkt 232001 by 5:30 p.m. on March 3, 2014, and should be accompanied by proof of 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. The Trust, c/o Nicole J. Macarchuk, Esq., KKR Asset Management LLC, 555 California Street, 50th Floor, San Francisco, California 94104; and Prisma, c/o Francis J. Conroy and Vince Cuticello, Esq., Prisma Capital Partners LP, One Penn Plaza, Suite 3515, New York, New York 10119. FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at (202) 551–6826, or David P. Bartels, 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 organized as a Delaware statutory trust and is registered with the Commission as an open-end management investment company under the Act. The Trust may offer one or more series of shares (each a ‘‘Series’’ and collectively, ‘‘Series’’) with its own distinct investment objectives, policies and restrictions. Prisma is the investment adviser to KKR Alternative Strategies Fund, a series of the Trust (the ‘‘Multi-Manager Fund’’). Prisma is a Delaware limited partnership and is a subsidiary of KKR & Co. L.P.1 1 The Trust and Prisma, together, the ‘‘Applicants.’’ Prisma or another investment adviser controlling, controlled by or under common control with Prisma or its successors, each, an ‘‘Adviser.’’ For purposes of the requested order, ‘‘successor’’ is limited to an entity that results from reorganization into another jurisdiction or a change in the type of PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 2. Applicants request an order to permit the Adviser, subject to the approval of 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 Series or the Adviser (‘‘Independent Trustees’’), to, without obtaining shareholder approval: (i) Select SubAdvisers to manage all or a portion of the assets of a Sub-Advised Series and enter into Sub-Advisory Agreements (as defined below) with the Sub-Advisers, and (ii) materially amend Sub-Advisory Agreements with the Sub-Advisers.2 Applicants request that the relief apply to the Applicants, as well as to any future Series and any other existing or future registered open-end management investment company or series thereof that is advised by an Adviser, uses the multi-manager structure described in the application (‘‘Multi-Manager Structure’’), and complies with the terms and conditions of the application (‘‘Sub-Advised Series’’).3 3. Prisma will serve as the investment adviser to the Multi-Manager Fund pursuant to an investment advisory agreement with the Trust (the ‘‘Investment Management Agreement’’). The Investment Management Agreement was approved by the Board, including a majority of the Independent Trustees, and prior to the commencement date, will be approved by the initial shareholder of the Multi-Manager Fund as required by sections 15(a) and 15(c) of the Act and rule 18f-2 thereunder. The terms of the Investment business organization. Prisma is, and any other Adviser will be, registered with the Commission as an investment adviser under the Investment Advisers Act of 1940, as amended (‘‘Advisers Act’’). 2 Shareholder approval will continue to be required for any other sub-adviser change (not otherwise permitted by rule and material amendments to an existing sub-advisory agreement with any sub-adviser other than a Non-Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser (all such changes referred to as ‘‘Ineligible Affiliated Sub-Adviser Changes’’). 3 The Trust is the only registered open-end investment company that currently intend to rely on the requested order. The Multi-Manager Fund is the only Series that currently intends to be a SubAdvised Series. Any entity that relies on the requested order will do so only in accordance with the terms and conditions contained in the application. The requested relief will not extend to any sub-adviser, other than a Wholly-Owned SubAdviser, who is an affiliated person, as defined in Section 2(a)(3) of the Act, of the Trust, a SubAdvised Series, or an Adviser, other than by reason of serving as a sub-adviser to one or more of the Sub-Advised Series (‘‘Affiliated Sub-Adviser’’). E:\FR\FM\10FEN1.SGM 10FEN1 7720 Federal Register / Vol. 79, No. 27 / Monday, February 10, 2014 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES Management Agreements comply with section 15(a) of the Act. Each other Investment Management Agreement will comply with section 15(a) of the Act and will be similarly approved. 4. Under the terms of the Investment Management Agreement, Prisma, subject to the supervision of the Board, will provide continuous oversight of the investment management of the assets of the Multi-Manager Fund. For its services to the Multi-Manager Fund under the Investment Management Agreement, Prisma will receive an investment management fee from the Multi-Manager Fund based on the average daily net assets of the MultiManager Fund. Consistent with the contemplated Multi-Manager Structure, Prisma may, subject to the approval of the Board, including a majority of the Independent Trustees, delegate portfolio management responsibilities of all or a portion of the assets of the MultiManager Fund to one or more SubAdvisers.4 5. Pursuant to the Investment Management Agreement, Prisma has overall responsibility for the management of the Multi-Manager Fund; these responsibilities include recommending the removal or replacement of Sub-Advisers, determining the portion of the MultiManager Fund’s assets to be managed by any given Sub-Adviser and reallocating those assets as necessary from time to time. 6. Pursuant to the authority under the Investment Management Agreement, Prisma will be permitted to enter into investment sub-advisory agreements with Sub-Advisers (‘‘Sub-Advisory Agreements’’) on behalf of the MultiManager Fund.5 The terms of