THE VALUE EQUITY PROTFOLIO OF THE HIRTLE CALLAGHAN TRUST
575 East Swedesford Road
Wayne, PA 19087-1613
Dear Shareholder,
Enclosed is a proxy statement asking you to vote in favor of the
engagement of Hotchkis and Wiley LP as an investment manager for the
Trust, and the continuation of this engagement following the
acquisition of the Hotchkis firm by Merrill Lynch & Co., Inc. The
engagement has been approved by the Board of Trustees; under
applicable federal regulations, the engagement must also be approved
by shareholders of The Value Equity Portfolio.
Please take a few moments to review the enclosed proxy statement. If
you have authorized an investment adviser or other fiduciary to vote
shares of The Value Equity Portfolio beneficially held by you, you
need not take any further action. If you wish to instruct your
investment adviser or other fiduciary to vote your shares either
"for" or "against" either or both of the proposals, please follow the
instructions on the enclosed form of proxy, and return it to the
indicated address at your earliest convenience, but not later than
October , 1996.
Thank you for your attention to this matter and for your continuing
support.
Very truly yours,
Donald E. Callaghan
President and Chairman
PRELIMINARY PROXY STATEMENT
THE HIRTLE CALLAGHAN TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
of
THE VALUE EQUITY PORTFOLIO
to be held on
October ___, 1996
TO THE SHAREHOLDERS:
A Special Meeting of shareholders of The Value Equity Portfolio
("Portfolio") of The Hirtle Callaghan Trust (the "Trust") will be
held on October ___, 1996, at the Trust's principal office, which is
located at 575 East Swedesford Road, Wayne, PA 19087-1613.
Shareholders of the Portfolio will meet for the following purposes:
(1) To approve (i) the engagement of Hotchkis and Wiley, an
investment advisory firm currently organized as a limited
partnership, ("Hotchkis LP") to provide portfolio management services
to The Value Equity Portfolio pursuant to a portfolio management
agreement between the Trust and Hotchkis LP, ("Hotchkis Agreement");
and
(2) to approve the continuation of the Hotchkis engagement following
the proposed acquisition of Hotchkis LP by Merrill Lynch & Co., Inc.,
pursuant to a second portfolio management agreement ("Successor
Hotchkis Agreement"), the terms and conditions of which are
substantially the same as those of the Hotchkis Agreement., and
(3) To transact such further business as may properly come
before the meeting or any adjournment thereof.
Shareholders of record at the close of business on ____,199_ are
entitled to vote at the special meeting and any adjournments. If you
attend the meeting, you may vote your shares in person. If you do
not expect to attend the meeting, please fill in, date, sign and
return the proxy in the enclosed envelope which requires no postage
if mailed in the United States.
It is important that you return your signed proxy promptly so that a
quorum may be assured.
BY ORDER OF THE BOARD OF TRUSTEES<PAGE>
THE VALUE EQUITY PORTFOLIO
of
THE HIRTLE CALLAGHAN TRUST
575 East Swedesford Road.
Wayne, PA 19087-1613
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Trustees (the
"Board") of The Hirtle Callaghan Trust (the "Trust"), with respect to
The Value Equity Portfolio (the "Portfolio"). Proxies so solicited
are intended for use at the Special Meeting of Shareholders of The
Value Equity Portfolio or any adjournment of that meeting (the
"Special Meeting"), to be held on October __, 1996 at 575 East
Swedesford Road, Wayne, PA 19087-1613. The purpose of the Special
Meeting is to consider the approval of certain new portfolio
management arrangements, as set forth in the Notice of Meeting
accompanying this proxy statement and more fully described below
("Proposals"). It is anticipated that this Proxy Statement and form
of Proxy will first be mailed to shareholder on or about __________ ,
1996.
Only those persons who were shareholders of record of The Value
Portfolio at the close of business on _________ ("Record Date") are
entitled to notice of, and to vote at, the Special Meeting. On the
Record Date, the Portfolio had outstanding _________ shares, each
share being entitled to one vote. The presence of the holders of 40%
of the outstanding shares of the Portfolio on the Record Date,
represented in person or by proxy, shall constitute a quorum for the
purpose of conducting the business at the Special Meeting. Persons
and groups known by management to own beneficially 5% or more of the
shares of the Portfolio are listed in this Proxy Statement, under the
heading "Information about the Trust."
If the accompanying form of Proxy is executed properly and returned,
shares represented by such Proxy will be voted at the Special Meeting
in accordance with the instructions on the form of Proxy. If no
instructions are specified, shares will be voted For the approval of
the Proposals. If the votes required to approve Proposals are not
received, the persons named as proxies on the accompanying form of
proxy may propose one or more adjournments of the Special Meeting to
permit further solicitation of proxies. When voting on any proposed
adjournment, the persons names as proxies on the enclosed form of
Proxy will vote in favor of the proposed adjournment unless otherwise
directed. A shareholder can revoke the proxy prior to its use by
appearing at the Special Meeting and voting in person, by giving
written notice of such revocation to the Trust or by returning a
subsequently dated form of proxy to the Trust.
Copies of the Trust's most recent annual and semi-annual reports,
including financial statements, have previously been delivered to
shareholders of the Trust. Shareholder of the Trust may obtain
without charge additional copies of such reports by writing to the
Trust at 575 East Swedesford Road, Wayne, PA 19087-1613.
SUMMARY AND INTRODUCTION.
During the period August 25, 1995 through July 29, 1996,
(commencement of the Portfolio's operations), Cowen Asset Management
(hereinafter, "Cowen" or "the Prior Manager") served, pursuant to the
terms of a separate agreement ("Prior Agreement"), as one of two
investment advisory organizations retained by the Trust to provide
portfolio management services for The Value Equity Portfolio. As
more fully described below, the Board of Trustees of the Trust
("Board") determined that it would be in the best interests of the
Portfolio to replace the Prior Manager with another investment
management organization. Accordingly, at a meeting of the Board held
on July 19, 1996, the Board approved the termination of the Prior
Agreement and the engagement of Hotchkis and Wiley, LP ("Hotchkis
LP") under an agreement between Hotchkis and the Trust ("Hotchkis
Agreement"). The terms and conditions of the Hotchkis Agreement,
including the fee to be paid by the Portfolio for portfolio
management services, are substantially the same as those of the Prior
Agreement. Under the Investment Company Act of 1940 ("Investment
Company Act"), the Hotchkis Agreement will terminate automatically if
shareholder approval of that Agreement is not obtained within 120
days of the date on which the Hotchkis Agreement became effective,
the Hotchkis Agreement will terminate. The Hotchkis Agreement became
effective, and the Prior Agreement terminated, on July 29, 1996.
In connection with its consideration of the Hotchkis engagement, the
Board was advised that Merrill Lynch & Co., Inc. ("ML") has agreed to
acquire all of the partnership interests in Hotchkis LP subject to
certain conditions ("Acquisition"). The Board was further advised
that, if the Acquisition is consummated as proposed, the investment
advisory business now operated by Hotchkis LP will become a part of
Merrill Lynch Asset Management LP ("MLAM") to be known as Hotchkis
and Wiley, (hereinafter referred to as "the Hotchkis Division") and
operate as a separate business unit within ML's Capital Management
Group. The Board was also advised by counsel that, if consummated,
the Acquisition described above will constitute a change in the
control of Hotchkis LP which, under the Investment Company Act would
automatically terminate the Hotchkis Agreement. After considering
the matter, including the fact that, following the Acquisition, the
Hotchkis Division would be prepared to continue to provide the same
portfolio management services to the Portfolio in accordance with the
terms and conditions set forth in the Hotchkis Agreement, the Board
determined also to approve the retention of Hotchkis Division
following the Acquisition under an advisory agreement the would
become effective upon consummation of the Acquisition ("Successor
Hotchkis Agreement"). To ensure the continuity of portfolio
management services to The Value Equity Portfolio and to avoid the
expense of holding another meeting of the Portfolio's shareholders
for the purpose of considering the Hotchkis engagement, at the
Special Meeting, shareholders of the Portfolio will also be asked to
approve Successor Hotchkis Agreement. The Successor Hotchkis
Agreement is identical to the Hotchkis Agreement, except for the
description of the portfolio manager, the effective and termination
dates, and the modification of certain notice provisions relating to
the obligation of Hotchkis to indemnify the Trust under certain
circumstances. A copy of the Hotchkis Agreement appears as Exhibit A
to this Proxy Statement. A copy of the form of Successor Hotchkis
Agreement, marked to reflect those provisions that are different from
the Hotchkis Agreement, appears as Exhibit B.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE "FOR" PROPOSALS I AND II.
