SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (the "Agreement") made as of this 1st day of
May, 2014 by and between Cornerstone Advisors Inc., a Washington corporation
with its principal place of business at 225 -- 000xx Xxxxxx XX , Xxxxx 000,
Xxxxxxxx, Xxxxxxxxxx 00000-0000 (the "Adviser"), and BlackRock Financial
Management, Inc., a Delaware corporation with its principal place of business at
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, pursuant to authority granted to the Adviser by the Board of
Trustees (the "Board") of THE ADVISORS' INNER CIRCLE FUND (the "Trust") on
behalf of the series set forth on Schedule A to this Agreement (the "Fund") and
pursuant to the provisions of the Investment Advisory Agreement dated as of May
1, 2014 between the Adviser and the Trust on behalf of the Fund (the "Management
Agreement"), the Adviser has selected the Sub-Adviser to act as sub-investment
adviser of the Fund and to provide certain related services, as more fully set
forth below, and to perform such services under the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Adviser and the Sub-Adviser do hereby agree as follows:
1. THE SUB-ADVISER'S SERVICES.
(a) DISCRETIONARY INVESTMENT MANAGEMENT SERVICES. The Sub-Adviser
shall act as sub-investment adviser with respect to the Fund. In such capacity,
the Sub-Adviser shall, subject to the supervision of the Adviser and the Board,
regularly provide the Fund with investment research, advice and supervision and
shall furnish continuously an investment program for such Fund assets as may be
allocated by the Adviser to the Sub-Adviser, consistent with the investment
objectives and policies of the Fund. The Sub-Adviser shall determine, from time
to time, what investments or reinvestments shall be purchased or made for the
Fund and what investments shall be held or sold by the Fund, subject always to
the provisions of the Trust's Agreement and Declaration of Trust, By-Laws and
its registration statement on Form N-1A (the "Registration Statement") under the
Investment Company Act of 1940, as amended (the "1940 Act"), and under the
Securities Act of 1933, as amended (the "1933 Act"), covering Fund shares, as
filed with the Securities and Exchange Commission (the "Commission"), each of
which documents shall have been provided in advance to the Sub-Adviser in
writing and to the investment objectives, policies and restrictions of the Fund,
as each of the same shall have been communicated in writing to the Sub-Adviser
and as the same shall be from time to time in effect. To carry out such
obligations, the Sub-Adviser shall exercise its full discretion without the need
for prior consultation with the Adviser or the Fund and act for the Fund in the
same manner and with the same force and effect as the Fund itself might or could
do with respect to purchases, sales or other transactions, as well as with
respect to all other such things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions. Subject to the
foregoing, the Sub-Adviser is authorized, in its
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discretion, to buy, sell, lend and otherwise trade in any stocks, bonds and
other securities and investment instruments on behalf of the Fund, without
regard to the length of time the securities have been held and the resulting
rate of portfolio turnover or any tax considerations; and the majority or the
whole of the Fund may be invested in such proportions of stocks, bonds, other
securities or investment instruments, or cash, as the Sub-Adviser shall
determine. With respect to any such investments, including but not limited to
repurchase and reverse repurchase agreements, derivatives contracts, options,
futures contracts, International Swaps and Derivatives Association, Inc.
("ISDA") Master Agreements, and options on futures contracts, which Subadviser
is hereby authorized to make so long as such investments are consistent with
the Fund's investment policies, the Adviser hereby authorizes the Sub-Adviser
to do and perform every act and thing whatsoever necessary or incidental in
performing its duties and obligations under this Agreement including, but not
limited to, executing as agent of the Adviser, on behalf of the Fund, brokerage
agreements and other documents to establish, operate and conduct all brokerage
and other trading accounts, and executing as agent of the Adviser, on behalf of
the Fund, such agreements and other documentation as may be required for the
purchase or sale, assignment, transfer and ownership of any permitted
investment, including limited partnership agreements, repurchase and derivative
master agreements, including any schedules and annexes to such agreements,
releases, consents, elections and confirmations. Notwithstanding the
foregoing, the Sub-Adviser shall, upon written instructions from the Adviser,
effect such portfolio transactions for the Fund as the Adviser may from time to
time direct; provided however, that the Sub-Adviser shall not be responsible
for any such portfolio transactions effected upon written instructions from the
Adviser. No reference in this Agreement to the Sub-Adviser having full
discretionary authority over the Fund's investments shall in any way limit the
right of the Adviser, in its sole discretion, to establish or revise policies
in connection with the management of the Fund's assets or to otherwise exercise
its right to control the overall management of the Fund's assets; provided,
however, that such policy revisions shall be communicated with reasonable
advance notice to the Sub-Adviser and the parties shall use reasonable efforts
to resolve any conflicts that may occur between such revised policies and the
Sub-Adviser's compliance policies and procedures; and provided further,
however, that Sub-Adviser shall not be responsible for implementing such
revised policies that it reasonably believes it is incapable of implementing.
The Sub-Adviser may perform its services through any employee, officer or agent
of the Sub-Adviser, and the Adviser shall not be entitled to the advice,
recommendation or judgment of any specific person; provided, however, that the
persons identified in the Prospectus of the Fund shall perform the portfolio
management duties described therein until the Sub-Adviser notifies the Adviser
that one or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific date. The
Sub-Adviser shall use commercially reasonable efforts to inform the Adviser of
any such events with enough time prior to the event taking effect such that
allows the Adviser sufficient time to prepare and file any necessary supplement
to the Prospectus.
