AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION October 18, 1996
1933 Act File No. 87636
1940 Act File No. 811-8918
Form N-1A
Securities and Exchange Commission
Washington, D.C. 20549
Form N-1A
Registration Statement Under the Securities Act of 1933 [ ]
Pre-Effective Amendment No. _________ [ ]
Post-Effective Amendment No.___3_____ [x]
and/or
Registration Statement Under the Investment Company Act of 1940 [x]
Amendment No. 5
(Check appropriate box or boxes.)
THE HIRTLE CALLAGHAN TRUST
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(Exact Name of Registrant as Specified in Charter)
575 E. Swedesford Road, Wayne PA 19087
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(Address of Principal Executive Offices) (Zip Code)
610-254-9596
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(Registrant's Telephone Number, including Area Code)
Laura Anne Corsell, Esq (With Copy To):
c/o Hirtle Callaghan & Co. Inc. Audrey Talley, Esq.
575 Swedesford Road Stradley Ronan Stevens & Young
Wayne, PA 19087 2600 One commerce Square
Philadelphia, PA, 19103-7098
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this
Registration Statement
It is proposed that this filing will become effective (check appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i) of rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
An indefinite number of Registrant's securities has been registered pursuant to
Rule 24f-2 under the Investment Company Act of 1940.
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<PAGE>
CROSS REFERENCE SHEET
(Required by Rule 481(a) under the Securities Act of 1933)
<TABLE>
<S> <C>
Part A -- Information required in a Prospectus Prospectus Heading
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Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page;
Management of the
Trust; General
Item 5. Management of the Fund Management of the
Trust
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
-------------------------------------------
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
Item 15. Control Persons and Principal Management of the Trust
Holders of Securities
</TABLE>
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<TABLE>
<S> <C>
Item 16. Investment Advisory and Other Management of the Trust
Services
Item 17. Brokerage Allocation Portfolio Transactions and
Valuation
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
Item 22. Calculation of Performance Date Not Applicable
Item 23. Financial Statements Independent Accountants
and Financial Statements
</TABLE>
Part C - Other Information
Information required to be included in Part C is set forth under the
appropriate item so numbered in Part C of this Registration Statement.
<PAGE>
<PAGE>
THE HIRTLE CALLAGHAN TRUST
575 E. Swedesford Road
Wayne, PA 19087
November __, 1996
The Hirtle Callaghan Trust ("Trust"), a diversified, open-end management
investment company, was organized in 1994 by Hirtle, Callaghan & Co., Inc.
("Hirtle Callaghan") to enhance Hirtle Callaghan's ability to acquire the
services of independent specialist money management organizations for the
clients Hirtle Callaghan serves. The Trust currently consists of five separate
investment portfolios (each a "Portfolio"). Day-to-day portfolio management
services are provided to each of the Trust's five Portfolios by one or more
independent investment advisory organizations ("Investment Managers"),
selected by, and under the general supervision of, the Trust's Board of Trustees
("Board"). Shares of the Trust are available exclusively to investors
("Eligible Investors") who are clients of Hirtle Callaghan or clients of
financial intermediaries, such as investment advisers, acting in a fiduciary
capacity with investment discretion, that have established relationships with
Hirtle Callaghan.
The Trust currently consists of five separate Portfolios, as listed below:
The Value Equity Portfolio seeks total return by investing in equity
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securities.
The Growth Equity Portfolio seeks capital appreciation by investing in equity
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securities.
The Small Capitalization Equity Portfolio seeks long term capital appreciation
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by investing primarily in equity securities of smaller companies.
The International Equity Portfolio seeks total return by investing in a
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diversified portfolio of equity securities of non-U.S. issuers.
The Limited Duration Municipal Bond Portfolio seeks a high level of current
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income exempt from Federal income tax, consistent with the preservation of
capital.
This prospectus contains concise information about the Trust that a prospective
investor needs to know before investing in any of the Portfolios. Please read
it carefully and keep it for future reference. A Statement of Additional
Information, dated November __, 1996, has been filed with the Securities and
Exchange Commission and is incorporated by reference in this prospectus. It may
be obtained upon request free of charge by contacting the Trust at 610-254-9596.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
<PAGE>
EXPENSE INFORMATION
Table 1: Shareholder Transaction Expenses: NONE
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Table 2: Annual Operating Expenses (as a percentage of average net assets) *
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TO BE SUPPLIED BY AMENDMENT
Example: An investor would pay the following expenses on a $1,000 investment,
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assuming (1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Small
Value Growth Capitalization International Limited Duration
Portfolio Equity Equity Equity Equity Municipal Bond
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<S> <C> <C> <C> <C> <C>
1 year $ 7 $ 7 $ 8 $ 9 $ 5
3 years $21 $21 $26 $27 $17
</TABLE>
The preceding example assumes that all dividends and distributions are
reinvested and that the percentage totals listed under "Estimated Annual Trust
Operating Expenses" remain the same in the years shown. The example should not
be considered a representation of future expenses and actual expenses may be
greater or less than those shown.
As shown above in Table 1, none of the Trust's Portfolios impose any shareholder
transaction fees in connection with either the purchase or redemption of shares.
Investors who acquire shares of the Trust through a program of services offered
by a financial intermediary, such as an investment adviser or bank, may be
subject to charges for services. All such charges are in addition to those
expenses borne by the Trust and described in the foregoing tables, or reflected
in the Example shown. Investors should contact any such financial intermediary
for information concerning what, if any, additional fees may be charged. For
more complete descriptions of the various costs and expenses, see "Management of
the Trust," in this prospectus.
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<PAGE>
Financial Highlights
(Selected per share data and rations for a share outstanding throughtout each
period)
The following information, which [to be supplied by amendment], should be read
in conjunction with the Trust's financial statements. The Trust's financial
statements are included in the Trust's Statement of Additional Information,
which is available upon request.
<TABLE>
<CAPTION>
VALUE GROWTH SMALL CAPITALIZATION INTERNATIONAL LIMITED DURATION
AUGUST 25, 1995 AUGUST 8, 1995 SEPTEMBER 5, 1995 AUGUST 17, 1995 OCTOBER 10, 1995
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
THROUGH THROUGH THROUGH THROUGH THROUGH
JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1996
--------------- -------------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- -------- ------- ------- -------
Income from Investment
Operations:
Net investment income..... 0.22 0.04 0.10 0.16 0.35
Net realized and
unrealized gain on
investments and foreign
currency transactions.... 1.51 1.13 1.07 1.35 0.01
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Total from investment
operations............... 1.73 1.17 1.17 1.51 0.36
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Less Distributions:
From net investment
income................... (0.22) (0.04) (0.10) (0.24) (0.36)
From realized gains....... (0.03) 0.00 0.00 (0.01) 0.00
------- -------- ------- ------- -------
Total distributions....... (0.25) (0.04) (0.10) (0.25) (0.36)
------- -------- ------- ------- -------
Net Asset Value, End of
Period.................... $ 11.48 $ 11.13 $ 11.07 $ 11.26 $ 10.00
======= ======== ======= ======= =======
Total Return............... 17.28% 11.69% 11.82% 15.15% 3.60%
Net Assets End of Period
(in thousands)............ $71,503 $110,537 $61,503 $77,732 $29,485
Ratios to Average Net
Assets of:
Net investment income*.... 2.55% 0.46% 1.33% 1.75% 4.78%
Expenses net of
waivers/reimbursements*.. 0.63% 0.63% 0.78% 0.81% 0.53%
Expenses before
waivers/reimbursements*.. 0.68% 0.68% 0.90% 0.92% 0.81%
Portfolio Turnover Rate.... 92% 80% 38% 15% 116%
</TABLE>
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* Annualized.
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a brief description of the investment objective and policies
of each of the Trust's Portfolios, as well as the identity of the Investment
Manager(s) responsible for making day-to-day investment decisions for each
Portfolio. More detailed information about the Investment Managers appears in
this prospectus under the heading "Management of the Trust." Further
information about the types of instruments in which each Portfolio may invest,
and the risks associated with such investments, appears in this prospectus under
the heading "Investment Practices and Risk Considerations" and in the related
Statement of Additional Information. The Statement of Additional Information
also lists those investment restrictions to which the various Portfolios are
subject under the Investment Company Act of 1940 ("Investment Company Act").
Unless otherwise noted, the investment objectives and policies of the respective
Portfolios as set forth below are not fundamental and may be changed or modified
by the Trust's Board without a shareholder vote.
As further described in this prospectus under the heading "Management of the
Trust," investment discretion with respect to the assets of each Portfolio is
vested with one or more Investment Managers retained by the Trust. While the
Trust's Board is ultimately responsible for all matters relating to the Trust,
day-to-day decisions with respect to the purchase and sale of securities in
accordance with a Portfolio's investment objectives and policies are the
responsibility of the Investment Managers retained from time to time by the
Trust on behalf of the respective Portfolios. As is the case with any
investment in securities, an investment in any of the Portfolios involves
certain risks and there can be no assurance that any Portfolio will achieve its
objective.
The Value Equity Portfolio. The investment objective of this Portfolio is to
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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. In selecting securities for the
Portfolio, the Investment Managers will generally emphasize equity securities
with a relatively lower price-earnings ratio but higher dividend income than the
average range for stocks included in the Standard & Poor's 500 Stock Index;
dividends paid by The Value Equity Portfolio can generally be expected to be
higher than those paid by The Growth Equity Portfolio. Up to 15% of the
Portfolio's assets may be invested in convertible securities; up to 15% of the
Portfolio's assets may be invested in American Depositary Receipts. Further
information about equity related securities appears in this prospectus under the
heading "Investment Practices and Risk Considerations: About Equity Securities."
Hotchkis and Wiley and Institutional Capital Corporation currently serve as
Investment Managers for The Value Equity Portfolio.
The Growth Equity Portfolio. The investment objective of this Portfolio is to
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provide capital appreciation, with income as a secondary consideration. The
Portfolio will seek to achieve this objective by investing primarily in a
diversified portfolio of equity securities traded on registered exchanges or in
the over-the-counter market in the U.S. In selecting securities for the
Portfolio, the Investment Managers will generally emphasize equity securities
with long-term earnings growth potential and relatively higher price-earnings
ratios than the average range for stocks included in the Standard & Poor's 500
Stock Index. Although dividend paying securities will be considered for
<PAGE>
<PAGE>
inclusion in the Portfolio, dividends paid by The Growth Equity Portfolio can
generally be expected to be lower than those paid by The Value Equity Portfolio.
Up to 10% of the Portfolio's assets may be invested in convertible securities.
Further information about investments in equity related investments appears in
this prospectus under the heading "Investment Practices and Risk Considerations:
About Equity Securities." In addition, a maximum of 20% of the Portfolio's
assets may be invested in securities of non-U.S. issuers. Further information
about the special considerations applicable to international investments appears
in this prospectus under the heading "Investment Practices and Risk
Considerations: About Foreign Securities." Jennison Associates Capital Corp.
and Westfield Capital Management Company, Inc. currently serve as Investment
Managers for The Growth Equity Portfolio.
The Small Capitalization Equity Portfolio. The investment objective of this
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Portfolio is to provide long term capital appreciation by investing primarily in
equity securities of smaller companies. Companies in which the Portfolio may
invest are those which, in the view of one or more of the Portfolio's Investment
Managers, have demonstrated, or have the potential for, strong capital
appreciation potential due to their relative market position, anticipated
earnings, changes in management or other factors. Under normal market
conditions, at least 65% of the Portfolio's total assets will be invested in
equity securities of companies with capitalizations of less than $1.0 billion at
the time of purchase; up to 35% of the Portfolio's assets may be invested in
the equity securities of companies with larger capitalizations. Further
information about the special considerations applicable to equity investments in
smaller companies appears in this prospectus under the heading "Investment
Practices and Risk Considerations: About Equity Securities." Clover Capital
Management, Inc. and Frontier Capital Management Company currently serve as
Investment Managers for The Small Capitalization Equity Portfolio.
The International Equity Portfolio. The investment objective of this
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Portfolio is to maximize total return, consisting of capital appreciation and
current income, by investing primarily in a diversified portfolio of equity
securities of non-U.S. issuers. Under normal market conditions, at least 65% of
the Portfolio's total assets will be invested in equity securities of issuers
located in at least three countries other than the United States. Further
information about the special considerations applicable to international
investments appears in this prospectus under the heading "Investment Practices
and Risk Considerations: About Foreign Securities." Brinson Partners, Inc.
currently serves as Investment Manager for The International Equity Portfolio.
The International Equity Portfolio is designed to invest in the equity
securities of non-U.S. issuers that are believed to be undervalued in relation
to the issuer's assets, cash flow, earnings and revenues based upon the
Investment Manager's research and proprietary valuation systems. Although the
Portfolio may invest anywhere in the world, the Portfolio is expected to invest
primarily in the equity markets included in the Morgan Stanley Capital
International Europe, Australia, Far East Index ("EAFE"). Currently, these
markets are Japan, the United Kingdom, Germany, France, Canada, Italy, the
Netherlands, Australia, Switzerland, Spain, Hong Kong, Belgium, Singapore,
Malaysia, Sweden, Denmark, Norway, New Zealand, Austria, Finland and Ireland.
Securities of non-U.S. issuers purchased by the Portfolio may be purchased on
U.S. registered exchanges, the over-the-counter markets or in the form of
sponsored or unsponsored American Depositary Receipts traded on registered
exchanges or NASDAQ or sponsored or unsponsored European Depositary Receipts.
<PAGE>
<PAGE>
Securities may also be purchased on recognized foreign exchanges or on over-the-
counter markets overseas. In addition, the Portfolio may enter into forward
foreign currency exchange contracts, buy or sell options, futures or options on
futures relating to foreign currencies and may purchase securities indexed to
currency baskets in order to hedge against fluctuations in the relative value of
the currencies in which securities held by the Portfolio are denominated.
Further information about the Portfolio's use of these instruments appears in
this prospectus under the heading "Investment Practices and Risk Considerations:
About Hedging Strategies." The International Equity Portfolio may also invest
in high-quality short-term debt instruments (including repurchase agreements)
denominated in U.S. or foreign currencies for temporary purposes. Further
information about the Portfolio's temporary investment practices appears in this
prospectus under the heading "Investment Practices and Risk Considerations:
About Temporary Investment Practices."
The Limited Duration Municipal Bond Portfolio. The investment objective of this
- ---------------------------------------------
Portfolio is to provide a high level of current income exempt from Federal
income tax, consistent with the preservation of capital. The Portfolio seeks to
achieve this objective by investing primarily in a diversified portfolio of
municipal bonds (i.e., debt securities issued by municipalities and related
entities, the interest on which is exempt from Federal income tax). It is a
fundamental policy of the Portfolio that, under normal circumstances, at least
80% of its net assets will be invested in such securities (collectively, "Tax-
Exempt Securities"). Tax-Exempt Securities may include general obligation bonds
and notes, revenue bonds and notes (including industrial revenue bonds and
municipal lease obligations), as well as participation interests relating to
such securities. In order to maintain liquidity, the Portfolio is authorized to
invest up to 20% of its total assets in taxable instruments. Further
information about such investments appears in this prospectus under the heading
"Investment Practices and Risk Considerations: About Temporary Investment
Practices." Morgan Grenfell Capital Management Incorporated currently serves as
Investment Manager for The Limited Duration Municipal Bond Portfolio.
It is anticipated that the average credit quality of all Tax-Exempt Securities
purchased for the Portfolio will be comparable to securities rated "Aa" by
Moody's Investors Service ("Moody's"), or "AA" by Standard & Poor's Corporation
("S&P"), respectively (or, in the case of municipal notes and commercial paper,
corresponding ratings assigned to such instruments). The Portfolio is also,
however, authorized to invest in Tax-Exempt Securities that, at the time of
investment, are rated at least investment grade (e.g. "Baa" or better by
Moody's, "BBB" by S&P or, if unrated, are determined by the Portfolio's
Investment Manager to be of comparable quality to securities that have
received such ratings). Securities rated "Baa" or "BBB" may be said to have
speculative characteristics in that changes in economic conditions or other
circumstances may be more likely to weaken the issuer's capacity to make
principal and interest payments than is the case with respect to securities that
have received higher ratings. The municipal notes in which the Portfolio may
invest will be limited to those obligations which are rated, at the time of
purchase, at least MIG-1 or V-MIG-1 by Moody's or SP-1 by S&P or, if unrated,
are determined by the Investment Manager to be of comparable quality to
securities that have received such ratings. Tax-exempt commercial paper must be
rated at least A-1 by S&P or Prime -1 by Moody's at the time of investment or,
if not rated, determined by the Portfolio's Investment Manager to be of
comparable quality to issues that have received such ratings. Taxable
investments, if any, will be limited to those rated "Aa" or "AA" by Moody's or
<PAGE>
<PAGE>
S&P, respectively (or, in the case of securities not rated by these services or
unrated, of comparable quality). Further information about ratings appears in
this prospectus under the heading "Investment Practices and Risk Considerations:
About Debt Securities and Ratings Organizations."
Municipal securities purchased for the Portfolio will have varying maturities,
but under normal circumstances the Portfolio will have an overall duration of
less than 4 years. Duration is a concept that incorporates a bond's yield,
coupon interest payments, final maturity and call features into one measure that
is used by investment professionals as a more precise alternative to the concept
of term-to-maturity. As a point of reference, the maturity of a current coupon
bond with a 3 year duration is approximately 3.5 years and the maturity of a
current coupon bond with a 6 year duration is approximately 9 years. Changes in
interest rates can adversely affect the value of an investment in the Portfolio.
As an example, a one percent increase in interest rates could result in a four
percent decrease in the value of a portfolio with a duration of four years.
When interest rates are falling, a fixed income portfolio with a shorter
duration generally will not generate as high a level of total return as one with
a longer duration. When interest rates are flat, shorter duration portfolios
generally will not generate as high a level of total return as longer duration
portfolios. In determining whether to invest in a particular Tax Exempt
Security, the Portfolio's Investment Manager will rely on the opinion of bond
counsel for the issuer as to the validity of the security and the exemption of
interest on such security from Federal and relevant state income taxes, and will
not make an independent investigation of the basis for any such opinion.
INVESTMENT PRACTICES AND RISK CONSIDERATIONS
Although the Trust's Portfolios have different investment objectives and
policies, certain investment practices may be used by one or more of the
Portfolios. A general description of each such practice is set forth below,
together with the Portfolios to which each practice is available.
About Equity Securities. The Value Equity, Growth Equity, Small Capitalization
- -----------------------
Equity and International Equity Portfolios invest primarily in equity
securities. For purposes of the investment policies of these Portfolios, the
term "equity securities" includes common and preferred stock and rights and
warrants to purchase other equity securities. A maximum of 15% of the assets of
The Value Equity Portfolio and up to 10% of the assets of The Growth Equity
Portfolio may be invested in convertible issues, the market value of which tend
to move together with the market value of the underlying common stock as a
result of the conversion feature. Both The International Equity Portfolio and
The Small Capitalization Equity Portfolio are also authorized to invest up to 5%
of their respective assets in similar convertible issues, although these
Portfolios have no present intention of doing so. In general, investments in
equity securities and convertible issues are subject to market risks that may
cause their prices to fluctuate over time. Additionally, the value of
securities, such as warrants and convertible issues, is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions. Convertible issues purchased for any Portfolio will be limited to
those issues that are either rated (or, unrated securities that, in the judgment
of the relevant Investment Manager, are comparable in quality to securities
rated) investment grade or better by Moody's or S&P or other ratings
organization. Please refer to "Debt Securities and Ratings Organizations" in
this section of the prospectus for further information about such organizations
<PAGE>
<PAGE>
and their ratings. Fluctuations in the value of equity securities in which a
Portfolio invests will cause the net asset value of that Portfolio to
fluctuate.
An investment in those Portfolios of the Trust that invest primarily in equity
securities may be more suitable for long-term investors who can bear the risk of
short-term principal fluctuation. The Small Capitalization EquityPortfolio
invests primarily in equity securities issued by smaller companies, generally
with a capitalization of less than $1.0 billion. Equity securities of smaller
companies involve greater risk than that customarily associated with
investments in larger, more established companies. This increased risk may be
due to the fact that such companies often have limited markets and financial
resources, narrow product lines and lack of depth of management. The securities
of smaller companies are often traded in the over-the-counter markets and, if
listed on national or regional exchanges, may not be traded in volumes typical
for such exchanges. Thus, the securities of smaller companies are likely to be
less liquid, and subject to more abrupt or erratic price movements than larger,
more established companies. Further information about securities that may be
illiquid is included in this section under the heading
"About Illiquid Securities."
About Debt Securities and Ratings Organizations. Ratings of debt securities and
- ------------------------------------------------
rated convertible issues represent the judgment of the nationally recognized
rating organization (each an "NRSRO"), such as S&P and Moody's, that assigns the
rating regarding the rated instrument. Such ratings are not a guarantee of
quality and may be reduced after the Trust has acquired the security. If a
security's rating is reduced while it is held by the Trust, the appropriate
Investment Manager will consider whether the Trust should continue to hold the
security but is not required to dispose of it. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, an NRSRO may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial conditions may be better or worse than the rating indicates. A
summary of the ratings categories of Moody's and S&P appears in the Appendix to
the Statement of Additional Information.
Certain of the Portfolios may purchase debt securities that have not been
assigned ratings by any NRSRO but are determined by the relevant Investment
Manager to be of a quality comparable to rated securities that the Portfolio is
permitted to purchase. The quality of unrated securities will be determined by
an Investment Manager in accordance with guidelines adopted by the Board.
About Foreign Securities. The International Equity Portfolio invests primarily
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in equity securities of non-U.S. issuers, which securities may be traded in the
U.S. or abroad and which may be denominated in foreign currencies. In addition
and as noted earlier in this prospectus, The Growth Equity Portfolio may also
invest in such securities. The International Equity Portfolio may also invest
in short-term debt instruments denominated in foreign currencies under unusual
market conditions. Equity securities of overseas issuers are subject to the
same risks, described above, applicable to equity securities in general. In
addition, both debt and equity securities of foreign issuers may involve risks
which are not ordinarily associated with investing in domestic securities. Such
factors include the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting standards;
<PAGE>
<PAGE>
less liquidity and more volatility in foreign securities markets; the
possibility of expropriation; the imposition of foreign withholding and other
taxes; the impact of foreign political, social or diplomatic developments;
limitations on the movement of funds or other assets between different
countries; difficulties in invoking legal process abroad and enforcing
contractual obligations; and the difficulty of assessing economic trends in
foreign countries. In addition, changes in foreign exchange rates will affect
the value of securities denominated or quoted in foreign currencies relative to
the U.S. dollar. Exchange rate movements can be large and can endure for
extended periods of time, affecting either favorably or unfavorably the value of
securities held in the Portfolio and, thus, the Portfolio's net asset value per
share. Securities transactions effected in markets overseas are generally
subject to higher fixed commissions than may be negotiated on U.S. exchanges.