each SubAdvisory Agreement will comply fully with the requirements of section 15(a) of the Act. The Sub-Advisory Agreements will be approved by the Board, including a majority of the Independent Trustees, in accordance with sections 15(a) and 15(c) of the Act. The Sub4 As used herein, a ‘‘Sub-Adviser’’ for a Series may be: (1) An indirect or direct ‘‘wholly-owned subsidiary’’ (as such term is defined in the Act) of the Adviser for that Series, or (2) a sister company of the Adviser for that Series that is an indirect or direct ‘‘wholly-owned subsidiary’’ (as such term is defined in the Act) of the same company that, indirectly or directly, wholly owns the Adviser (each of (1) and (2) a ‘‘Wholly-Owned Sub-Adviser’’ and collectively, the ‘‘Wholly-Owned SubAdvisers’’), or (3) not an ‘‘affiliated person’’ (as such term is defined in section 2(a)(3) of the Act) of the Series, the Trust, or an Adviser, except to the extent that an affiliation arises solely because the subadviser serves as a Sub-Adviser to a Series (each a ‘‘Non-Affiliated Sub-Adviser’’). 5 If the name of any Series contains the name of a Sub-Adviser, that name will be preceded by the name of the Adviser. VerDate Mar<15>2010 19:25 Feb 07, 2014 Jkt 232001 Advisers, subject to the supervision of Prisma and oversight of the Board, will determine the securities and other instruments to be purchased, sold or entered into by the Multi-Manager Fund’s portfolio or a portion thereof, and will place orders with brokers or dealers that they select. Prisma will compensate each Sub-Adviser out of the fee paid to Prisma under the Investment Management Agreement. 7. Sub-Advised Series 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 Sub-Adviser is hired for any Sub-Advised Series, that Sub-Advised Series will send its shareholders either a Multi-Manager Notice or a MultiManager Notice and Multi-Manager Information Statement; 6 and (b) the Sub-Advised Series 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 MultiManager Information Statement) is first sent to shareholders, and will maintain it on that Web site for at least 90 days. Applicants state that, in the circumstances described in the application, a proxy solicitation to approve the appointment of new SubAdvisers provides no more meaningful information to shareholders than the proposed Multi-Manager Information Statement. Applicants state that the Board would comply with the requirements of sections 15(a) and 15(c) of the Act before entering into or amending Sub-Advisory Agreements. 8. Applicants also request an order exempting the Sub-Advised Series from certain disclosure obligations that may require the Applicants to disclose fees paid by the Adviser to each Sub6 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 Sub-Adviser; (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 MultiManager 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 Sub-Advised Series. 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 order to permit Aggregate Fee Disclosure, as defined below. Multi-Manager Information Statements will be filed with the Commission via the EDGAR system. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 Adviser. Applicants seek relief to permit each Sub-Advised Series to disclose (as a dollar amount and a percentage of the Sub-Advised Series’ net assets): (a) the aggregate fees paid to the Adviser and any Wholly-Owned Sub-Advisers; and (b) the aggregate fees paid to NonAffiliated Sub-Advisers (the ‘‘Aggregate Fee Disclosure’’). If a sub-adviser, other than a Non-Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser, is employed to provide management services to a Sub-Advised Series, that Sub-Advised Series will provide separate disclosure of any fees paid to such sub-adviser. Applicants’ Legal Analysis 1. Section 15(a) of the Act states, in 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, which contract, whether with such registered company or with an investment adviser of such registered company, has been approved by the vote of a majority of the outstanding voting securities of such registered company.’’ Rule 18f–2 under the Act states that any ‘‘matter required to be submitted . . . to the holders of the outstanding voting securities of a series company shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each class or series of stock affected by such matter.’’ Further, rule 18(f)–2(c)(1) under the Act provides that a vote to approve an investment advisory contract required by section 15(a) of the Act ‘‘shall be deemed to be effectively acted upon with respect to any class or series of securities of such registered investment company if a majority of the outstanding voting securities of such class or series vote for the approval of such matter.’’ 2. Form N–1A is the registration statement used by open-end investment companies. Item 19(a)(3) of Form N–1A requires a registered investment company to disclose in its statement of additional information the method of computing the ‘‘advisory fee payable’’ by the investment company, including the total dollar amounts that the investment company ‘‘paid to the adviser (aggregated with amounts paid to affiliated advisers, if any), and any advisers who are not affiliated persons of the adviser, under the investment advisory contract for the last three fiscal years.’’ 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), E:\FR\FM\10FEN1.SGM 10FEN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 79, No. 27 / Monday, February 10, 2014 / Notices 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 fee,’’ 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 financial statement information about the investment advisory fees. 5. Section 6(c) of the Act provides that the Commission by order upon application may conditionally or unconditionally exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provisions 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 their requested relief meets this standard for the reasons discussed below. 