(b) COMPLIANCE. The Sub-Adviser agrees to comply with the
requirements of the 1940 Act, the Investment Advisers Act of 1940, as amended
(the "Advisers Act"), the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the
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Commodity Exchange Act and the respective rules and regulations thereunder, as
applicable, as well as with all other applicable federal and state laws, rules,
regulations and case law that relate to the services and relationships
described hereunder and to the conduct of its business as a registered
investment adviser. The Sub-Adviser also agrees to comply with the objectives,
policies and restrictions set forth in the Registration Statement, as amended
or supplemented, of the Fund, and with any policies, guidelines, instructions
and procedures approved by the Board or the Adviser, provided that the
foregoing areprovided to the Sub-Adviser in advance in writing. In selecting
the Fund's portfolio securities and performing the Sub-Adviser's obligations
hereunder, the Sub-Adviser shall cause the Fund to comply with the
diversification and source of income requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company. The Sub-Adviser shall maintain compliance
procedures that it reasonably believes are adequate to ensure the compliance
with the foregoing. No supervisory activity undertaken by the Adviser shall
limit the Sub-Adviser's full responsibility for any of the foregoing.
(c) PROXY VOTING. Pursuant to Board authority, the Adviser has the
authority to determine how proxies with respect to securities that are held by
the Fund shall be voted, and the Adviser may delegate the authority and
responsibility to vote proxies for the Fund's securities to the Sub-Adviser. So
long as proxy voting authority for the Fund has been delegated to the
Sub-Adviser, the Adviser shall provide such assistance to the Sub-Adviser with
respect to the voting of proxies for the Fund as the Sub-Adviser may from time
to time reasonably request, and the Adviser shall promptly forward to the
Sub-Adviser any information or documents necessary for the Sub-Adviser to
exercise its proxy voting responsibilities. The Sub-Adviser shall carry out
such responsibility in accordance with any instructions that the Board or the
Adviser shall provide from time to time, and at all times in a manner
consistent with Rule 206(4)-6 under the Advisers Act and its fiduciary
responsibilities to the Trust. The Sub-Adviser shall provide periodic reports
and keep such records relating to proxy voting as the Board may reasonably
request or as may be necessary for the Fund to comply with the 1940 Act and
other applicable law. Any such delegation of proxy voting responsibility to the
Sub-Adviser may be revoked or modified by the Board or the Adviser at any
time.
The Sub-Adviser is authorized to instruct the Fund's custodian and/or broker(s)
to forward promptly to the Sub-Adviser or designated service provider copies of
all proxies and shareholder communications relating to securities held in the
portfolio of a Fund (other than materials relating to legal proceedings against
the Fund). The Sub-Adviser may also instruct the Fund's custodian and/or
broker(s) to provide reports of holdings in the portfolio of the Fund. The
Sub-Adviser has the authority to engage a service provider to assist with
administrative functions related to voting Fund proxies. The Trust shall
direct the Fund's custodian and/or broker(s) to provide any assistance
requested by the Sub-Adviser in facilitating the use of a service provider. In
no event shall the Sub-Adviser have any responsibility to vote proxies that are
not received on a timely basis. The Adviser and the Trust acknowledge that the
Sub-Adviser, consistent with the Sub-Adviser's written proxy voting policies
and procedures, may refrain or abstain from voting a proxy if, in the
Sub-Adviser's discretion, refraining or abstaining from voting
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would be in the best interests of the Fund and its shareholders.
(d) RECORDKEEPING. The Sub-Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the Fund,
except as otherwise provided herein or as may be necessary for the Sub-Adviser
to supply to the Adviser, the Trust or its Board the information required to be
supplied under this Agreement.
The Sub-Adviser shall maintain separate books and detailed records of
all matters pertaining to the Fund's assets advised by the Sub-Adviser required
by Rule 31a-1 under the 1940 Act (other than those records being maintained by
the Adviser, or any administrator, custodian or transfer agent appointed by the
Fund) relating to its responsibilities provided hereunder with respect to the
Fund, and shall preserve such records for the periods and in a manner
prescribed therefore by Rule 31a-2 under the 1940 Act (the "Fund Books and
Records"). The Fund Books and Records shall be available to the Adviser and
the Board at any time upon request, shall be delivered to the Trust upon the
termination of this Agreement upon request, and shall be available without
delay during any day the Trust is open for business.
(e) HOLDINGS INFORMATION AND PRICING. The Sub-Adviser shall provide
regular reports regarding the Fund's holdings, and may, on its own initiative,
furnish the Adviser, the Trust and its Board from time to time with whatever
information the Sub-Adviser believes is appropriate for this purpose. The
Sub-Adviser will provide reasonable assistance to the Fund's portfolio
accounting agent or the Adviser in determining or confirming the value of any
portfolio securities or other assets of the Fund for which the portfolio
accounting seeks assistance from or identifies for review by the Sub-Adviser
and the parties agree that the Sub-Adviser shall not bear any responsibility or
liability for the determination or accuracy of the valuation of any portfolio
securities or other assets of the Fund.
(f) COOPERATION WITH AGENTS OF THE ADVISER AND THE TRUST. The
Sub-Adviser agrees to cooperate with and provide reasonable assistance to the
Adviser, the Trust and any Trust custodian or foreign sub-custodians, any Trust
pricing agents and all other agents and representatives of the Adviser and the
Trust with respect to such information regarding the Fund as such entities may
reasonably request from time to time in the performance of their obligations,
provide prompt responses to reasonable requests made by such persons and
establish appropriate interfaces with each so as to promote the efficient
exchange of information and compliance with applicable laws and regulations.