Custody arrangements for the Portfolio's foreign securities will be more costly
than those associated with domestic securities of equal value. Certain foreign
governments levy withholding taxes against dividend and interest income.
Although in some countries a portion of these taxes is recoverable, the non-
recovered portion of foreign withholding taxes will reduce the Portfolio's
income.
The Value Equity Portfolio may invest in American Depositary Receipts ("ADRs").
ADRs are dollar-denominated receipts generally issued in registered form by
domestic banks, that represent the deposit with the bank of a security of a
foreign issuer. ADRs, which are publicly traded on U.S. exchanges and in the
over-the-counter markets, may be sponsored by the foreign issuer of the
underlying security or may be unsponsored. The International Equity Portfolio
and the Growth Equity Portfolio are also permitted to invest in ADRs.
Additionally, these portfolios may invest in European Depositary Receipts
("EDRs"). EDRs are similar to ADRs but are issued and traded in Europe. EDRs
are generally issued in bearer form and denominated in foreign currencies and,
for this reason, are subject to the currency risks described above. For
purposes of the Trusts' investment policies, ADRs and EDRs are deemed to have
the same classification as the underlying securities they represent. Thus, an
ADR or EDR representing ownership of common stock will be treated as common
stock. ADR or EDR programs may be sponsored or unsponsored. Unsponsored
programs are subject to certain risks. In contrast to sponsored programs,
where the foreign issuer of the underlying security works with the depository
institution to ensure a centralized source of information about the underlying
company, including any annual or other similar reports to shareholders,
dividends and other corporate actions, unsponsored programs are based on a
service agreement between the depository institution and holders of ADRs or
EDRs issued by the program; thus investors bear expenses associated with
certificate transfer, custody and dividend payments. In addition, there may be
several depository institutions involved in issuing unsponsored ADRs or EDRs for
the same underlying issuer. Such duplication may lead to market confusion
because there would be no central source of information for buyers, sellers and
intermediaries, and delays in the payment of dividends and information about the
underlying issuer or its securities could result.
About Tax-Exempt Securities. The Limited Duration Municipal Bond Portfolio
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intends to invest substantially all of its assets in Tax-Exempt Securities,
including municipal bonds, notes and related instruments. The performance of
this Portfolio depends primarily on interest rate risk and credit risk.
Interest rate risk is the risk that the value of an investment will fluctuate in
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response to changes in interest rates. Credit risk is the risk that an issuer
will be unable to make principal and interest payments when due. The credit
quality of municipal obligations held by the Portfolio can be affected, among
other things, by the financial condition of the issuer or guarantor of a Tax-
Exempt Security, the issuer's future borrowing plans and sources of revenue, the
economic feasibility of the underlying project and regional political or
economic developments.
Generally, the value of debt securities such as Tax-Exempt Securities, will tend
to decrease in value when interest rates rise and increase in value when
interest rates fall, with shorter term securities generally less sensitive to
interest rate changes than longer term securities. Municipal bonds are debt
obligations which are typically issued with maturities of five years or more,
issued by local, state and regional governments or other governmental
authorities. Municipal bonds may be issued for a wide range of purposes,
including construction of public facilities, funding operating expenses, funding
of loans to public institutions; or refunding outstanding municipal debt.
Municipal bonds may be "general obligations" of their issuers, the repayment of
which is secured by the issuer's pledge of full faith, credit and taxing power.
"Revenue" or "special tax" bonds, such as municipal lease obligations and
industrial revenue bonds are obligations that are payable from revenues derived
from a particular facility or a special excise or other tax. Trusts for
repayment of revenue bonds are generally limited to revenues from the underlying
project or facility. As a consequence, the credit quality of such obligations
is ordinarily dependent on the credit quality of the private user or operator of
the project or facility rather than the governmental issuer of the obligation.
Municipal lease obligations likewise may not be backed by the issuing
municipality's credit and may involve risks not normally associated with
investments in Tax-Exempt Securities. For example, interest on such obligations
may become taxable if the lease is assigned. The Portfolio may also incur
losses if the municipal issuer does not appropriate funds for lease payments on
an annual basis, which may result in termination of the lease and possible
default. Municipal leases may also be illiquid. Further information about
securities that may be illiquid is included in this section under the heading
"About Illiquid Securities."
The Limited Duration Municipal Bond Portfolio may also invest in Tax-Exempt
Securities, the proceeds of which are directed, at least in part, to private,
for-profit organizations. Although the interest from such bonds is exempt from
regular Federal income tax, if the bond was issued after August 7, 1986, the
interest may be treated as tax preference items for purposes of the alternative
minimum tax; such bonds are often referred to as "AMT Bonds." The alternative
minimum tax is a special separate tax that applies to a limited number of
taxpayers who have certain adjustments to income or tax preference items.
Municipal notes are obligations issued by local, state and regional governments
to meet their short-term funding requirements. Municipal notes may be short-
term debt obligations which are issued pending receipt of taxes or other
revenues, and retired upon receipt of such revenues. Such securities include
bond anticipation notes, revenue anticipation notes and tax and revenue
anticipation notes. Other types of municipal notes in which the Portfolio may
invest are issued to fund municipal operations on a temporary or revolving basis
and may include construction loan notes, short-term discount notes, tax-exempt
commercial paper demand notes and similar instruments.
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Long term fixed rate municipal bonds that have been coupled with puts granted by
a third party financial institution may also be purchased for the Portfolio.
Such instruments, which may be represented by custodial receipts or trust
certificates, are designed to enhance the liquidity and shorten the duration of
the underlying bond. Under certain circumstances, however, such as the
downgrading of the underlying bond or a change in its tax-exempt status, the
associated put will terminate automatically and the weighted average maturity
of the Portfolio may increase. A "Participation interest" is a floating or
variable rate security issued by a financial institution. These instruments
represent interests in municipal bonds or other municipal obligations held by
the issuing financial institution. Participation interests are generally backed
by an irrevocable letter of credit or guarantee by a bank (which may or may not
be the issuing financial institution). The letter of credit feature is usually
designed to enhance the credit quality of the underlying municipal obligations.
In addition, participation interests generally carry a demand feature. These
demand features permit the Portfolio to tender the participation interest back
to the issuing financial institution and are usually designed to provide
liquidity for the Portfolio in the event of a downgrade in the credit quality
of the instrument or default in the underlying municipal obligation. The
Portfolio may acquire stand-by commitments, also known as "liquidity puts"
solely for the purpose of facilitating portfolio liquidity. These instruments
give the Portfolio the right to sell specified securities back to the seller,
at the option of the Portfolio, at a specified price. It is expected that such
stand-by commitments will be available without the payment of any direct or
indirect consideration. However, if advisable in the judgment of the Investment
Manager of the Portfolio, the Portfolio may pay for such commitments at the time
the underlying security is acquired.
Tax-Exempt Securities may be purchased on a "when-issued" basis. When
securities are purchased on a when-issued or delayed delivery basis, the
Portfolio must maintain, in a segregated account until the settlement date,
cash, U.S. Government Securities or high-grade debt obligations in an amount
sufficient to meet the purchase price (or enter into offsetting contracts for
the forward sale of other securities it owns). The purchase of securities on a
when-issued or delayed delivery basis involves a risk of loss if the value of
the security to be purchased declines prior to the settlement date. Although
purchases of securities on a when-issued or delayed delivery basis are expected
to be made only with the intention of acquiring those securities for the
investment portfolio of the purchasing Portfolio, when-issued or delayed
delivery securities may be sold prior to settlement if the purchasing
Portfolio's Investment Manager deems it appropriate to do so. The market value
of when-issued securities may increase or decrease prior to settlement as a
result of changes in interest rates or other factors and short-term gains or
losses may be realized on any sales of such when-issued securities.
About Temporary Investment Practices. Although it is the intention of the Trust
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that each of the Portfolios be fully invested in accordance with its respective
investment objectives and policies at all times, to maintain liquidity pending
investment, The Value Equity, Growth Equity, Small Capitalization Equity and
Limited Duration Municipal Bond Portfolios are authorized to invest up to 20% of
their respective assets in short-term money market instruments issued, sponsored
or guaranteed by the U.S. Government, its agencies or instrumentalities or
repurchase agreements secured by such securities (collectively, "U.S. Government
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Securities"), or short-term money market instruments of other issuers, which may
include corporate commercial paper, and variable and floating rate debt
instruments, that have received, or are comparable in quality to securities that
have received, one of the two highest ratings assigned by at least one NRSRO.
The International Equity Portfolio is also permitted to invest in U.S.
Government Securities or short-term money market instruments of other issuers
denominated in U.S. dollars or other currencies to maintain liquidity pending
investment. Investments in short-term instruments denominated in foreign
currencies are subject to the same risk considerations as described above under
the heading "About Foreign Securities." All such investments will be subject to
the same quality standards as those applicable to short-term investments made on
behalf of the Trust's domestic portfolios. Under extraordinary market or
economic conditions, all or any portion of a Portfolio's assets may be invested
in short-term money market instruments for temporary defensive purposes.
Further information about those instruments that each of the Portfolios may use
for temporary investment purposes appears in the Statement of Additional
Information, under the heading "Further Information on Investment Policies."
About Illiquid Securities. A Portfolio may not purchase illiquid securities if,
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at the time of such purchase, more than 15% of the value of the Portfolio's net
assets will be invested in illiquid securities. Illiquid securities are those
that cannot be disposed of promptly within seven days and in the usual course of
business at the prices at which they are valued. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Variable rate demand notes with demand periods in
excess of seven days, securities issued with restrictions on their disposition
("restricted issues") and municipal lease obligations, which may be unrated,
will be deemed illiquid unless a Portfolio's Investment Manager determines that
such securities are readily marketable and could be disposed of within seven
days promptly at the prices at which they are valued. In the case of municipal
lease obligations, this determination will be made by the Portfolio's Investment
Manager in accordance with guidelines established by the Trust's Board. The
liquidity of restricted issues and, in particular, the availability of an
adequate dealer or institutional trading market for those restricted issues
("Rule 144A Securities") that are not registered for sale to the general public
but can be resold to institutional investors, will be determined by each
Portfolio's Investment Manager in accordance with guidelines established by
the Trust's Board. The institutional market for Rule 144A Securities is
relatively new and liquidity of the investments in such securities could be
impaired if trading does not further develop or declines. Factors relevant to
the liquidity of a particular instrument include the frequency of trades and
availability of dealer quotes, the number of dealers and market makers active in
the issue and the nature of marketplace trades (e.g. mechanics of transfer and
solicitation of offers).
About Hedging Strategies. Each of the Portfolios may engage in certain
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strategies ("Hedging Strategies") designed to reduce certain risks that would
otherwise be associated with their respective securities investments, and/or in
anticipation of futures purchases. These strategies include the use of options
on securities and securities indices, options on stock index and interest rate
futures contracts and options on such futures contracts. The Growth Equity and
International Equity Portfolios may also use forward foreign currency contracts
in connection with the purchase and sale of those securities, denominated in
foreign currencies, in which each is permitted to invest. The International
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Equity Portfolio may use foreign currency options and foreign currency futures
to hedge against fluctuations in the relative value of the currencies in which
securities held by The International Equity Portfolio are denominated. A
Portfolio may invest in the instruments noted above (collectively, "Hedging
Instruments") only in a manner consistent with its investment objective and
policies. A Portfolio may not invest more than 10% of its total assets in option
purchases and may not commit more than 5% of its net assets to margin deposits
on futures contracts and premiums for options on futures contracts. In
addition, each Portfolio may use the Hedging Instruments only for the purpose of
reducing investment risk and not for speculative purposes. Further information
relating to the use of Hedging Instruments, and the limitations on their use,
appears in the Statement of Additional Information.
There are certain overall considerations to be aware of in connection with the
use of Hedging Instruments in any of the Portfolios. The ability to predict the
direction of the securities or currency markets and interest rates involves
skills different from those used in selecting securities. Although the use of
various Hedging Instruments is intended to enable each of the Portfolios to
hedge against certain investment risks, there can be no guarantee that this
objective will be achieved. For example, in the event that an anticipated
change in the price of the securities (or currencies) that are the subject of
the strategy does not occur, it may be that the Portfolio employing the Hedging
Strategy would have been in a better position had it not used such a strategy at
all. Moreover, even if the Investment Manager correctly predicts interest rate
or market price movements, a hedge could be unsuccessful if changes in the value
of the option or futures position do not correspond to changes in the value of
investments that the position was designed to hedge. Liquid markets do not
always exist for certain Hedging Instruments and lack of a liquid market for any
reason may prevent a Portfolio from liquidating an unfavorable position. In the
case of an option, the option could expire before it can be sold, with the
resulting loss of the premium paid by a Portfolio for the option. In the case
of a futures contract, a Portfolio would remain obligated to meet margin
requirements until the position is closed. In addition, options that are traded
over-the-counter differ from exchanged traded options in that they are two-party
contracts with price and other terms negotiated between the parties. For this
reason, the liquidity of these instruments may depend on the willingness of the
counterparty to enter into a closing transaction. In the case of currency
related instruments, such as foreign currency options, options on foreign
currency futures, and forward foreign currency contracts, it is generally not
possible to structure transactions to match the precise value of the securities
involved since the future value of the securities will change during the period
that the arrangement is outstanding. As a result, such transactions may
preclude or reduce the opportunity for gain if the value of the hedged currency
changes relative to the U.S. dollar. Like over-the-counter options, such
instruments are essentially contracts between the parties and the liquidity of
these instruments may depend on the willingness of the counterparty to enter
into a closing transaction.
About Other Permitted Instruments. Each of the Portfolios may borrow money from
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a bank for temporary emergency purposes, and may enter into reverse repurchase
agreements. A reverse repurchase agreement, which is considered a borrowing for
purposes of the Investment Company Act, involves the sale of a security by the
Trust and its agreement to repurchase the instrument at a specified time and
price. Accordingly, the Trust will maintain a segregated account consisting of
cash, U.S. Government securities or high-grade debt obligations, maturing not
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later than the expiration of the reverse repurchase agreement, to cover its
obligations under reverse repurchase agreements. To avoid potential leveraging
effects of a Portfolio's borrowings, additional investments will not be made
while aggregate borrowings, including reverse repurchase agreements, are in
excess of 5% of a Portfolio's total assets. Borrowings outstanding at any time
will be limited to no more than one-third of a Portfolio's total assets.
Each of the Portfolios may lend portfolio securities to brokers, dealers and
financial institutions provided that cash, or equivalent collateral, equal to at
least 100% of the market value (plus accrued interest) of the securities loaned
is maintained by the borrower with the lending Portfolio. During the time
securities are on loan, the borrower will pay the Portfolio any income that may
accrue on the securities. The Portfolio may invest the cash collateral and earn
additional income or may receive an agreed upon fee from the borrower who has
delivered equivalent collateral. No Portfolio will enter into any securities
lending transaction if, at the time the loan is made, the value of all loaned
securities, together with any other borrowings, equals more than one-third of
the value of that Portfolio's total assets.
MANAGEMENT OF THE TRUST
The Board of Directors. The Trust's Board is responsible for the overall
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supervision and management of the business and affairs of the Trust, including
(i) the selection and general supervision of the Investment Managers that
provide day-to-day portfolio management services to the Trust's several
Portfolios; and (ii) for Portfolios for which more than one Investment Manager
has been retained, allocation of that Portfolio's assets among such Investment
Managers. In particular, the Board may, from time to time, allocate portions of
a Portfolio's assets between or among several Investment Managers, each of whom
may have a different investment style and/or security selection discipline.
The Board also may reallocate a Portfolio's assets among such Investment
Managers or terminate particular Investment Managers, if the Board deems it
appropriate to do so in order to achieve the overall objectives of the Portfolio
involved. The Board may also retain additional Investment Managers on behalf
of a Portfolio subject to the approval of the shareholders of that Portfolio in
accordance with the Investment Company Act.
The Investment Managers. As indicated above, day-to-day investment decisions
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for each of the Portfolios are the responsibility of one or more Investment
Managers retained by the Trust. In accordance with the terms of individual
investment advisory contracts relating to the respective Portfolios, and subject
to the general supervision of the Trust's Board, each of the Investment Managers
is responsible for providing a continuous program of investment management to,
and placing all orders for, the purchase and sale of securities and other
instruments on behalf of the respective Portfolios they serve.
Brinson Partners, Inc. ("Brinson") serves as Investment Manager for The
International Equity Portfolio. For its services to the Portfolio, Brinson
receives a fee, based on the average daily net asset value of that portion of
the Portfolio's assets managed by it, at an annual rate of 0.40%. Brinson, the
principal offices of which are located at 209 South LaSalle Street, Chicago,
Illinois 60604-1295, and its predecessor entities have provided investment
management services for international equity assets since 1974. The day-to-day
management of The International Equity Portfolio is the responsibility of a team
of Brinson's investment professionals; investment decisions are made by
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committee and no person has primary responsibility for making recommendations to
the committee. Brinson had assets of approximately $____ billion under
management as of ________, 1996, of which approximately $___ billion
represented assets of mutual funds. Brinson is a wholly-owned indirect
subsidiary of Swiss Bank Corporation, an internationally diversified
organization with operations in many aspects of the financial services industry.
Clover Capital Management, Inc. ("Clover Capital") serves an Investment Manager
for The Small Capitalization Equity Portfolio. For its services to the
Portfolio, Clover Capital receives a fee, based on the average daily net asset
value of that portion of the Portfolio's assets managed by it, at an annual rate
of 0.45%. Clover Capital, the principal offices of which are located at 11 Tobey
Village Office Park, Pittsford, New York 14534, was incorporated in 1986.
Michael E. Jones and Geoffrey H. Rosenberger are primarily responsible for
making day-to-day investment decisions for that portion of the Portfolio's
assets assigned to Clover Capital. Mr. Jones and Mr. Rosenberger are the
founders of Clover Capital and have served as Managing Directors of Clover
Capital since the firm's inception. Mr. Jones, a chartered financial analyst, is
a research analyst and portfolio manager. Mr. Rosenberger, also a chartered
financial analyst, manages Clover Capital's overall research effort. Clover
Capital had, as of ________, 1996, assets of approximately $___ billion under
management, of which approximately $__ million represented assets of mutual
funds.
Hotchkis and Wiley ("Hotchkis") serves as an Investment Manager for The Value
Equity Portfolio. For its services to the Portfolio, Hotchkis receives a fee,
based on the average daily net asset value of that portion of the Portfolio's
assets managed by it, at an annual rate of 0.30%. Hotchkis, the principal
offices of which are located at 800 West Sixth Street, Los Angeles, California,
90017, and its predecessor entities have provided investment management
services for equity assests since 1980. Sheldon Lieberman will be
responsible for making day-to-day investment
decisions for that portion of The Value Equity Portfolio allocated to
Hotchkis and Wiley. Before joining Hotchkis and Wiley in 1994, Mr.
Lieberman was the Chief Investment Officer for the Los Angeles County
Employees Retirement Association. Prior to that, he was Manager of
Trust Investments at Lockheed Corporation. As of June 30, 1996, Hotchkis
and Wiley managed total assets of approximately $10 billion, of which
approximately $1.5 billion represent assets of mutual funds. Merrill Lynch &
Co., Inc. ("ML") has agreed to acquire all of the partnership interests in
Hotchkis subject to certain conditions ("Acquistion"). If the Acquistion is
consummated as proposed, the investment advisory business now operated by
Hotchkis 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. Further information regarding the Acquistion is set forth in
the Statement of Additional Information under the heading "Management of the
Trust - Other Matters."
Frontier Capital Management Company ("Frontier") serves as an Investment Manager
for The Small Capitalization Equity Portfolio. For its services to the
Portfolio, Frontier receives a fee based on the average daily net asset value of
that portion of the Portfolio's assets managed by it, at an annual rate of
0.45%. Frontier, the principal offices of which are located at 99 Summer
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Street, Boston, Massachusetts 02110, was established in 1980. Michael
Cavarretta is responsible for making the day-to-day investment decisions for
that portion of the Portfolio's assets assigned to Frontier. Mr. Cavarretta has
been an investment professional with Frontier since 1988. Before joining
Frontier, Mr. Cavarretta was a financial analyst with General Electric Co. and
attended Harvard Business School (M.B.A. 1988). Frontier had, as of ________,
1996, assets of approximately $___ billion under management, of which
approximately $__ million represented assets of mutual funds.
Institutional Capital Corporation ("ICAP") serves as an Investment Manager for
The Value Equity Portfolio. For its services to the Portfolio, ICAP receives a
fee, based on the average daily net asset value of that portion of the
Portfolio's assets managed by it, at an annual rate of 0.30%. ICAP, the
principal offices of which are located at 225 West Wacker, Chicago, Illinois
60606, has provided investment management services for equity assets since 1970.
Investment decisions for those assets of the Portfolio assigned to ICAP are made
by a team of ICAP investment professionals; investment decisions are made by
committee and no single individual has primary responsibility for making
recommendations to the committee. ICAP had assets of approximately $___ billion
under management as of ________, 1996, of which approximately $__ million
represented assets of mutual funds.
Jennison Associates Capital Corp. ("Jennison") serves as an Investment Manager
for The Growth Equity Portfolio. For its services to the Portfolio, Jennison
receives a fee, based on the average daily net asset value of that portion of
the Portfolio's assets managed by it, at an annual rate of 0.30%. Jennison, the
principal offices of which are located at 466 Lexington Avenue, New York, New
York 10017, was established in 1969. Robert B. Corman, Senior Vice-President and
a director of Jennison, is responsible for making day-to-day investment
decisions for the portion of the Portfolio's assets assigned to Jennison. Mr.