6. Applicants assert that the shareholders expect the Adviser, subject to review and approval of the Board, to select Sub-Advisers who the Adviser believes can achieve the Sub-Advised Series’ investment objectives. Applicants assert that, from the perspective of the shareholder, the role of the Sub-Advisers is substantially equivalent to the role of the individual portfolio managers employed by an investment adviser to a traditional investment company. Applicants believe that permitting the Adviser to perform the duties for which the shareholders of the Sub-Advised Series are paying the Adviser—the selection, supervision and evaluation of the SubAdvisers, including Wholly-Owned Sub-Advisers—without incurring unnecessary delays or expenses is appropriate in the interest of the SubAdvised Series’ shareholders and will allow such Sub-Advised Series to operate more efficiently. Applicants state that each Investment Management Agreement will continue to be fully subject to section 15(a) of the Act and rule 18f-2 under the Act, and was VerDate Mar<15>2010 19:25 Feb 07, 2014 Jkt 232001 approved by the Board, including a majority of the Independent Trustees, in the manner required by sections 15(a) and 15(c) of the Act. Applicants are not seeking an exemption with respect to the Investment Management Agreements. 7. Applicants assert that disclosure of the individual fees that the Adviser would pay to the Sub-Advisers would not serve any meaningful purpose. Applicants contend that the primary reasons for requiring disclosure of individual fees paid to Sub-Advisers are to inform shareholders of expenses to be charged by a particular Sub-Advised Series and to enable shareholders to compare the fees to those of other comparable investment companies. Applicants believe that the requested relief satisfies these objectives because the advisory fee paid to the Adviser will be fully disclosed and, therefore, shareholders will know what the SubAdvised Series’ fees and expenses are and will be able to compare the advisory fees a Sub-Advised Series is charged to those of other investment companies. Applicants assert that the requested relief would benefit shareholders of the Sub-Advised Series because it would improve the Adviser’s ability to negotiate the fees paid to Sub-Advisers. Applicants assert that the Adviser’s ability to negotiate with the various Sub-Advisers would be adversely affected by public disclosure of fees paid to each Sub-Adviser. Applicants state that if the Adviser is not required to disclose the Sub-Advisers’ fees to the public, the Adviser may be able to negotiate rates that are below a SubAdviser’s ‘‘posted’’ amounts. Applicants submit that the relief will also encourage Sub-Advisers to negotiate lower sub-advisory fees with the Adviser if the lower fees are not required to be made public. 8. For the reasons discussed above, Applicants submit that the requested relief meets the standards for relief under section 6(c) of the Act. Applicants state that the operation of the SubAdvised Series in the manner described in the application must be approved by shareholders of a Sub-Advised Series before that Sub-Advised Series may rely on the requested relief. In addition, Applicants state that the proposed conditions to the requested relief are designed to ensure that shareholder interests are adequately protected through Board oversight. Applicants assert that conditions 6, 7, 10 and 11 are designed to provide the Board with sufficient independence and the resources and information it needs to monitor and address any conflicts of interest. Applicants state that, PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 7721 accordingly, they believe the requested relief 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’ Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions:7 1. Before a Sub-Advised Series may rely on the order requested in the application, the operation of the SubAdvised Series pursuant to the MultiManager Structure, including the hiring of Wholly-Owned Sub-Advisers, will be approved by a majority of the SubAdvised Series’ outstanding voting securities, as defined in the Act, which in the case of a Sub-Advised Series whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 2 below, will be by the sole initial shareholder before offering the Sub-Advised Series’ shares to the public. 2. The prospectus for each SubAdvised Series will disclose the existence, substance, and effect of any order granted pursuant to the application. Each Sub-Advised Series will hold itself out to the public as employing the Multi-Manager Structure described in the application. A SubAdvised Series’ prospectus will prominently disclose that the Adviser has the ultimate responsibility, subject to oversight by the Board, to oversee the Sub-Advisers and recommend their hiring, termination and replacement. 3. The Adviser will provide general management services to a Sub-Advised Series, including overall supervisory responsibility for the general management and investment of the SubAdvised Series’ assets. Subject to review and approval of the Board, the Adviser will (a) set a Sub-Advised Series’ overall investment strategies, (b) evaluate, select, and recommend Sub-Advisers to manage all or a portion of a SubAdvised Series’ assets, and (c) implement procedures reasonably designed to ensure that Sub-Advisers comply with a Sub-Advised Series’ investment objective, policies and restrictions. Subject to review by the Board, the Adviser will (a) when appropriate, allocate and reallocate a Sub-Advised Series’ assets among multiple Sub-Advisers; and (b) monitor and evaluate the performance of SubAdvisers. 