(g) CONSULTATION WITH OTHER SUB-ADVISERS. In performance of its
duties and obligations under this Agreement, the Sub-Adviser shall not consult
with any other sub-adviser to the Fund or a sub-adviser to a portfolio that is
under common control with the Fund concerning transactions for the Fund, except
for the purposes of complying with conditions of paragraphs (a) and (b) of Rule
12d3-1 under the 1940 Act and except as permitted by the policies and
procedures of the Fund. The Sub-Adviser shall not provide investment advice to
any assets of the Fund other than the assets managed by the Sub-
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Adviser.
(h) CERTAIN LITIGATION. The Sub-Adviser shall have no power,
authority, responsibility, or obligation hereunder to take any action with
regard to any claim or potential claim in any bankruptcy proceedings, class
action securities litigation, or other litigation or proceeding affecting
securities held at any time in the Fund's portfolio, including, without
limitation, to file proofs of claim or other documents related to such
proceedings (the "Litigation"), or to investigate, initiate, supervise, or
monitor the Litigation involving Fund assets, and the Adviser acknowledges and
agrees that no such power, authority, responsibility or obligation is delegated
hereunder. Nevertheless, the Sub-Adviser agrees that it shall provide the
Adviser with any and all documentation or information relating to the
Litigation as may reasonably be requested by the Adviser.
2. OBLIGATIONS OF THE ADVISER.
(a) The Adviser shall provide (or cause the Fund's Custodian to
provide) information to the Sub-Adviser in a timely manner regarding such
matters as the composition of Fund assets as may be allocated by the Adviser to
the Sub-Adviser, cash requirements and cash available for investment in the
Fund, and all other information as may be necessary for the Sub-Adviser to
perform its responsibilities hereunder.
(b) The Adviser has furnished the Sub-Adviser a copy of the Fund's
prospectus and statement of additional information and internal investment
guidelines and agrees during the continuance of this Agreement on an on-going
basis to furnish the Sub-Adviser copies of any revisions or supplements thereto
at, or, if practicable, before the time the revisions or supplements become
effective. Upon request, the Adviser agrees to furnish the Sub-Adviser with
materials or information which the Sub-Adviser may reasonably request to enable
it to perform its functions under this Agreement. The Adviser shall also inform
the Sub-Adviser of the results of any audits or examinations by regulatory
authorities pertaining to the assets of the Fund or the Sub-Adviser's
responsibilities under this Agreement.
(c) Until the Adviser delivers to the Sub-Adviser any supplements or
amendments to the documents described in this section 2, the Sub-Adviser shall
be fully protected in relying on the most recent versions of such documents
previously furnished to the Sub-Adviser.
(d) The Adviser hereby warrants and represents to the Sub-Adviser
that (i) it has obtained all applicable licenses, permits, registrations and
approvals that may be required in order to serve in its designated capacities
with respect to the Fund, and shall continue to keep current such licenses,
permits, registrations and approvals for so long as this Agreement is in
effect; (ii) it will immediately notify the Sub-Adviser of the occurrence of
any event that would disqualify it from serving in its designated capacities
with respect to the Fund; (iii) this Agreement has been duly and validly
authorized, executed and delivered on behalf of the Adviser and is a valid and
binding agreement of
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the Adviser enforceable in accordance with its terms; and (iv) it has received
a copy of the Sub-Adviser's Form ADV at least 48 hours prior to the execution
of this Agreement and has delivered a copy of the same to the Trustees.
(e) The Adviser hereby acknowledges that in performing its
obligations pursuant to this agreement Sub-Adviser will be acting in reliance
on the information provided by the Adviser relating to the financial condition,
tax status, and investment objectives of the Trust and the Fund. The Adviser
represents and warrants to Sub-Adviser that all such information is, and will
be, accurate in all material respects, and that the Adviser will not fail to
disclose any information which, if omitted, might render the information
misleading.
3. CODE OF ETHICS. The Sub-Adviser has adopted a written code of
ethics that it reasonably believes complies with the requirements of Rule 17j-1
under the 1940 Act, which it has provided to the Adviser and the Trust. The
Sub-Adviser shall ensure that its Access Persons (as defined in the
Sub-Adviser's Code of Ethics) comply in all material respects with the
Sub-Adviser's Code of Ethics, as in effect from time to time. Upon request, the
Sub-Adviser shall provide the Trust with (i) a copy of the Sub-Adviser's
current Code of Ethics, as in effect from time to time, and (ii) a
certification that it has adopted procedures reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by the Sub-Adviser's
Code of Ethics. Annually, the Sub-Adviser shall furnish a written report, which
complies with the requirements of Rule 17j-1, concerning the Sub-Adviser's Code
of Ethics to the Adviser and the Trust's Board. The Sub-Adviser shall respond
to requests for information from the Adviser and the Trust as to violations of
the Code by Access Persons and the sanctions imposed by the Sub-Adviser. The
Sub-Adviser shall, as soon as reasonably practicable after its occurrence,
notify the Adviser and the Trust of any material violation of the Code with
respect to an Access Person of the Fund, whether or not such violation relates
to a security held by any Fund.
4. INFORMATION AND REPORTING. The Sub-Adviser shall provide the
Adviser, the Trust, and their respective officers with such periodic reports
concerning the obligations the Sub-Adviser has assumed under this Agreement as
the Adviser and the Trust may from time to time reasonably request.