PROPOSAL I: Approval of the Hotchkis Agreement
Background. The investment objective of The Value Equity Portfolio
is to provide total return consisting of capital appreciation and
current income. The Portfolio seeks to achieve this objective
primarily through investment in a diversified portfolio of equity
securities, generally emphasizing those with relatively lower price
earnings ratios, but higher dividend income than the average range
for stock included in the Standard & Poor's 500 Stock Index ("S & P
Index"). When it commenced operations on August 25, 1995, the
Portfolio was served by two separate investment management
organizations: Cowen Asset Management and Institutional Capital
Corporation ("ICAP"). Although both managers are required to adhere
to the Portfolio's investment objective, policies and restrictions,
each may do so in the context of its own management style. As part
of its overall responsibility to supervise these managers, the Board
attempts to ensure that the respective portfolio management styles
are complementary.
During the course of the Portfolio's first fiscal year, that portion
of the Portfolio allocated to Cowen proved to be more interest rate
sensitive than desired. In addition, the investment discipline
followed by Cowen, which generally requires that securities which
fail to meet certain yield criteria be sold, appeared to result in an
over weighting in certain market segments. Acting through its
Executive Committee, the Board considered several courses of action,
including reducing the portion of the Portfolio's assets allocated to
the Cowen and replacing Cowen with another investment advisory
organization whose investment style would result in an investment
portfolio less sensitive to interest rates. After considering these
and several other options, the Executive Committee recommended that
Cowen be replaced by Hotchkis LPS
FACTORS CONSIDERED BY THE BOARD OF TRUSTEES.
At a special meeting of the Board held on July 19, 1996, the Board
considered the recommendation of its Executive Committee.
Thereafter, the Board, including a majority of those Trustees
("Independent Trustees") who are not "interested persons" of the
Trust within the meaning of the Investment Company Act, approved the
Hotchkis Agreement. During the course of its deliberations, and in
addition to the investment related factors summarized above, the
Board discussed information provided to it relating to the management
style and past performance record of Hotchkis LP. The Board was also
presented with information relating to the nature and quality of the
services to be provided by Hotchkis LP, the background and experience
of those individuals who would be responsible for making day-to-day
investment decisions with respect to assets of the Portfolio and
other registered investment companies to which Hotchkis LP provides
investment advisory services. The Board also considered the fact
that the terms and conditions pursuant to which Hotchkis LP would
provide its services were substantially the same as those contained
in the Cowen Agreement, and in particular, that the advisory fee to
be paid to Hotchkis LP was the same as the advisory fee paid by the
Portfolio to Cowen.
The Board was also advised by counsel regarding its responsibilities
under Section 15(c) of the Investment Company Act and the
requirements of Section 15(a) of that Act. In particular, it was
noted that Section 15 of the Investment Company Act normally would
prohibit any person from serving as an investment adviser to a
registered investment company unless the written contract has been
approved by the shareholders of that company. Counsel also discussed
the exception to this requirement contained in rule 15a-4 under the
Investment Company Act. Under that provision, an adviser may provide
advisory services to an investment company pursuant to a written
contract approved by the investment company's board of directors
(including those directors who are not "interested persons" of the
company or the adviser) in the event that a prior advisory contract
is terminated by action of such company's board, provided such
contract is approved within 120 days of its effective date by the
shareholders of such company.
DESCRIPTION OF THE HOTCHKIS AGREEMENT
The terms and conditions set forth in the Hotchkis Agreement are
identical to those contained in the Prior Agreement except for the
description of the portfolio manager, the effective and termination
dates, and the modification of certain notice provisions relating to
the obligation of Hotchkis to indemnify the Trust under certain
circumstances. Both agreements require the portfolio manager,
subject to the overall supervision of the Board, to provide a
continuous investment program for the assets of the Portfolio, or
that portion of such assets as may be, from time to time allocated to
it. Under both agreements, the named portfolio manager is
responsible, among other things, for the provision of investment
research and management of all investments and the selection of
brokers and dealers through which securities transactions are
executed, as well as the maintenance of certain records required
under relevant provisions of the Investment Company Act. The
agreements each also provide that the portfolio manager will not be
liable to the Trust for any error of judgment or mistake of law on
the part of the portfolio manager for any loss sustained by the Trust
in connection with the purchase or sale of any instrument on behalf
of the Portfolio, except losses that may be sustained as a result of
willful misfeasance, reckless disregard of its duties, misfeasance,
bad faith or gross negligence on the part of the portfolio manager.
Each of the agreements also provides for its termination, at any time
and without penalty, either by the Trust or by the portfolio manager,
in each case upon sixty days' written notice, and its termination in
the event of an "assignment" as defined in the 1940 Act.
The Hotchkis Agreement became effective on July 29, 1996, the date on
which the Prior Agreement was terminated, in accordance with section
7 of the Hotchkis Agreement and as permitted under rule 15a-4 of the
1940 Act. It will continue in effect for two years from its
effective date, unless sooner terminated, provided that the Hotchkis
Agreement is approved by the shareholders of The Value Equity
Portfolio within 120 days of such effective date. Thereafter, the
Hotchkis Agreement shall continue in effect from year to year for so
long as its continuance is specifically approved, at least annually,
by (i) a majority of the Board or the vote of the holders of a
majority of the Portfolio's outstanding voting securities; and (ii)
the affirmative vote, cast in person at a meeting called for the
purpose of voting on such continuance, of a majority of the Trust's
Independent Trustees. Section 5 of the Hotchkis Agreement provides
that the indemnification obligation of the portfolio manager with
respect to information provided to the Trust by Hotchkis L.P. in
writing for use in the Trust's registration statement and certain
other documents shall not apply unless the portfolio manager has had
an opportunity to review such documents for a specified period of
time prior to the date on which they are filed with the Securities
and Exchange Commission and unless the portfolio manager is notified
in writing of any claim for indemnification within specified periods.
The Prior Agreement was approved by the Trust's Board (including the
Independent Trustees) at a meeting of the Board held on July 20,
1995, and by the its initial shareholder on July 21, 1995. Had it
not been terminated by the Board as described above, the Prior
Agreement would have remained in effect until its second anniversary,
and would have continued in effect thereafter from year to year so
long as such continuation is approved by the Trust's Board in
accordance with the 1940 Act. The Prior Agreement also provided for
the indemnification of the Trust under substantially the same
conditions set forth in the Hotchkis Agreement, but did not include
the prior review or notice conditions included in the Hotchkis
Agreement.
INFORMATION ABOUT HOTCHKIS AND WILEY
The principal address of Hotchkis LP is 800 West 6th Street, Los
Angeles, California 90017. The managing directors of Hotchkis LP are
John Hotchkis, Geroge Wiley, Roger DeBard, George Davis, Michael
Baxter and Gail Bardin. Each of these individuals, whose business
address is 800 West 6th Street, Los Angeles, CA 90017, also serves as
a portfolio manager for Hotchkis LP. With the exception of Mr.
Wiley, each has agreed to sign a long-term employment agreement with,
and will serve as a managing director of, ML's Capital Management
Group. Hotchkis LP is a California limited partnership which, in
1995, reorganized through a transaction in which all of then general
partners of the firm contributed their interests to Hotchkis and
Wiley LLC, a newly organized Delaware limited liability company
("LLC"). Such general partners then become members of the LLC and
the LLC became the new general partner of Hotchkis LP. The majority
of the voting interests in the LLC are held by Mr. Hotchkis, Mr.
Wiley and entities controlled by Mr. Wiley.