Corman, who is a chartered financial analyst, has been an officer and investment
professional with Jennison since 1981. As of ________, 1996, Jennison had
approximately $___ billion under management, of which approximately $___
billion represented assets of mutual funds. Jennison is a wholly-owned
subsidiary of Prudential Insurance Company of America.
Morgan Grenfell Capital Management Incorporated ("Morgan Grenfell") serves as
Investment Manager for The Limited Duration Municipal Bond Portfolio. For its
services to the Portfolio, Morgan Grenfell receives a fee, based on the average
daily net asset value of that portion of the Portfolio's assets managed by it,
at an annual rate of 0.20%. Morgan Grenfell, whose principal offices are
located at 885 Third Avenue, New York, New York 10022, has been active in
managing municipal securities since 1989. David Baldt, who is Morgan Grenfell's
Fixed Income Manager, is primarily responsible for making the day-to-day
investment decisions for the Portfolio. Mr. Baldt has managed fixed income
investments since 1973, and has been with Morgan Grenfell since 1989. As of
________, 1996, Morgan Grenfell had assets of approximately $___ billion of
which approximately $___ million represented assets of mutual funds. Morgan
Grenfell is an indirect, wholly-owned subsidiary of Deutschebank, A.G., a German
financial services conglomerate.
Westfield Capital Management Company, Inc. ("Westfield") serves as an Investment
Manager for The Growth Equity Portfolio. For its services to the Portfolio,
Westfield receives a fee, based on the average daily net asset value of that
portion of the Portfolio's assets managed by it, at an annual rate of 0.30%.
Westfield, established in 1989, is owned 100% by the active members of its
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professional staff. The firm maintains its principal offices at One Financial
Center, Boston, Massachusetts, 02111. C. Michael Hazard, Arthur J. Bauernfeind
and Michael J. Chapman are responsible for making the day-to-day investment
decisions for the Portfolio. Mr. Hazard is Chairman of the Board and Chief
Executive Officer of Westfield. Prior to founding Westfield in 1989, he was
Executive Vice President of Essex Investment Management Company, Inc. in Boston
Massachusetts. Mr. Bauernfeind, President and Chief Operating Officer of
Westfield, is a chartered financial analyst and chartered investment counselor.
Before joining Westfield in 1990, he was a Managing Partner and Vice-President
of Loomis Sayles & Co. in Boston, Massachusetts. Mr. Chapman, Westfield's
Director of Research and Chief Investment Officer, has been an officer and
portfolio manager with Westfield since 1990. He joined Westfield after nine
years with Eaton Vance Corporation in Boston, Massachusetts, where he was a
Vice-President and headed the Emerging Growth Department. Mr. Chapman is also
a chartered financial analyst. Westfield had, as of ________, 1996, assets of
approximately $____ million under management, of which approximately $___
million represented assets of mutual funds.
Consulting Arrangement. Pursuant to an agreement with the Trust, ("HCCI
Consulting Agreement"), Hirtle Callaghan continuously monitors the performance
of various investment management organizations, including the Investment
Managers. 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 August 31, 1996, had approximately $ 685 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.
Administration, Distribution, and Related Services. BISYS Fund Services
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("BISYS")3435 Stelzen Road, Columbus, Ohio 43219 has been retained, pursuant to
a separate Administrative Services Contract with the Trust, to serve as
the Trust's administrator. Services performed by BISYS in that capacity
include, but are not limited to: (a) general supervision of the operation of the
Trust and coordination of services performed by the various service
organizations retained by the Trust; (b) regulatory compliance, including the
compilation of information for documents and reports furnished to the Securities
and Exchange Commission and corresponding state agencies; (c) assistance in
connection with the preparation and filing of the Trust's registration statement
and amendments thereto; and (d) maintenance of the Trust's registration in the
various states in which shares of the Trust are offered. For its services as the
Trust's administrator, BISYS is entitled to receive a fee, payable monthly
by the Trust, at the annual rate of 0.10% of the Trust's average daily net
assets up to $1 billion and 0.060% on such assets in excess of $1 billion.
Pursuant to separate contracts, BISYS or its affiliates also serve as the
Trust's transfer and dividend disbursing agent, as well as the Trust's
accounting agent and receives a fee for such services based on the number of
shareholder accounts maintained and the services required by each such account.
BISYS also serves as the Trust's distributor. BISYS performs similar services
for mutual funds other than the Trust. Bankers Trust Company has been retained
by the Trust to serve as custodian for the assets of each of the Portfolios.
BISYS and its affiliated companies are wholly-owned by The BISYS Group, Inc.,
a publicly-held company which is a provider of information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.
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Expenses. The Trust pays all expenses incurred in its operation, other than
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those expenses expressly assumed by Hirtle Callaghan, the Investment Managers or
other service organizations. Those Trust expenses that can be readily identified
as belonging to a particular Portfolio will be paid by that Portfolio. General
expenses of the Trust that are not so identified will be allocated among the
Portfolios based on their relative net assets at the time those expenses are
accrued. The Trust's principal expenses are the fees payable to the Investment
Managers; fees for administration, transfer agency and portfolio accounting
payable to Furman Selz; fees for domestic and international custody of the
Trust's assets payable to Bankers Trust Company; fees for independent auditing
and for legal services; fees for filing reports and registering shares with
regulatory bodies; and consulting fees payable to Hirtle Callaghan.
PURCHASES AND REDEMPTIONS
General Information About Purchases. Shareholder accounts in the Trust may be
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established only by, and shares of each of the Portfolios are available
exclusively to, Eligible Investors. Shares are sold at net asset value and
without sales charge. Payment for purchases of Trust shares may be made by
wire transfer or by check drawn on a U.S. bank. All purchases must be made in
U.S. dollars. The Trust reserves the right to reject any purchase order.
Purchase orders may be received by the Trust's Transfer Agent on any day the
Trust is open for business ("Business Day"). The Trust is open every day,
Monday through Friday, that the New York Stock Exchange is open for
trading, which excludes the following business holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The Trust reserves the right to reject any
purchase order and will not issue share certificates. Purchases of shares of the
Portfolios will be executed at the net asset value per share next computed after
receipt by the Trust of a purchase order placed on behalf of an Eligible
Investor and after the order has been accepted by the Trust. If such a purchase
order is received prior to 4 P.M. Eastern Time on any Business Day, the purchase
will be executed at the net asset value per share determined as of the close of
trading on the New York Stock Exchange on that Business Day--normally 4:00 P.M.
Eastern Time. Purchase orders received after 4 P.M. Eastern Time will be
executed at the net asset value per share as determined on the following
Business Day.
General Information About Redemptions. Shares may be redeemed on any Business
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Day. Shares will be redeemed at the net asset value next computed after receipt
of a redemption request in proper form by the Transfer Agent. The Trust
reserves the right to redeem the account of any shareholder if as a result of
redemptions, the aggregate value of shares held in a Portfolio falls below a
minimum of $5,000 after 30 days notice and provided that, during such 30 day
period, such aggregate value is not increased to at least such minimum level.
Under extraordinary conditions, as provided under the rules of the Securities
and Exchange Commission, payment for shares redeemed may be postponed, or the
right of redemption suspended.
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Redemptions may be made in number of shares or a stated dollar amount by sending
a written request to the Trust's Transfer Agent at the address shown on the
first page of this prospectus. Redemption requests must be signed in the exact
name in which the shares are registered; redemption requests for joint accounts
require the signature of each joint owner. For redemption requests of $25,000
or more, each signature must be guaranteed by a commercial bank or trust company
which is a member of the Federal Deposit Insurance Corporation, a member firm of
a national securities exchange and certain other securities dealers and credit
unions. Guarantees must be signed by an authorized signatory of the guarantor
institution and "Signature Guaranteed" must appear with the signature.
Proceeds of redemption requests transmitted by mail will normally be paid by
check and mailed to the shareholder's address as indicated on the Trust's books.
Redemption proceeds of $2,500 or more may be transferred electronically to the
bank account number, if any, recorded on the Trust's books. Wire redemption
requests received prior to 1:00 P.M. on any Business Day will be effected on
that Business Day and wired to your bank on the following Business Day. The
Trust ordinarily will make payment for all shares redeemed within seven days
after receipt of a redemption request in proper form. Payment of redemption
proceeds for shares purchased by check may be delayed for a period of up to
fifteen days after their purchase, pending a determination that the check has
cleared.
Additional Information About Purchases and Redemptions. The Trust does not
- ------------------------------------------------------
impose investment minimums or sales charges of any kind. It is expected,
however, that shares of the Trust will be acquired through a program of services
offered by a financial intermediary, such as an investment adviser or bank, and
that shares will be held, of record, in the name of such intermediary or a
related entity. Intermediaries may impose service or advisory fees, which are
in addition to those expenses borne by the Trust and described in this
prospectus under the heading "Expense Information." Investors should contact
such intermediary for information concerning what, if any, additional fees may
be charged.
The Trust may, at its discretion, permit investors to purchase shares of a
Portfolio through an exchange of securities. Any securities exchanged must meet
the investment objectives, policies and limitations of the Portfolio involved,
must have a readily ascertainable market value, must be liquid and must not be
subject to restrictions on resale. The market value of any securities exchanged
plus any cash, must be at least $250,000. Shares acquired through any such
exchange will not be redeemed until the transfer of securities to the Trust has
settled -- usually within 15 days following the purchase by exchange. The Trust
may, at its discretion, pay any portion of the redemption amount in excess of
$250,000 by a distribution "in kind" of securities held in a Portfolio's
investment portfolio. Investors will incur brokerage charges on the sale of
these portfolio securities.
Shareholder Reports and Inquiries. Shareholders will receive semi-annual
- ---------------------------------
reports containing unaudited financial statements as well as annual reports
containing financial statements which have been audited by the Trust's
independent accountants. Each shareholder will be notified annually as to the
Federal tax status of distributions made by the Portfolios in which such
shareholder is invested. Shareholders may contact the Trust by calling the
telephone number, or by writing to the Trust at the address, shown on the first
page of this prospectus.
<PAGE>
<PAGE>
PORTFOLIO TRANSACTIONS AND VALUATION
Portfolio Transactions. Subject to the general supervision of the Board, each
- ----------------------
of the Investment Managers is responsible for placing orders for securities
transactions for the Portfolio they serve. Purchases and sales of equity
securities will normally be conducted through brokerage firms entitled to
receive commissions for effecting such transactions. In placing orders, it is
the policy of the Trust to ensure that the most favorable execution for its
transactions is obtained. Where such execution may be obtained from more than
one broker or dealer, securities transactions may be directed to those who
provide research, statistical and other information to the Trust or the
Investment Managers. Purchases and sales of debt securities are expected to
occur primarily with issuers, underwriters or major dealers acting as
principals. Such transactions are normally effected on a net basis and do not
involve payment of brokerage commissions. The Trust has no obligation to enter
into securities transactions with any particular dealer, issuer, underwriter or
other entity. In addition, the Board may, to the extent consistent with the
Investment Company Act and other applicable law, authorize Investment Managers
to direct transactions to service organizations retained by the Trust or their
affiliates; under appropriate circumstances, such transactions may be used for
the purpose of offsetting fees otherwise payable by the Trust for custody,
transfer agency or other services.
Valuation. The net asset value per share of the Portfolios is determined once
- ---------
on each Business Day as of the close of the New York Stock Exchange, which is
normally 4 P.M. Eastern Time. Each Portfolio's net asset value per share is
calculated by adding the value of all securities and other assets of the
Portfolio, subtracting its liabilities and dividing the result by the number of
its outstanding shares. Those assets that are traded on an exchange or in the
over-the-counter market are valued based upon market quotations. Short-term
obligations with maturities of 60 days or less are valued at amortized cost,
which constitutes fair value as determined by the Trust's Board. Other assets
for which market quotations are not readily available are valued at their fair
value as determined in good faith by the Trust's Directors. With the approval
of the Board, any of the Portfolios may use a pricing service, bank or broker-
dealer experienced in such matters to value the Portfolio's securities. A more
detailed discussion of net asset value and security valuation is contained in
the Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividend and Capital Gain Distribution Options. It is anticipated that The
- ----------------------------------------------
Value Equity Portfolio, The Growth Equity Portfolio and The Small Capitalization
Equity Portfolio will declare and distribute dividends from net investment
income on a quarterly basis. The Limited Duration Municipal Bond Portfolio will
declare dividends from net investment income daily, with payments on a monthly
basis. The International Equity Portfolio will declare dividends from net
investment income semi-annually. Net realized capital gains, if any, will be
distributed at least annually for each Portfolio. Unless another distribution
option is elected, dividends and capital gain distributions will be credited to
shareholder accounts in additional shares of the Portfolio with respect to which
<PAGE>
<PAGE>
they are paid. Elections may be made by writing to the Trust c/o its Transfer
Agent. Elections must be received in writing by the Transfer Agent at least
five days prior to the payable date of the dividend in order for the election to
be effective for that dividend and on or before the record date of a
distribution in order to be effective for that distribution. In the event that
a shareholder redeems all shares in an account between the record date and the
payable date, the value of dividends or gain distributions declared and payable
will be paid in cash regardless of the existing election.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders on December 31 of such year, provided
such dividends are paid during January of the following year. Investors should
also be careful to consider the tax implications of buying shares just prior to
a distribution. The price of shares purchased at that time may reflect the
amount of the forthcoming distribution. Those investors purchasing just prior
to a distribution may nevertheless be taxed on the entire amount of the
distribution received, although the distribution may have the effect of reducing
the market value of shares below the shareholder's cost.
The Trust will provide written notices to shareholders annually regarding the
tax status of distributions made by each Portfolio.
Federal Taxes. The following discussion is only a brief summary of some of the
- -------------
important Federal tax considerations generally affecting the Portfolios and
their shareholders and is not intended as a substitute for careful tax planning.
Dividends and distributions may also be taxable under state and local tax laws.
In addition, shareholders who are nonresident alien individuals, foreign trusts
or estates, foreign corporations or foreign partnerships may be subject to
different tax treatment under U.S. Federal income tax laws than shareholders who
are U.S. residents. Furthermore, future legislative or administrative changes
or court decisions may materially affect the tax consequences of investing in
one or more Portfolios of the Trust. Accordingly, shareholders are urged to
consult their tax advisers with specific reference to his or her particular tax
situation.
Each Portfolio intends to qualify annually to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended ("Code"). In order to do so, each Portfolio must distribute at least
90% of its taxable income annually, and must derive at least 90% of its gross
income from its investment activities, provided that not more than 30% of such
income is derived from the disposition of securities held for less than three
months. So long as a Portfolio qualifies for this tax treatment, that Portfolio
will be not be subject to Federal income tax on amounts distributed to
shareholders.
Shareholders, however, will be subject to income or capital gains taxes on
distributed amounts (except for dividends that are treated as tax-exempt
dividends such as those expected to be paid by The Limited Duration Municipal
Bond Portfolio), regardless of whether such dividends and/or distributions are
paid in cash or reinvested in additional shares. Distributions paid by a
Portfolio out of long term capital gains are taxable to those investors subject
to income tax as long-term capital gains, regardless of the length of time an
investor has owned shares in the Portfolio. All other distributions, to the
extent they are taxable, are taxed to shareholders as ordinary income. A
redemption of shares of any Portfolio may also result in a capital gain or loss
to the redeeming shareholder. A loss incurred upon redemption of shares of any
Portfolio of the Trust (other than The Limited Duration Municipal Bond
Portfolio) held for six months or less will be treated as long-term capital loss
to the extent of capital gain dividends received with respect to such shares.
Tax Matters Relating to The Limited Duration Municipal Bond Portfolio. As a
- ---------------------------------------------------------------------
matter of fundamental policy, The Limited Duration Municipal Bond Portfolio
intends to invest a sufficient portion of its assets in municipal bonds and
<PAGE>
<PAGE>
notes so that it will qualify to pay "exempt-interest dividends." Exempt-
interest dividends distributed to shareholders are excluded from a shareholder's
gross income for Federal tax purposes. Under certain circumstances, receipt of
exempt-interest dividends may be relevant to shareholders in determining their
tax liability. Dividends paid from gains realized by the Portfolio from the
disposition of a tax-exempt bond that was acquired after April 30, 1993 for a
price less than the principal amount of the bond is taxable to shareholders as
ordinary income to the extent of the accrued market discount. Exempt interest
dividends paid by The Limited Duration Municipal Bond Portfolio, although exempt
from regular income tax in the hands of a shareholder of the Portfolio, are
includable in the tax base for determining the extent to which a shareholder's
Social Security Benefits would be subject to Federal income tax. Shareholders
are required to disclose their receipt of tax-exempt interest on their Federal
income tax returns. In addition, a portion of The Limited Duration Municipal
Bond Portfolio's dividends may be derived from income on "private activity"
municipal bonds and therefore may be a preference item under Federal tax law and
subject to the Federal alternative minimum tax. A loss incurred upon the
redemption of shares of The Limited Duration Municipal Bond Portfolio held for
six months or less will be disallowed to the extent of exempt-interest dividends
paid with respect to such shares; any loss not so disallowed will be treated as
a long-term capital loss to the extent of capital gain dividends received with
respect to such shares.
Tax Matters Relating to International Investments. Foreign currency gains and
- -------------------------------------------------
losses realized by a Portfolio, including those from forward currency exchange
contracts and certain futures and options on foreign currencies, will increase
or decrease the Portfolio's investment company taxable income available to be
distributed to shareholders as ordinary income. If foreign currency losses
exceed other investment company taxable income during a taxable year, the
Portfolio would not be able to make any ordinary dividend distributions, and any
distributions made before the losses were realized but in the same taxable year
would be recharacterized as a return of capital to shareholders, thereby
reducing each shareholder's basis in shares of that Portfolio. A Portfolio may
be subject to foreign withholding taxes on income from certain foreign
securities, if any, held. If more than 50% of the total assets of this
Portfolio is invested in securities of foreign corporations, the Portfolio may
elect to pass-through to its shareholders their pro rata share of foreign taxes
paid by such Portfolio. If this election is made, shareholders will be (i)
required to include in their gross income their pro rata share of foreign source
income (including any foreign taxes paid by the Portfolio), and (ii) entitled
to either deduct (as an itemized deduction in the case of individuals) their
share of such foreign taxes in computing their taxable income or to claim a
credit for such taxes against their U.S. income tax, subject to certain
limitations under the Code.
<PAGE>
<PAGE>
Back-up Withholding; Dividends-Received Deduction. The Trust is required to
- --------------------------------------------------
withhold 31% of taxable dividends, capital gains distributions, and redemptions
paid to shareholders who have not provided the Trust with their certified
taxpayer identification number in compliance with regulations adopted by the
Internal Revenue Service. Dividends paid from net investment income by The
Value Equity, Growth Equity and Small Capitalization Equity Portfolios will
generally qualify in part for the corporate dividends-received deduction
available to corporate investors. The portion of the dividends so qualified,
however, depends on the aggregate qualifying dividend income received by each
such Portfolio from domestic (U.S.) sources.
Further information about tax matters relating to the Trust, including its
foreign investments, appears in the Statement of Additional Information under
the heading "Dividends, Distributions and Taxes."
PERFORMANCE INFORMATION
Yield and Effective Yield. From time to time, each of the Portfolios may quote
- -------------------------
its "yield" and/or its "total return" in sales literature and in presentations
to prospective investors. These figures are based on historical earnings and
are not intended to indicate future performance. To arrive at a Portfolio's
"yield," the net investment income generated by an investment in the Portfolio
during a 30 day (or one month) period, is determined and the resulting figure is
annualized, (i.e. assumed to be the amount of income generated each week over a
52-week period) and expressed as a percentage of the initial investment. The
"effective yield" of a Portfolio is calculated in a similar manner but, when
annualized, the income earned by an investment in the Portfolio is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The yield of
any investment is generally a function of prevailing interest rates, portfolio
quality and maturity, type of investment and operating expenses. The yield on
shares of the Portfolio will fluctuate and is not necessarily representative of
future results. The Limited Duration Municipal Bond Portfolio may also quote
its tax-equivalent yield; this figure is calculated by determining the pre-tax
yield which, after being taxed at a stated rate, would be equivalent to the
yield determined as described above.
Average Annual Total Return. This figure shows the average percentage change in
- ---------------------------
value of a particular investment from the beginning date of the measuring period
to the end of the measuring period. The calculations required to determine
average total return will reflect changes in net asset value per share and
assume that any income dividends and/or capital gains distributions made during
the period were reinvested. Figures will be given for recent one, five and ten
year periods (if applicable), and may be given for other periods as well (such
as from commencement of operations, or on a year-by-year basis). In addition,
each Portfolio may present its total return over different periods by means of
aggregate, average, year-by-year or other types of total return figures, or
compare the yield or total return of a Portfolio to those of other mutual funds
with similar investment objectives and to other relevant indices. For example,
the performance of any of the Portfolios may be compared to the data prepared by
Lipper Analytical Services, Inc., a widely-recognized independent service that
monitors the performance of mutual funds. The Portfolios may also compare their
individual performance records to those of relevant indices, such as the
<PAGE>
<PAGE>
Standard & Poor's 500 Stock Index, the Russell 5000 Small Cap Stock Index, and
the Morgan Stanley Capital International Europe, Australia, Far East Index
("EAFE").
GENERAL
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, each with a different objective and
differing investment policies. 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.
</PAGE
<PAGE>
THE HIRTLE CALLAGHAN TRUST
TABLE OF CONTENTS
INFORMATION ABOUT:
Expense Information
Financial Highlights
Investment Objectives and Policies
The Value Equity Portfolio
The Growth Equity Portfolio
The Small Capitalization Equity Portfolio
The International Equity Portfolio
The Limited Duration Municipal
Bond Portfolio
Investment Practices and Risk Considerations
About Equity Securities
About Debt Securities and Ratings
Organizations
About Foreign Securities
About Tax-Exempt Securities
About Temporary Investment Practices
About Illiquid Securities
About Hedging Strategies
About Other Permitted Instruments
Management of the Trust
Purchases and Redemptions
Portfolio Transactions and Valuation
Dividends, Distributions and Taxes
Performance Information
General
No person has been authorized to give any information or to make representations
not contained in this prospectus in connection with any offering made by this
prospectus and, if given or made, such information must not be relied upon as
having been authorized by the Trust or its distributor. This prospectus does
not constitute an offering by the Trust or by its distributor in any
jurisdiction in which such offering may not lawfully be made.
