Filing pursuant to Rule 497(e)
for The Hirtle Callaghan Trust
1933 Act File No. 33-87762
1940 Act File No. 811-8918
The Hirtle Callaghan Trust
Supplement to
Statement of Additional Information dated
May 20, 1996
Management of The Trust.
Hotchkis serves as an Investment Manager for The Value Equity Portfolio
pursuant to a contract ("Hotchkis Agreement") that was approved by the Board
(including the Independent Trustees) on July 19, 1996, and by the shareholders
of The Value Equity Portfolio on October 23, 1996. The Hotchkis contract
first became effective on November 12, 1996. The terms and conditions set
forth in the Hotchkis Agreement are identical to those contained in the
Portfolio Management Contracts 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. Specifically, 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. From July 29, 1996, until November 12, 1996, Hotchkis'
predecessor limited partnership served as a portfolio manager of The Value
Equity Portfolio pursuant to an agreement ("15a-4 Agreement") approved by the
Board at a meeting held on July 19, 1996. The 15a-4 Agreement became effective
on July 29, 1996, the date on which a similar contract("Prior Agreement") with
a former portfolio manager for the Portfolio was terminated, and was approved
by the shareholders of The Value Equity Portfolio on October 23, 1996, in the
manner contemplated under rule 15a-4 of the Investment Company Act. The 15a-4
Agreement is identical to the Hotchkis Agreement except for the name of the
advisory organization and the terms relating to effective dates. The Hotchkis
Agreement is identical to the Prior Agreement except for the name of the
advisory organization, effective dates and the modification of notice
provisions relating to the Trust's right of indemnification, as noted above.
The Hotchkis Agreement will remain in effect for two years from its effective
date, unless sooner terminated, and thereafter 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. Prior to November 12, 1996, Hotchkis was
an independent California limited partnership. On November 11, 1996, all of
the interests in that partnership were acquired by Merrill Lynch & Co., ("ML")
and the limited partnership became a division of Merrill Lynch Asset Management
LP., a company controlled ML. In accordance with the Investment Company Act,
the consummation of that acquisition terminated the 15a-4 Agreement; at the
same time, and in accordance with the terms of the 15a-4 Agreement and the
Hotchkis Agreement, the Hotchkis Agreement became effective. ML is a public
company whose shares are traded on the New York Stock Exchange.
During the fiscal year ended June 30, 1996, Hirtle Callaghan received advisory
fees from each of the Portfolios, calculated at an annual rate of .05%, as
follows: The Value Equity Portfolio, $24,343; The Growth Equity Portfolio,
$34,071; The Small Capitalization Portfolio, $16,940; The International Equity,
Portfolio, $24,436; and The Limited Duration Municipal Bond Portfolio, $7,628.
The following table sets forth the investment advisory fee received from the
specified Portfolio by each of its respective Investment Managers during the
fiscal year ended June 30, 1996:
Investment Manager Portfolio Advisory Fee Rate 1 Actual Fee Paid
Institutional Value Equity .30% of average $94,103
Capital Corporation net assets
Cowen Asset Value Equity .30% of average 51,954
Management 2 net assets
Jennison Associates Growth Equity .30% of average 102,397
Capital Corp. net assets
Westfield Capital Growth Equity .30% of average 102,030
Management Co. net assets
Clover Capital Small Cap .45% of average 86,448
Management, Inc. net assets
Frontier Capital Small Cap .45% of average 66,017
Management Co. net assets
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Brinson Partners International .40% of average 95,488
net assets
Morgan Grenfell Limited .20% of average 30,513
Capital Management Duration net assets
Incorporated
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1 Rate shown applies to that portion of the specified portfolio's assets
allocated to the specified Investment Manager.
2 Effective July 29, 1996, Hotchkis and Wiley replaced Cowen Asset
Management.
On or before 1, 1996, and following the acquisition of Furman's mutual fund
business by The BISYS Group, Inc., certain officers of the Trust will become
employees of BISYS. Ms. Corsell, who serves as the Trust's Secretary and
counsel, received approximately $42,000.00 for legal services rendered to the
Trust during the fiscal year ended June 30, 1996.
Brokerage Commissions and Portfolio Turnover.
During the fiscal year ended June 30, 1996, the respective portfolios of the
Trust paid the following aggregate brokerage commissions: The Value Equity
Portfolio, $137,963; The Growth Equity Portfolio, $238,948; The Small
Capitalization Portfolio, $147,928; and The International Equity Portfolio,
$144,359. The Limited Duration Municipal Bond Portfolio paid no brokerage
commissions during the period.