7 Applicants will only comply with conditions 8 and 12 if they rely on the relief that would allow them to provide Aggregate Fee Disclosure. E:\FR\FM\10FEN1.SGM 10FEN1 mstockstill on DSK4VPTVN1PROD with NOTICES 7722 Federal Register / Vol. 79, No. 27 / Monday, February 10, 2014 / Notices 4. A Sub-Advised Series will not make any Ineligible Affiliated SubAdviser Changes without the approval of the shareholders of the applicable Sub-Advised Series. 5. A Sub-Advised Series will inform shareholders of the hiring of a new SubAdviser within 90 days after the hiring of the new Sub-Adviser pursuant to the Modified Notice and Access Procedures. 6. 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. 7. Independent Legal Counsel, as defined in rule 0–1(a)(6) under the Act, will be engaged to represent the Independent Trustees. The selection of such counsel will be within the discretion of the then-existing Independent Trustees. 8. The Adviser will provide the Board, no less frequently than quarterly, with information about the profitability of the Adviser on a per Sub-Advised Series basis. The information will reflect the impact on profitability of the hiring or termination of any sub-adviser during the applicable quarter. 9. Whenever a sub-adviser is hired or terminated, the Adviser will provide the Board with information showing the expected impact on the profitability of the Adviser. 10. Whenever a sub-adviser change is proposed for a Sub-Advised Series with an Affiliated Sub-Adviser or WhollyOwned Sub-Adviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that such change is in the best interests of the Sub-Advised Series and its shareholders, and does not involve a conflict of interest from which the Adviser or the Affiliated Sub-Adviser or Wholly-Owned Sub-Adviser derives an inappropriate advantage. 11. No Board member or officer of a Sub-Advised Series or any partner, director, manager, 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 Sub-Adviser, except for (i) ownership of interests in the Adviser or any entity, other than a Wholly-Owned Sub-Adviser, 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 a publicly traded company that is either a Sub-Adviser or an entity that controls, is controlled by, or is under common control with a SubAdviser. VerDate Mar<15>2010 19:25 Feb 07, 2014 Jkt 232001 12. Each Sub-Advised Series will disclose the Aggregate Fee Disclosure in its registration statement. 13. In the event the Commission adopts a rule under the Act providing substantially similar relief to that requested in the application, the requested order will expire on the effective date of that rule. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–02766 Filed 2–7–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Wednesday, February 12, 2014 at 2:00 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matter at the Closed Meeting. Commissioner Aguilar, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session. The subject matter of the Closed Meeting will be: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; Consideration of amicus participation; and Other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 Dated: February 5, 2014. Elizabeth M. Murphy, Secretary. [FR Doc. 2014–02880 Filed 2–6–14; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71469; File No. SR–FICC– 2014–801] Self-Regulatory Organizations; The Fixed Income Clearing Corporation; Notice of Filing of an Advance Notice Concerning the Government Security Division’s Inclusion of GCF Repo® Positions in Its Intraday Participant Clearing Fund Requirement Calculation, and Its Hourly Internal Surveillance Cycles February 4, 2014. Pursuant to Section 806(e)(1)(A) of the Payment, Clearing, and Settlement Supervision Act of 2010 (‘‘Clearing Supervision Act’’) 1 and Rule 19b– 4(n)(1)(i) of the Securities Exchange Act of 1934 (‘‘Act’’),2 notice is hereby given that on January 10, 2014, The Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the advance notice as described in Items I, II and III below, which Items have been prepared by FICC. The Commission is publishing this notice to solicit comments on the advance notice from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Advance Notice This advance notice is filed by the Government Securities Division (the ‘‘GSD’’) of FICC in connection with including GCF Repo® 3 positions in its intraday (i.e., noon) participant Clearing Fund requirement calculation, and its hourly internal surveillance cycles. The model change is described in additional detail below. 1 12 U.S.C. 5465(e)(1)(A). The Financial Stability Oversight Council designated FICC a systemically important financial market utility on July 18, 2012. See Financial Stability Oversight Council 2012 Annual Report, Appendix A, https:// www.treasury.gov/initiatives/fsoc/Documents/ 2012%20Annual%20Report.pdf. Therefore, FICC is required to comply with Title VIII of the DoddFrank Wall Street Reform and Consumer Protection Act. 2 17 CFR 240.19b–4(n)(1)(i). 3 The GCF Repo® service enables dealers to trade general collateral repos, based on rate, term, and underlying product, throughout the day without requiring intra-day, trade-for-trade settlement on a Deliver-versus-Payment (DVP) basis. The service fosters a highly liquid market for securities financing. E:\FR\FM\10FEN1.SGM 10FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 27 (Monday, February 10, 2014)]
[Notices]
[Pages 7719-7722]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02766]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30905; File No. 812-14124]