(a) NOTIFICATION OF BREACH / COMPLIANCE REPORTS. The Sub-Adviser
shall notify the Trust's Chief Compliance Officer and Adviser immediately upon
detection of (i) any material failure to manage any Fund in accordance with its
investment objectives and policies or any applicable law; or (ii) any material
breach of any of the Fund's or the Adviser's policies, guidelines or
procedures. In addition, the Sub-Adviser shall provide a quarterly report
regarding the Fund's compliance with its investment objectives and policies,
applicable law, including, but not limited to the 1940 Act and Subchapter M of
the Code, and the Fund's and the Adviser's policies, guidelines or procedures
as applicable to the Sub-Adviser's obligations under this Agreement. The
Sub-Adviser acknowledges and agrees that the Adviser may, in its discretion,
provide such quarterly compliance certifications to the Board. The Sub-Adviser
agrees to correct any such failure promptly and to take any action that the
Board and/or the Adviser may reasonably request in connection with any such
breach. Upon request, the Sub-Adviser shall also
6
provide the officers of the Trust with supporting certifications in connection
with such certifications of Fund financial statements and disclosure controls
pursuant to the Xxxxxxxx-Xxxxx Act. The Sub-Adviser will promptly notify the
Trust in the event (i) the Sub-Adviser is served or otherwise receives notice
of any action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court, public board, or body, involving the affairs of the
Trust (excluding class action suits in which a Fund is a member of the
plaintiff class by reason of the Fund's ownership of shares in the defendant)
or the compliance by the Sub-Adviser with the federal or state securities laws
or (ii) an actual change in control of the Sub-Adviser resulting in an
"assignment" (as defined in the 1940 Act) has occurred or is otherwise proposed
to occur.
(b) INSPECTION. Upon reasonable request, the Sub-Adviser agrees to
make its records and premises (including the availability of the Sub-Adviser's
employees for interviews) to the extent that they relate to the conduct of
services provided to the Fund or the Sub-Adviser's conduct of its business as
an investment adviser reasonably available for compliance audits by the Adviser
or the Trust's officers, employees, accountants or counsel; in this regard, the
Trust and the Adviser acknowledge that the Sub-Adviser shall have no obligation
to make available proprietary information unrelated to the services provided to
the Fund or any information related to other clients of the Sub-Adviser, except
to the extent necessary for the Adviser to confirm the absence of any conflict
of interest and compliance with any laws, rules or regulations in the
management of the Fund.
(c) BOARD AND FILINGS INFORMATION. The Sub-Adviser will also provide
the Adviser and Trust with any information reasonably requested regarding its
management of the Fund required for any meeting of the Board, or for any
shareholder report, Form N-CSR, Form N-Q, Form N-PX, Form N-SAR, amended
registration statement, proxy statement, or prospectus supplement to be filed
by the Trust with the Commission. The Sub-Adviser will make its portfolio
management or other mutually agreeable employees of BlackRock, Inc. available
to meet with the Board from time to time (but no more frequently than once per
calendar year) on due notice to review its investment management services to
the Fund in light of current and prospective economic and market conditions and
shall furnish to the Board such information as may reasonably be necessary in
order for the Board to evaluate this Agreement or any proposed amendments
thereto.
(d) TRANSACTION INFORMATION. Upon reasonable request, the Sub-Adviser
shall furnish to the Adviser and the Trust such information concerning
portfolio transactions as may be necessary to enable the Adviser, Trust or
their designated agents to perform such compliance testing on the Fund and the
Sub-Adviser's services as the Adviser and the Trust may, in their sole
discretion, determine to be appropriate. The provision of such information by
the Sub-Adviser to the Adviser, Trust or their designated agents in no way
relieves the Sub-Adviser of its own responsibilities under this Agreement.
5. BROKERAGE.
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(a) PRINCIPAL TRANSACTIONS. In connection with purchases or sales of
securities for the account of a Fund, neither the Sub-Adviser nor any of its
directors, officers or employees will act as a principal or agent or receive
any commission except as permitted by the 1940 Act.
(b) PLACEMENT OF ORDERS. The Sub-Adviser shall arrange for the
placing of all orders for the purchase and sale of securities for a Fund's
account with brokers or dealers selected by the Sub-Adviser. In the selection
of such brokers or dealers and the placing of such orders, the Sub-Adviser is
directed at all times to seek for a Fund the most favorable execution and net
price available under the circumstances. It is also understood that it is
desirable for the Fund that the Sub-Adviser have access to brokerage and
research services provided by brokers who may execute brokerage transactions at
a higher cost to the Fund than may result when allocating brokerage to other
brokers, consistent with section 28(e) of the 1934 Act and any Commission staff
interpretations thereof. Therefore, the Sub-Adviser is authorized to place
orders for the purchase and sale of securities for the Fund with such brokers,
subject to review by the Adviser and the Board from time to time with respect
to the extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to the Sub-Adviser in
connection with its or its affiliates' services to other clients.
(c) AGGREGATED TRANSACTIONS. On occasions when the Sub-Adviser deems
the purchase or sale of a security to be in the best interest of a Fund as well
as other clients of the Sub-Adviser, the Sub-Adviser may, to the extent
permitted by applicable law and regulations, aggregate the order for securities
to be sold or purchased. In such event, the Sub-Adviser will allocate
securities or futures contracts so purchased or sold, as well as the expenses
incurred in the transaction, in the manner the Sub-Adviser reasonably considers
to be equitable and consistent with its fiduciary obligations to a Fund and to
such other clients under the circumstances. The Adviser hereby acknowledges
that such aggregation of orders may not result in more favorable pricing or
lower brokerage commissions in all instances.