<PAGE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
The Hirtle Callaghan Trust
575 E. Swedesford Road
Wayne, PA 19087
This statement of additional information is designed to supplement information
contained in the prospectus relating to The Hirtle Callaghan Trust ("Trust"), an
open-end, diversified, series, management investment company registered under
the Investment Company Act of 1940 ("Investment Company Act"). This document,
although not a prospectus, is incorporated by reference in its entirety in the
Trust's prospectus and should be read in conjunction with the Trust's prospectus
dated November __, 1996. A copy of that prospectus is available by contacting
the Trust at 610-254-9596.
<TABLE>
<CAPTION>
Statement of Additional Information Heading Corresponding Prospectus Heading
- ------------------------------------------- --------------------------------
Item Page
<S> <C> <C>
Management of the Trust Management of the Trust; General;
Expense Information
Further Information About the Trust's Investment Investment Objectives and Policies
Policies Investment Practices and Risk
Considerations
Hedging through the Use of Options Investment Practices and Risk
Considerations: About Hedging
Strategies
Hedging through the Use of Investment Practices and Risk
Futures Contracts and Related Instruments Considerations: About Hedging
Strategies
Hedging through the Use of Investment Practices and Risk
Currency-Related Instruments Considerations: About Hedging
Strategies
Investment Restrictions Investment Objectives and Policies
Investment Practices and Risk
Considerations
Additional Purchases and Redemption Information Purchases and Redemptions
Portfolio Transactions and Valuation Portfolio Transactions and Valuation
Dividends, Distributions and Taxes Dividends, Distributions and Taxes
Performance Information Performance Information
Financial Statements and Independent Accountants
Ratings Appendix
</TABLE>
This statement of additional information does not contain all of the information
set forth in the registration statement filed by the Trust with the Securities
and Exchange Commission under the Securities Act of 1933. Copies of the
registration statement may be obtained at a reasonable charge from the
Securities and Exchange Commission or may be examined, without charge, at its
offices in Washington, D.C.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS NOVEMBER __, 1996.
<PAGE>
<PAGE>
MANAGEMENT OF THE TRUST
Trustees and Officers. The Trust's Board of Trustees ("Board") is responsible
- ---------------------
for the overall supervision and management of the business and affairs of the
Trust, including (i) the selection and general supervision of those investment
advisory organizations ("Investment Managers") retained by the Trust to provide
portfolio management services to each of its separate investment portfolios
(each a "Portfolio"); and (ii) for Portfolios for which more than one Investment
Manager has been retained, allocation of that Portfolio's assets among such
Investment Managers. In particular, the Board may, from time to time, allocate
portions of a Portfolio's assets between or among several Investment Managers,
each of whom may have a different investment style and/or investment selection
discipline. The Board also may reallocate a Portfolio's assets among such
Investment Managers, or terminate particular Investment Managers, if the Board
deems it appropriate to do so in order to achieve the overall objectives of the
Portfolio involved. In addition, the Board may retain additional Investment
Managers on behalf of a Portfolio subject to the approval of the shareholders of
that Portfolio in accordance with the Investment Company Act. Day-to-day
operations of the Trust are the responsibility of the Trust's officers, who are
elected by, and serve at the pleasure of, the Board. The name and principal
occupation for the past five years of each of the Trust's current officers and
directors are set forth below; unless otherwise indicated, the business address
of each is 575 East Swedesford Road Wayne, PA 19087.
<TABLE>
<CAPTION>
Name, Business Address and Age Position with the Trust Principal Occupation for
the Last Five Years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Donald E. Callaghan 50 Chairman of the Board of For more than the past five years,
Trustees and President Principal, Hirtle Callaghan & Co., Inc.
Ross H. Goodman 48 Trustee For more than the past five years,
Mr. Goodman has been Vice
President of American Industrial
Management & Sales, Inc.
*Jonathan J. Hirtle 43 Trustee For more than the past five years,
Principal, Hirtle Callaghan & Co., Inc.
Jarrett Burt Kling 52 Trustee For more than the past five years,
Mr. Kling has been associated with CRA
Real Estate Securities, L.P. and its
affiliate, Radnor Advisers, Inc. a
Mr. Kling is general partner of TDH II
and a special limited partner of TDH III
(venture capital limited partnerships) since 1983.
*David M. Spungen 34 Trustee For more than the past five years,
1926 Arch Street Mr. Spungen has been associated
Philadelphia, PA 19103-1484 with The CMS Companies (financial services). Mr.
Spungen currently serves as Director of CMS
Capital Management, (a division of CMS
Investment Resources, Inc.)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Richard W. Wortham, III 57 Trustee For more than the past five years,
President, Video Rental of
Pennsylvania, Inc. and its parent,
Houston VMC, Inc. Mr.
Wortham is also a trustee of the
Wortham Foundation and
the Museum of Fine Arts, Houston.
Robert Zion 42 Vice President and Treasurer Officer of Hirtle Callaghan.
Laura Anne Corsell, Esq. 47 Secretary Ms. Corsell is an attorney in
237 Park Avenue private practice. From 1989
New York, N.Y. 10017 through 1994, Ms. Corsell was
associated with the law firm of
Ballard Spahr Andrews and
Ingersoll, as counsel.
John J. Pileggi 36 Assistant Vice President For more than the past five years,
230 Park Avenue Senior Managing Director of
New York, N.Y. 10169 Furman Selz LLC.
Gordon M. Forrester 34 Assistant Vice President and For more than the past five years,
230 Park Avenue Assistant Treasurer Director--Mutual Funds Division,
New York, N.Y. 10169 Furman Selz LLC.
Joan V. Fiore, Esq. 39 Assistant Secretary Since 1991, Managing Director
230 Park Avenue and Counsel--Mutual Funds
New York, N.Y. 10169 Division, Furman Selz LLC
from 1986 to 1991,
staff attorney with the
Securities and Exchange
Commission.
Sheryl Hirschfeld 35 Assistant Secretary Since 1994, Director of
230 Park Avenue Corporate Secretary Services--
New York, N.Y. 10169 Mutual Funds Division, Furman
Selz LLC; for more
than five years prior to that,
served as assistant to the
corporate secretary and to the
general counsel of Dreyfuss
Corporation.
</TABLE>
*Indicates a Trustee who is an "interested person" of the Trust within the
meaning of the Investment Company Act.
<PAGE>
<PAGE>
Each of those members of the Board who are not "interested persons" of the Trust
within the meaning of the Investment Company Act ("Independent Trustees")
receive from the Trust a fee of $1,000.00 per meeting of the Board
attended and are reimbursed for expenses incurred in connection with each
such meeting. Those members of the Board who are "interested persons" of the
Trust and the Trust's officers receive no compensation from the Trust for
performing the duties of their respective offices. The table below, which is
required to be included in this Statement of Additional by the Securities and
Exchange Commission, shows the aggregate compensation received from the Trust
by each of the Independent Trustees during the fiscal year ending June 30, 1996
(excluding reimbursed expenses).
<TABLE>
<S> <C> <C> <C> <C>
Pension/ Estimated
Aggregate Retirement Benefits Upon
Name and Compensation Benefits Retirement From Total Compensation
Position From Trust From Trust From Trust From Trust
- ---------------------- ------------ ---------- --------------- ------------------
Ross H. Goodman $4000.00 $0.0 $0.0 $4000.00
Jarrett Burt Kling 3000.00 0.0 0.0 3000.00
Richard W. Wortham, III 3000.00 0.0 0.0 3000.00
</TABLE>
As permitted under the Trust's Amended and Restated Declaration and
Agreement of Trust and by-laws, the Board has established an executive committee
and has appointed Messrs. Callaghan, Hirtle and Spungen to serve on that
committee. Under the Trust's by-laws, the executive committee is authorized to
act for the full Board in all matters for which the affirmative vote of a
majority of the Board of the Trust's Independent Trustees is not required
under the Investment Company Act or other applicable law. All of the officers
and trustees of the Trust own in the aggregate, less than one percent of the
outstanding shares of The Value Equity, Growth Equity, Small Capitalization
Equity, Limited Duration Municipal Bond and International Equity Portfolios,
respectively.
Investment Advisory Arrangements. As described in the prospectus, Hirtle,
- ---------------------------------
Callaghan & Co., Inc. ("Hirtle Callaghan") has entered into a written consulting
agreement with the Trust ("HCCI Consulting Agreement"). 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 HCCI
Consulting Agreement will remain in effect until its second anniversary, unless
sooner terminated and will continue from year to year so long as such
continuation is approved, at a meeting called for the purpose of voting on such
continuance, at least annually (i) by vote of a majority of the Trust's Board or
the vote of the holders of a majority of the outstanding securities of the
Trust; and (ii) by a majority of the Independent Trustees, by vote cast in
person. The HCCI Consulting Agreement may be terminated at any time, without
penalty, either by the Trust or by Hirtle Callaghan, upon sixty days' written
notice and will automatically terminate in the event of its assignment as
defined in the Investment Company Act. The HCCI Consulting Agreement permits
<PAGE>
<PAGE>
the Trust to use the name "Hirtle Callaghan." In the event, however, the HCCI
Consulting Agreement is terminated, Hirtle Callaghan has the right to require
the Trust to discontinue any references to the name "Hirtle Callaghan" and to
change the name of the Trust as soon as is reasonably practicable. The HCCI
Consulting Agreement further provides that HCCI will not be liable to the Trust
for any error, mistake of judgment or of law, or loss suffered by the Trust in
connection with the matters to which the HCCI Consulting Agreement relates
(including any action of any Hirtle Callaghan officer or employee in connection
with the service of any such officer or employee as an officer of the Trust),
whether or not any such action was taken in reliance upon information provided
to the Trust by Hirtle Callaghan, except losses that may be sustained
as a result of willful misfeasance, reckless disregard of its duties, bad faith
or gross negligence on the part of Hirtle Callaghan.
The Trust has also entered into investment advisory contracts ("Portfolio
Management Contracts") on behalf of each of the Portfolios with one or more of
the Investment Managers. Other than the agreement between the Trust and
Hotchkis and Wiley ("Hotchkis") relating to The Value Equity Portfolio, each
of the Portfolio Management Contracts was approved by the Trust's initial
shareholder on July 21, 1995, following that approval of the Trust's Board
(including the Independent Trustees) at a meeting of the Board held on July 20,
1995. Each such contract will remain in effect until its second anniversary,
and will continue in effect thereafter from year to year so long as such
continuation is approved, at a meeting called for the purpose of voting on such
continuance, at least annually (i) by vote of a majority of the Trust's Board or
the vote of the holders of a majority of the outstanding securities of the
Trust; and (ii) by a majority of the Independent Trustees, by vote cast in
person. Each of the Portfolio Management Contracts may be terminated at any
time, without penalty, either by the Trust or by the respective Investment
Managers named in the contract, in each case upon sixty days' written notice,
and each will automatically terminate in the event of its assignment, as that
term is defined in the Investment Company Act.
Each of the Portfolio Management Contracts provides that the named Investment
Manager will, subject to the overall supervision of the Board, provide a
continuous investment program for the assets of the Portfolio to which such
contract relates, or that portion of such assets as may be, from time to time
allocated to such Investment Manager. The Portfolio Managers are responsible,
among other things, for the provision of investment research and management of
all investments and other instruments and the selection of brokers and dealers
through which securities transactions are executed. Each of the Portfolio
Management Contracts provides that the named Investment Manager will not be
liable to the Trust for any error of judgment or mistake of law on the part of
the Investment Manager, or for any loss sustained by the Trust in connection
with the purchase or sale of any instrument on behalf of the named 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 named Investment Manager.
Hotchkis serves as an Investment Manager for The Value Equity Portfolio pursuant
to a contract 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
July 29, 1996, upon the termination of a similar contract ("Prior Agreement")
with another investment advisory organization.
The terms and conditions set forth in the agreement between the Trust
and Hotchkis and Wiley relating to The Value Equity Portfolio are
identical to those contained in the Prior Agreement and each of the
other investment management agreements except for the
description of the portfolio manager, the effective and termination
</PAGE
<PAGE>
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.
The Hotchkis Agreement became effective on July 29, 1996, the date on
which the Prior Agreement was terminated, and as permitted under rule
15a-4 of the Investment Company 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
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. The Prior Agreement was approved by the Board
(including the Independent Trustees) at a meeting of the Board held
on July 20, 1995, and by 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 Investment Company Act.
Hotchkis and Wiley is a California limited partnership which, in
1995, reorganized through a transaction in which all of the 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 became 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.
As noted in the prospectus, Merrill Lynch & Co., Inc. ("ML") has agreed to
acquire all of the partnership interests in Hotchkis LP subject to
certain conditions ("Acquisition"). If the Acquisition is consummated as
proposed, the investment advisory business now operated by Hotchkis and Wiley
will become a part of Merrill Lynch Asset Management LP ("MLAM")
(hereinafter referred to as "the Hotchkis Division") and operate as
a separate business unit within ML's Capital Management
Group. MLAM is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc., a public company whose shares are traded on the
New York Stock Exchange. At a meeting held on July 19, 1996, the Board
has approved the retention of Hotchkis Division following the Acquisition
under an advisory agreement that would become effective upon
consummation of the Acquisition ("Successor Hotchkis Agreement").
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<PAGE>
The Successor Agreement was approved by the shareholders of The
Value Equity Portfolio at a meeting of shareholders held on October
23, 1996. 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.
The Successor Hotchkis Agreement will not take effect unless
and until the consummation of the Acquisition.
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:
[to be supplied by amendment]
Other Matters. As noted in the prospectus, BISYS Fund Services ("BISYS")
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serves as the principal underwriter of the Trust, pursuant to an agreement
with the Trust approved by the Trust's Board at its meeting held on July 19,
1996, BISYS does not receive any underwriting fees or other compensation in
connection with the distribution of the Trust's shares. BISYS also
serves as the Trust's administrator, accounting agent and
transfer agent pursuant to written agreements more fully
described in the Trust's prospectus and receives a fee for services
provided under those agreements. Bankers Trust Company,
One Bankers Trust Plaza, New York, N.Y. 10006, serves as the custodian
for the assets of each of the Trust's Portfolios. BISYS is a
wholly-owned indirect subsidiary of BISYS Group, Inc. a public
company whose shares are traded in the over-the-counter markets.
Furman Selz LLC, served as the Trust's principal underwriter
and provided certain other services to the Trust from the
commencement of the Trust's operations until that firm's
mutual funds division was aquired by BISYS Group, Inc.
on October ____, 1996.
FURTHER INFORMATION ABOUT THE TRUST'S INVESTMENT POLICIES
The following discussion supplements the discussion of the investment policies
of each of the Portfolios as set forth in the prospectus and the types of
securities and other instruments in which the respective Portfolios may invest.
Repurchase Agreements. As noted in the prospectus, among the instruments that
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each of the Portfolios may use for temporary investment purposes are repurchase
agreements. Under the terms of a typical repurchase agreement, a Portfolio
would acquire an underlying debt security for a relatively short period (usually
not more than one week), subject to an obligation of the seller to repurchase
that security and the obligation of the Portfolio to resell that security at an
agreed-upon price and time. Repurchase agreements could involve certain risks
in the event of default or insolvency of the other party, including possible
delays or restrictions upon the Portfolio's ability to dispose of the underlying
securities. The Investment Manager for each Portfolio, in accordance with
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<PAGE>
guidelines adopted by the Board, monitors the creditworthiness of those banks
and non-bank dealers with which the respective Portfolios may enter into
repurchase agreements. The Trust also monitors the market value of the
securities underlying any repurchase agreement to ensure that the repurchase
obligation of the seller is adequately collateralized.
Repurchase agreements may be entered into with primary dealers in U.S.
Government Securities who meet credit guidelines established by the Board (each
a "repo counterparty"). Under each repurchase agreement, the repo counterparty
will be required to maintain, in an account with the Trust's custodian bank,
securities that equal or exceed the repurchase price of the securities subject
to the repurchase agreement. A Portfolio will generally enter into repurchase
agreements with short durations, from overnight to one week, although securities
subject to repurchase agreements generally have longer maturities. A Portfolio
may not enter into a repurchase agreement with more than seven days to maturity
if, as a result, more than 15% of the value of its net assets would be invested
in illiquid securities including such repurchase agreements.
For purposes of the Investment Company Act, a repurchase agreement may be deemed
a loan to the repo counterparty. It is not clear whether, in the context of a
bankruptcy proceeding involving a repo counterparty, a court would consider a
security acquired by a Portfolio subject to a repurchase agreement as being
owned by that Portfolio or as being collateral for such a "loan." If a court
were to characterize the transaction as a loan, and a Portfolio has not
perfected a security interest in the security acquired, that Portfolio could be
required to turn the security acquired over to the bankruptcy trustee and be
treated as an unsecured creditor of repo counterparty. As an unsecured creditor,
the Portfolio would be at the risk of losing some or all of the principal and
income involved in the transaction. In the event of any such bankruptcy or
insolvency proceeding involving a repo counterparty with whom a Portfolio has
outstanding repurchase agreements a Portfolio may encounter delays and incur
costs before being able to sell securities acquired subject to such repurchase
agreements. Any such delays may involve loss of interest or a decline in price
of the security so acquired.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the repo counterparty may fail to repurchase the security. However,
a Portfolio will always receive as collateral for any repurchase agreement to
which it is a party securities acceptable to it, the market value of which is
equal to at least 100% of the repurchase price, and the Portfolio will make
payment against such securities only upon physical delivery or evidence of book
entry transfer of such collateral to the account of its custodian bank. If the
market value of the security subject to the repurchase agreement falls below the
repurchase price the Trust will direct the repo counterparty to deliver to the
Trust's custodian additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price.
Variable and Floating Rate Instruments. As noted in the prospectus, among the
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instruments that each of the Portfolios may use for temporary investment
purposes are variable rate demand notes (including floating rate instruments)
from banks and other issuers. A "variable rate instrument" is one whose terms
provide for the adjustment of its interest rate on set dates and which, upon
such adjustment, can reasonably be expected to have a market value that
approximates its par value. A "floating rate instrument" is one whose terms
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a
market
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value that approximates its par value. The Portfolios will be able (at any time
or during specified periods generally not exceeding one year, depending upon the
instrument involved) to demand payment of the principal of a note. The notes are
not typically rated by credit rating agencies. If an issuer of a variable rate
demand note defaulted on its payment obligation, a Portfolio might be unable to
dispose of the note and a loss would be incurred to the extent of the default.
The continuing creditworthiness of issuers of variable rate instruments, if any,
held by a Portfolio will be monitored by its Investment Managers to determine
whether such notes should continue to be held.
When-Issued Securities. As noted in the prospectus, Tax-Exempt Securities may
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be purchased on a "when-issued" basis. The price of securities purchased on a
when-issued basis, which may be expressed in yield terms, is fixed at the time
the commitment to purchase is made, but delivery and payment for the when-
issued securities takes place at a later date. Normally, the settlement date
occurs within one month of the purchase. During the period between purchase and
settlement, no payment is made by the purchaser to the issuer and no interest
accrues to the purchaser. Thus, to the extent that assets are held in cash
pending the settlement of a purchase of securities, the purchaser would earn no
income. At the time a commitment to purchase a security on a when-issued basis
is made, the transaction is recorded and the value of the security will be
reflected in determining net asset value. The market value of the when-issued
securities may be more or less than the purchase price. The Trust does not
believe that net asset value or income will be adversely affected by the
purchase of securities on a when-issued basis.
HEDGING THROUGH THE USE OF OPTIONS.
As indicated in the prospectus, each of the Portfolios may, consistent with its
investment objectives and policies, use options on securities and securities
indexes to reduce the risks associated with the types of securities in which
each is authorized to invest and/or in anticipation of future purchases. A
Portfolio may use options only in a manner consistent with its investment
objective and policies and may not invest more than 10% of its total assets in
option purchases. Options may be used only for the purpose of reducing
investment risk and not for speculative purposes. The following discussion sets
forth certain information relating to the types of options that the Portfolios
may use, together with the risks that may be associated with their use.
About Options on Securities. A call option is a short-term contract pursuant to
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which the purchaser of the option, in return for a premium, has the right to buy
the security underlying the option at a specified price at any time during the
term of the option. The writer of the call option, who receives the premium,
has the obligation, upon exercise of the option during the option period, to
deliver the underlying security against payment of the exercise price. A put
option is a similar contract that gives its purchaser, in return for a premium,
the right to sell the underlying security at a specified price during the term
of the option. The writer of the put option, who receives the premium, has the
obligation, upon exercise of the option during the option period, to buy the
underlying security at the exercise price.
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<PAGE>
Options may be based on a security, a securities index or a currency. Options on
securities are generally settled by delivery of the underlying security whereas
options on a securities index or currency are settled in cash. Options may be
traded on an exchange or in the over-the-counter markets.
Option Purchases. Call options on securities may be purchased in order to fix
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the cost of a future purchase. In addition, call options may be used as a means
of participating in an anticipated advance of a security on a more limited risk
basis than would be possible if the security itself were purchased. In the
event of a decline in the price of the underlying security, use of this strategy
would serve to limit the amount of loss, if any, to the amount of the option
premium paid. Conversely, if the market price of the underlying security rises
and the call is exercised or sold at a profit, that profit will be reduced by
the amount initially paid for the call.
Put options may be purchased in order to hedge against a decline in market value
of a security held by the purchasing portfolio. The put effectively guarantees
that the underlying security can be sold at the predetermined exercise price,
even if that price is greater than the market value at the time of exercise. If
the market price of the underlying security increases, the profit realized on
the eventual sale of the security will be reduced by the premium paid for the
put option. Put options may also be purchased on a security that is not held by
the purchasing portfolio in anticipation of a price decline in the underlying
security. In the event the market value of such security declines below the
designated exercise price of the put, the purchasing portfolio would then be
able to acquire the underlying security at the market price and exercise its put
option, thus realizing a profit. In order for this strategy to be successful,
however, the market price of the underlying security must decline so that the
difference between the exercise price and the market price is greater than the
option premium paid.
Option Writing. Call options may be written (sold) by the Portfolios.
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Generally, calls will be written only when, in the opinion of a Portfolio's
Investment Manager, the call premium received, plus anticipated appreciation in
the market price of the underlying security up to the exercise price of the
call, will be greater than the appreciation in the price of the underlying
security.