Hotchkis LP, which has been engaged in the investment advisory
business since 1980, had, as of June 30, 1996, over $10 billion in
assets under management, $1.5 billion of which represented assets of
registered investment companies. Certain information about those
investment companies for which Hotchkis LP serves in either an
investment advisory or subadvisory capacity, and whose investment
objectives and policies are similar to the investment objectives and
policies of The Value Equity Portfolio are listed below.
FUND ANNUAL FEE ASSETS
(as a % of average assets) (6/30/96)
Hotchkis and Wiley
Equity Income Fund .75 of 1% of average daily $182,538,112
net assets (annual expenses
of the Fund are limited to 1%
such assets)
American AAdvantage For all accounts (incl. $233,800,475
Growth and Income separate accounts) combined
Fund .60% of the first $10 million
.50% of the next $140 million
.30% of the next $50 million
.20% over $200 million
The Target Portfolio .30% of daily net assets $104,189,998
Trust -- Large
Capitalization Equity
Portfolio
Approval of the Hotchkis Agreement requires the approval of a
"majority of the outstanding voting securities" of the Portfolio.
Under the Investment Company Act, this term means the lesser of (i)
67% of the outstanding shares represented at a meeting at which more
than 50% of the outstanding shares are present in person or
represented by proxy, or (ii) more than 50% of the Portfolio's
outstanding voting securities. If the Hotchkis Agreement is not
approved by the Portfolio's shareholders at the Special Meeting, that
agreement will terminate.
PROPOSAL II: Approval of The Successor Hotchkis Agreement
Background. If Proposal I is approved by the shareholders of The
Value Equity Portfolio, the Hotchkis Agreement will continue in
effect until July 29, 1997, and thereafter from year to year,
provided it is approved each year by the Trust's Board, including
the Independent Trustees, and provided it is not sooner terminated.
As noted above, the Acquisition by ML of Hotchkis LP will result in
the automatic termination of the Hotchkis Agreement. Therefore, if
the Hotchkis engagement is to continue uninterrupted following the
Acquisition, shareholders of the Portfolio must approve the Successor
Hotchkis Agreement. Such approval must occur before the Successor
Hotchkis Agreement can become effective. Approval of the Successor
Hotchkis Agreement also requires the approval of a "majority of the
outstanding voting securities" of the Portfolio, as that term is
defined in the Investment Company Act. If the Successor Hotchkis
Agreement is not approved by the Portfolio's shareholders prior to
the consummation of the Acquisition (and resulting automatic
termination of the Hotchkis Agreement), the Successor Hotchkis
Agreement will not become effective and the Hotchkis engagement will
terminate as of the Effective Date of the Acquisition.
FACTORS CONSIDERED BY THE BOARD OF TRUSTEES.
The Board considered the Successor Hotchkis Agreement at the Special
Meeting of the Board held on July 19, 1996. Thereafter, the Board,
including a majority of the Independent Trustees, approved the
Hotchkis Agreement. At its meeting, the Board considered, among
other things, the impact that the Acquisition, if consummated, would
have on the ability of the Hotchkis firm to continue to deliver
quality investment advisory services to the Portfolio. The Board
reviewed representations made by Hotchkis LP to officers of the
Trust, to the effect that, except for the retiring Mr. George Wiley,
all of the investment personnel upon whose expertise the Executive
Committee relied in recommending that the Board approve the Hotchkis
engagement have agreed to sign long-term employment agreements with
ML Capital Management Group and remain with the Hotchkis Division.
In addition, the Board considered similar representation that no
changes in investment philosophy or processes are anticipated
following the Acquisition.
The Board was also advised by counsel with respect to the impact that
the affiliation between the Portfolio and ML (an affiliation that
would be created as a result of the Acquisition) might have on the
Portfolio's trading practices. In particular, it was noted that,
following the Acquisition, the Portfolio would not, absent an order
of exemption issued by the Securities and Exchange Commission ("SEC
Order"), be permitted to engage in principal transactions with ML or
any affiliate of ML. It was also noted that the Portfolio, and each
of the other Portfolios of the Trust would likely be prohibited from
investing in securities issued by ML or any affiliate of ML following
the Acquisition, absent an SEC order permitting such investments..
INFORMATION ABOUT ML AND MLAM
ML, a Delaware corporation formed in 1973, is a holding company,
whose shares are publicly held. Through its subsidiaries and
affiliates, ML provides investment, financing, insurance and related
services on a global basis. Such services include securities
brokering, trading and underwriting activities; asset management and
other investment advisory services; investment banking and other
corporate finance advisory services; trading of foreign exchange
instruments, futures, commodities and derivatives; securities
clearance services; and banking, trust and lending services. These
services are provided to a large group of clients and customers,
including individual investors, corporations, governments and
governmental agencies and financial institutions. ML conducts its
business through a number of highly integrated subsidiaries and
affiliates that frequently participate in the facilitation and
consummation of a single transaction. ML is headquartered in New
York City, New York, and has additional principal locations in New
Jersey, London, Tokyo, Hong Kong, various regional facilities located
in the United States and in other countries and numerous retail sales
and other offices throughout the world. ML's asset management
activities are conducted through, or are managed by, MLAM, Fund Asset
Management, LP and certain other affiliates of MLAM. At the end of
1995, these companies managed 217 portfolios, including mutual funds,
representing a wide variety of investment objectives; their total
assets under management at the end of 1995 were approximately $196
billion. MLAM is located at 800 Scudders Mill Road, Plainsboro, New
Jersey 08536. MLAM is a limited partnership, 100% of the interests
in which are owned by ML or its subsidiaries. Princeton Services,
Inc. Is the general partner of MLAM (owned through a holding company
by ML). The president of MLAM is Arthur Zeikel.
INFORMATION ABOUT THE ML ACQUISITION
On June 19, 1996, Messrs. Hotchkis and Wiley, together with the other
members of Hotchkis and Wiley LLC, the general partner of Hotchkis
LP, entered into a definitive agreement ("Acquisition Agreement") to
sell all of the partnership interests in Hotchkis and Wiley to ML.
The Acquisition, which is subject to various approvals and consents,
is expected to close by the end of the fourth quarter of 1996. As
noted in above under the heading "Summary and Introduction," the
Acquisition will result in the establishment of the Hotchkis Division
as a part of MLAM. The Hotchkis Division will operate as a separate
business unit within ML's Capital Management Group. No changes in
investment philosophy or processes are anticipated and the Hotchkis
Division will remain in Los Angeles. In connection with the
Acquisition, ML has provided incentives for certain key personnel to
remain employed with the Hotchkis Division. Specifically, it is
anticipated that Mr. Hotchkis will enter into an employment agreement
to serve as chairman of the Hotchkis Division and that Mr. Wiley, who
is retiring, will serve as a special adviser to the ML's Capital
Management Group pursuant to a service agreement. It is also
expected that substantially all of those managing directors, and key
employees of Hotchkis LP who are responsible for equity management
will sign long-term employment agreements with ML.
INFORMATION ABOUT THE TRUST
Pursuant to a written agreement ("HCCI Consulting Agreement") Hirtle,
Callaghan & Co., Inc. ("Hirtle Callaghan") continuously monitors the
performance of various investment management organizations, including
the several portfolio managers retained by the Trust. The HCCI
Consulting Agreement provides that Hirtle Callaghan will make its
officers available to serve as officers and/or Trustees of the Trust,
and maintain office space sufficient for the Trust's principal
office. For its services under The HCCI Consulting Agreement, Hirtle
Callaghan is entitled to receive an annual fee of .05% of each
Portfolio's average net assets. Hirtle Callaghan's principal offices
are located at 575 East Swedesford Road, Wayne, Pennsylvania 19087.
Hirtle Callaghan was organized in 1988 and has no history of
operation prior to that date. However, Hirtle Callaghan has, since
1988, been registered as an investment adviser under the Investment
Advisers Act of 1940 and, as of June 30, 1996 had approximately
$______ million of assets under management. Hirtle Callaghan is
controlled by Jonathan Hirtle and Donald E. Callaghan, each of whom
also serves on the Trust's Board and as an officer of the Trust. The
HCCI Consulting Agreement was approved by the Trust's initial
shareholder on July 21, 1995, following the approval of the Trust's
Board (including a majority of the Trust's Independent Trustees) at a
meeting of the Board held on July 20, 1995.