KKR Series Trust and Prisma Capital Partners LP; Notice of
Application

AGENCY: Securities and Exchange 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 sub-advisory agreements with
Wholly-Owned Sub-Advisers (as defined below) and non-affiliated sub-
advisers without shareholder approval and would grant relief from
certain disclosure requirements.

Applicants: KKR Series Trust (the ``Trust''), and Prisma Capital
Partners LP (``Prisma'').

Filing Dates: The application was filed on February 15, 2013, and
amended on June 25, 2013, and November 6, 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 March 3, 2014, and should be accompanied by proof of 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. The Trust, c/
o Nicole J. Macarchuk, Esq., KKR Asset Management LLC, 555 California
Street, 50th Floor, San Francisco, California 94104; and Prisma, c/o
Francis J. Conroy and Vince Cuticello, Esq., Prisma Capital Partners
LP, One Penn Plaza, Suite 3515, New York, New York 10119.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826, or David P. Bartels, 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 organized as a Delaware statutory trust and is
registered with the Commission as an open-end management investment
company under the Act. The Trust may offer one or more series of shares
(each a ``Series'' and collectively, ``Series'') with its own distinct
investment objectives, policies and restrictions. Prisma is the
investment adviser to KKR Alternative Strategies Fund, a series of the
Trust (the ``Multi-Manager Fund''). Prisma is a Delaware limited
partnership and is a subsidiary of KKR & Co. L.P.\1\
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\1\ The Trust and Prisma, together, the ``Applicants.'' Prisma
or another investment adviser controlling, controlled by or under
common control with Prisma or its successors, each, an ``Adviser.''
For purposes of the requested order, ``successor'' is limited to an
entity that results from reorganization into another jurisdiction or
a change in the type of business organization. Prisma is, and any
other Adviser will be, registered with the Commission as an
investment adviser under the Investment Advisers Act of 1940, as
amended (``Advisers Act'').
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2. Applicants request an order to permit the Adviser, subject to
the approval of 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 Series or
the Adviser (``Independent Trustees''), to, without obtaining
shareholder approval: (i) Select Sub-Advisers to manage all or a
portion of the assets of a Sub-Advised Series and enter into Sub-
Advisory Agreements (as defined below) with the Sub-Advisers, and (ii)
materially amend Sub-Advisory Agreements with the Sub-Advisers.\2\
Applicants request that the relief apply to the Applicants, as well as
to any future Series and any other existing or future registered open-
end management investment company or series thereof that is advised by
an Adviser, uses the multi-manager structure described in the
application (``Multi-Manager Structure''), and complies with the terms
and conditions of the application (``Sub-Advised Series'').\3\
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\2\ Shareholder approval will continue to be required for any
other sub-adviser change (not otherwise permitted by rule and
material amendments to an existing sub-advisory agreement with any
sub-adviser other than a Non-Affiliated Sub-Adviser or a Wholly-
Owned Sub-Adviser (all such changes referred to as ``Ineligible
Affiliated Sub-Adviser Changes'').
\3\ The Trust is the only registered open-end investment company
that currently intend to rely on the requested order. The Multi-
Manager Fund is the only Series that currently intends to be a Sub-
Advised Series. Any entity that relies on the requested order will
do so only in accordance with the terms and conditions contained in
the application. The requested relief will not extend to any sub-
adviser, other than a Wholly-Owned Sub-Adviser, who is an affiliated
person, as defined in Section 2(a)(3) of the Act, of the Trust, a
Sub-Advised Series, or an Adviser, other than by reason of serving
as a sub-adviser to one or more of the Sub-Advised Series
(``Affiliated Sub-Adviser'').
---------------------------------------------------------------------------