Put options may also be written. This strategy will generally be used when it
is anticipated that the market value of the underlying security will remain
higher than the exercise price of the put option or when a temporary decrease in
the market value of the underlying security is anticipated and, in the view of a
Portfolio's Investment Manager, it would not be appropriate to acquire the
underlying security. If the market price of the underlying security rises or
stays above the exercise price, it can be expected that the purchaser of the put
will not exercise the option and a profit, in the amount of the premium received
for the put, will be realized by the writer of the put. However, if the market
price of the underlying security declines or stays below the exercise price, the
put option may be exercised and the portfolio that sold the put will be
obligated to purchase the underlying security at a price that may be higher than
its current market value.
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<PAGE>
All option writing strategies will be employed only if the option is "covered."
For this purpose, "covered" means that, so long as the Portfolio that has
written (sold) the option is obligated as the writer of a call option, it will
(1) own the security underlying the option; or (2) hold on a share-for-share
basis a call on the same security, the exercise price of which is equal to or
less than the exercise price of the call written. In the case of a put option,
the Portfolio that has written (sold) the put option will (1) maintain cash or
cash equivalents in an amount equal to or greater than the exercise price; or
(2) hold on a share-for share basis, a put on the same security as the put
written provided that the exercise price of the put held is equal to or greater
than the exercise price of the put written.
Options on Securities Indices. Options on securities indices may by used in
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much the same manner as options on securities. Index options may serve as a
hedge against overall fluctuations in the securities markets or market sectors,
rather than anticipated increases or decreases in the value of a particular
security. Thus, the effectiveness of techniques using stock index options will
depend on the extent to which price movements in the securities index selected
correlate with price movements of the portfolio to be hedged. Options on stock
indices are settled exclusively in cash.
Risk Factors Relating to the Use of Options Strategies. The premium paid or
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received with respect to an option position will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to the market price, the historical price volatility of the
underlying security, the option period, supply and demand, and interest rates.
Moreover, the successful use of options as a hedging strategy depends upon the
ability to forecast the direction of market fluctuations in the underlying
securities, or in the case of index options, in the market sector represented by
the index selected.
Under normal circumstances, options traded on one or more of the several
recognized options exchanges may be closed by effecting a "closing purchase
transaction," i.e. by purchasing an identical option with respect to the
underlying security in the case of options written and by selling an identical
option on the underlying security in the case of options purchased. A closing
purchase transaction will effectively cancel an option position, thus permitting
profits to be realized on the position, to prevent an underlying security from
being called from, or put to, the writer of the option or, in the case of a call
option, to permit the sale of the underlying security. A profit or loss may be
realized from a closing purchase transaction, depending on whether the overall
cost of the closing transaction (including the price of the option and actual
transaction costs) is less or more than the premium received from the writing of
the option. It should be noted that, in the event a loss is incurred in a
closing purchase transaction, that loss may be partially or entirely offset by
the premium received from a simultaneous or subsequent sale of a different call
or put option. Also, because increases in the market price of an option will
generally reflect increases in the market price of the underlying security, any
loss resulting from a closing purchase transaction is likely to be offset in
whole or in part by appreciation of the underlying security held.
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<PAGE>
Options will normally have expiration dates between three and nine months from
the date written. The exercise price of the options may be below, equal to, or
above the current market values of the underlying securities at the time the
options are written. Options that expire unexercised have no value. Unless an
option purchased by a Portfolio is exercised or a closing purchase transaction
is effected with respect to that position, a loss will be realized in the amount
of the premium paid.
HEDGING THROUGH THE USE OF FUTURES CONTRACTS AND RELATED INSTRUMENTS.
As indicated in the prospectus, each of the Portfolios may, consistent with its
investment objectives and policies, use futures contracts and options on futures
contracts to reduce the risks associated with the types of securities in which
each is authorized to invest and/or in anticipation of future purchases. A
Portfolio may invest in futures-related instruments only for hedging purposes
and not for speculation and only in a manner consistent with its investment
objective and policies. In particular, a Portfolio may not commit more than 5%
of its net assets, in the aggregate, to margin deposits on futures contracts or
premiums for options on futures contracts. The following discussion sets forth
certain information relating to the types of futures contracts that the
Portfolios may use, together with the risks that may be associated with their
use.
About Futures Contracts and Options on Futures Contracts. A futures contract is
- --------------------------------------------------------
a bilateral agreement pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of the specified type of security or currency
called for in the contract at a specified future time and at a specified price.
In practice, however, contracts relating to financial instruments or currencies
are closed out through the use of closing purchase transactions before the
settlement date and without delivery or the underlying security or currency. In
the case of futures contracts based on a securities index, the contract provides
for "delivery" of an amount of cash equal to the dollar amount specified
multiplied by the difference between the value of the underlying index on the
settlement date and the price at which the contract was originally fixed.
Stock Index Futures Contracts. A Portfolio may sell stock index futures
- ------------------------------
contracts in anticipation of a general market or market sector decline that may
adversely affect the market values of securities held. To the extent that
securities held correlate with the index underlying the contract, the sale of
futures contracts on that index could reduce the risk associated with a market
decline. Where a significant market or market sector advance is anticipated,
the purchase of a stock index futures contract may afford a hedge against not
participating in such advance at a time when a Portfolio is not fully invested.
This strategy would serve as a temporary substitute for the purchase of
individual stocks which may later be purchased in an orderly fashion.
Generally, as such purchases are made, positions in stock index futures
contracts representing an equivalent securities would be liquidated.
Futures Contracts on Debt Securities. Futures contracts on debt securities,
- -------------------------------------
often referred to as "interest rate futures," obligate the seller to deliver a
specific type of debt security called for in the contract, at a specified future
time. A public market now exists for futures contracts covering a number of
debt securities, including long-term U.S. Treasury bonds, ten-year U.S. Treasury
42
<PAGE>
notes, and three-month U.S. Treasury bills, and additional futures contracts
based on other debt securities or indices of debt securities may be developed
in the future. Such contracts may be used to hedge against changes in the
general level of interest rates. For example, a Portfolio may purchase such
contracts when it wishes to defer a purchase of a longer-term bond because
short-term yields are higher than long-term yields. Income would thus be earned
on a short-term security and minimize the impact of all or part of an increase
in the market price of the long-term debt security to be purchased in the
future. A rise in the price of the long-term debt security prior to its
purchase either would be offset by an increase in the value of the contract
purchased by the Portfolio or avoided by taking delivery of the debt securities
underlying the futures contract. Conversely, such a contract might be sold in
order to continue to receive the income from a long-term debt security, while
at the same time endeavoring to avoid part or all of any decline in market value
of that security that would occur with an increase in interest rates. If
interest rates did rise, a decline in the value of the debt security would be
substantially offset by an increase in the value of the futures contract sold.
Options on Futures Contracts. An option on a futures contract gives the
- ----------------------------
purchaser the right, in return for the premium, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put) at a specified price at any time during the period of
the option. The risk of loss associated with the purchase of an option on a
futures contract is limited to the premium paid for the option, plus transaction
cost. The seller of an option on a futures contract is obligated to a broker
for the payment of initial and variation margin in amounts that depend on the
nature of the underlying futures contract, the current market value of the
option, and other futures positions held by the Portfolio. Upon exercise of the
option, the option seller must deliver the underlying futures position to the
holder of the option, together with the accumulated balance in the seller's
futures margin account that represents the amount by which the market price of
the underlying futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option involved. If an option
is exercised on the last trading day prior to the expiration date of the option,
settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the value at the close of trading on the
expiration date.
Risk Considerations Relating to Futures Contracts and Related Instruments.
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Participants in the futures markets are subject to certain risks. Positions in
futures contracts may be closed out only on the exchange on which they were
entered into (or through a linked exchange): no secondary market exists for
such contracts. In addition, there can be no assurance that a liquid market
will exist for the contracts at any particular time. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that
limit. It is possible that futures contract prices could move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses. In such event, and in the event of adverse price
movements, a Portfolio would be required to make daily cash payments of
variation margin. In such circumstances, an increase in the value of that
portion of the securities being hedged, if any, may partially or completely
offset losses on the futures contract.
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As noted above, there can be no assurance that price movements in the futures
markets will correlate with the prices of the underlying securities positions.
In particular, there may be an imperfect correlation between movements in the
prices of futures contracts and the market value of the underlying securities
positions being hedged. In addition, the market prices of futures contracts may
be affected by factors other than interest rate changes and, as a result, even a
correct forecast of interest rate trends might not result in a successful
hedging strategy. If participants in the futures market elect to close out
their contracts through offsetting transactions rather than by meeting margin
deposit requirements, distortions in the normal relationship between debt
securities and the futures markets could result. Price distortions could also
result if investors in the futures markets opt to make or take delivery of the
underlying securities rather than engage in closing transactions because such
trend might result in a reduction in the liquidity of the futures market. In
addition, an increase in the participation of speculators in the futures market
could cause temporary price distortions.
The risks associated with options on futures contracts are similar to those
applicable to all options and are summarized above under the heading "Hedging
Through the Use of Options: Risk Factors Relating to the Use of Options
Strategies." In addition, as is the case with futures contracts, there can be
no assurance that (1) there will be a correlation between price movements in the
options and those relating to the underlying securities; (2) a liquid market for
options held will exist at the time when a Portfolio may wish to effect a
closing transaction; or (3) predictions as to anticipated interest rate or other
market trends on behalf of a Portfolio will be correct.
Margin Requirements and Limitations Applicable to Futures Related Transactions.
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When a purchase or sale of a futures contract is made by a Portfolio, that
Portfolio is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of cash or U.S. Government securities ("initial
margin"). The margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned to the Portfolio upon
termination of the contract, assuming all contractual obligations have been
satisfied. The Portfolio expects to earn interest income on its initial margin
deposits. A futures contract held by a Portfolio is valued daily at the
official settlement price of the exchange on which it is traded. Each day
the Portfolio pays or receives cash, called "variation margin" equal to the
daily change in
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value of the futures contract. This process is known as "marking to market."
Variation margin does not represent a borrowing or loan by the Portfolio but is
instead a settlement between the Portfolio and the broker of the amount one
would owe the other if the futures contract expired. In computing daily net
asset value, the Portfolio will value its open futures positions at market.
A Portfolio will not enter into a futures contract or an option on a futures
contract if, immediately thereafter, the aggregate initial margin deposits
relating to such positions plus premiums paid by it for open futures option
positions, less the amount by which any such options are "in-the-money," would
exceed 5% of the Portfolio's total assets. A call option is "in-the-money" if
the value of the futures contract that is the subject of the option exceeds the
exercise price. A put option is "in-the-money" if the exercise price exceeds
the value of the futures contract that is the subject of the option.
Segregation Requirements.
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Futures Contracts. When purchasing a futures contract, a Portfolio will
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maintain, either with its custodian bank or, if permitted, a broker, and will
mark-to-market on a daily basis, cash, U.S. Government securities, or other
highly liquid debt securities that, when added to the amounts deposited with a
futures commission merchant as margin, are equal to the market value of the
futures contract. Alternatively, a Portfolio may "cover" its position by
purchasing a put option on the same futures contract with a strike price as high
or higher than the price of the contract held by the Portfolio.
When selling a futures contract, a Portfolio will similarly maintain liquid
assets that, when added to the amount deposited with a futures commission
merchant as margin, are equal to the market value of the instruments underlying
the contract. Alternatively, a Portfolio may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based), or by holding a call option
permitting a Portfolio to purchase the same futures contract at a price no
higher than the price of the contract written by that Portfolio (or at a higher
price if the difference is maintained in liquid assets with the Trust's
custodian).
Options on Futures Contracts. When selling a call option on a futures contract,
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a Portfolio will maintain, either with its custodian bank or, if permitted, a
broker, and will mark-to-market on a daily basis, cash, U. S. Government
securities, or other highly liquid debt securities that, when added to the
amounts deposited with a futures commission merchant as margin, equal the total
market value of the futures contract underlying the call option. Alternatively,
the Portfolio may cover its position by entering into a long position in the
same futures contract at a price no higher than the strike price of the call
option, by owning the instruments underlying the futures contract, or by holding
a separate call option permitting the Portfolio to purchase the same futures
contract at a price not higher than the strike price of the call option sold by
the Portfolio.
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When selling a put option on a futures contract, the Portfolio will similarly
maintain cash, U.S. Government securities, or other highly liquid debt
securities that equal the purchase price of the futures contract, less any
margin on deposit. Alternatively, the Portfolio may cover the position either by
entering into a short position in the same futures contract, or by owning a
separate put option permitting it to sell the same futures contract so long as
the strike price of the purchased put option is the same or higher than the
strike price of the put option sold by the Portfolio.
HEDGING THROUGH THE USE OF CURRENCY RELATED INSTRUMENTS.
As indicated in the prospectus, The Growth Portfolio may use forward foreign
currency exchange contracts in connection with permitted purchases and sales of
securities of non-U.S. issuers. In addition, The International Equity Portfolio
may, consistent with its investment objectives and policies, use such contracts
as well as certain other currency related instruments to reduce the risks
associated with the types of securities in which it is authorized to invest and
to hedge against fluctuations in the relative value of the currencies in which
securities held by The International Equity Portfolio are denominated. The
following discussion sets forth certain information relating to forward currency
contracts and other currency related instruments, together with the risks that
may be associated with their use.
About Currency Transactions and Hedging. The International Equity Portfolio is
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authorized to purchase and sell options, futures contracts and options thereon
relating to foreign currencies and securities denominated in foreign currencies.
Such instruments may be traded on foreign exchanges, including foreign over-the-
counter markets. Transactions in such instruments may not be regulated as
effectively as similar transactions in the United States, may not involve a
clearing mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign securities.
The value of such positions also could be adversely affected by: (i) foreign
political, legal and economic factors; (ii) lesser availability than in the
United States of data on which to make trading decisions; (iii) delays in a
Portfolio's ability to act upon economic events occurring in foreign markets
during non-business hours in the United States; and (iv) lesser trading volume.
Foreign currency exchange transactions may be entered into for the purpose of
hedging against foreign currency exchange risk arising from the Portfolio's
investment or anticipated investment in securities denominated in foreign
currencies. The International Equity Portfolio may also purchase and sell
options relating to foreign currencies to increase exposure to a foreign
currency or to shift foreign currency exposure from one country to another.
Foreign Currency Options and Related Risks. The International Equity Portfolio
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may take positions in options on foreign currencies to hedge against the risk of
foreign exchange rate fluctuations on foreign securities the Portfolio holds in
its portfolio or intends to purchase. For example, if the Portfolio were to
enter into a contract to purchase securities denominated in a foreign currency,
it could effectively fix the maximum U.S. dollar cost of the securities by
purchasing call options on that foreign currency. Similarly, if the Portfolio
held securities denominated in a foreign currency and anticipated a decline in
the value of that currency against the U.S. dollar, it could hedge against such
a decline by purchasing a put option on the currency involved. The markets in
foreign currency options are relatively new, and the Portfolio's ability to
establish and close out positions in such options is subject to the maintenance
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of a liquid secondary market. There can be no assurance that a liquid
secondary market will exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The quantities of currencies underlying option contracts represent odd
lots in a market dominated by transactions between banks, and as a result
extra transaction costs may be incurred upon exercise of an option.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that
quotations be firm or revised on a timely basis. Quotation information is
generally representative of very large transactions in the interbank market and
may not reflect smaller transactions where rates may be less favorable. Option
markets may be closed while round-the-clock interbank currency markets are open,
and this can create price and rate discrepancies.
Forward Foreign Currency Exchange Contracts. The Growth Portfolio may use
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forward contracts to protect against uncertainty in the level of future exchange
rates in connection with specific transactions. For example, when the Portfolio
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, or when the Portfolio anticipates the receipt in a foreign
currency of dividend or interest payments on a security that it holds, the
Portfolio may desire to "lock in" the U.S. dollar price of the security or the
U.S. dollar equivalent of the payment, by entering into a forward contract for
the purchase or sale of the foreign currency involved in the underlying
transaction in exchange for a fixed amount of U.S. dollars or foreign currency.
This may serve as a hedge against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the period
between the date on which the security is purchased or sold, or on which the
payment is declared, and the date on which such payments are made or received.
The International Equity Portfolio may also use forward contracts in connection
with specific transactions. In addition, it may use such contracts to lock in
the U.S. dollar value of those positions, to increase the Portfolio's exposure
to foreign currencies that the Investment Manager believes may rise in value
relative to the U.S. dollar or to shift the Portfolio's exposure to foreign
currency fluctuations from one country to another. For example, when the
Investment Manager believes that the currency of a particular foreign country
may suffer a substantial decline relative to the U.S. dollar or another
currency, it may enter into a forward contract to sell the amount of the former
foreign currency approximating the value of some or all of the Portfolio's
portfolio securities denominated in such foreign currency. This investment
practice generally is referred to as "cross-hedging."
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for a
Portfolio to purchase additional foreign currency on the spot (i.e., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the
Portfolio is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Portfolio to sustain losses on these contracts and transaction costs. A
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Portfolio may enter into forward contracts or maintain a net exposure to such
contracts only if: (1) the consummation of the contracts would not obligate the
Portfolio to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities and other assets denominated in that currency; or (2) the
Portfolio maintains cash, U.S. Government securities or other liquid securities
in a segregated account in an amount which, together with the value of all the
Portfolio's securities denominated in such currency, equals or exceeds the value
of such contracts.
At or before the maturity date of a forward contract that requires the Portfolio
to sell a currency, the Portfolio may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Portfolio will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, the
Portfolio may close out a forward contract requiring it to purchase a specified
currency by entering into another contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. As a result of
such an offsetting transaction, a Portfolio would realize a gain or a loss to
the extent of any change in the exchange rate between the currencies involved
between the execution dates of the first and second contracts.
The cost to a Portfolio of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
prevailing market conditions. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities the Portfolio owns or intends to acquire, but it does fix
a rate of exchange in advance. In addition, although forward contracts limit
the risk of loss due to a decline in the value of the hedged currencies, they
also limit any potential gain that might result should the value of the
currencies increase.
Although The International Equity Portfolio values its assets daily in terms of
U.S. dollars, it does not intend to convert its holdings of foreign currencies
into U.S. dollars on a daily basis. The Portfolio may convert foreign currency
from time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference between the prices
at which they are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to the Portfolio at one rate, while offering
a lesser rate of exchange should the Portfolio desire to resell that currency
to the dealer.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and policies of the Portfolios, each
Portfolio is subject to certain investment restrictions both in accordance with
various provisions of the Investment Company Act and guidelines adopted by the
Trust's Board. These investment restrictions are summarized below.
The following investment restrictions (1 though 9) are fundamental and cannot be
changed with respect to any Portfolio without the affirmative vote of a majority
of the Portfolio's outstanding voting securities as defined in the Investment
Company Act.
A Portfolio may not:
1. Purchase the securities of any issuer, if as a result of such purchase,
more than 5% of the total assets of the Portfolio would be invested in the
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securities of that issuer, or purchase any security if, as a result of such
purchase, a Portfolio would hold more than 10% of the outstanding voting
securities of an issuer, provided that up to 25% of the value of the
Trust's assets may be invested without regard to this limitation, and
provided further that this restriction shall not apply to investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, repurchase agreements secured by such obligations, or
securities issued by other investment companies.
2. Borrow money, except that a Portfolio (i) may borrow amounts, taken in the
aggregate, equal to up to 5% of its total assets, from banks for temporary
purposes (but not for leveraging or investment) and (ii) may engage in
reverse repurchase agreements for any purpose, provided that (i) and (ii)
in combination do not exceed 33 1/3% of the value of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than
borrowings).
3. Mortgage, pledge or hypothecate any of its assets except in connection with
any permitted borrowing, provided that this restriction does not prohibit
escrow, collateral or margin arrangements in connection with a Portfolio's
permitted use of options, futures contracts and similar derivative
financial instruments described in the Trust's prospectus.
4. Issue senior securities, as defined in the Investment Company Act, provided
that this restriction shall not be deemed to prohibit a Portfolio from
making any permitted borrowing, mortgage or pledge, and provided further
that the permitted use of options, futures contracts and similar derivative
financial instruments described in the Trust's prospectus shall not
constitute issuance of a senior security.
5. Underwrite securities issued by others, provided that this restriction
shall not be violated in the event that the Portfolio may be considered an
underwriter within the meaning of the Securities Act of 1933 in the
disposition of portfolio of securities.
6. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments, provided that this shall not prevent a
Portfolio from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business.
7. Purchase or sell commodities or commodity contracts, unless acquired as a
result of ownership of securities or other instruments, provided that a
Portfolio may purchase and sell futures contracts relating to financial
instruments and currencies and related options in the manner described in
the Trust's prospectus.
8. Make loans to others, provided that this restriction shall not be construed
to limit (a) purchases of debt securities or repurchase agreements in
accordance with a Portfolio's investment objectives and policies; and (b)
loans of portfolio securities in the manner described in the Trust's
prospectus.
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9. Invest more than 25% of the market value of its assets in the securities of
companies engaged in any one industry provided that this restriction does
not apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, repurchase agreements secured by such
obligations or securities issued by other investment companies.
The following investment restrictions (10 through 15) reflect policies that have
been adopted by the Trust, but they are not fundamental and may be changed by
the Trust's Board, without shareholder vote.
A Portfolio may not:
10. Invest in any issuer for purposes of exercising control or management.
11. Make short sales of securities or maintain a short position, or purchase
securities on margin, provided that this restriction shall not preclude
the Trust from obtaining such short-term credits as may be necessary for
the clearance of purchases and sales of its portfolio securities, and
provided further that this restriction will not be applied to limit the
use by a Portfolio of options, futures contracts and similar derivative
financial instruments in the manner described in the Trust's prospectus.
12. Invest in securities of other investment companies except as permitted
under the Investment Company Act.
13. Buy or sell interests in oil, gas or mineral exploration or development
programs or related leases, provided that this restriction shall not
preclude investments in marketable securities of issuers engaged in such
activities.
14. Purchase any security if, as a result, the Portfolio would have more than
5% of its total assets (taken at current value) invested in securities of
companies (including predecessors) less than three years old.
15. Invest more than 5% of the market value of a Portfolio's total assets in
warrants or invest more than 2% of such value in warrants that are not
listed on the New York or American Stock Exchange.