The Trust was organized as a Delaware business trust on December 15,
1994, and is registered with the Securities and Exchange Commission
as an open-end diversified, series, management investment company.
The Trust currently offers shares of five investment portfolios, one
of which is The Value Equity Portfolio. Each of the Trust's
investment portfolios had a different objective and differing
investment policies and the Trust may organize additional investment
portfolios in the future. The Trust is authorized to issue an
unlimited number of shares, each with a par value of $.001. Under
the Trust's Amended and Restated Declaration of Trust, the Board has
the power to classify or reclassify any unissued shares from time to
time, and to increase the number of authorized shares. Each share of
the respective Portfolios represents an equal proportionate interest
in that Portfolio. Each share is entitled to one vote for the
election of Trustees and any other matter submitted to a shareholder
vote. Voting rights are not cumulative and, accordingly, the holders
of more than 50% of the aggregate shares of the Trust may elect all
of the Trustees. Shares of the Trust do not have preemptive or
conversion rights and, when issued for payment as described in this
prospectus, shares of the Trust will be fully paid and
non-assessable.
As a Delaware business trust, the Trust is not required, and
currently does not intend, to hold annual meetings of shareholders
except as required by the Investment Company Act or other applicable
law. The Investment Company Act requires initial shareholder
approval of each of the investment advisory agreements, election of
Trustees and, if the Trust holds an annual meeting, ratification of
the Board's selection of the Trust's independent public accountants.
Under certain circumstances, the law provides shareholders with the
right to call for a meeting of shareholders to consider the removal
of one or more Trustees. To the extent required by law, the Trust
will assist in shareholder communication in such matters.
As of the Record Date, to the knowledge of the Trust, no shareholder
owned beneficially more than 5% of the outstanding shares of the
Portfolio. As of that date, Bankers Trust Company and PNC Bank held
______ and _____ shares of the Portfolio, as nominee.
OTHER MATTERS
A properly executed and returned form of Proxy marked with an
abstention will be considered present at the Special meeting for the
purpose of determining the existence of a quorum. If any form of
proxy received by the Trust that withholds authority to vote
represents a "broker non-vote," shares represented by such form of
proxy will be not be counted for purposes of determining whether or
not a quorum is present at the Special Meeting and will not be deemed
"votes cast" with respect to any matter with respect to which
authority to vote is withheld. As used in this Proxy Statement,
"broker non-vote" means a form of proxy, executed by a broker or
other nominee, indicating that the nominee has not received
instructions from the beneficial owner or other person entitled to
vote shares on a particular matter with respect to which the broker
or nominee does not have discretionary power. Abstentions and broker
non-votes will thus not constitute a vote "for" or "against" any
matter, but will have the same effect as a negative vote with respect
to matters which require the approval of a requisite percentage of
the outstanding shares of the Portfolio.
By Order of the Board of Trustees,
_____________________________
Chairman of the Board of Trustees
_____________________, 199_
Exhibit A
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made as of July 29, 1996 between HOTCHKIS and WILEY, a
California limited partnership, ("Portfolio Manager") and THE HIRTLE
CALLAGHAN TRUST, a Delaware business trust ("Trust"), for
effectiveness in accordance with Section 7 hereof.
WHEREAS, the Trust is registered as an open-end, diversified,
management series investment company under the Investment Company Act
of 1940, as amended ("Investment Company Act") which currently offers
five series of beneficial interests ("shares") representing interests
in separate investment portfolios, and may offer additional
portfolios in the future; and
WHEREAS, the Trust desires to retain the Portfolio Manager to provide
a continuous program of investment management for The Value Equity
Portfolio of the Trust ("Portfolio") and Portfolio Manager is
willing, in accordance with the terms and conditions hereof, to
provide such services to the Trust;
NOW THEREFORE, in consideration of the promises and covenants set
forth herein and intending to be legally bound hereby, it is agreed
between the parties as follows:
1. Appointment of Portfolio Manager.
The Trust hereby retains Portfolio Manager to provide the investment
services set forth herein and Portfolio Manager agrees to accept such
appointment. In carrying out its responsibilities under this
Agreement, the Portfolio Manager shall at all times act in
accordance with the investment objectives, policies and restrictions
applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the
Investment Company Act and the rules and regulations promulgated
under that Act and other applicable federal securities laws.
2. Duties of Portfolio Manager.
(a) Portfolio Manager shall provide a continuous program of
investment management for that portion of the assets of the Portfolio
("Account") that may, from time to time be allocated to it by the
Trust's Board of Trustees, in writing, by an authorized officer of
the Trust. It is understood that the Account may consist of all, a
portion of or none of the assets of the Portfolio, and that the Board
of Trustees has the right to allocate and reallocate such assets to
the Account at any time, and from time to time, upon such notice to
the Portfolio Manager as may be reasonably necessary, in the view of
the Trust, to ensure orderly management of the Account or the
Portfolio.
(b) Subject to the general supervision of the Trust's Board of
Trustees, Portfolio Manager shall have sole investment discretion
with respect to the Account, including investment research, selection
of the securities to be purchased and sold and the portion of the
Account, if any, that shall be held uninvested, and the selection of
brokers and dealers through which securities transactions in the
Account shall be executed. Specifically, and without limiting the
generality of the foregoing, Portfolio Manager agrees that it will:
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as
the case may be, made on behalf of the Account, specifying the
name and quantity of the security purchased or sold, the unit and
aggregate purchase or sale price, commission paid, the market on
which the transaction was effected, the trade date, the
settlement date, the identity of the effecting broker or dealer
and/or such other information, and in such manner, as may from
time to time be reasonably requested by the Trust;
(ii) maintain all applicable books and records with respect to
the securities transactions of the Account. Specifically,
Portfolio Manager agrees to maintain with respect to the Account
those records required to be maintained under Rule 31a-1(b)(1),
(b)(5) and (b)(6) under the Investment Company Act with respect
to transactions in the Account including, without limitation,
records which reflect securities purchased or sold in the
Account, showing for each such transaction, the name and quantity
of securities, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was
effected, the trade date, the settlement date, and the identity
of the effecting broker or dealer. Portfolio Manager will
preserve such records in the manner and for the periods
prescribed by Rule 31a-2 under the Investment Company Act.
Portfolio Manager acknowledges and agrees that all records it
maintains for the Trust are the property of the Trust and
Portfolio Manager will surrender promptly to the Trust any such
records upon the Trust's request;
(iii) provide, in a timely manner, such information as may be
reasonably requested by the Trust or its designated agents in
connection with, among other things, the daily computation of the
Portfolio's net asset value and net income, preparation of proxy
statements or amendments to the Trust's registration statement
and monitoring investments made in the Account to ensure
compliance with the various limitations on investments applicable
to the Portfolio and to ensure that the Portfolio will continue
to qualify for the special tax treatment accorded to regulated
investment companies under Subchapter M of the Internal Revenue
Code of 1986, as amended; and
(iv) render regular reports to the Trust concerning the
performance of Portfolio Manager of its responsibilities under
this Agreement. In particular, Portfolio Manager agrees that it
will, at the reasonable request of the Board of Trustees, attend
meetings of the Board or its validly constituted committees and
will, in addition, make its officers and employees available to
meet with the officers and employees of the Trust at least
quarterly and at other times upon reasonable notice, to review
the investments and investment program of the Account.
3. Portfolio Transaction and Brokerage. In placing orders for
portfolio securities with brokers and dealers, Portfolio Manager
shall use its best efforts to execute securities transactions on
behalf of the Account in such a manner that the total cost or
proceeds in each transaction is the most favorable under the
circumstances. Portfolio Manager may, however, in its discretion,
direct orders to brokers that provide to Portfolio Manager research,
analysis, advice and similar services, and Portfolio Manager may
cause the Account to pay to those brokers a higher commission than
may be charged by other brokers for similar transactions, provided
that Portfolio Manager determines in good faith that such commission
is reasonable in terms either of the particular transaction or of the
overall responsibility of the Portfolio Manager to the Account and
any other accounts with respect to which Portfolio Manager exercises
investment discretion, and provided further that the extent and
continuation of any such practice is subject to review by the Trust's
Board of Trustees. Portfolio Manager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an
"affiliated person" of the Trust or Portfolio Manager, including any
other investment advisory organization that may, from time to time
act as a portfolio manager for the Portfolio or any of the Trust's
other Portfolios, without prior written approval of the Trust. The
Trust shall provide a list of such affiliated brokers and dealers to
Portfolio Manager and will promptly advise Portfolio Manager of any
changes in such list.