(d) AFFILIATED BROKERS. The Sub-Adviser or any of its affiliates may
act as broker in connection with the purchase or sale of securities or other
investments for a Fund, subject to: (a) the requirement that the Sub-Adviser
seek to obtain best execution and price within the policy guidelines determined
by the Board and set forth in a Fund's current Registration Statement; (b) the
provisions of the 1940 Act; (c) the provisions of the Advisers Act; (d) the
provisions of the 1934 Act; and (e) other provisions of applicable law. These
brokerage services are not within the scope of the duties of the Sub-Adviser
under this Agreement. Subject to the requirements of applicable law and any
procedures adopted by the Board, the Sub-Adviser or its affiliates may receive
brokerage commissions, fees or other remuneration from a Fund for these
services in addition to the Sub-Adviser's fees for services under this
Agreement.
6. CUSTODY. The Adviser shall provide the Sub-Adviser with a copy of
the Fund's agreement with the custodian designated to hold the assets of the
Fund (the "Custodian") and any modifications thereto (the "Custody Agreement")
and shall instruct Custodian to furnish Sub-
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Adviser with information and reports requested by Sub-Adviser concerning the
custodial account of the Fund. The assets of the Fund shall be maintained in
the custody of the Custodian identified in, and in accordance with the terms
and conditions of, the Custody Agreement (or any sub-custodian properly
appointed as provided in the Custody Agreement). The Sub-Adviser shall provide
timely instructions directly to the Fund's Custodian, in the manner and form as
required by the Custody Agreement (including with respect to exchange offerings
and other corporate actions) necessary to effect the investment and
reinvestment of the Fund's assets. Any assets added to the Fund shall be
delivered directly to the Custodian and Sub-Adviser will not take possession of
the Fund's money or securities. Nothing in this Agreement shall permit the
Sub-Adviser to take or receive physical possession of cash, securities or other
investments of a Fund.
7. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser will bear its
own costs of providing services hereunder. Other than as herein specifically
indicated, the Sub-Adviser shall not be responsible for a Fund's or the
Adviser's expenses, including without limitation: (a) brokerage and other
expenses incurred in placing orders for the purchase and sale of securities and
other investment instruments; (b) interest expenses of the Fund and taxes
levied against the Fund or any of its property; (c) fees and expenses of the
Fund's custodian, transfer agent and other service providers who are not
employees of the Sub-Adviser and (d) fees of the Fund's independent public
accountants.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) PROPERLY REGISTERED. The Sub-Adviser is registered as an
investment adviser under the Advisers Act, and will remain so registered for the
duration of this Agreement. The Sub-Adviser is not prohibited by the Advisers
Act or the 1940 Act from performing the services contemplated by this Agreement,
and to the best knowledge of the Sub-Adviser, there is no proceeding or
investigation that is reasonably likely to result in the Sub-Adviser being
prohibited from performing the services contemplated by this Agreement. The
Sub-Adviser agrees to promptly notify the Trust of the occurrence of any event
that would disqualify the Sub-Adviser from serving as an investment adviser to
an investment company. The Sub-Adviser is in compliance in all material respects
with all applicable federal and state law in connection with its investment
management operations.
(b) ADV DISCLOSURE. The Sub-Adviser has provided the Trust with a
copy of Part I of its Form ADV as most recently filed with the Commission and
its Part II as most recently updated and will, promptly after filing any
amendment to its Form ADV with the Commission or updating its Part II, furnish
a copy of such amendments or updates to the Trust. The information contained in
the Adviser's Form ADV is accurate and complete in all material respects and
does not omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
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(c) FUND DISCLOSURE DOCUMENTS. Upon request of the Adviser, the
Sub-Adviser has reviewed certain relevant portions of the Trust's/Fund's
Registration Statement, summary prospectus, prospectus, statement of additional
information, periodic reports to shareholders, reports and schedules filed with
the Commission (including any amendment, supplement or sticker to any of the
foregoing) and advertising and sales material relating to the Fund, each as
previously furnished to the Sub-Adviser by the Adviser for review (collectively
the "Disclosure Documents") and represents and warrants that such portions of
such Disclosure Documents that are reasonably familiar to the Sub-Adviser and
that relate to the Sub-Adviser or the Sub-Adviser's services provided or to be
provided to the Fund pursuant to this Agreement contain no untrue statement of
any material fact and do not omit any statement of material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Sub-Adviser agrees to review, upon the Adviser's reasonable request and upon
reasonable advance notice thereof, those portions of future Disclosure
Documents furnished to the Sub-Adviser that are reasonably familiar to the
Sub-Adviser and that relate to the Sub-Adviser or the Sub-Adviser's services
provided or to be provided to the Fund pursuant to this Agreement and to
express an opinion whether such portions of such Disclosure Documents contain
any untrue statement of any material fact or omit any statement of material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(d) USE OF THE NAME "CORNERSTONE ADVISORS." The Sub-Adviser has the
right to use the name "Cornerstone Advisors" in connection with its services to
the Trust. The Sub-Adviser is not aware of any threatened or existing actions,
claims, litigation or proceedings that would adversely affect or prejudice the
rights of the Sub-Adviser or the Trust to use the name "Cornerstone Advisors."
(e) INSURANCE. The Sub-Adviser maintains errors and omissions
insurance coverage in an appropriate amount and shall provide prior written
notice to the Trust of any material changes in its insurance policies or
insurance coverage. Furthermore, the Sub-Adviser shall, upon reasonable
request, provide the Trust with any information it may reasonably require
concerning the amount of or scope of such insurance.