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An investment restriction applicable to a particular Portfolio shall not be
deemed violated as a result of a change in the market value of an investment,
the net or total assets of that Portfolio, or any other later change provided
that the restriction was satisfied at the time the relevant action was taken.
In order to permit the sale of its shares in certain states, the Trust may make
commitments more restrictive than those described above. Should the Trust
determine that any such commitment may no longer be appropriate, the Board will
consider whether to revoke the commitment and terminate sales of its shares in
the state involved.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion to suspend the continued
offering of the Trust's shares and to reject purchase orders in whole or in part
when in the judgment of the Board such action is in the best interest of the
Trust.
Payments to shareholders for shares of the Trust redeemed directly from the
Trust will be made as promptly as possible but no later than seven days after
receipt by the Trust's Transfer Agent of the written request in proper form,
with the appropriate documentation as stated in the prospectus, except that the
Trust may suspend the right of redemption or postpone the date of payment during
any period when (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission or such Exchange is closed
for other than weekends and holidays; (b) an emergency exists as determined by
the Securities and Exchange Commission making disposal of portfolio securities
or valuation of net assets of the Trust not reasonably practicable; or for such
other period as the Securities and Exchange Commission may permit for the
protection of the Trust's shareholders.
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Each of the Portfolios reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of the
Trust's shares by making payment in whole or in part in readily marketable
securities chosen by the Trust and valued in the same way as they would
be valued for purposes of computing each Portfolio's net asset value. If
such payment were made, an investor may incur brokerage costs in converting such
securities to cash. The value of shares on redemption or repurchase may be more
or less than the investor's cost, depending upon the market value of the Trust's
portfolio securities at the time of redemption or repurchase.
PORTFOLIO TRANSACTIONS AND VALUATION
Subject to the general supervision of the Board, the Investment Managers of the
respective Portfolios are responsible for placing orders for securities
transactions for each of the Portfolios. Securities transactions involving
stocks will normally be conducted through brokerage firms entitled to receive
commissions for effecting such transactions. In placing portfolio transactions,
an Investment Manager will use its best efforts to choose a broker or dealer
capable of providing the services necessary to obtain the most favorable price
and execution available. The full range and quality of services available will
be considered in making these determinations, such as the size of the order, the
difficulty of execution, the operational facilities of the firm involved, the
firm's risk in positioning a block of securities, and other factors. In placing
brokerage transactions, the respective Investment Managers may, however,
consistent with the interests of the Portfolios they serve, select brokerage
firms on the basis of the research, statistical and pricing services they
provide to the Investment Manager. In such cases, a Portfolio may pay a
commission that is higher than the commission that another qualified broker
might have charged for the same transaction, providing the Investment Manager
involved determines in good faith that such commission is reasonable in terms
either of that transaction or the overall responsibility of the Investment
Manager to the Portfolio and such manager's other investment advisory clients.
Transactions involving debt securities and similar instruments are expected to
occur primarily with issuers, underwriters or major dealers acting as
principals. Such transactions are normally effected on a net basis and do not
involve payment of brokerage commissions. The price of the security, however,
usually includes a profit to the dealer. Securities purchased in underwritten
offerings include a fixed amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. When securities are
purchased directly from or sold directly to an issuer, no commissions or
discounts are paid.
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In no instance will portfolio securities be purchased from or sold to Investment
Managers, Hirtle Callaghan or any affiliated person of the foregoing entities
except to the extent permitted by applicable law or an order of the Securities
and Exchange Commission. Investment decisions for the several Portfolios are
made independently from those of any other client accounts (which may include
mutual funds) managed or advised by an Investment Manager. Nevertheless, it is
possible that at times identical securities will be acceptable for both a
Portfolio of the Trust and one or more of such client accounts. In such cases,
simultaneous transactions are inevitable. Purchases and sales are then averaged
as to price and allocated as to amount according to a formula deemed equitable
to each such account. While in some cases this practice could have a
detrimental effect upon the price or value of the security as far as a Portfolio
is concerned, in other cases it is believed that the ability of a Portfolio to
participate in volume transactions may produce better executions for such
Portfolio.
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Portfolio Turnover. Changes may be made in the holdings of any of the
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Portfolios consistent with their respective investment objectives and policies
whenever, in the judgment of the relevant Investment Manager, such changes are
believed to be in the best interests of the Portfolio involved. It is
anticipated that the annual portfolio turnover rate for a Portfolio will not
exceed 100% under normal circumstances. The portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of portfolio securities
by the average monthly value of a Portfolio's securities. For purposes of this
calculation, portfolio securities exclude all securities having a maturity when
purchased of one year or less. The portfolio turnover rate for each of the
Portfolios that has more than one Investment Manager will be an aggregate of the
rates for each individually managed portion of that Portfolio. Rates for each
portion, however, may vary significantly. The portfolio turnover rate for each
of the Trust's Portfolios for the fiscal year ended June 30, 1996, is as
follows: [TO BE SUPPLIED BY AMENDMENT.]
Valuation. The net asset value per share of the Portfolios is determined once
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on each Business Day as of the close of the New York Stock Exchange, which is
normally 4 P.M. New York City time, on each day the New York Stock Exchange is
open for trading. It is expected that such Exchange will be closed on Saturdays
and Sundays and on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas. The Trust does not
expect to determine the net asset value of its shares on any day when the
Exchange is not open for trading even if there is sufficient trading in its
portfolio securities on such days to materially affect the net asset value per
share.
In valuing the Trust's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board shall determine in
good faith to reflect the security's fair value. All other assets of each
Portfolio are valued in such manner as the Board in good faith deems
appropriate to reflect their fair value.
The net asset value per share of each of the Trust's Portfolios is calculated as
follows: All liabilities incurred or accrued are deducted from the valuation of
total assets which includes accrued but undistributed income; the resulting net
asset value is divided by the number of shares outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. As noted in the prospectus, each Portfolio will
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distribute substantially all of its net investment income and net realized
capital gains, if any. It is anticipated that The Value Portfolio, The Growth
Portfolio and The Small Capitalization Equity Portfolio will declare and
distribute dividends from net investment income on a quarterly basis. The
Limited Duration Municipal Bond Portfolio will declare dividends daily, with
payments on a monthly basis. The International Equity Portfolio will declare
dividends semi-annually. The Trust expects to distribute any undistributed net
investment income and capital gains for the 12-month period ended each October
31, on or about December 31 of each year.
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Tax Information. Each of the Trust's Portfolios is treated as a separate entity
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for federal income tax purposes. Each Portfolio intends to qualify and elect to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") for the fiscal year ending June
30, 1996 and intends to continue to so qualify. Accordingly, it is the policy
of each Portfolio to distribute to its shareholders by December 31 of each
calendar year (i) at least 98% of its ordinary income for such year; (ii) at
least 98% of the excess of its realized capital gains over its realized capital
losses for the 12-month period ending on October 31 during such year; and (iii)
any amounts from the prior calendar year that were not distributed.
The following discussion and related discussion in the prospectus do not purport
to be a complete description of all tax implications of an investment in the
Trust. In addition, such information relates solely to the application of that
law to U.S. citizens or residents and U.S. domestic corporations, partnerships,
trusts and estates. A shareholder should consult with his or her own tax
adviser for more information about Federal, state, local or foreign taxes. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Trust, including the possibility that
such a shareholder may be subject to a U.S. withholding tax on amounts
constituting ordinary income.
Distributions of net investment income and short-term capital gains are taxable
to shareholders as ordinary income. In the case of corporate shareholders, a
portion of the distributions may qualify for the dividends-received deduction to
the extent the Trust designates the amount distributed by any Portfolio as a
qualifying dividend. The aggregate amount so designated cannot, however, exceed
the aggregate amount of qualifying dividends received by that Portfolio for its
taxable year. It is expected that dividends from domestic corporations will be
part of the gross income for one or more of the Portfolios and, accordingly,
that part of the distributions by such Portfolios may be eligible for the
dividends-received deduction for corporate shareholders. However, the portion of
a particular Portfolio's gross income attributable to qualifying dividends is
largely dependent on that Portfolio's investment activities for a particular
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year and therefore cannot be predicted with any certainty. The deduction may be
reduced or eliminated if shares of such Portfolio held by a corporate investor
are treated as debt-financed or are held for less than 46 days.
Distributions of net investment income and short-term capital gains are taxable
to shareholders as long-term capital gains, regardless of the length of time
they have held their shares. Capital gains distributions are not eligible for
the dividends-received deduction referred to in the previous paragraph.
Distributions of any net investment income and net realized capital gains will
be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date. Distributions
are generally taxable when received. However, distributions declared in
October, November or December to shareholders of record on a date in such a
month and paid the following January are taxable as if received on December 31.
Distributions are includable in alternative minimum taxable income in computing
a shareholder's liability for the alternative minimum tax.
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A redemption of Trust shares may result in recognition of a taxable gain or
loss. Any loss realized upon a redemption of shares within six months from the
date of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gains
during such six-month period. Any loss realized upon a redemption may be
disallowed under certain wash sale rules to the extent shares of the same Trust
are purchased (through reinvestment of distributions or otherwise) within 30
days before or after the redemption or exchange.
The Trust is required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Trust shares, except in the case of exempt
shareholders, which includes most corporations. Pursuant to the backup
withholding provisions of the Code, distributions of any taxable income and
capital gains and proceeds from the redemption of Trust shares may be subject to
withholding of federal income tax at the rate of 31 percent in the case of non-
exempt shareholders who fail to furnish the Trust with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. If the withholding provisions are applicable,
any such distributions and proceeds, whether taken in cash or reinvested in
additional shares, will be reduced by the amounts required to be withheld.
Corporate and other exempt shareholders should provide the Trust with their
taxpayer identification numbers or certify their exempt status in order to
avoid possible erroneous application of backup withholding. The Trust reserves
the right to refuse to open an account for any person failing to provide a
certified taxpayer identification number.
Tax Matters Relating to the Use of Certain Hedging Instruments and Foreign
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Investments. Certain of the Portfolios may write, purchase or sell certain
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options, futures and foreign currency contracts. Such transactions are subject
to special tax rules that may affect the amount, timing and character of
distributions to shareholders. Unless a Portfolio is eligible to make, and
makes, a special election, any such contract that is a "Section 1256 contract"
will be "marked-to-market" for Federal income tax purposes at the end of each
taxable year, i.e., each contract will be treated for tax purposes as though it
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had been sold for its fair market value on the last day of the taxable year. In
general, unless the special election referred to in the previous sentence is
made, gain or loss from transactions in Section 1256 contracts will be 60% long
term and 40% short term capital gain or loss. Additionally, Section 1092 of the
Code, which applies to certain "straddles," may affect the tax treatment of
income derived by a Portfolio from transactions in option, futures and foreign
currency contracts. In particular, under this provision, a Portfolio may, for
tax purposes, be required to postpone recognition of losses incurred in certain
closing transactions.
Section 988 of the Code contains special tax rules applicable to certain foreign
currency transactions that may affect the amount, timing, and character of
income, gain or loss recognized by the Trust. Under these rules, foreign
exchange gain or loss realized with respect to foreign currency-denominated debt
instruments, foreign currency forward contracts, foreign currency-denominated
payables and receivables, and foreign currency options and futures contracts
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(other than options, futures, and foreign currency contracts that are governed
by the mark-to-market and 60%-40% rules of Section 1256 of the Code and for
which no election is made) is treated as ordinary income or loss. Under the
Code, dividends or gains derived by a Portfolio from any investment in a
"passive foreign investment company" ("PFIC")-- a foreign corporation 75 percent
or more of the gross income of which consists of interest, dividends, royalties,
rents, annuities or other "passive income" or 50 percent or more of the assets
of which produce "passive income" -- may subject a Portfolio to U.S. federal
income tax even with respect to income distributed by the Portfolio to its
shareholders. In addition, any such tax will not itself give rise to a
deduction or credit to the Portfolio or to any shareholder. In order to avoid
the tax consequences described above, those Portfolios authorized to invest
in foreign securities will attempt to avoid investments in PFICs.
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PERFORMANCE INFORMATION
From time to time, a Portfolio may state its total return in sales literature
and investor presentations. Total return may be stated for any relevant period
specified. Any statements of total return will be accompanied by information on
that Portfolio's average annual compounded rate of return over the most recent
four calendar quarters and the period from the inception of that Portfolio's
operations. The Trust may also advertise aggregate and average total return
information over different periods of time for the various Portfolios.
The average annual compounded rate of return for a Portfolio is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the formula P(1+T)/n/ =
ERV. For purposes of this formula, the variables represent the following
values:
P = a hypothetical initial purchase of $1,000
T = average annual total return
n = number of years
ERV = redeemable value of hypothetical $1,000 initial purchase
at the end of the period.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period and gives effect to the maximum applicable sales charge.
From time to time, evaluations of a Trust's performance by independent sources
may also be used in advertisements and in information furnished to present or
prospective investors in the Trusts. Investors should note that the investment
results of each of the Trust's Portfolios will fluctuate over time, and any
presentation of a Portfolio's total return for any period should not be
considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
<PAGE>
<PAGE>
As _______, 1996, the following persons were held, as of record, 5% or more
of shares of the Trust, as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small
Name and Address of Record Value Growth Capitalization International Limited Duration
Owner Equity Equity Equity Equity Municipal Bond
- -----------------------------------------------------------------------------------------------------------------
Bankers Trust Company
1 Bankers Trust Plaza [TO BE SUPPLIED BY AMENDMENT.]
New Yor, N.Y. 10006
PNC Bank, N.A.
P.O. Box 7780-1888
Philadelphia, PA 19182
Northern Trust Company
P.O. Box 92956
Chicago, IL 60675
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS.
Coopers and Lybrand, LLP., serves as the Trust's auditors. The Trust's financial
statement as of June 30, 1996, has been audited by Coopers and Lybrand, LLP,
whose address is 2400 Eleven Penn Center, Philadelphia, PA 19103. Such
statement and accompanying report are set forth below.
<PAGE>
<PAGE>
THE HIRTLE CALLAGHAN TRUST
VALUE EQUITY PORTFOLIO
Portfolio of Investments -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCK -- 93.00%
COWEN ASSET MANAGEMENT
PORTFOLIO -- 34.65%
ENERGY EQUIPMENT & SERVICES -- 1.15%
9,500 Exxon Corp. .............................. $ 675,233 $ 825,313
----------- -----------
FINANCIAL SERVICES -- 2.56%
21,000 Keycorp .................................. 721,760 813,750
29,000 National City Corp. ...................... 895,602 1,018,625
----------- -----------
1,617,362 1,832,375
----------- -----------
HOLDING COMPANIES --
DIVERSIFIED -- 1.20%
60,000 Hanson plc - ADR+ ........................ 983,481 855,000
----------- -----------
INSURANCE -- 1.31%
27,000 Ohio Casualty Corp. ...................... 918,213 938,250
----------- -----------
OIL & GAS -- 6.53%
9,000 Atlantic Richfield Co. ................... 994,127 1,066,500
22,000 Equitable Resources ...................... 639,299 621,500
28,000 National Fuel Gas Co. .................... 815,393 1,008,000
11,000 Shell Transport and Trading - ADR+ ....... 883,966 968,000
12,000 Texaco Inc. .............................. 948,845 1,006,500
----------- -----------
4,281,630 4,670,500
----------- -----------
PERSONAL CARE -- 1.03%
18,000 Tambrands Inc. ........................... 827,010 735,750
----------- -----------
PUBLISHING & PRINT -- 1.37%
23,000 Readers Digest ........................... 996,188 977,500
----------- -----------
REAL ESTATE -- 2.42%
10,000 Kimco Realty Corp. ....................... 261,775 282,500
41,000 New Plan Realty Trust .................... 905,398 866,125
15,000 Weingarten Realty ........................ 541,970 581,250
----------- -----------
1,709,143 1,729,875
----------- -----------
RETAIL -- 1.54%
21,000 Penney (J.C.) Co. ........................ 976,616 1,102,500
----------- -----------
TELECOMMUNICATIONS -- 1.13%
17,000 NYNEX Corp. .............................. 800,908 807,500
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
VALUE EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
TOBACCO -- 1.40%
22,000 American Brands Inc. ..................... $ 941,658 $ 998,250
----------- -----------
UTILITIES -- 13.01%
16,000 Allegheny Power System ................... 478,335 494,000
31,000 Baltimore Gas & Electric Co. ............. 818,709 879,625
32,000 Brooklyn Union Gas Co. ................... 818,070 872,000
30,000 Central & South West Corp. ............... 752,210 870,000
19,000 Consolidated Natural Gas ................. 848,073 992,750
UTILITIES (CONTINUED)
19,000 GTE Corp. ................................ 722,915 850,250
38,000 MCN Corp. ................................ 738,718 926,250
13,000 Piedmont Natural Gas Co. ................. 266,368 300,625
32,000 Scana Corp. .............................. 752,758 900,000
32,000 Southern Co. ............................. 707,932 788,000
30,000 Utilcorp United Inc. ..................... 834,888 828,750
20,000 Western Resources ........................ 593,926 597,500
----------- -----------
8,332,902 9,299,750
----------- -----------
TOTAL -- COWEN ASSET MANAGEMENT .......... 23,060,344 24,772,563
----------- -----------
INSTITUTIONAL CAPITAL CORP.
PORTFOLIO -- 58.35%
AEROSPACE/DEFENSE -- 2.31%
11,000 Boeing Co. ............................... 882,801 958,375
7,450 Northrop Grumman Corp. ................... 494,545 507,531
12,900 Trans World Airlines* .................... 250,797 183,825
----------- -----------
1,628,143 1,649,731
----------- -----------
AUTOMOBILE PRODUCTION -- 2.08%
28,350 General Motors Corp. ..................... 1,482,213 1,484,831
----------- -----------
BANKING -- 3.19%
11,550 Citicorp ................................. 805,750 954,319
5,550 Wells Fargo & Co. ........................ 1,375,423 1,325,756
----------- -----------
2,181,173 2,280,075
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
VALUE EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
CHEMICALS -- 4.47%
16,550 DuPont E.I. DeNemours & Co. .............. $ 1,182,834 $ 1,309,519
36,050 Hoechst AG - ADR+ ........................ 1,017,774 1,217,048
9,450 W.R. Grace & Co. ......................... 659,854 669,769
----------- -----------
2,860,462 3,196,336
----------- -----------
COMPUTERS -- 0.77%
11,250 Compaq Computer Corp.* ................... 513,610 554,063
----------- -----------
COMPUTER EQUIPMENT -- 2.38%
12,700 International Business Machines Corp. .... 1,248,328 1,257,300
18,700 Silicon Graphics* ........................ 536,250 448,800
----------- -----------
1,784,578 1,706,100
----------- -----------
ELECTRONIC COMPONENTS AND INSTRUMENTS -- 3.38%
8,900 Duracell International ................... 385,465 383,813
19,600 Nokia Corp ADR+ .......................... 748,985 725,200
40,100 Philips Electronics NV ................... 1,727,044 1,308,263
----------- -----------
2,861,494 2,417,276
----------- -----------
ENTERTAINMENT -- 3.05%
18,600 Carnival Cruise Lines, Inc. .............. 478,301 537,075
32,000 Time Warner Inc. ......................... 1,205,797 1,256,000
13,600 Harrah's Entertainment* .................. 451,247 384,200
----------- -----------
2,135,345 2,177,275
----------- -----------
FINANCIAL SERVICES -- 2.25%
14,900 Keycorp. ................................. 516,122 577,375
22,675 Travelers Inc. ........................... 815,351 1,034,547
----------- -----------
1,331,473 1,611,922
----------- -----------
HEALTH CARE -- 1.75%
28,700 Abbott Labratories ....................... 1,173,011 1,248,450
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
VALUE EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
INSURANCE -- 4.37%
32,300 Allstate Insurance Corp. ................. $ 1,162,110 $ 1,473,688
20,900 Loews Corp. .............................. 1,634,971 1,648,488
----------- -----------
2,797,081 3,122,176
----------- -----------
LODGING -- 0.72%
24,200 Host Marriott Corp. ...................... 306,098 317,625
3,700 Marriott International Inc. .............. 177,372 198,875
----------- -----------
483,470 516,500
----------- -----------
MEDICAL MANAGEMENT &
SERVICES -- 0.54%
18,200 Tenet Healthcare Corp. ................... 308,289 389,025
----------- -----------
METALS - STEEL -- 1.63%
18,200 Allegheny Ludlum ......................... 373,544 343,525
14,300 Aluminum Co. of America .................. 848,384 820,462
----------- -----------
1,221,928 1,163,987
----------- -----------
MULTI-INDUSTRY -- 0.56%
16,050 ITT Industries Inc. ...................... 415,411 403,256
----------- -----------
OIL & GAS -- 3.26%
16,450 Amoco Corp. .............................. 1,136,141 1,190,569
10,150 Mobil .................................... 1,084,385 1,138,069
----------- -----------
2,220,526 2,328,638
----------- -----------
PHARMACEUTICALS -- 4.77%
11,500 American Home Products Corp. ............. 570,545 691,437
13,700 Bristol Myers Squibb ..................... 1,173,363 1,233,000
24,350 Ciba-Geigy
AG - ADR+ ............................... 1,047,633 1,483,402
----------- -----------
2,791,541 3,407,839
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
VALUE EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
PUBLISHING & PRINTING -- 4.20%
26,350 Dun & Bradstreet Corp. .................. $ 1,675,609 $ 1,646,875
67,500 News Corp. Ltd -
ADR+* .................................. 1,335,815 1,358,437
----------- -----------
3,011,424 3,005,312
----------- -----------
RETAIL -- 1.06%
22,200 Federated Department Store Inc.* ........ 623,247 757,575
----------- -----------
RETAIL - GROCERY -- 0.22%
4,000 Kroger Co. .............................. 154,850 158,000
----------- -----------
TELECOMMUNICATIONS -- 4.03%
24,350 American Telephone & Telegraph Co. ...... 1,496,472 1,509,700
40,600 Pacific Telesis Group ................... 1,371,475 1,370,250
----------- -----------
2,867,947 2,879,950
----------- -----------
TOBACCO -- 1.98%
13,600 Philip Morris Cos. Inc. ................. 1,148,662 1,414,400
----------- -----------
TOYS -- 1.12%
14,400 Hasbro Inc. ............................. 498,858 514,800
10,000 Mattel Inc. ............................. 247,091 286,250
----------- -----------
745,949 801,050
----------- -----------
TRANSPORTATION -- 4.26%
10,200 Burlington Northern Co. ................. 766,812 824,925
12,100 Consolidated Rail ....................... 873,290 803,137
20,300 Union Pacific Corp. ..................... 1,369,011 1,418,461
----------- -----------
3,009,113 3,046,523
----------- -----------
TOTAL -- INSTITUTIONAL CAPITAL CORP. .... 39,750,940 41,720,290
----------- -----------
TOTAL -- COMMON STOCK ................... 62,811,284 66,492,853
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
VALUE EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS -- 6.64%
COWEN ASSET MANAGEMENT -- 3.29%
$1,120,000 American Express Comercial Paper, 5.29%
due 07/03/96 ......................... $ 1,120,000 $ 1,120,000
1,230,000 Ford Motor Credit Corp., 5.37% due
07/02/96 ............................. 1,230,000 1,230,000
----------- -----------
TOTAL -- COWEN ASSET MANAGEMENT ....... 2,350,000 2,350,000
----------- -----------
INSTITUTIONAL CAPITAL CORP. -- 3.35%
$ 800,000 Ford Motor Credit Corp., 5.34% due
07/12/96 ............................. 798,695 798,695
1,300,000 Ford Motor Credit Corp., 5.34% due
07/01/96 ............................. 1,300,000 1,300,000
300,000 Walt Disney Co., 5.24% due
07/29/96 ............................. 298,777 298,777
----------- -----------
TOTAL -- INSTITUTIONAL CAPITAL
CORP. ................................ 2,397,472 2,397,472
----------- -----------
TOTAL -- SHORT-TERM INVESTMENTS ....... 4,747,472 4,747,472
----------- -----------
TOTAL INVESTMENTS --
99.64% ............................... $67,558,756++ 71,240,325
===========
CASH AND OTHER ASSETS LESS
LIABILITIES --
0.36% ................................ 262,307
-----------
TOTAL NET ASSETS --
100.00% .............................. $71,502,632
===========
</TABLE>
* Non-income producing security.
