
[Federal Register Volume 77, Number 116 (Friday, June 15, 2012)]
[Notices]
[Pages 36020-36022]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14630]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30102; 812-13859-01]


Notice of Application; Hirtle Callaghan & Co., LLC and HC Capital 
Trust

June 11, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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

Applicants: Hirtle Callaghan & Co., LLC (the ``Adviser'') and HC 
Capital Trust (the ``Trust'').

DATES: Filing Dates: The application was filed on January 19, 2011, and 
amended on May 5, 2011, and April 27, 2012.

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 July 9, 2012, and should be accompanied by proof of service on 
the applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: 
Hirtle Callaghan & Co., LLC; Five Tower Bridge, 300 Barr Harbor Drive, 
Suite 500, West Conshohocken, PA 19428.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at (202) 551-6990, or Jennifer L. Sawin, Branch Chief, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company 
Regulation).

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

Applicants' Representations

    1. The Trust, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company and offers series of 
shares (each a ``Series''), each of which has its own distinct 
investment objectives, policies and restrictions.\1\ The Adviser,

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a Delaware limited liability company, is registered as an investment 
adviser under the Investment Advisers Act of 1940 (``Advisers Act'') 
and serves as the investment adviser to the Trust pursuant to two 
separate investment advisory agreements currently in effect, one of 
which applies to each Series (each an ``Investment Advisory Agreement'' 
and together the ``Investment Advisory Agreements''). Each Investment 
Advisory Agreement was initially approved by the board of trustees of 
the Trust (the ``Board''),\2\ including a majority of the trustees who 
are not ``interested persons,'' as defined in section 2(a)(19) of the 
Act, of the Trust or the Adviser (``Independent Trustees'') and by the 
shareholders of the applicable Subadvised Fund in accordance with 
sections 15(a) and 15(c) of the Act and rule 18f-2 thereunder.\3\
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    \1\ Applicants also request relief with respect to future Series 
and any other existing or future registered open-end management 
investment company or series thereof that: (a) Is advised by the 
Adviser or an entity controlling, controlled by or under common 
control with the Adviser or its successors (each such entity 
included in the term ``Adviser''); (b) uses the multi-manager 
structure described in the application; and (c) complies with the 
terms and conditions of the application (together with any Series 
that currently uses one or more Sub-Advisers, as defined below, each 
a ``Subadvised Fund'' and collectively, the ``Subadvised Funds''). 
The only existing registered open-end management investment company 
that currently intends to rely on the requested order is named as an 
Applicant. For purposes of the requested order, ``successor'' is 
limited to an entity that results from a reorganization into another 
jurisdiction or a change in the type of business organization. If 
the name of any Subadvised Fund contains the name of a Sub-Adviser, 
the name of the Adviser that serves as the primary adviser to the 
Subadvised Fund, or a trademark or trade name that is owned by that 
Adviser, will precede the name of the Sub-Adviser.
    \2\ The term ``Board'' also includes the board of trustees or 
directors of a future Subadvised Fund.
    \3\ Each other Subadvised Fund will enter into an investment 
advisory agreement with its Adviser (included in the term 
``Investment Advisory Agreement''). Each Investment Advisory 
Agreement will be approved by the applicable Board, including a 
majority of the Independent Trustees and the shareholders of that 
Subadvised Fund. Each other Adviser will be registered with the 
Commission as an investment adviser under the Advisers Act.
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    2. Under the terms of each Investment Advisory Agreement, the 
Adviser, subject to the oversight of the Board, furnishes a continuous 
investment program for each Subadvised Fund. The Adviser periodically 
reviews each Subadvised Fund's investment policies and strategies and 
based on the need of a particular Subadvised Fund may recommend changes 
to the investment policies and strategies of the Subadvised Fund for 
consideration by its Board. For its services to each Subadvised Fund, 
the Adviser receives an investment advisory fee from that Subadvised 
Fund as specified in the applicable Investment Advisory Agreement. The 
investment advisory fees for the current Series of the Trust are 
calculated based on the ``Average Daily Net Assets'' of the particular 
Series.\4\ The terms of each Investment Advisory Agreement also permit 
the Adviser, subject to the approval of the Board, including a majority 
of the Independent Trustees, and the shareholders of the applicable 
Subadvised Fund, to delegate portfolio management responsibilities of 
all or a portion of the assets of the Subadvised Fund to one or more 
sub-advisers (``Sub-Advisers''). The Trust has entered into investment 
subadvisory agreements with various Sub-Advisers (``Sub-Advisory 
Agreements'') to provide investment advisory services to certain 
Subadvised Funds.\5\ The Adviser may also enter into Sub-Advisory 
Agreements on behalf of other Subadvised Funds. Each Sub-Adviser is, 
and any future Sub-Adviser will be, an investment adviser as defined in 
section 2(a)(20) of the Act as well as registered as an investment 
adviser under the Advisers Act. The Adviser evaluates, allocates assets 
to and oversees the Sub-Advisers, and makes recommendations about their 
hiring, termination and replacement to the Board, at all times subject 
to the authority of the Board. For its services to a Subadvised Fund, 
each Sub-Adviser will receive from the Subadvised Fund, a monthly fee, 
computed and accrued daily, on the same basis (but not necessarily the 
same rate) as the Adviser's investment advisory fees are calculated for 
the particular Subadvised Fund managed by that Sub-Adviser. The Adviser 
is not responsible for paying sub-advisory fees to the Sub-Adviser.
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    \4\ The amounts of the investment advisory fees paid for the 
current Series of the Trust are calculated based on the ``Average 
Daily Net Assets'' of the particular Series, which means the average 
daily value of the total assets of the Series, less all accrued 
liabilities of the Series, (other than the aggregate amount of any 
outstanding borrowings constituting financial leverage).
    \5\ The Trust has not entered into a Sub-Advisory Agreement with 
an affiliate of the Adviser. The requested relief will not extend to 
Affiliated Sub-Advisers, as defined below.
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    3. Applicants request an order to permit the Adviser, subject to 
Board approval, including a majority of Independent Trustees, to select 
certain Sub-Advisers to manage all or a portion of the assets of a 
Subadvised Fund pursuant to a Sub-Advisory Agreement and materially 
amend Sub-Advisory Agreements without obtaining shareholder approval. 
The requested relief will not extend to any Sub-Adviser that is an 
affiliated person, as defined in section 2(a)(3) of the Act, of a 
Subadvised Fund, or the Adviser other than by reason of serving as a 
Sub-Adviser to a Subadvised Fund (``Affiliated Sub-Adviser''). Because 
the Sub-Advisers are paid directly by the Subadvised Funds, Applicants 
acknowledge that, after the requested order is issued, shareholder 
approval will still be sought for any amendment to a Sub-Advisory 
Agreement that would increase the total management and advisory fees 
payable by a Subadvised Fund.