(f) NON-EXCLUSIVITY. The Adviser agrees that the services of the
Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and its
affiliates are free to act as investment manager and provide other services to
various investment companies and other managed accounts, except as the
Sub-Adviser and the Adviser may otherwise agree from time to time in writing
before or after the date hereof. This Agreement shall not in any way limit or
restrict the Sub-Adviser or any of its trustees, officers, partners, directors,
employees, agents, controlling persons, limited partners and any other person
or entity affiliated with the Sub-Adviser from buying, selling or trading any
securities or other investment instruments for its or their own account or for
the account of others for whom it or they may be acting, provided that such
activities do not adversely affect or otherwise impair the performance by the
Sub-Adviser of its duties and obligations under this Agreement. The Adviser
recognizes and agrees that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the
10
timing and nature of such action, may differ from or be identical to advice
given or action taken with respect to the Fund. The Sub-Adviser represents and
warrants that all selections of securities by the Sub-Adviser for a Fund shall
be done in accordance with what is in the best interest of the Fund.
(g) QUALIFIED ELIGIBLE PERSON. The Adviser represents that the Fund
is a "qualified eligible person" within the meaning of Commodity Futures
Trading Commission ("CFTC") Regulations Rule 4.7 and, as such, consents to
treat any futures accounts established by the Sub-Adviser in the name and on
behalf of the Fund in accordance with the exemption contained in CFTC
Regulations Rule 4.7.
(h) CONFLICTS. The Sub-Adviser shall act honestly, in good faith and
in the best interests of the Trust including requiring any of its personnel
with knowledge of Fund activities to place the interest of the Fund first,
ahead of their own interests, in all personal trading scenarios that may
involve a conflict of interest with the Fund, consistent with its fiduciary
duties under applicable law.
(i) REPRESENTATIONS. The representations and warranties of Sub-Adviser
in this Section 8 shall be deemed to be made on the date this Agreement is
executed and at the time of delivery of the quarterly compliance report required
by Section 34a), whether or not specifically referenced in such report.
9. THE NAMES "CORNERSTONE ADVISORS" AND "BLACKROCK."
(a) The Adviser has granted to the Trust a license to use the name
"Cornerstone Advisors" (collectively, the "Name") as part of the name of the
Fund. The foregoing authorization by the Adviser to the Trust to use the Name as
part of the name of the Fund is not exclusive of the right of the Adviser itself
to use, or to authorize others to use, the Name; the Sub-Adviser acknowledges
and agrees that as between the Sub-Adviser and the Adviser, the Adviser has the
right to use, or authorize others to use, the Name and the Sub-Adviser agrees to
take such action as may reasonably be requested by the Adviser to give full
effect to the provisions of this section. Without limiting the generality of the
foregoing, the Sub-Adviser agrees that, upon any termination of this Agreement,
the Sub-Adviser will not thereafter transact any business using the name
"Cornerstone Advisors."
(b) It is understood that "BlackRock" is the name of the
Sub-Adviser's parent company, BlackRock, Inc., and any derivative names or
logos associated with such name are the valuable property of the Sub-Adviser,
and that the Trust has the right to include such phrase as a part of the name
of the Fund or for any other purpose only so long as this Agreement shall
continue. Upon termination of this Agreement, the Adviser shall cause the Trust
forthwith to cease to use such phrase and logos. The Adviser shall cause the
Trust to furnish to the Sub-Adviser, prior to its use, each piece of
advertising, supplemental sales literature or other promotional material in
which the Sub-Adviser or any of its affiliates is named. No such material shall
be used except with prior written permission of the Sub-Adviser or its
delegate. The Sub-Adviser agrees to respond to any request for approval on a
prompt and timely basis.
11
10. SUB-ADVISER'S COMPENSATION. The Fund shall pay to the
Sub-Adviser, as compensation for the Sub-Adviser's services hereunder, a fee,
determined as described in Schedule A that is attached hereto and made a part
hereof. Such fee shall be computed daily and paid not less than monthly in
arrears by the Fund.
The Sub-Adviser will be compensated based on the portion of Fund
assets allocated to the Sub-Adviser by the Adviser. The method for determining
net assets of the Fund for purposes hereof shall be the same as the method for
determining net assets for purposes of establishing the offering and redemption
prices of Fund shares as described in the Fund's prospectus. In the event of
termination of this Agreement, the fee provided in this Section shall be
computed on the basis of the period ending on the last business day on which
this Agreement is in effect subject to a pro rata adjustment based on the
number of days elapsed in the current month as a percentage of the total number
of days in such month.
11. INDEPENDENT CONTRACTOR. In the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor and,
unless otherwise expressly provided herein or otherwise authorized in writing,
shall have no authority to act for or represent the Fund, the Trust or the
Adviser in any way or otherwise be deemed to be an agent of the Fund, the Trust
or the Adviser. If any occasion should arise in which the Sub-Adviser gives any
advice to its clients concerning the shares of a Fund, the Sub-Adviser will act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
12. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, without the payment of any penalty, (i) in the event of its
assignment (as defined in section 2(a)(4) of the 0000 Xxx) or (ii) in the event
of the termination of the Management Agreement; provided that such termination
shall not relieve the Adviser or the Sub-Adviser of any liability incurred
hereunder.
This Agreement may not be added to or changed orally and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act, when applicable.