The Trust has adopted procedures pursuant to which each portfolio is permitted
to allocate brokerage transactions to affiliates of the various Investment
Managers. Under such procedures, commissions paid to any such affiliate must
be fair and reasonable compared to the commission, fees or other remuneration
paid to other brokers in connection with comparable transactions. Several of
the Trust's Investment Managers are affiliated with brokerage firms to which
brokerage transactions may, from time to time, be allocated. The table below
reflects the aggregate dollar amount of commissions paid to each such firm, as
well as similar information about transactions allocated to Furman Selz, LLC,
the Trust's principal underwriter by The Value Equity and Growth Equity
Portfolios during the period. None of the other portfolios of the Trust
effected brokerage transactions through brokers affiliated with the Trust.
Information shown is expressed both as a percentage of the total amount of
commission dollars paid by each portfolio and as a percentage of the total
value of all brokerage transactions effected on behalf of each portfolio.
Portfolio1 Affiliated Broker2
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Cowen & Co.3 Prudential Furman Selz LLC5
Securities4
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[S] [C] [C] [C]
Value Equity
% of commissions .34% none none
% of transactions .94%
Growth Equity
% of commissions .02% 1.45% 4.20%
% of transactions .05% .70% 1.26%
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1. The Trust's other portfolios did not direct brokerage transaction to any
affiliated broker during the period.
2. Other brokers that may be deemed to be affiliated with the Trust include
companies affiliated with Swiss Bank, of which Brinson Partners is a
wholly-owned subsidiary, and companies affiliated with Deutchebank the parent
company of Morgan Grenfell Capital Management Incorporated. No brokerage
transactions were affected through such companies during the period.
3. Cowen Asset Management, formerly an Investment Manager of The Value Equity
Portfolio, is a division of Cowen & Co.
4. Both Prudential Securities and Jennison Associates Capital Management
Corp., which serves as an Investment Manager of The Value Equity Portfolio,
are wholly-owned subsidiaries of Prudential Insurance Company of America.
5. Furman Selz LLC currently serves as the Trust's principal underwriter.
Independent Accountants And Financial Statements.
Coopers and Lybrand, L.L.P., serves as the Trust's independent accountants.
The Trust's financial statements as of June 30, 1996, have been audited by
Coopers and Lybrand, L.L.P, whose address is 2400 Eleven Penn Center,
Philadelphia, PA 19103. Such statement and accompanying report are set forth
in the Trust's Annual Report, which accompanies this Supplement, and is
incorporated by reference herein.
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CROSS REFERENCE SHEET
(Required by Rule 481(a) under the Securities Act of 1933)
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Part A -- Information required in a Prospectus Prospectus Heading
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Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Information; Prospectus Supplement
Item 3. Condensed Financial Information Financial Highlights; Prospectus Supplement
Item 4. General Description of Registrant Cover Page;
Management of the
Trust; General
Item 5. Management of the Fund Management of the
Trust; Prospectus Supplement
Item 6. Capital Stock and other Securities General
Item 7. Purchase of Securities Being Offered Purchases and Redemptions
Item 8. Redemption or Repurchase Purchases and Redemptions
Item 9. Legal Proceedings Not Applicable
Part B -- Information required in a Statement Statement of Additional
of Additional Information Heading
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Cover Page; Management of
the Trust
Item 13. Investment Objectives and Policies Further Information on
Investment Policies;
Hedging through the use
of Options; Hedging
through the use of Futures
Contracts; Hedging
through the use of
Currency-related
Instruments; Investment
Restrictions
Item 14. Management of the Registrant Management of the Trust; Supplement
Item 15. Control Persons and Principal Management of the Trust
Holders of Securities
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Item 16. Investment Advisory and Other Management of the Trust; Supplement
Services
Item 17. Brokerage Allocation Portfolio Transactions and
Valuation; Supplement
Item 18. Capital Stock and Other Securities General (in Prospectus)
Item 19. Purchase, Redemption and Pricing of Additional Purchase and
Securities Being Offered Redemption Information;
Portfolio Transactions
and Valuation
Item 20. Tax Status Dividends, Distributions
and Taxes
Item 21. Underwriters Management of the Trust; Supplement
Item 22. Calculation of Performance Date Not Applicable
Item 23. Financial Statements Independent Accountants
and Financial Statements;
Supplement
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