+ American Depository Receipts.
++ The cost of securities for Federal income tax purposes is substantially the
same.
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCK -- 97.78%
JENNISON ASSOCIATES CAPITAL
CORP. PORTFOLIO -- 48.36%
ADVERTISING -- 0.66%
15,800 Omnicom Group, Inc. ........................ $ 534,651 $ 734,700
------------ ------------
AEROSPACE/DEFENSE -- 2.39%
18,500 Boeing Co. ................................. 1,347,408 1,611,813
12,400 Delta Air Lines Inc. ....................... 989,966 1,029,200
------------ ------------
2,337,374 2,641,013
------------ ------------
BEVERAGES -- 1.51%
11,400 Coca Cola Co. .............................. 384,067 557,175
31,600 Pepsico, Inc. .............................. 878,280 1,117,850
------------ ------------
1,262,347 1,675,025
------------ ------------
BROADCASTING -- 0.72%
26,700 Infinity Broadcasting....................... 649,829 801,000
------------ ------------
CAPITAL GOODS -- 0.35%
11,700 Harnischfeger Industries, Inc. ............. 429,656 389,025
------------ ------------
COMMERCIAL SERVICES -- 1.88%
18,600 America Online Inc.*........................ 928,240 813,750
26,000 CUC International, Inc.*.................... 861,205 923,000
8,800 Manpower Inc. .............................. 346,442 345,400
------------ ------------
2,135,887 2,082,150
------------ ------------
COMPUTERS -- 2.41%
13,300 Compaq Computer Corp. ...................... 643,780 655,025
17,300 Computer Associates International, Inc. .... 979,018 1,232,625
9,700 First Data Corp. ........................... 613,301 772,362
------------ ------------
2,236,099 2,660,012
------------ ------------
COMPUTER EQUIPMENT -- 2.90%
13,600 Autodesk, Inc. ............................. 589,311 406,300
16,000 Dell Computer Corp.*........................ 542,546 814,000
7,300 Microsoft Corp.*............................ 715,749 876,913
13,200 Seagate Technology Inc.*.................... 755,781 594,000
11,600 Symbol Technologies, Inc.*.................. 435,044 516,200
------------ ------------
3,038,431 3,207,413
------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMPUTER SOFTWARE -- 4.01%
5,600 Broderbund Software*........................ $ 315,854 $ 180,600
6,800 Checkpoint Software*........................ 95,200 163,200
27,500 Cisco Systems, Inc.*........................ 1,049,570 1,557,187
16,000 Compuware Corp. ............................ 453,965 632,000
12,400 Electronic Data Systems Corp. .............. 678,897 666,500
7,700 Intuit*..................................... 430,413 363,825
18,900 3COM Corp.*................................. 843,350 864,675
------------ ------------
3,867,249 4,427,987
------------ ------------
CONSUMER NON-DURABLES -- 0.68%
12,100 Gillette Company............................ 556,153 754,737
------------ ------------
ELECTRONIC COMPONENTS &
INSTRUMENTS -- 4.69%
11,700 Applied Materials, Inc.*.................... 523,811 356,850
14,200 Hewlett Packard Co. ........................ 1,275,793 1,414,675
17,200 KLA Instrument Corp.*....................... 464,823 399,900
20,000 Intel Corp. ................................ 1,259,156 1,468,750
28,600 International Rectifier Corp. .............. 605,230 461,175
21,700 LSI Logic Corp.*............................ 864,901 564,200
14,200 Nokia Corp. ADR+............................ 554,072 525,400
------------ ------------
5,547,786 5,190,950
------------ ------------
ENERGY EQUIPMENT & SERVICES -- 0.82%
10,700 Schlumberger Ltd. .......................... 834,518 901,475
------------ ------------
ENTERTAINMENT -- 1.56%
18,400 Harrah's Entertainment, Inc.*............... 557,246 519,800
19,100 The Walt Disney Co. ........................ 1,163,411 1,200,913
------------ ------------
1,720,657 1,720,713
------------ ------------
FINANCIAL SERVICES -- 2.98%
14,800 Chase Manhattan Corp. ...................... 957,996 1,045,250
21,200 Federal National Mortgage Association....... 566,975 710,200
9,900 J.P. Morgan & Co. .......................... 809,636 837,788
64,200 Hibernia Corp. Cl. A........................ 645,117 698,175
------------ ------------
2,979,724 3,291,413
------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
HEALTH CARE -- 2.29%
17,400 Healthsouth Corp.*.......................... $ 589,572 $ 626,400
22,600 Johnson & Johnson........................... 1,024,856 1,118,700
15,600 United Healthcare Corp. .................... 809,610 787,800
------------ ------------
2,424,038 2,532,900
------------ ------------
INSURANCE -- 1.63%
7,900 Cigna Corp. ................................ 876,927 931,213
20,600 PMI Group................................... 933,225 875,500
------------ ------------
1,810,152 1,806,713
------------ ------------
LODGING -- 1.08%
5,100 Hilton Hotels Corp. ........................ 529,808 573,750
21,100 Promus Hotels Corp.*........................ 486,077 625,088
------------ ------------
1,015,885 1,198,838
------------ ------------
MULTI-INDUSTRY -- 0.76%
12,700 ITT Corp.*.................................. 688,953 841,375
------------ ------------
PERSONAL CARE -- 0.63%
16,400 Estee Lauder Co. ........................... 515,018 692,900
------------ ------------
PHARMACEUTICALS -- 4.87%
18,800 Astra A Fria - ADR+*........................ 653,790 822,500
6,500 Chiron Corp.*............................... 610,293 637,000
14,000 Ciba-Geigy AG-ADR+*......................... 820,384 852,880
16,900 Eli Lilly & Co. ............................ 825,733 1,098,500
13,400 Pfizer Inc. ................................ 857,722 956,425
18,600 Smithkline Beecham
plc - ADR+................................. 910,440 1,011,375
------------ ------------
4,678,362 5,378,680
------------ ------------
PUBLISHING & PRINTING -- 1.01%
15,400 Reuters Holding
plc - ADR+................................. 874,913 1,116,500
------------ ------------
RAW MATERIALS -- 0.64%
9,100 Kimberly Clark Corp. ....................... 663,618 702,975
------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
RESTAURANT -- 0.53%
15,400 Lone Star Steakhouse & Saloon*.............. $ 516,320 $ 581,350
------------ ------------
RETAIL -- 3.54%
22,400 Autozone, Inc.*............................. 610,226 778,400
13,300 Corporate Express*.......................... 433,624 532,000
25,825 Dollar General Corp. ....................... 655,640 843,130
18,800 The Limited Inc. ........................... 384,351 404,200
15,400 Kohl's Corp.*............................... 419,356 564,025
7,700 Nike Inc. .................................. 625,782 791,175
------------ ------------
3,128,979 3,912,930
------------ ------------
TELECOMMUNICATIONS -- 2.18%
36,800 MCI Communications Corp. ................... 970,825 943,000
13,400 Tellabs, Inc.*.............................. 614,365 896,125
15,400 Vodafone Group
plc - ADR+................................. 628,025 567,875
------------ ------------
2,213,215 2,407,000
------------ ------------
TEXTILES AND APPAREL -- 0.62%
10,700 Gucci Group................................. 235,400 690,150
------------ ------------
TELECOMMUNICATIONS
EQUIPMENT -- 0.53%
14,800 Picturetel Corp.*........................... 569,170 582,750
------------ ------------
UTILITIES -- 0.49%
25,000 Ericsson (L.M.) Telephone Spa - ADR+........ 513,656 537,500
------------ ------------
TOTAL -- JENNISON ASSOCIATES CAPITAL
CORP. ..................................... 47,978,040 53,460,174
------------ ------------
WESTFIELD CAPITAL MANAGEMENT
PORTFOLIO -- 49.42%
AEROSPACE/DEFENSE -- 1.34%
17,000 Boeing Co. ................................ 1,401,071 1,481,125
------------ ------------
BANKING -- 1.08%
5,000 Wells Fargo & Co. ......................... 1,248,477 1,194,375
------------ ------------
BROADCASTING -- 1.24%
38,200 Lin Television Corp.*...................... 1,317,900 1,375,200
------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMPUTERS -- 0.98%
13,625 First Data Corp. .......................... $ 809,465 $ 1,084,891
------------ ------------
COMPUTER EQUIPMENT -- 2.05%
21,000 Ceridian Corp.*............................ 895,055 1,060,500
73,900 Computervision Corp. ...................... 811,404 739,000
10,000 Xylan Corp.*............................... 677,830 465,000
------------ ------------
2,384,289 2,264,500
------------ ------------
COMPUTER SOFTWARE -- 4.13%
32,000 3COM Corp.*................................. 1,283,115 1,464,000
10,800 Computer Sciences Corp.*.................... 654,736 807,300
7,700 Netscape Communications Corp.*.............. 482,726 479,325
13,000 Sterling Software Inc.*..................... 764,780 1,001,000
42,100 USCS International*......................... 757,016 810,425
------------ ------------
3,942,373 4,562,050
------------ ------------
ELECTRONIC COMPONENTS AND INSTRUMENTS -- 2.37%
60,000 Alpha Industries, Inc.*..................... 879,914 532,500
43,000 Analog Devices Inc.*........................ 1,174,202 1,096,500
10,000 Hewlett Packard............................. 1,021,850 996,250
------------ ------------
3,075,966 2,625,250
------------ ------------
ENERGY EQUIPMENT AND SERVICES -- 0.64%
20,000 BJ Services Co.*............................ 580,877 702,500
------------ ------------
ENGINEERING & CONSTRUCTION -- 1.18%
20,000 Fluor Corp. ................................ 1,338,450 1,307,500
------------ ------------
ENTERTAINMENT -- 0.97%
17,000 The Walt Disney Co. ........................ 1,003,570 1,068,875
------------ ------------
ENVIRONMENTAL -- 1.31%
49,900 Republic Industries Inc.*................... 807,169 1,453,338
------------ ------------
HEALTH CARE -- 0.98%
20,000 Amgen Inc.*................................. 1,142,723 1,080,000
------------ ------------
HOUSEHOLD PRODUCTS -- 1.10%
45,000 First Brands Corp. ......................... 1,010,634 1,215,000
------------ ------------
INDUSTRIAL COMPONENTS -- 1.04%
30,000 Corning Inc. ............................... 1,140,550 1,151,250
------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
INSURANCE -- 0.81%
30,000 Allmerica Financial Corp. .................. $ 788,138 $ 892,500
------------ ------------
LODGING -- 1.03%
35,000 Bristol Hotel Co.*.......................... 909,945 1,137,500
------------ ------------
MANUFACTURING -- 2.55%
30,000 Danaher Corp. .............................. 1,011,091 1,305,000
37,000 Tyco International.......................... 1,419,823 1,507,750
------------ ------------
2,430,914 2,812,750
------------ ------------
MEDICAL BIOTECHNOLOGY -- 1.01%
20,000 Medtronic Inc. ............................. 1,041,622 1,120,000
------------ ------------
MEDICAL MANAGEMENT &
SERVICES -- 3.67%
35,900 Apria Healthcare Group, Inc.*............... 1,060,985 1,126,362
20,000 Healthcare Compare Corp.*................... 963,760 975,000
45,000 Quorum Health Group*........................ 1,055,350 1,186,875
35,000 Summit Care Corp.*.......................... 778,750 770,000
------------ ------------
3,858,845 4,058,237
------------ ------------
MEDICAL SUPPLIES -- 2.59%
30,000 C. R. Bard Inc. ............................ 1,081,800 1,020,000
17,100 Idexx Laboratories*......................... 720,338 671,175
37,500 Genesis Health Ventures, Inc.*.............. 821,849 1,176,563
------------ ------------
2,623,987 2,867,738
------------ ------------
OIL & GAS -- 4.08%
26,000 Halliburton Co. ............................ 1,099,873 1,443,000
73,100 NGC Corp. .................................. 1,089,448 1,096,500
33,750 Weatherford International, Inc.*............ 868,771 1,012,500
16,500 Western Atlas International, Inc............ 722,691 961,125
------------ ------------
3,780,783 4,513,125
------------ ------------
PHARMACEUTICALS -- 2.13%
16,000 Cardinal Health Inc. ....................... 1,152,960 1,154,000
18,500 Merck & Co. ................................ 1,087,985 1,195,563
------------ ------------
2,240,945 2,349,563
------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
REAL ESTATE -- 2.78%
50,900 Beacon Properties Corp. ................ $ 1,188,183 $ 1,304,311
25,500 Cali Realty Corp. ...................... 588,526 618,375
35,000 Reckson Associates Realty Corp. ........ 1,077,048 1,155,000
------------ ------------
2,853,757 3,077,686
------------ ------------
RETAIL--GROCERY -- 2.18%
29,700 Albertson's Inc. ....................... 1,108,864 1,228,837
30,000 Kroger Co. ............................. 1,085,020 1,185,000
------------ ------------
2,193,884 2,413,837
------------ ------------
RESTAURANT -- 0.30%
10,000 Quality Dining Inc.*.................... 237,500 327,500
------------ ------------
SERVICES -- 1.56%
30,000 Service Corp. International............. 1,264,612 1,725,000
------------ ------------
TECHNOLOGY SERVICES -- 1.32%
34,500 Verifone Inc.*.......................... 1,549,449 1,457,625
------------ ------------
TELECOMMUNICATIONS -- 1.88%
13,000 Premisys Communications Inc.*........... 539,722 793,000
18,400 Telebras - ADR+......................... 1,160,818 1,281,100
------------ ------------
1,700,540 2,074,100
------------ ------------
TRANSPORTATION -- 1.12%
20,000 Continental Airlines*................... 930,530 1,235,000
------------ ------------
TOTAL -- WESTFIELD CAPITAL
MANAGEMENT............................. 49,608,965 54,628,015
------------ ------------
TOTAL -- COMMON STOCK................... 97,587,005 108,088,189
------------ ------------
SHORT-TERM INVESTMENTS -- 3.08%
JENNISON ASSOCIATES
CAPITAL CORP. -- 0.61%
$ 671,000 Ford Motor Credit Corp. Commercial
Paper, 5.42%, due 07/01/96............. 671,000 671,000
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
GROWTH EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
WESTFIELD CAPITAL
MANAGEMENT -- 2.47%
2,730,000 Bankers Trust Repurchase Agreement
3.90%, due 07/01/96 collateralized
by:
$2,703,000 U.S. Treasury Notes,
6.00%, 12/31/97 vs. $2,785,334....... $ 2,730,000 $ 2,730,000
------------ ------------
TOTAL -- SHORT-TERM INVESTMENTS....... 3,401,000 3,401,000
------------ ------------
TOTAL INVESTMENTS --100.86%........... $100,988,005++ 111,489,189
============
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS -- (0.86)%............ (952,629)
------------
TOTAL NET ASSETS --100.00%.......... $110,536,560
============
</TABLE>
*Non-income producing security.
+American Depository Receipts.
++ The cost of securities for Federal income tax purposes is substantially the
same.
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCKS -- 92.27%
CLOVER CAPITAL MANAGEMENT, INC. PORTFOLIO -- 43.68%
ADVERTISING -- 1.18%
70,000 Advo, Inc. ............................. $ 906,330 $ 726,250
----------- -----------
BROADCASTING AND PUBLISHING -- 2.54%
85,000 Comcast Corp. CL A*..................... 1,596,026 1,561,875
----------- -----------
CHEMICALS -- 0.25%
7,500 Hanna M A Co. .......................... 120,350 156,563
----------- -----------
COMMERCIAL SERVICES -- 0.88%
40,000 Ideon Group, Inc. ...................... 454,460 540,000
----------- -----------
COMPUTER SOFTWARE -- 2.02%
70,000 Marcam Corp.*........................... 843,400 840,000
10,000 Sungard Data System, Inc.*.............. 283,450 401,250
----------- -----------
1,126,850 1,241,250
----------- -----------
CONSUMER CYCLICAL -- 1.40%
20,000 Designs, Inc.*.......................... 160,500 120,000
50,000 Pier 1 Imports, Inc. ................... 528,163 743,750
----------- -----------
688,663 863,750
----------- -----------
CONSUMER DURABLES -- 0.55%
60,000 Service Merchandise Co.*................ 461,460 337,500
----------- -----------
ELECTRONIC COMPONENTS AND INSTRUMENTS -- 6.38%
60,000 Amphenol Corp.
Cl A*.................................. 1,290,159 1,380,000
25,000 Avnet, Inc. ............................ 1,192,489 1,053,125
57,000 Mentor Graphics Corp.*.................. 887,413 926,250
17,000 Wyle Electronics........................ 551,395 563,125
----------- -----------
3,921,456 3,922,500
----------- -----------
ELECTRICAL AND ELECTRONICS -- 2.63%
50,000 Augat, Inc. ............................ 856,351 956,250
50,000 Pioneer Standard Electronics, Inc. ..... 692,900 662,500
----------- -----------
1,549,251 1,618,750
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
ENTERTAINMENT -- 1.77%
30,000 King World Productions, Inc.*........... $ 1,162,882 $ 1,091,250
----------- -----------
ENVIRONMENTAL -- 0.99%
40,000 Wheelabrator Technologies, Inc.*........ 582,216 610,000
----------- -----------
FOOD - PROCESSING -- 2.55%
40,000 Interstate Bakeries, Corp. ............. 834,488 1,070,000
150,000 United Biscuits Holdings - ADR+......... 669,000 498,000
----------- -----------
1,503,488 1,568,000
----------- -----------
HEALTH CARE -- 2.38%
58,000 Caremark International, Inc. ........... 1,297,042 1,464,500
----------- -----------
HOSPITAL MANAGEMENT & SERVICES -- 0.76%
12,000 Salick Healthcare, Inc.*................ 438,000 465,000
----------- -----------
MANUFACTURING HOUSING -- 0.34%
25,000 Stimsonite Corp.*....................... 229,375 209,375
----------- -----------
OIL/GAS-EXPLORATION -- 1.90%
60,000 Union Texas Petroleum Holdings, Inc. ... 1,106,100 1,170,000
----------- -----------
PHARMACEUTICALS -- 1.78%
75,000 Carter-Wallace, Inc. ................... 1,053,750 1,096,875
----------- -----------
PUBLISHING & PRINTING -- 0.89%
20,000 American Greetings Corp. Cl A........... 603,511 547,500
----------- -----------
REAL ESTATE INVESTMENT TRUST -- 3.77%
30,000 Manufactured Home Communities, Inc. .... 512,000 577,500
8,500 Meditrust Corp. ........................ 287,476 283,687
7,500 Public Storage Management, Inc. ........ 229,483 260,625
26,000 ROC Communities, Inc. .................. 598,425 620,750
28,000 Storage Trust Realty.................... 567,000 574,000
----------- -----------
2,194,384 2,316,562
----------- -----------
RETAIL -- 1.65%
50,000 Cash America Investments, Inc. ........ 351,925 325,000
17,000 Melville Corp. ........................ 589,208 688,500
----------- -----------
941,133 1,013,500
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
STORAGE -- 0.95%
22,000 Sovran Self Storage, Inc. ............. $ 544,676 $ 583,000
----------- -----------
TELECOMMUNICATIONS -- 1.24%
50,000 California Microwave, Inc.*............ 1,161,812 762,500
----------- -----------
TOBACCO -- 1.66%
33,000 RJR Nabisco Holding Corp. ............. 1,109,269 1,023,000
----------- -----------
TRANSPORTATION - RAIL -- 2.39%
80,000 Canadian National Railway Co. ......... 1,313,725 1,470,000
----------- -----------
UTILITIES - ELECTRICAL -- 0.83%
20,000 Sierra Pacific Resources............... 438,362 507,500
----------- -----------
TOTAL -- CLOVER CAPITAL MANAGEMENT
INC. ................................. 26,504,571 26,867,000
----------- -----------
FRONTIER CAPITAL MANAGEMENT CO. PORTFOLIO -- 48.60%
AEROSPACE/DEFENSE -- 2.57%
9,500 AAR Corp. ................................ $ 185,344 $ 193,562
36,000 Aeroflex, Inc.*........................... 158,940 220,500
60,800 Banner Aerospace, Inc.*................... 319,622 509,200
16,800 Be Aerospace, Inc.*....................... 163,640 218,400
2,200 Precision Castparts Corp. ................ 78,485 94,600
25,700 UNC Resources, Inc.*...................... 171,756 215,238
4,700 Watkins-Johnson Co. ...................... 216,845 128,663
----------- -----------
1,294,632 1,580,163
----------- -----------
AUTO PARTS -- 0.32%
8,100 Tower Automotive, Inc.*................... 122,425 198,450
----------- -----------
BUILDING MATERIALS & COMPONENTS -- 1.10%
12,000 Drew Industries, Inc.*.................... 168,301 207,000
27,200 Perini Corp.*............................. 287,940 326,400
2,100 Texas Industries, Inc. ................... 102,770 144,113
----------- -----------
559,011 677,513
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
BROADCASTING -- 0.84%
4,700 Cablevision System Corp.*................. $ 233,520 $ 217,375
12,000 Jones Intercable, Inc.