3. Prisma will serve as the investment adviser to the Multi-Manager
Fund pursuant to an investment advisory agreement with the Trust (the
``Investment Management Agreement''). The Investment Management
Agreement was approved by the Board, including a majority of the
Independent Trustees, and prior to the commencement date, will be
approved by the initial shareholder of the Multi-Manager Fund as
required by sections 15(a) and 15(c) of the Act and rule 18f-2
thereunder. The terms of the Investment

[[Page 7720]]

Management Agreements comply with section 15(a) of the Act. Each other
Investment Management Agreement will comply with section 15(a) of the
Act and will be similarly approved.
4. Under the terms of the Investment Management Agreement, Prisma,
subject to the supervision of the Board, will provide continuous
oversight of the investment management of the assets of the Multi-
Manager Fund. For its services to the Multi-Manager Fund under the
Investment Management Agreement, Prisma will receive an investment
management fee from the Multi-Manager Fund based on the average daily
net assets of the Multi-Manager Fund. Consistent with the contemplated
Multi-Manager Structure, Prisma may, subject to the approval of the
Board, including a majority of the Independent Trustees, delegate
portfolio management responsibilities of all or a portion of the assets
of the Multi-Manager Fund to one or more Sub-Advisers.\4\
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\4\ As used herein, a ``Sub-Adviser'' for a Series may be: (1)
An indirect or direct ``wholly-owned subsidiary'' (as such term is
defined in the Act) of the Adviser for that Series, or (2) a sister
company of the Adviser for that Series that is an indirect or direct
``wholly-owned subsidiary'' (as such term is defined in the Act) of
the same company that, indirectly or directly, wholly owns the
Adviser (each of (1) and (2) a ``Wholly-Owned Sub-Adviser'' and
collectively, the ``Wholly-Owned Sub-Advisers''), or (3) not an
``affiliated person'' (as such term is defined in section 2(a)(3) of
the Act) of the Series, the Trust, or an Adviser, except to the
extent that an affiliation arises solely because the sub-adviser
serves as a Sub-Adviser to a Series (each a ``Non-Affiliated Sub-
Adviser'').
---------------------------------------------------------------------------

5. Pursuant to the Investment Management Agreement, Prisma has
overall responsibility for the management of the Multi-Manager Fund;
these responsibilities include recommending the removal or replacement
of Sub-Advisers, determining the portion of the Multi-Manager Fund's
assets to be managed by any given Sub-Adviser and reallocating those
assets as necessary from time to time.
6. Pursuant to the authority under the Investment Management
Agreement, Prisma will be permitted to enter into investment sub-
advisory agreements with Sub-Advisers (``Sub-Advisory Agreements'') on
behalf of the Multi-Manager Fund.\5\ The terms of each Sub-Advisory
Agreement will comply fully with the requirements of section 15(a) of
the Act. The Sub-Advisory Agreements will be approved by the Board,
including a majority of the Independent Trustees, in accordance with
sections 15(a) and 15(c) of the Act. The Sub-Advisers, subject to the
supervision of Prisma and oversight of the Board, will determine the
securities and other instruments to be purchased, sold or entered into
by the Multi-Manager Fund's portfolio or a portion thereof, and will
place orders with brokers or dealers that they select. Prisma will
compensate each Sub-Adviser out of the fee paid to Prisma under the
Investment Management Agreement.
---------------------------------------------------------------------------

\5\ If the name of any Series contains the name of a Sub-
Adviser, that name will be preceded by the name of the Adviser.
---------------------------------------------------------------------------

7. Sub-Advised Series will inform shareholders of the hiring of a
new Sub-Adviser pursuant to the following procedures (``Modified Notice
and Access Procedures''): (a) within 90 days after a new Sub-Adviser is
hired for any Sub-Advised Series, that Sub-Advised Series will send its
shareholders either a Multi-Manager Notice or a Multi-Manager Notice
and Multi-Manager Information Statement; \6\ and (b) the Sub-Advised
Series 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. Applicants state that, in the
circumstances described in the application, a proxy solicitation to
approve the appointment of new Sub-Advisers provides no more meaningful
information to shareholders than the proposed Multi-Manager Information
Statement. Applicants state that the Board would comply with the
requirements of sections 15(a) and 15(c) of the Act before entering
into or amending Sub-Advisory Agreements.
---------------------------------------------------------------------------

\6\ 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 Sub-Adviser; (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 Sub-Advised Series. 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 order to permit Aggregate Fee Disclosure, as defined below.
Multi-Manager Information Statements will be filed with the
Commission via the EDGAR system.
---------------------------------------------------------------------------