4. Expenses and Compensation.
Portfolio Manager shall pay all of its expenses incurred in the
performance of its duties under this Agreement and shall not be
required to pay any other expenses of the Trust. For its services
under this Agreement, Portfolio Manager shall be entitled to receive
a fee at the annual rate of .30% of the average daily net asset value
of the Account, which fee shall be payable monthly.
5. Limitation of Liability and Indemnification.
(a) Portfolio Manager shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates including, without
limitation, losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security or other
investment by the Trust except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Portfolio
Manager in the performance of its duties or from reckless disregard
by it of its duties under this Agreement.
(b) Notwithstanding the foregoing, Portfolio Manager expressly agrees
that the Trust may rely upon information provided, in writing, by
Portfolio Manager to the Trust (including, without limitation,
information contained in Portfolio Manager's then current Form ADV)
in accordance with Section 9 of the Agreement or otherwise, in
preparing the Trust's registration statement and amendments thereto
and certain periodic reports relating to the Trust and its Portfolios
that are required to be furnished to shareholders of the Trust and/or
filed with the Securities and Exchange Commission ("SEC Filings"),
provided that a copy of any such filing is provided to Portfolio
Manager (i) at least 10 business days prior to the date on which it
will become effective, in the case of a registration statement; (ii)
at least 10 business days prior to the date upon which it is filed
with the SEC in the case of the Trust's semi-annual report on Form
N-SAR or any shareholder report or proxy statement.
(c) Portfolio Manager agrees to indemnify and hold harmless the
Trust and each of its Trustees, officers and employees from any
claims, liabilities and expenses, including reasonable attorneys'
fees, (collectively, "Losses") to the extent that Losses are incurred
as a result of statements contained in an SEC Filing ("Disputed
Statements") that are misleading either because they are (i) untrue
statements of material fact; or (ii) omitted to state any material
fact necessary in order to make the statements made, in the light of
the circumstances under which they are made, not misleading. For
purposes of the indemnification obligation set forth in this Section
5(c), a Disputed Statement will be deemed misleading if so declared
by a decision of a court or administrative law judge or in an order
of settlement issued by any court or administrative body.
(d) Portfolio Manager further agrees to indemnify and hold harmless
the Trust and each of its Trustees, from any Losses to the extent
that such Losses are incurred as a result of Disputed Statements that
are alleged (i) to be untrue statements of material fact; or (ii) to
have omitted to state any material fact necessary in order to make
the statements made, in the light of the circumstances under which
they are made, provided that the indemnification obligation set forth
in this Section 5(d) is expressly limited to Losses arising from
Disputed Statements that accurately reflect information provided to
the Trust in writing by the Portfolio Manager and that cannot be
independently verified by the Trust. Further, the indemnification
set forth in this Section 5(d) will not require reimbursement of fees
or expenses other than those incurred by the Trust's regular counsel
in connection with such counsel's representation of the Trust or its
Trustees.
(e) The indemnification obligations set forth in Sections 5(c) and
(d) shall not apply unless (i) Disputed Statements accurately
reflect information provided to the Trust in writing by the Portfolio
Manager; (ii) Disputed Statements were included in an SEC Filing in
reliance upon written information provided to the Trust by the
Portfolio Manager; (iii) the Portfolio Manager was afforded the
opportunity to review Disputed Statements in connection with the 10
business day review requirement set forth in Section 5(b) above; and
(iv) upon receipt by the Trust of any notice of the commencement of
any action or the assertion of any claim to which the indemnification
obligations set forth in Section 5(c) and (d) may apply, the Trust
notifies the Portfolio Manager, within 30 days and in writing, of
such receipt and provides to Portfolio Manager the opportunity to
participate in the defense and/or settlement of any such action or
claim. Further, Portfolio Manager will not be required to indemnify
any person under this Section 5 to the extent that Portfolio Manager
relied upon statements or information furnished to the Portfolio
Manager, in writing, by any officer, employee or Trustee of the
Trust, or by the Trust's Custodian, Administrator or Accounting Agent
or any other agent of the Trust, in preparing written information
provided to the Trust and upon which the Trust relied in preparing
any Disputed Statement.
6. Permissible Interest.
Subject to and in accordance with the Trust's Declaration of Trust
and Bylaws and corresponding governing documents of Portfolio
Manager, Trustees , officers, agents and shareholders of the Trust
may have an interest in the Portfolio Manager as officers, directors,
agents and/or shareholders or otherwise. Portfolio Manager may have
similar interests in the Trust. The effect of any such
interrelationships shall be governed by said governing documents and
the provisions of the Investment Company Act.
7. Duration, Termination and Amendments.
This Agreement shall become effective as of the date on which that
certain contract between Cowen Asset Management and the Trust
relating to the Portfolio terminates. This Agreement shall continue
in effect for two years from its effective date, unless sooner
terminated, provided that this Agreement is approved by the
shareholders of The Value Equity Portfolio within 120 days of such
effective date. Thereafter, this Agreement shall continue in effect
from year to year for so long as its continuance is specifically
approved, at least annually, by (i) a majority of the Board of
Trustees or the vote of the holders of a majority of the Portfolio's
outstanding voting securities; and (ii) the affirmative vote, cast in
person at a meeting called for the purpose of voting on such
continuance, of a majority of those members of the Board of Trustees
("Independent Trustees ") who are not "interested persons" of the
Trust or any investment adviser to the Trust.
This Agreement may be terminated by the Trust or by Portfolio Manager
at any time and without penalty upon sixty days written notice to the
other party, which notice may be waived by the party entitled to it.
This Agreement may not be amended except by an instrument in writing
and signed by the party to be bound thereby provided that if the
Investment Company Act requires that such amendment be approved by
the vote of the Board, the Independent Trustees and/or the holders of
the Trust's or the Portfolio's outstanding shareholders, such
approval must be obtained before any such amendment may become
effective. This Agreement shall terminate upon its assignment.
For purposes of this Agreement, the terms "majority of the
outstanding voting securities, "assignment" and "interested person"
shall have the meanings set forth in the Investment Company Act.
8. Confidentiality; Use of Name.
Portfolio Manager acknowledges and agrees that during the course of
its responsibilities hereunder, it may have access to certain
information that is proprietary to the Trust or to one or more of the
Trust's agents or service providers. Portfolio Manager agrees that
Portfolio Manager, its officers and its employees shall treat all
such proprietary information as confidential and will not use or
disclose information contained in, or derived from such material for
any purpose other than in connection with the carrying out of
Portfolio Manager's responsibilities hereunder. In addition,
Portfolio Manager shall use its best efforts to ensure that any agent
or affiliate of Portfolio Manager who may gain access to such
proprietary materials shall be made aware of the proprietary nature
of such materials and shall likewise treat such materials as
confidential.
It is acknowledged and agreed that the names "Hirtle Callaghan,"
"Hirtle Callaghan Chief Investment Officers" (which is a registered
trademark of Hirtle, Callaghan & Co., Inc. ("HCCI")), and derivatives
of either, as well as any logo that is now or shall later become
associated with either name ("Marks") are valuable property of
Hirtle, Callaghan and Co. Inc. ("HCCI") and that the use of the
Marks, or any one of them, by the Trust or its agents is subject to
the license granted to the Trust HCCI. Portfolio Manager agrees that
it will not use any Mark without the prior written consent of the
Trust. Portfolio Manager consents to use of its name, performance
data, biographical data and other pertinent data by the Trust for use
in marketing and sales literature, provided that any such marketing
and sales literature shall not be used by the Trust without the prior
written consent of Portfolio Manager, which consent shall not be
unreasonably withheld. The provisions of this Section 8 shall
survive termination of this Agreement.