13. DURATION AND TERMINATION.
This Agreement shall become effective as of the date executed and
shall remain in full force and effect continually thereafter, subject to renewal
as provided in Section 13(d) and unless terminated automatically as set forth in
Section 12 hereof or until terminated as follows:
(a) The Trust may cause this Agreement to terminate either (i) by
vote of its Board or (ii) with respect to the Fund, upon the affirmative vote
of a majority of the outstanding voting securities of the Fund; or
(b) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice delivered
or mailed by registered mail, postage prepaid, to the Sub-Adviser; or
12
(c) The Sub-Adviser may at any time terminate this Agreement by not
more than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees, including a
majority vote of such Trustees who are not interested persons of the Trust, the
Adviser or the Sub-Adviser, at a meeting called for the purpose of voting on
such approval; or (ii) the vote of a majority of the outstanding voting
securities of the Fund; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder as to the Fund
in a manner consistent with the 1940 Act and the rules and regulations
thereunder; or
(e) At any time upon mutual agreement of the parties hereto; and
(f) Termination of this Agreement pursuant to this Section shall be
without payment of any penalty.
In the event of termination of this Agreement for any reason, the Sub-Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such notice, cease all activity on behalf of the Fund and with
respect to any of its assets, except as expressly directed by the Adviser or as
otherwise required by any fiduciary duties of the Sub-Adviser under applicable
law. In addition, the Sub-Adviser shall, upon request, deliver the Fund's Books
and Records to the Adviser by such means and in accordance with such schedule
as the Adviser shall direct and shall otherwise cooperate, as reasonably
directed by the Adviser, in the transition of portfolio asset management to any
successor of the Sub-Adviser, including the Adviser.
14. CERTAIN DEFINITIONS. FOR THE PURPOSES OF THIS AGREEMENT:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940 Act,
subject, however, to such exemptions as may be granted by the Commission under
the 1940 Act or any interpretations of the Commission staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions as
may be granted by the Commission under the 1940 Act or any interpretations of
the Commission staff.
15. LIABILITY OF THE SUB-ADVISER.
(a) The Sub-Adviser shall have responsibility for the accuracy and
completeness (and liability for the lack thereof) of statements in the Fund's
Disclosure Documents pertaining to the Sub-Adviser that has been provided to the
Adviser by the
13
Sub-Adviser.
(b) The Sub-Adviser shall be liable to the Fund for any loss
(including transaction costs) incurred by the Fund as a result of any
investment made by the Sub-Adviser in contravention of any investment policy,
guideline or restriction set forth in the Registration Statement or as approved
by the Board from time to time and provided to the Sub-Adviser.
(c) The Sub-Adviser shall indemnify and hold harmless the Trust, each
affiliated person of the Trust within the meaning of Section 2(a)(3) of the
1940 Act, and each person who controls the Trust within the meaning of Section
15 of the 1933 Act (any such person, an "Indemnified Party") against any and
all losses, claims, damages, expenses or liabilities (including the reasonable
cost of investigating and defending any alleged loss, claim, damage, expense or
liability and reasonable counsel fees incurred in connection therewith) to
which any such person may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages, expenses or liabilities
(or actions in respect thereof) arise out of or are based upon: (i) a breach by
the Sub-Adviser of this Agreement or of the representations and warranties made
by the Sub-Adviser herein; (ii) any investment that was made in contravention
of any investment policy, guideline or restriction set forth in the
Registration Statement or as appoved by the Board from time to time and
provided to the Sub-Adviser in writing or applicable law, excluding Subchapter
M of the Code; or (iii) any untrue statement of a material fact contained in
any portion of a Disclosure Document pertaining to the Sub-Adviser that has
been provided to the Adviser by the Sub-Adviser or the omission from such
portion of such Disclosure Document of a material fact required to be stated
therein or necessary to make the statements therein not misleading;; provided,
however, that nothing herein shall be deemed to protect any Indemnified Party
who is a Trustee or officer of the Trust against any liability to the Trust or
to its shareholders to which such Indemnified Party would otherwise be subject
by reason or willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office with
the Trust. The Adviser shall indemnify the Sub-Adviser, and its officers,
partners, directors, employees, agents, controlling persons, limited partners
and any other person or entity affiliated with the Sub-Adviser, from any and
all losses, claims, damages, liabilities or litigations (including reasonable
legal and other expenses) arising from the Sub-Adviser's providing services
under this Agreement or the sale of securities of the Fund.
(d) Notwithstanding any other provision of this Agreement, the
Sub-Adviser shall not be liable to the Adviser, it officers, directors, agents,
employees, controlling persons or shareholders or to the Trust or the Fund or
its shareholders for (i) any acts of the Adviser or any other subadviser to the
Fund with respect to any portion of the assets of the Fund not managed by the
Sub-Adviser and (ii) acts of the Sub-Adviser which result from or are based
upon acts of the Adviser, including, but not limited to, failure of the Adviser
to provide accurate and current information with respect to any records
maintained by Adviser or any other subadviser to the Fund, which records are
not also
14
maintained by the Sub-Adviser or, to the extent such records relate to the
portion of the assets managed by the Sub-Adviser, otherwise available to the
Sub-Adviser upon reasonable request. The Adviser shall indemnify the
Sub-Adviser (and its officers, partners, directors, employees, agents,
controlling persons, limited partners and any other person or entity affiliated
with the Sub-Adviser) against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses) arising from the
conduct of the Adviser, the Fund and any other subadviser with respect to the
portion of the Fund's assets not allocated to the Sub-Adviser and with respect
to any other portfolio of the Trust.
16. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
17. LIMITATION OF LIABILITY. The parties to this Agreement
acknowledge and agree that all liability of the Fund arising hereunder, whether
direct or indirect, and of any and every nature whatsoever shall be satisfied
solely out of the assets of the affected Fund and that no Trustee, officer or
holder of shares of beneficial interest of the Fund shall be personally liable
for any of such liability. The Trust's Certificate of Trust, as amended from
time to time, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts. Such Certificate of Trust and the Trust's
Agreement and Declaration of Trust describe in detail the respective
responsibilities and limitations on liability of the Trustees, officers, and
holders of shares of beneficial interest.