8. Applicants also request an order exempting the Sub-Advised
Series from certain disclosure obligations that may require the
Applicants to disclose fees paid by the Adviser to each Sub-Adviser.
Applicants seek relief to permit each Sub-Advised Series to disclose
(as a dollar amount and a percentage of the Sub-Advised Series' net
assets): (a) the aggregate fees paid to the Adviser and any Wholly-
Owned Sub-Advisers; and (b) the aggregate fees paid to Non-Affiliated
Sub-Advisers (the ``Aggregate Fee Disclosure''). If a sub-adviser,
other than a Non-Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser,
is employed to provide management services to a Sub-Advised Series,
that Sub-Advised Series will provide separate disclosure of any fees
paid to such sub-adviser.

Applicants' Legal Analysis

1. Section 15(a) of the Act states, in 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, which
contract, whether with such registered company or with an investment
adviser of such registered company, has been approved by the vote of a
majority of the outstanding voting securities of such registered
company.'' Rule 18f-2 under the Act states that any ``matter required
to be submitted . . . to the holders of the outstanding voting
securities of a series company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of
the outstanding voting securities of each class or series of stock
affected by such matter.'' Further, rule 18(f)-2(c)(1) under the Act
provides that a vote to approve an investment advisory contract
required by section 15(a) of the Act ``shall be deemed to be
effectively acted upon with respect to any class or series of
securities of such registered investment company if a majority of the
outstanding voting securities of such class or series vote for the
approval of such matter.''
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires a registered
investment company to disclose in its statement of additional
information the method of computing the ``advisory fee payable'' by the
investment company, including the total dollar amounts that the
investment company ``paid to the adviser (aggregated with amounts paid
to affiliated advisers, if any), and any advisers who are not
affiliated persons of the adviser, under the investment advisory
contract for the last three fiscal years.''
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),

[[Page 7721]]

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 fee,'' 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 financial statement
information about the investment advisory fees.
5. Section 6(c) of the Act provides that the Commission by order
upon application may conditionally or unconditionally exempt any
person, security, or transaction or any class or classes of persons,
securities, or transactions from any provisions 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 their requested relief meets this standard for
the reasons discussed below.
6. Applicants assert that the shareholders expect the Adviser,
subject to review and approval of the Board, to select Sub-Advisers who
the Adviser believes can achieve the Sub-Advised Series' investment
objectives. Applicants assert that, from the perspective of the
shareholder, the role of the Sub-Advisers is substantially equivalent
to the role of the individual portfolio managers employed by an
investment adviser to a traditional investment company. Applicants
believe that permitting the Adviser to perform the duties for which the
shareholders of the Sub-Advised Series are paying the Adviser--the
selection, supervision and evaluation of the Sub-Advisers, including
Wholly-Owned Sub-Advisers--without incurring unnecessary delays or
expenses is appropriate in the interest of the Sub-Advised Series'
shareholders and will allow such Sub-Advised Series to operate more
efficiently. Applicants state that each Investment Management Agreement
will continue to be fully subject to section 15(a) of the Act and rule
18f-2 under the Act, and was approved by the Board, including a
majority of the Independent Trustees, in the manner required by
sections 15(a) and 15(c) of the Act. Applicants are not seeking an
exemption with respect to the Investment Management Agreements.
7. Applicants assert that disclosure of the individual fees that
the Adviser would pay to the Sub-Advisers would not serve any
meaningful purpose. Applicants contend that the primary reasons for
requiring disclosure of individual fees paid to Sub-Advisers are to
inform shareholders of expenses to be charged by a particular Sub-
Advised Series and to enable shareholders to compare the fees to those
of other comparable investment companies. Applicants believe that the
requested relief satisfies these objectives because the advisory fee
paid to the Adviser will be fully disclosed and, therefore,
shareholders will know what the Sub-Advised Series' fees and expenses
are and will be able to compare the advisory fees a Sub-Advised Series
is charged to those of other investment companies. Applicants assert
that the requested relief would benefit shareholders of the Sub-Advised
Series because it would improve the Adviser's ability to negotiate the
fees paid to Sub-Advisers. Applicants assert that the Adviser's ability
to negotiate with the various Sub-Advisers would be adversely affected
by public disclosure of fees paid to each Sub-Adviser. Applicants state
that if the Adviser is not required to disclose the Sub-Advisers' fees
to the public, the Adviser may be able to negotiate rates that are
below a Sub-Adviser's ``posted'' amounts. Applicants submit that the
relief will also encourage Sub-Advisers to negotiate lower sub-advisory
fees with the Adviser if the lower fees are not required to be made
public.
8. For the reasons discussed above, Applicants submit that the
requested relief meets the standards for relief under section 6(c) of
the Act. Applicants state that the operation of the Sub-Advised Series
in the manner described in the application must be approved by
shareholders of a Sub-Advised Series before that Sub-Advised Series may
rely on the requested relief. In addition, Applicants state that the
proposed conditions to the requested relief are designed to ensure that
shareholder interests are adequately protected through Board oversight.
Applicants assert that conditions 6, 7, 10 and 11 are designed to
provide the Board with sufficient independence and the resources and
information it needs to monitor and address any conflicts of interest.
Applicants state that, accordingly, they believe the requested relief
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' Conditions