9. Representation, Warranties and Agreements of Portfolio Manager.
Portfolio Manager represents and warrants that:
(a) It is registered as an investment adviser under the Investment
Advisers Act of 1940 ("Investment Advisers Act"), it will maintain
such registration in full force and effect and will promptly report
to the Trust the commencement of any formal proceeding that could
render the Portfolio Manager ineligible to serve as an investment
adviser to a registered investment company under Section 9 of the
Investment Company Act.
(b) It understands that, as a result of its services hereunder,
certain of its employees and officers may be deemed "access persons"
of the Trust within the meaning of Rule 17j-1 under the Investment
Company Act and that each such access person is subject to the
provisions of the code of ethics ("Trust's Code") adopted by the
Trust in compliance with such rule. Portfolio Manager further
represents that it is subject to a written code of ethics ("Portfolio
Manager's Code") complying with the requirements of Rule 204-2(a)(12)
under the Investment Advisers Act and will provide the Trust with a
copy of such code of ethics. During the period that this Agreement
is in effect, an officer or director of Portfolio Manager shall
certify to the Trust, on a quarterly basis, that Portfolio Manager
has complied with the requirements of the Portfolio Manager's Code
during the prior year; and that either (i) that no violation of such
code occurred or (ii) if such a violation occurred, that appropriate
action was taken in response to such violation. In addition,
Portfolio Manager acknowledges that the Trust may, in response to
regulations or recommendations issued by the Securities and Exchange
Commission or other regulatory agencies, from time to time, request
additional information regarding the personal securities trading of
its directors, partners, officers and employees and the policies of
Portfolio Manager with regard to such trading. Portfolio Manager
agrees that it make every effort to respond to the Trust's reasonable
requests in this area.
(c) Upon request of the Trust, Portfolio Manager shall promptly
supply the Trust with any information concerning Portfolio Manager
and its stockholders, employees and affiliates that the Trust may
reasonably require in connection with the preparation of its
registration statements, proxy materials, reports and other documents
required, under applicable state or Federal laws, to be filed with
state or Federal agencies or to be provided to shareholders of the
Trust.
10. Status of Portfolio Manager.
The Trust and Portfolio Manager acknowledge and agree that the
relationship between Portfolio Manager and the Trust is that of an
independent contractor and under no circumstances shall any employee
of Portfolio Manager be deemed an employee of the Trust or any other
organization that the Trust may, from time to time, engage to provide
services to the Trust, its Portfolios or its shareholders. The
parties also acknowledge and agree that nothing in this Agreement
shall be construed to restrict the right of Portfolio Manager or its
affiliates to perform investment management or other services to any
person or entity, including without limitation, other investment
companies and persons who may retain Portfolio Manager to provide
investment management services and the performance of such services
shall not be deemed to violate or give rise to any duty or
obligations to the Trust.
11. Counterparts and Notice.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original. Any notice required to be
given under this Agreement shall be deemed given when received, in
writing addressed and delivered, by certified mail, by hand or via
overnight delivery service as follows, or to such other person or
address as may be designated, in writing, by the party to whom such
notice is to be given:
If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087
If to Portfolio Manager:
Hotchkis and Wiley
800 West Sixth Street, Fifth Floor
Los Angeles, California 90017
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed
by the law of the state of Delaware provided that nothing herein
shall be construed as inconsistent with the Investment Company Act or
the Investment Advisers Act.
Portfolio Manager is hereby expressly put on notice of the
limitations of shareholder and Trustee liability set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed
by the Trust pursuant to this Agreement shall be limited in all cases
to the assets of the Portfolio. Portfolio Manager further agrees
that it will not seek the satisfaction of any such obligations from
the shareholders or any individual shareholder of the Trust, or from
the Trustees of the Trust or any individual Trustee of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day
and year first written above.
/s/ Hotchkis and Wiley L.P.
/s/ The Hirtle Callaghan Trust
EXHIBIT B -- FORM OF AGREEMENT (Post Acquisition)
The form of agreement below is marked to show changes from the
Hotchkis Agreement. Material in brackets deleted; uppercase text to
be added.
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made [as of July _____,]THIS __________DAY OF __________
1996, between HOTCHKIS and WILEY, [a California limited
partnership,]("Portfolio Manager"), A DIVISION OF MERRILL LYNCH ASSET
MANAGEMENT, L.P. A __________ LIMITED PARTNERSHIP, and THE HIRTLE
CALLAGHAN TRUST, a Delaware business trust ("Trust"), for
effectiveness in accordance with Section 7 hereof.
WHEREAS, the Trust is registered as an open-end, diversified,
management series investment company under the Investment Company Act
of 1940, as amended ("Investment Company Act") which currently offers
five series of beneficial interests ("shares") representing interests
in separate investment portfolios, and may offer additional
portfolios in the future; and
WHEREAS, the Trust desires to retain the Portfolio Manager to provide
a continuous program of investment management for The Value Equity
Portfolio of the Trust ("Portfolio") and Portfolio Manager is
willing, in accordance with the terms and conditions hereof, to
provide such services to the Trust;
NOW THEREFORE, in consideration of the promises and covenants set
forth herein and intending to be legally bound hereby, it is agreed
between the parties as follows:
1. Appointment of Portfolio Manager.
The Trust hereby retains Portfolio Manager to provide the investment
services set forth herein and Portfolio Manager agrees to accept such
appointment. In carrying out its responsibilities under this
Agreement, the Portfolio Manager shall at all times act in
accordance with the investment objectives, policies and restrictions
applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the
Investment Company Act and the rules and regulations promulgated
under that Act and other applicable federal securities laws.
2. Duties of Portfolio Manager.
(a) Portfolio Manager shall provide a continuous program of
investment management for that portion of the assets of the Portfolio
("Account") that may, from time to time be allocated to it by the
Trust's Board of Trustees, in writing, by an authorized officer of
the Trust. It is understood that the Account may consist of all, a
portion of or none of the assets of the Portfolio, and that the Board
of Trustees has the right to allocate and reallocate such assets to
the Account at any time, and from time to time, upon such notice to
the Portfolio Manager as may be reasonably necessary, in the view of
the Trust, to ensure orderly management of the Account or the
Portfolio.
(b) Subject to the general supervision of the Trust's Board of
Trustees, Portfolio Manager shall have sole investment discretion
with respect to the Account, including investment research, selection
of the securities to be purchased and sold and the portion of the
Account, if any, that shall be held uninvested, and the selection of
brokers and dealers through which securities transactions in the
Account shall be executed. Specifically, and without limiting the
generality of the foregoing, Portfolio Manager agrees that it will:
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as
the case may be, made on behalf of the Account, specifying the
name and quantity of the security purchased or sold, the unit and
aggregate purchase or sale price, commission paid, the market on
which the transaction was effected, the trade date, the
settlement date, the identity of the effecting broker or dealer
and/or such other information, and in such manner, as may from
time to time be reasonably requested by the Trust;
(ii) maintain all applicable books and records with respect to
the securities transactions of the Account. Specifically,
Portfolio Manager agrees to maintain with respect to the Account
those records required to be maintained under Rule 31a-1(b)(1),
(b)(5) and (b)(6) under the Investment Company Act with respect
to transactions in the Account including, without limitation,
records which reflect securities purchased or sold in the
Account, showing for each such transaction, the name and quantity
of securities, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was
effected, the trade date, the settlement date, and the identity
of the effecting broker or dealer. Portfolio Manager will
preserve such records in the manner and for the periods
prescribed by Rule 31a-2 under the Investment Company Act.
Portfolio Manager acknowledges and agrees that all records it
maintains for the Trust are the property of the Trust and
Portfolio Manager will surrender promptly to the Trust any such
records upon the Trust's request;
(iii) provide, in a timely manner, such information as may be
reasonably requested by the Trust or its designated agents in
connection with, among other things, the daily computation of the
Portfolio's net asset value and net income, preparation of proxy
statements or amendments to the Trust's registration statement
and monitoring investments made in the Account to ensure
compliance with the various limitations on investments applicable
to the Portfolio and to ensure that the Portfolio will continue
to qualify for the special tax treatment accorded to regulated
investment companies under Subchapter M of the Internal Revenue
Code of 1986, as amended; and
(iv) render regular reports to the Trust concerning the
performance of Portfolio Manager of its responsibilities under
this Agreement. In particular, Portfolio Manager agrees that it
will, at the reasonable request of the Board of Trustees, attend
meetings of the Board or its validly constituted committees and
will, in addition, make its officers and employees available to
meet with the officers and employees of the Trust at least
quarterly and at other times upon reasonable notice, to review
the investments and investment program of the Account.