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of securities in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any 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 the requested relief meets this standard for 
the reasons discussed below.
    3. Applicants assert that the shareholders expect the Adviser, 
subject to the review and approval of the Board, to select the Sub-
Advisers who are best suited to achieve the Subadvised Fund's 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Sub-Adviser is substantially 
equivalent to the role of the individual portfolio managers employed by 
an investment adviser to a traditional investment company. Applicants 
state that requiring shareholder approval of each Sub-Advisory 
Agreement would impose unnecessary delays and expenses on the 
Subadvised Funds, and may preclude the Adviser from acting promptly in 
a manner considered advisable by the Board. Applicants note that the 
Investment Advisory Agreement and Sub-Advisory Agreement with an 
Affiliated Sub-Adviser (if any) will continue to be subject to the 
shareholder approval requirement of section 15(a) of the Act and rule 
18f-2 under the Act.
    4. If new Sub-Advisers are hired, the Subadvised Funds 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 Subadvised 
Fund, that Subadvised Fund will send its shareholders either a Multi-
manager Notice or a Multi-manager Notice and Multi-manager Information 
Statement; \6\ and (b) the

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Subadvised Fund will make the Multi-manager Information Statement 
available on the Web site identified in the Multi-manager Notice no 
later than when the Multi-manager Notice (or Multi-manager Notice and 
Multi-manager Information Statement) is first sent to shareholders, and 
will maintain it on that Web site for at least 90 days. In the 
circumstances described in this 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. Moreover, as indicated above, the applicable Board would 
comply with the requirements of section 15(a) and 15(c) of the Act 
before entering into or amending Sub-Advisory Agreements.
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    \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 Subadvised Funds.
    A ``Multi-manager Information Statement'' will meet the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Exchange Act for an information statement. Multi-
manager Information Statements will be filed electronically with the 
Commission via the EDGAR system.
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Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Subadvised Fund may rely on the requested order, the 
operation of the Subadvised Fund in the manner described in the 
application will have been approved by a majority of the Subadvised 
Fund's outstanding voting securities as defined in the Act or, in the 
case of a Subadvised Fund whose public shareholders purchase shares on 
the basis of a prospectus containing the disclosure contemplated by 
condition 2 below, by the initial shareholder(s) before such Subadvised 
Fund's shares are offered to the public.
    2. The prospectus for each Subadvised Fund will disclose the 
existence, substance, and effect of any order granted pursuant to this 
application. In addition, each Subadvised Fund will hold itself out to 
the public as employing a multi-manager structure as described in the 
application. The prospectus will prominently disclose that the Adviser 
has ultimate responsibility, subject to oversight by the Board, to 
oversee the Sub-Advisers and recommend their hiring, termination, and 
replacement.
    3. Subadvised Funds 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.
    4. The Adviser will not enter into a Sub-Advisory Agreement with 
any Affiliated Sub-Adviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Subadvised Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    6. Whenever a Sub-Adviser change is proposed for a Subadvised Fund 
with an Affiliated Sub-Adviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board minutes, that the change is in the best interests of the 
Subadvised Fund and its shareholders, and does not involve a conflict 
of interest from which the Adviser or the Affiliated Sub-Adviser 
derives an inappropriate advantage.
    7. The Adviser will provide general management services to each 
Subadvised Fund, including overall supervisory responsibility for the 
general management and investment of the Subadvised Fund's assets, and 
subject to review and approval of the Board, will: (i) Set the 
Subadvised Fund's overall investment strategies; (ii) evaluate, select 
and recommend Sub-Advisers to manage all or a portion of the Subadvised 
Fund's assets; (iii) allocate and, when appropriate, reallocate the 
Subadvised Fund's assets among Sub-Advisers; (iv) monitor and evaluate 
the Sub-Advisers' performance; and (v) implement procedures reasonably 
designed to ensure that the Sub-Advisers comply with the Subadvised 
Fund's investment objective, policies and restrictions.
    8. No trustee or officer of the Trust or of a Subadvised Fund or 
director or officer of the Adviser will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person) any interest in a Sub-Adviser, except for (i) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by, or is under common control with the Adviser; or (ii) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of 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.
    9. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the application, the requested order will expire on the effective 
date of that rule.
    10. Subadvised Funds pay fees to a Sub-Adviser directly from Fund 
assets. Any changes to a Sub-Advisory Agreement that would result in an 
increase in the total management and advisory fees payable by a 
Subadvised Fund will be approved by the shareholders of that Subadvised 
Fund.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14630 Filed 6-14-12; 8:45 am]
BILLING CODE 8011-01-P