Applicants agree that any order granting the requested relief will
be subject to the following conditions:\7\
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\7\ Applicants will only comply with conditions 8 and 12 if they
rely on the relief that would allow them to provide Aggregate Fee
Disclosure.
---------------------------------------------------------------------------

1. Before a Sub-Advised Series may rely on the order requested in
the application, the operation of the Sub-Advised Series pursuant to
the Multi-Manager Structure, including the hiring of Wholly-Owned Sub-
Advisers, will be approved by a majority of the Sub-Advised Series'
outstanding voting securities, as defined in the Act, which in the case
of a Sub-Advised Series whose public shareholders purchase shares on
the basis of a prospectus containing the disclosure contemplated by
condition 2 below, will be by the sole initial shareholder before
offering the Sub-Advised Series' shares to the public.
2. The prospectus for each Sub-Advised Series will disclose the
existence, substance, and effect of any order granted pursuant to the
application. Each Sub-Advised Series will hold itself out to the public
as employing the Multi-Manager Structure described in the application.
A Sub-Advised Series' prospectus will prominently disclose that the
Adviser has the ultimate responsibility, subject to oversight by the
Board, to oversee the Sub-Advisers and recommend their hiring,
termination and replacement.
3. The Adviser will provide general management services to a Sub-
Advised Series, including overall supervisory responsibility for the
general management and investment of the Sub-Advised Series' assets.
Subject to review and approval of the Board, the Adviser will (a) set a
Sub-Advised Series' overall investment strategies, (b) evaluate,
select, and recommend Sub-Advisers to manage all or a portion of a Sub-
Advised Series' assets, and (c) implement procedures reasonably
designed to ensure that Sub-Advisers comply with a Sub-Advised Series'
investment objective, policies and restrictions. Subject to review by
the Board, the Adviser will (a) when appropriate, allocate and
reallocate a Sub-Advised Series' assets among multiple Sub-Advisers;
and (b) monitor and evaluate the performance of Sub-Advisers.

[[Page 7722]]

4. A Sub-Advised Series will not make any Ineligible Affiliated
Sub-Adviser Changes without the approval of the shareholders of the
applicable Sub-Advised Series.
5. A Sub-Advised Series will inform shareholders of the hiring of a
new Sub-Adviser within 90 days after the hiring of the new Sub-Adviser
pursuant to the Modified Notice and Access Procedures.
6. 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.
7. Independent Legal Counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Trustees. The
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
8. The Adviser will provide the Board, no less frequently than
quarterly, with information about the profitability of the Adviser on a
per Sub-Advised Series basis. The information will reflect the impact
on profitability of the hiring or termination of any sub-adviser during
the applicable quarter.
9. Whenever a sub-adviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
10. Whenever a sub-adviser change is proposed for a Sub-Advised
Series with an Affiliated Sub-Adviser or Wholly-Owned Sub-Adviser, the
Board, including a majority of the Independent Trustees, will make a
separate finding, reflected in the Board minutes, that such change is
in the best interests of the Sub-Advised Series and its shareholders,
and does not involve a conflict of interest from which the Adviser or
the Affiliated Sub-Adviser or Wholly-Owned Sub-Adviser derives an
inappropriate advantage.
11. No Board member or officer of a Sub-Advised Series or any
partner, director, manager, 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 Sub-Adviser,
except for (i) ownership of interests in the Adviser or any entity,
other than a Wholly-Owned Sub-Adviser, 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
a publicly traded company that is either a Sub-Adviser or an entity
that controls, is controlled by, or is under common control with a Sub-
Adviser.
12. Each Sub-Advised Series will disclose the Aggregate Fee
Disclosure in its registration statement.
13. In the event the Commission adopts a rule under the Act
providing substantially similar relief to that requested in the
application, the requested order will expire on the effective date of
that rule.

For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-02766 Filed 2-7-14; 8:45 am]
BILLING CODE 8011-01-P

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