3. Portfolio Transaction and Brokerage. In placing orders for
portfolio securities with brokers and dealers, Portfolio Manager
shall use its best efforts to execute securities transactions on
behalf of the Account in such a manner that the total cost or
proceeds in each transaction is the most favorable under the
circumstances. Portfolio Manager may, however, in its discretion,
direct orders to brokers that provide to Portfolio Manager research,
analysis, advice and similar services, and Portfolio Manager may
cause the Account to pay to those brokers a higher commission than
may be charged by other brokers for similar transactions, provided
that Portfolio Manager determines in good faith that such commission
is reasonable in terms either of the particular transaction or of the
overall responsibility of the Portfolio Manager to the Account and
any other accounts with respect to which Portfolio Manager exercises
investment discretion, and provided further that the extent and
continuation of any such practice is subject to review by the Trust's
Board of Trustees. Portfolio Manager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an
"affiliated person" of the Trust or Portfolio Manager, including any
other investment advisory organization that may, from time to time
act as a portfolio manager for the Portfolio or any of the Trust's
other Portfolios, without prior written approval of the Trust. The
Trust shall provide a list of such affiliated brokers and dealers to
Portfolio Manager and will promptly advise Portfolio Manager of any
changes in such list.
4. Expenses and Compensation.
Portfolio Manager shall pay all of its expenses incurred in the
performance of its duties under this Agreement and shall not be
required to pay any other expenses of the Trust. For its services
under this Agreement, Portfolio Manager shall be entitled to receive
a fee at the annual rate of .30% of the average daily net asset value
of the Account, which fee shall be payable monthly.
5. Limitation of Liability and Indemnification.
(a) Portfolio Manager shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates including, without
limitation, losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security or other
investment by the Trust except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Portfolio
Manager in the performance of its duties or from reckless disregard
by it of its duties under this Agreement.
(b) Notwithstanding the foregoing, Portfolio Manager expressly agrees
that the Trust may rely upon information provided, in writing, by
Portfolio Manager to the Trust (including, without limitation,
information contained in Portfolio Manager's then current Form ADV)
in accordance with Section 9 of the Agreement or otherwise, in
preparing the Trust's registration statement and amendments thereto
and certain periodic reports relating to the Trust and its Portfolios
that are required to be furnished to shareholders of the Trust and/or
filed with the Securities and Exchange Commission ("SEC Filings"),
provided that a copy of any such filing is provided to Portfolio
Manager (i) at least 10 business days prior to the date on which it
will become effective, in the case of a registration statement; (ii)
at least 10 business days prior to the date upon which it is filed
with the SEC in the case of the Trust's semi-annual report on Form
N-SAR or any shareholder report or proxy statement.
(c) Portfolio Manager agrees to indemnify and hold harmless the Trust
and each of its Trustees, officers and employees from any claims,
liabilities and expenses, including reasonable attorneys' fees,
(collectively, "Losses") to the extent that Losses are incurred as a
result of statements contained in an SEC Filing ("Disputed
Statements") that are misleading either because they are (i) untrue
statements of material fact; or (ii) omitted to state any material
fact necessary in order to make the statements made, in the light of
the circumstances under which they are made, not misleading. For
purposes of the indemnification obligation set forth in this Section
5(c), a Disputed Statement will be deemed misleading if so declared
by a decision of a court or administrative law judge or in an order
of settlement issued by any court or administrative body.
(d) Portfolio Manager further agrees to indemnify and hold harmless
the Trust and each of its Trustees, from any Losses to the extent
that such Losses are incurred as a result of Disputed Statements that
are alleged (i) to be untrue statements of material fact; or (ii) to
have omitted to state any material fact necessary in order to make
the statements made, in the light of the circumstances under which
they are made, provided that the indemnification obligation set forth
in this Section 5(d) is expressly limited to Losses arising from
Disputed Statements that accurately reflect information provided to
the Trust in writing by the Portfolio Manager and that cannot be
independently verified by the Trust. Further, the indemnification
set forth in this Section 5(d) will not require reimbursement of fees
or expenses other than those incurred by the Trust's regular counsel
in connection with such counsel's representation of the Trust or its
Trustees.
(e) The indemnification obligations set forth in Sections 5(c) and
(d) shall not apply unless (i) Disputed Statements accurately
reflect information provided to the Trust in writing by the Portfolio
Manager; (ii) Disputed Statements were included in an SEC Filing in
reliance upon written information provided to the Trust by the
Portfolio Manager; (iii) the Portfolio Manager was afforded the
opportunity to review Disputed Statements in connection with the 10
business day review requirement set forth in Section 5(b) above; and
(iv) upon receipt by the Trust of any notice of the commencement of
any action or the assertion of any claim to which the indemnification
obligations set forth in Section 5(c) and (d) may apply, the Trust
notifies the Portfolio Manager, within 30 days and in writing, of
such receipt and provides to Portfolio Manager the opportunity to
participate in the defense and/or settlement of any such action or
claim. Further, Portfolio Manager will not be required to indemnify
any person under this Section 5 to the extent that Portfolio Manager
relied upon statements or information furnished to the Portfolio
Manager, in writing, by any officer, employee or Trustee of the
Trust, or by the Trust's Custodian, Administrator or Accounting Agent
or any other agent of the Trust, in preparing written information
provided to the Trust and upon which the Trust relied in preparing
any Disputed Statement.
6. Permissible Interest.
Subject to and in accordance with the Trust's Declaration of Trust
and Bylaws and corresponding governing documents of Portfolio
Manager, Trustees , officers, agents and shareholders of the Trust
may have an interest in the Portfolio Manager as officers, directors,
agents and/or shareholders or otherwise. Portfolio Manager may have
similar interests in the Trust. The effect of any such
interrelationships shall be governed by said governing documents and
the provisions of the Investment Company Act.
7. Duration, Termination and Amendments.
This Agreement shall become effective as of the date on which that
certain [contract]AGREEMENT between [Cowen Asset MANAGEMENT]PORTFOLIO
MANAGER'S PREDECESSOR LIMITED PARTNERSHIP AND THE TRUST RELATING TO
THE PORTFOLIO TERMINATES AS A RESULT OF ITS ASSIGNMENT, PROVIDED THAT
THIS AGREEMENT IS APPROVED BY THE SHAREHOLDERS OF THE PORTFOLIO PRIOR
TO SUCH EFFECTIVE DATE. This Agreement shall continue[ its effective
date, unless sooner TERMINATED]FOR TWO YEARS FOLLOWING SUCH EFFECTIVE
DATE,[ provided that this Agreement is approved by the shareholders
of The Value Equity Portfolio within 120 days of such effective date.
Thereafter, this Agreement] AND THEREAFTER shall continue in effect
from year to year for so long as its continuance is specifically
approved, at least annually, by (i) a majority of the Board of
Trustees or the vote of the holders of a majority of the Portfolio's
outstanding voting securities; and (ii) the affirmative vote, cast in
person at a meeting called for the purpose of voting on such
continuance, of a majority of those members of the Board of Trustees
("Independent Trustees ") who are not "interested persons" of the
Trust or any investment adviser to the Trust.
This Agreement may be terminated by the Trust or by Portfolio Manager
at any time and without penalty upon sixty days written notice to the
other party, which notice may be waived by the party entitled to it.
This Agreement may not be amended except by an instrument in writing
and signed by the party to be bound thereby provided that if the
Investment Company Act requires that such amendment be approved by
the vote of the Board, the Independent Trustees and/or the holders of
the Trust's or the Portfolio's outstanding shareholders, such
approval must be obtained before any such amendment may become
effective. This Agreement shall terminate upon its assignment.