18. CHANGE IN THE ADVISER'S OWNERSHIP. The Sub-Adviser agrees that
it shall notify, to the extent consistent with applicable laws, the Trust of
any anticipated or otherwise reasonably foreseeable change in the ownership of
the Sub-Adviser within a reasonable time prior to such change being effected.
19. JURISDICTION. This Agreement shall be governed by and construed
in accordance with the substantive laws of the Commonwealth of Massachusetts
and the Sub-Adviser consents to the jurisdiction of courts, both state or
federal, in Massachusetts, with respect to any dispute under this Agreement.
20. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
21. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
22. NOTICES. All notices given pursuant to this Agreement shall be
delivered or mailed to the business address of the applicable party as set
forth below in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt.
15
Notice shall be deemed given on the date delivered or received (if sent by
mail) in accordance with this paragraph.
If to Adviser:
Cornerstone Advisors, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
If to Sub-Adviser:
BlackRock Financial Management, Inc.
0 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
Attn:
With a copy to:
BlackRock Financial Management, Inc.
c/o BlackRock, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
23. USE OF FUTURES. PURSUANT TO AN EXEMPTION FROM THE COMMODITY
FUTURES TRADING COMMISSION (THE "COMMISSION") IN CONNECTION WITH ACCOUNTS OF
QUALIFIED ELIGIBLE PERSONS, THIS AGREEMENT IS NOT REQUIRED TO BE, AND HAS NOT
BEEN, FILED WITH THE COMMISSION. THE COMMISSION DOES NOT PASS UPON THE MERITS
OF
16
PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF
COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMISSION HAS NOT
REVIEWED OR APPROVED THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be signed on their behalf by their duly authorized officers as of the date
first above written.
CORNERSTONE ADVISORS INC.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: Secretary
BLACKROCK FINANCIAL MANAGEMENT, INC.
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Managing Director
17
SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
DATED MAY 1, 2014 BETWEEN
CORNERSTONE ADVISORS INC.
AND
BLACKROCK FINANCIAL MANAGEMENT, INC.
The Fund will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered, a fee, computed daily at an annual rate based on the average
daily net assets of the Fund as may be allocated by the Adviser to the
Sub-Adviser from time to time under the following fee schedule:
FUND RATE
Real Assets Fund [REDACTED]
18
BLACKROCK INFLATION PROTECTED BOND SEPARATE ACCOUNT
Investment Objective
To seek to maximize real return, consistent with preservation of real capital
and prudent investment management.
ACCOUNT GUIDELINES
o The primary benchmark for the account will be the Barclays Capital Global
Real: U. S. TIPS Index
o The portfolio will be diversified, holding between 30-200 positions
o Short Term Cash and Cash Equivalents will range from 0% to 15% of the
portfolio.
o The portfolio will maintain an average duration that is within +/- 20% of
the duration of the benchmark.
o The portfolio may invest up to 20% of its assets in non-dollar denominated
securities of non-U. S. issuers, and may invest without limit in U. S.
dollar denominated securities of non-U. S. issuers.
o Currency hedging will be utilized.
o The portfolio may buy or sell options on futures, or enter into credit
default swaps and interest rate or foreign currency transactions, including
swaps (collectively, commonly known as derivatives). The portfolio may seek
to obtain market exposure to the securities in which it primarily invests
by entering into a series of purchase and sale contracts or by using other
investment techniques (such as reverse repurchase agreements or dollar
rolls).
o Portfolio will utilize leverage, which will be less than 33% of managed
assets -- no naked shorts.
o The sub-advisor shall be responsible for voting all proxies.
--------------------------------------------------------------------------------
PERMISSIBLE SECURITIES
--------------------------------------------------------------------------------
US TIPS
--------------------------------------------------------------------------------
Nominal US Treasuries
--------------------------------------------------------------------------------
US Agency Debt
--------------------------------------------------------------------------------
MBS (Agency and non-agency; commercial and residential; pass-throughs and CMO
structures including IO and PO)
--------------------------------------------------------------------------------
Domestic and Foreign Corporations
--------------------------------------------------------------------------------
Debt Obligations of Foreign Governments (nominal and inflation-linked)
--------------------------------------------------------------------------------
Debt Obligations of Supranational Organizations
--------------------------------------------------------------------------------
ABS
--------------------------------------------------------------------------------
FX
--------------------------------------------------------------------------------
19
--------------------------------------------------------------------------------
Municipals
--------------------------------------------------------------------------------
Non-dollar debt (nominal or inflation-linked; hedged or unhedged)
--------------------------------------------------------------------------------
144A securities
--------------------------------------------------------------------------------
Futures
--------------------------------------------------------------------------------
Options (including, but not limited to, caps, floors,
options on swaps options on FX)
--------------------------------------------------------------------------------
Swaps (including, but not limited to, interest
rate swaps, inflation swaps, total return swaps and credit default swaps)
--------------------------------------------------------------------------------
Forward contracts (or other derivatives to manage currency risk)
--------------------------------------------------------------------------------
Collateralized Debt Obligations
--------------------------------------------------------------------------------
Emerging Market Debt (nominal and inflation-linked)
--------------------------------------------------------------------------------
Any bond in the benchmark index regardless of list above.
--------------------------------------------------------------------------------
20