For purposes of this Agreement, the terms "majority of the
outstanding voting securities, "assignment" and "interested person"
shall have the meanings set forth in the Investment Company Act.
8. Confidentiality; Use of Name.
Portfolio Manager acknowledges and agrees that during the course of
its responsibilities hereunder, it may have access to certain
information that is proprietary to the Trust or to one or more of the
Trust's agents or service providers. Portfolio Manager agrees that
Portfolio Manager, its officers and its employees shall treat all
such proprietary information as confidential and will not use or
disclose information contained in, or derived from such material for
any purpose other than in connection with the carrying out of
Portfolio Manager's responsibilities hereunder. In addition,
Portfolio Manager shall use its best efforts to ensure that any agent
or affiliate of Portfolio Manager who may gain access to such
proprietary materials shall be made aware of the proprietary nature
of such materials and shall likewise treat such materials as
confidential.
It is acknowledged and agreed that the names "Hirtle Callaghan,"
"Hirtle Callaghan Chief Investment Officers" (which is a registered
trademark of Hirtle, Callaghan & Co., Inc. ("HCCI")), and derivatives
of either, as well as any logo that is now or shall later become
associated with either name ("Marks") are valuable property of
Hirtle, Callaghan and Co. Inc. ("HCCI") and that the use of the
Marks, or any one of them, by the Trust or its agents is subject to
the license granted to the Trust HCCI. Portfolio Manager agrees that
it will not use any Mark without the prior written consent of the
Trust. Portfolio Manager consents to use of its name, performance
data, biographical data and other pertinent data by the Trust for use
in marketing and sales literature, provided that any such marketing
and sales literature shall not be used by the Trust without the prior
written consent of Portfolio Manager, which consent shall not be
unreasonably withheld. The provisions of this Section 8 shall
survive termination of this Agreement.
9. Representation, Warranties and Agreements of Portfolio Manager.
Portfolio Manager represents and warrants that:
(a) It is registered as an investment adviser under the Investment
Advisers Act of 1940 ("Investment Advisers Act"), it will maintain
such registration in full force and effect and will promptly report
to the Trust the commencement of any formal proceeding that could
render the Portfolio Manager ineligible to serve as an investment
adviser to a registered investment company under Section 9 of the
Investment Company Act.
(b) It understands that, as a result of its services hereunder,
certain of its employees and officers may be deemed "access persons"
of the Trust within the meaning of Rule 17j-1 under the Investment
Company Act and that each such access person is subject to the
provisions of the code of ethics ("Trust's Code") adopted by the
Trust in compliance with such rule. Portfolio Manager further
represents that it is subject to a written code of ethics ("Portfolio
Manager's Code") complying with the requirements of Rule 204-2(a)(12)
under the Investment Advisers Act and will provide the Trust with a
copy of such code of ethics. During the period that this Agreement
is in effect, an officer or director of Portfolio Manager shall
certify to the Trust, on a quarterly basis, that Portfolio Manager
has complied with the requirements of the Portfolio Manager's Code
during the prior year; and that either (i) that no violation of such
code occurred or (ii) if such a violation occurred, that appropriate
action was taken in response to such violation. In addition,
Portfolio Manager acknowledges that the Trust may, in response to
regulations or recommendations issued by the Securities and Exchange
Commission or other regulatory agencies, from time to time, request
additional information regarding the personal securities trading of
its directors, partners, officers and employees and the policies of
Portfolio Manager with regard to such trading. Portfolio Manager
agrees that it make every effort to respond to the Trust's reasonable
requests in this area.
(c) Upon request of the Trust, Portfolio Manager shall promptly
supply the Trust with any information concerning Portfolio Manager
and its stockholders, employees and affiliates that the Trust may
reasonably require in connection with the preparation of its
registration statements, proxy materials, reports and other documents
required, under applicable state or Federal laws, to be filed with
state or Federal agencies or to be provided to shareholders of the
Trust.
10. Status of Portfolio Manager.
The Trust and Portfolio Manager acknowledge and agree that the
relationship between Portfolio Manager and the Trust is that of an
independent contractor and under no circumstances shall any employee
of Portfolio Manager be deemed an employee of the Trust or any other
organization that the Trust may, from time to time, engage to provide
services to the Trust, its Portfolios or its shareholders. The
parties also acknowledge and agree that nothing in this Agreement
shall be construed to restrict the right of Portfolio Manager or its
affiliates to perform investment management or other services to any
person or entity, including without limitation, other investment
companies and persons who may retain Portfolio Manager to provide
investment management services and the performance of such services
shall not be deemed to violate or give rise to any duty or
obligations to the Trust.
11. Counterparts and Notice.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original. Any notice required to be
given under this Agreement shall be deemed given when received, in
writing addressed and delivered, by certified mail, by hand or via
overnight delivery service as follows, or to such other person or
address as may be designated, in writing, by the party to whom such
notice is to be given:
If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087
If to Portfolio Manager:
Hotchkis and Wiley
800 West Sixth Street, Fifth Floor
Los Angeles, California 90017
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed
by the law of the state of Delaware provided that nothing herein
shall be construed as inconsistent with the Investment Company Act or
the Investment Advisers Act.
Portfolio Manager is hereby expressly put on notice of the
limitations of shareholder and Trustee liability set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed
by the Trust pursuant to this Agreement shall be limited in all cases
to the assets of theThe Value Equity Portfolio. Portfolio Manager
further agrees that it will not seek the satisfaction of any such
obligations from the shareholders or any individual shareholder of
the Trust, or from the Trustees of the Trust or any individual
Trustee of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day
and year first written above.
<PAGE>
Hotchkis and Wiley, a division of Merrill Lynch Asset Management LP
The Hirtle Callaghan Trust
<PAGE>
Form of Proxy
The Value Equity Portfolio
of
The Hirtle Callaghan Trust
Special Meeting of Shareholders
______________, 199_
This Proxy is Solicited on Behalf of the Board of Trustees
The undersigned appoints, __________and ________, and each of them,
attorneys and proxies, with full power of substitution in each, to
vote and act on behalf of the undersigned at the special meeting of
shareholders of The Hirtle Callaghan Trust (the "Trust") representing
interests in the Trust's _____Portfolio (the "Portfolio") at the
offices of Hirtle, Callaghan & Co., Inc., 575 East Swedesford Road.,
Wayne, PA 19087-1937 on _____________, 199_ at [time], and at all
adjournments, according to the number of shares of Common Stock which
the undersigned could vote if present, upon such subjects as may
properly come before the meeting, all as set forth in the notice of
the meeting and the proxy statement furnished therewith. Unless
otherwise marked below, this proxy is given WITH authority to vote
FOR the proposal to approve the proposed new Sub-Advisory Agreement
for the Portfolio. The undersigned further confers upon such
attorneys and proxies discretionary authority to vote for and in the
name of the undersigned and with all of the powers the undersigned
would possess if personally present, all the Portfolio shares of the
undersigned in the Trust at said meeting. The Board of Trustees
recommends that you vote "FOR" each of the proposals below.
(1) To approve the engagement of Hotchkis and Wiley, an investment
advisory firm currently organized as a limited partnership,
("Hotchkis L.P.") to provide portfolio management services to The
Value Equity Portfolio pursuant to a portfolio management agreement
between the Trust and Hotchkis L.P., ("Hotchkis Agreement").
FOR AGAINST ABSTAIN
(2) to approve the continuation of the Hotchkis engagement following
proposed acquisition of Hotchkis L.P. by Merrill Lynch & Co., Inc.,
pursuant to a second portfolio management agreement ("Successor
Agreement"), which agreement is in all material respects the same as
the Hotchkis Agreement.
FOR AGAINST ABSTAIN
IMPORTANT: WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY OR AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER.
IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE - NO POSTAGE
REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE TRUST FURTHER
SOLICITATION EXPENSE. THE RECEIPT OF THE NOTICE OF MEETING AND PROXY
STATEMENT IS ACKNOWLEDGED BY EXECUTION OF THIS PROXY.
Dated:________________, 199_
X_________________________________
Signature and Title
X_________________________________
Signature, if held jointly
Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope
to:______________________