Cl. A*................................... 148,375 160,500
4,600 TCA Cable TV, Inc. ....................... 139,250 139,150
----------- -----------
521,145 517,025
----------- -----------
CHEMICALS -- 1.74%
20,000 AG Services of America, Inc.*............. 225,995 255,000
15,500 General Chemical Group, Inc. ............. 271,250 313,875
33,100 Hexcel Corp.*............................. 377,521 504,775
----------- -----------
874,766 1,073,650
----------- -----------
COMMERCIAL SERVICES -- 1.02%
18,150 Childrens Comprehensive Services, Inc. ... 140,086 390,225
14,600 Protection One, Inc. ..................... 150,807 239,075
----------- -----------
290,893 629,300
----------- -----------
COMPUTER EQUIPMENT -- 4.06%
16,500 4Front Software International, Inc.*...... 94,875 101,062
8,000 Converse Technology, Inc.*................ 143,647 244,000
18,800 Datametrics Corp.*........................ 139,280 94,000
72,100 ISG International Software Corp.*......... 579,056 811,125
7,200 Network General Corp.*.................... 128,186 154,800
2,784 Seagate Techology, Inc.*.................. 112,966 125,280
6,800 Sigma Designs, Inc.*...................... 62,050 63,750
10,700 Softkey International, Inc.*.............. 215,334 202,631
21,100 State of The Art, Inc.*................... 218,691 390,350
11,800 Western Digital Corp.*.................... 213,474 308,275
----------- -----------
1,907,559 2,495,273
----------- -----------
COMPUTER SOFTWARE -- 2.83%
11,500 American Business Information, Inc.*...... 184,975 209,875
3,600 Computer Task Group....................... 56,437 101,700
8,500 Compuware Corp.*.......................... 204,450 335,750
15,800 Evans & Sutherland Computer Corp.*........ 368,788 335,750
18,200 HNT Technology Corp.*..................... 182,000 286,650
20,300 Parcplace Digitalk, Inc.*................. 194,181 185,237
15,000 Tecnomatix Technologies, Inc.*............ 273,750 285,000
----------- -----------
1,464,581 1,739,962
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
ELECTRICAL AND ELECTRONICS -- 3.37%
1,500 Cherry Corp. - Cl. A*..................... $ 16,125 $ 16,125
8,000 Cirrus Logic, Inc.*....................... 244,084 140,000
37,600 Encore Wire Corp.*........................ 407,555 394,800
5,200 Harman International Industries, Inc. .... 192,811 256,100
8,700 Oak Industries, Inc.*..................... 216,935 257,738
8,400 Rogers Corp.*............................. 196,117 208,950
8,000 Sheldahl, Inc.*........................... 124,267 167,000
61,000 Spectrum Control, Inc.*................... 311,303 297,375
10,700 Trimble Navigation Ltd.*.................. 182,698 205,975
6,100 Triquint Semiconduct, Inc.*............... 155,550 126,575
----------- -----------
2,047,445 2,070,638
----------- -----------
ELECTRONIC COMPONENTS AND INSTRUMENTS -- 4.41%
32,400 Aavid Thermal Technologies, Inc.*......... 256,950 234,900
13,600 Allen Group, Inc. ........................ 311,387 295,800
18,500 Alpha Industries, Inc.*................... 213,086 164,187
14,000 Amphenol Corp.
Cl. A*................................... 340,058 322,000
4,100 DII Group, Inc.*.......................... 139,004 104,550
9,900 Lattice Semiconductor Corp.*.............. 245,310 238,837
5,500 Maxim Integrated Products, Inc.*.......... 194,494 150,219
5,700 Nokia Corp.
Cl. A - ADR+*........................... 224,837 210,900
24,600 Saftytek Corp.*........................... 324,632 258,300
19,800 Semiconductor Packaging Materials*........ 188,558 212,850
11,400 TSX Corp.*................................ 207,604 316,350
14,600 VLSI Technology, Inc.*.................... 261,620 202,575
----------- -----------
2,907,540 2,711,468
----------- -----------
ENGINEERING AND CONSTRUCTION -- 1.03%
29,920 Insituform Techologies Cl. A*............. 349,722 231,880
5,800 Jacobs Engineeing Group, Inc.*............ 130,123 152,975
10,000 J Ray McDermott S.A.*..................... 192,451 250,000
----------- -----------
672,296 634,855
----------- -----------
ENTERTAINMENT -- 0.31%
13,900 Lodgenet, Inc.*........................... 185,160 191,125
----------- -----------
FINANCIAL SERVICES -- 0.42%
8,400 Long Island Bancorp....................... 214,769 256,725
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
INSURANCE -- 2.51%
15,500 American Annuity Group, Inc. ............. $ 186,930 $ 201,500
11,400 Conseco, Inc. ............................ 329,508 456,000
19,900 John Alden Financial Corp. ............... 401,927 440,287
2,400 Mid Ocean Ltd. ........................... 87,581 98,400
8,200 Nymagic, Inc. ............................ 148,569 154,775
7,100 Paul Revere Corp. ........................ 152,160 195,250
----------- -----------
1,306,675 1,546,212
----------- -----------
LEISURE AND TOURISM -- 0.81%
15,000 International Game Technology............. 246,525 253,125
43,900 Topps Company, Inc.*...................... 278,468 246,938
----------- -----------
524,993 500,063
----------- -----------
MACHINERY & ENGINEERING -- 0.37%
5,100 Medar, Inc.*.............................. 52,037 52,912
3,400 York International Corp. ................. 154,161 175,950
----------- -----------
206,198 228,862
----------- -----------
MEDICAL SUPPLIES -- 0.33%
12,800 Staar Surgical Co.*....................... 181,491 200,000
----------- -----------
MEDICAL - BIOTECHNOLOGY -- 0.18%
4,900 Protein Design Labs, Inc.*................ 103,697 110,250
----------- -----------
MEDICAL - HOSPITAL MANAGEMENT & SERVICES -- 1.04%
17,000 Quantum Health Resources, Inc.*........... 189,615 289,000
8,000 Quorum Health Group, Inc.*................ 199,152 211,000
5,300 United Wisconsin Services, Inc. .......... 115,502 137,800
----------- -----------
504,269 637,800
----------- -----------
METALS - DIVERSIFIED -- 0.21%
5,100 Titanium Metals Corp.*.................... 123,810 131,963
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
OIL & GAS -- 3.23%
2,800 Anadarko Petroleum Corp. ................. $ 136,903 $ 162,400
11,900 Aquila Gas Pipeline Corp. ................ 122,764 154,700
13,300 Falcon Drilling, Inc.*.................... 141,338 360,762
14,600 Geoscience Corp.*......................... 185,566 204,400
5,500 Louisiana Land & Exploration.............. 218,310 316,937
7,400 Noble Drilling Corp.*..................... 96,200 102,675
10,200 Oryx Energy Co.*.......................... 137,991 165,750
2,100 Production Operators Corp. ............... 64,487 70,875
7,000 Ultramar Corp. ........................... 160,806 203,000
11,100 Varco International, Inc.*................ 108,891 201,188
3,600 Wiser Oil Co. ............................ 48,780 45,450
----------- -----------
1,422,036 1,988,137
----------- -----------
PACKAGING/CONTAINER -- 0.88%
6,000 Ball Corp. ............................... 178,070 172,500
22,700 U.S. Can Corp.*........................... 314,043 368,875
----------- -----------
492,113 541,375
----------- -----------
PHARMACEUTICALS -- 0.36%
33,800 Chantal Pharmacutical Corp.*.............. 243,760 223,925
----------- -----------
PUBLISHING & PRINT -- 1.79%
19,900 International Imaging Materials, Inc.*.... 449,644 472,625
10,500 Scientific Games Holdings Corp.*.......... 344,662 304,500
17,400 Valassis Communications, Inc.*............ 280,130 321,900
----------- -----------
1,074,436 1,099,025
----------- -----------
RETAIL - SPECIALTY -- 0.21%
6,300 Aviation Sales Co.*....................... 119,700 129,150
----------- -----------
STEEL -- 0.87%
5,900 Carpenter Technology Corp. ............... 237,569 188,800
25,300 Oregon Steel Mills, Inc. ................. 322,743 347,875
----------- -----------
560,312 536,675
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
TELECOMMUNICATION EQUIPMENT -- 2.60%
4,350 ADC Telecommunication, Inc. .............. $ 134,140 $ 195,750
14,600 Boston Technology, Inc. .................. 187,734 246,375
17,000 Centigram Communication Corp. ............ 338,553 269,875
2,800 Davox Corp. .............................. 29,723 82,600
19,900 Microwave Power Devise, Inc. ............. 139,935 119,400
27,000 Penril Datacom Networks, Inc. ............ 213,196 364,500
11,000 Spectrian Corp. .......................... 211,773 156,750
11,900 Summa Four, Inc. ......................... 153,126 165,113
----------- -----------
1,408,180 1,600,363
----------- -----------
TELECOMMUNICATIONS -- 1.77%
20,600 Arch Communications Group*................ 506,876 383,675
17,600 Equalnet Holding Corp.*................... 144,100 68,200
8,400 Natural Microsystems Corp.*............... 216,516 294,000
6,400 Qualcomm, Inc.*........................... 204,717 340,000
----------- -----------
1,072,209 1,085,875
----------- -----------
TEXTILES AND APPAREL -- 0.97%
12,000 Donnkenny, Inc.*.......................... 188,918 234,000
24,700 Sport-Haley, Inc.*........................ 250,184 361,238
----------- -----------
439,102 595,238
----------- -----------
TOYS -- 0.86%
13,000 Galoob (Lewis) Toys, Inc.* .............. 133,087 367,250
7,900 Toy Biz* ................................ 162,799 159,975
----------- -----------
295,886 527,225
----------- -----------
TRANSPORTATION -- 3.85%
4,100 Alaska Airgroup, Inc.* .................. 100,696 112,237
22,400 America West Airlines Cl. B* ............ 367,270 492,800
4,000 Atlas Air, Inc.* ........................ 69,220 230,000
6,400 Continental Air Cl. B* .................. 342,400 395,200
23,300 Mesaba Holdings, Inc.* .................. 190,580 265,038
22,300 OMI Corp.* .............................. 175,635 192,337
5,100 Overseas Shipholding Group .............. 105,678 92,438
12,000 Teekay Shipping Corp.* .................. 301,477 315,000
9,700 World Airways* .......................... 111,600 67,900
30,100 Worldcorp, Inc.* ........................ 352,063 203,175
----------- -----------
2,116,619 2,366,125
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
UTILITIES - ELECTRICAL -- 0.51%
12,200 Calenergy Company, Inc.* ................ $ 250,445 $ 311,100
----------- -----------
WHOLESALE SPECIAL LINE -- 1.22%
18,800 Central Garden & Pet Co.* ............... 148,975 338,400
13,400 Sodak Gaming, Inc.* ..................... 328,996 408,700
----------- -----------
477,971 747,100
----------- -----------
TOTAL -- FRONTIER CAPITAL MANAGEMENT
CO...................................... 25,986,124 29,882,610
----------- -----------
TOTAL -- COMMON STOCKS................... 52,490,695 56,749,610
----------- -----------
CORPORATE BONDS -- 0.82%
CLOVER CAPITAL MANAGEMENT, INC.
$500,000 Meditrust Corp., 7.50%, 03/01/01 ........ 509,877 503,750
----------- -----------
TOTAL CORPORATE BONDS ................... 509,877 503,750
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
SMALL CAPITALIZATION EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS -- 8.53%
CLOVER CAPITAL MANAGEMENT, INC. -- 3.36%
$2,067,946 Bankers Trust Co. Repurchase
Agreement, 3.90%, Due 7/01/96
collateralized by: $2,048,000 U.S.
Treasury Notes, 6.00%, 12/31/97 vs.
$2,110,382 .......................... $ 2,067,946 $ 2,067,946
----------- -----------
FRONTIER CAPITAL MANAGEMENT CO. -- 5.17%
3,180,965 Bankers Trust Co. Repurchase
Agreement, 3.90%, Due 7/01/96
collateralized by: $3,150,000 U.S.
Treasury Notes, 6.00%, 12/31/97 vs.
$3,245,950 .......................... 3,180,965 3,180,965
----------- -----------
TOTAL SHORT-TERM INVESTMENTS ......... 5,248,911 5,248,911
----------- -----------
TOTAL INVESTMENTS -- 101.63% ......... $58,249,483++ 62,502,271
===========
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS -- (1.63%) ............. (999,733)
-----------
TOTAL NET ASSETS -- 100.00% .......... $61,502,538
===========
</TABLE>
* Non-income producing security.
+ American Depository Receipts
++ The cost of securities for Federal income tax purposes is substantially the
same.
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCKS -- 92.39%
AUSTRALIA -- 4.21%
26,000 Amcor Ltd.
(Forest Products).......................... $ 192,338 $ 177,424
32,500 Australia New Zealand Bank Group
(Financial)................................ 140,569 154,348
31,900 Boral Limited
(Building & Materials)..................... 84,243 83,048
55,600 Broken Hill Proprietary Co. Ltd.
(Metals - Diversified)..................... 784,617 770,670
19,050 Cra Limited (Mining)........................ 279,467 293,958
99,000 David Jones Limited
(Retail Store)*............................ 147,808 137,458
16,491 Lend Lease Corp. Ltd.
(Real Estate)**............................ 234,002 253,690
87,700 M.I.M. Holdings Ltd. (Mining)............... 115,954 113,466
28,700 National Australia Bank Ltd. (Financial).... 244,109 266,037
34,000 News Corp.
(Publishing & Printing).................... 192,529 193,391
44,800 Pacific Dunlop Ltd.
(Holding Company).......................... 99,607 101,080
71,449 Qantas Airways Ltd. (Transportation)........ 118,002 121,187
54,200 Santos Ltd. (Oil & Gas)..................... 157,445 188,137
63,200 Westpac Bank Corp. (Financial).............. 260,427 280,703
19,000 WMC Limited
(Metals - Diversified)..................... 129,935 136,401
----------- -----------
3,181,052 3,270,998
----------- -----------
BELGIUM -- 2.93%
2,900 Delhaize Freres NPV
(Retail - Grocery)......................... 122,200 144,861
2,060 Electrabel NPV (Utilities).................. 454,071 439,879
1,960 Fortis AG NPV (Insurance)................... 233,892 257,121
970 Groupe Bruxells Lambert NPV
(Financial Services)....................... 126,538 121,366
1,080 Kredietbank NPV (Financial)................. 269,387 323,000
1,010 Petrofina S.A. NPV (Oil & Gas).............. 299,167 316,572
1,320 Societe Generale de Belique Paris (Multi-
Industries)................................ 100,473 100,064
390 Solvay S.A. (Chemical)...................... 217,464 239,315
450 Tractebel NPV (Multi-Industries)............ 162,871 184,209
1,970 Union Miniere NPV (Mining)*................. 139,501 150,910
----------- -----------
2,125,564 2,277,297
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
CANADA -- 3.40%
7,200 Alcan Aluminum Ltd. (Metals - Diversified).. $ 241,293 $ 219,535
13,000 Bank of Montreal (Financial)................ 288,465 318,632
4,100 Barrick Gold Corp. (Mining)................. 105,880 111,473
15,900 Canadian Pacific Ltd. (Holding Company)..... 281,976 348,873
5,300 Imperial Oil Ltd.
(Oil & Gas)................................ 189,994 224,026
4,200 Moore Corp. Ltd.
(Business Epuipment)....................... 75,391 78,748
6,200 Noranda Inc.
(Metals - Diversified)..................... 131,202 127,167
6,600 Norcen Energy
(Oil & Gas)................................ 103,610 115,998
3,700 Northern Telecom Ltd. (Telecommunications).. 158,281 201,603
9,800 Nova Corp of Alberta (Utilities)............ 84,276 88,816
9,000 Royal Bank of Canada (Financial)............ 199,848 216,299
6,200 Seagram Co. Ltd.
(Wine & Spirits)........................... 220,969 208,153
15,500 Thompson Corp.
(Publishing & Printing).................... 217,145 245,689
9,500 Trans Canada Pipeline (Utilities)........... 133,911 141,172
----------- -----------
2,432,241 2,646,184
----------- -----------
FINLAND -- 0.52%
15,700 Merita Ltd. (Banking)*...................... 39,161 32,796
6,200 Nokia (Telecommunications).................. 220,256 228,314
2,400 Outokumpu
(Metals - Steel)........................... 44,495 40,313
5,000 Repola (Metals - Steel)..................... 101,694 103,476
----------- -----------
405,606 404,899
----------- -----------
FRANCE -- 8.85%
1,800 Accor Ltd.
(Leisure & Tourism)........................ 234,545 251,665
2,630 Alcatel Alsthom (Telecommunications)........ 252,664 229,309
10,210 Banque National de Paris Cl. A (Financial).. 419,376 358,263
1,888 CEP Communications (Broadcasting)........... 175,450 159,481
1,088 CEP Communications Warrants Exp. 12/31/97
(Brosdcasting)*............................ 8,954 3,169
2,199 Cie Bancaire SA
(Financial Services)....................... 234,186 247,669
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
3,440 Cie de Saint Gobain (Building Materials).... $ 435,198 $ 460,252
790 Colas (Construction)........................ 143,315 141,441
3,960 Compagnie de Suez (Financial Services)...... 170,991 144,798
4,480 Credit Local de France (Financial
Services).................................. 373,461 364,511
1,320 Gan (Insurance)*............................ 41,710 35,373
4,600 Generale des Eaux (Utilities)............... 486,825 513,622
2,590 LVMH Moet Hennessey -Louis Vuitton
(Wine & Spirits)........................... 516,419 614,092
5,010 Michelin Cl. B
(Tire & Rubber)............................ 219,932 244,775
5,428 Pechiney Cert D'Invest (Metals)............. 260,439 219,135
4,850 Peugeot S.A.
(Auto Related)............................. 655,838 648,902
10,000 Rhone-Poulenc Ord. (Pharmaceuticals)........ 256,786 262,734
2,600 Seita (Tobacco)............................. 102,265 119,153
4,560 Societe Generale (Financial)................ 505,438 501,186
5,214 Societe Nationale Elf Acquitaine (Oil &
Gas)....................................... 386,190 383,327
7,810 Total Co. Cl. B
(Oil & Gas)................................ 496,425 579,035
7,100 UAP (Insurance)............................. 170,370 144,076
17,400 Usiminas Sacilor (Metals)................... 255,688 250,879
----------- -----------
6,802,465 6,876,847
----------- -----------
GERMANY -- 5.96%
256 Allianz AG Holding (Insurance)**............ 474,239 444,881
707 BASF AG (Chemical).......................... 167,436 201,290
9,660 Bayer AG (Chemical)......................... 272,224 339,743
4,646 Bayer Vereinsbank (Financial)............... 130,011 129,988
465 Bayerische Motoren Werke AG (Auto Related).. 259,873 268,445
642 Commerzbank AG (Banking).................... 146,834 132,735
425 Daimler Benz AG
(Auto Related)*............................ 216,200 227,908
425 Daimler Benz Rights Exp. 7/05/96 (Auto
Related)*.................................. 4,075 59
10,993 Deutsche Bank AG (Financial)................ 507,934 520,554
4,970 Hoechst AG (Chemical)....................... 122,885 167,777
603 Kaufhof Holdings AG (Retail)................ 205,763 227,917
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
GERMANY (CONTINUED)
300 Man AG (Machinery
& Engineering)............................. $ 84,477 $ 75,167
1,063 Mannesmann AG (Machinery & Engineering)..... 352,263 365,830
164 Muenchener Rueckver AG (Insurance).......... 327,117 334,980
721 Preussag AG
(Holding Company).......................... 203,731 181,600
5,100 RWE AG (Oil & Gas).......................... 187,064 198,292
1,908 Schering AG (Pharmaceuticals)............... 137,918 138,282
2,500 Siemens AG (Manufacturing).................. 141,019 133,949
1,250 Thyssen AG (Steel).......................... 240,284 228,638
5,922 Veba AG (Utilities)......................... 242,360 314,652
----------- -----------
4,423,707 4,632,687
----------- -----------
ITALY -- 2.72%
12,600 Assic Generali (Insurance).................. 301,857 290,340
18,000 Daniele Di Risp (Engineering)............... 67,169 63,946
21,000 Edison Spa (Utilities)...................... 104,806 126,621
5,900 Eni Ads - ADR+
(Oil & Gas)................................ 193,992 295,000
75,000 Fiat Spa (Auto Related)..................... 168,337 131,510
34,000 Instituto Mobiliare Italiano Spa (Financial
Services).................................. 214,246 283,684
33,000 Instituto Nazionale D Assicurazi
(Insurance)................................ 44,113 49,153
42,000 Italgas (Utilities)......................... 121,010 156,737
7,000 Mediobanca Spa
(Financial Services)**..................... 50,132 44,420
101,000 Montedison Spa
(Multi-Industries)*........................ 74,596 58,661
15,000 Rinascente (Retail -Department Store)....... 89,153 107,310
750 Rinascente Warrants Exp 12/31/99 (Retail -
Department Store)*......................... 120 124
13,000 Rinascente Savings (Retail - Department
Store)..................................... 36,685 36,015
650 Rinascente Savings-Warrants Exp 12/31/99
(Retail -Department Store)*................ 475 513
15,000 Sai Risp (Insurance)........................ 69,990 58,080
139,000 Telecom Italia Mobile
de Risp (Telecommunications)............... 144,963 189,368
128,000 Telecom Italia de Risp
(Telecommunications)....................... 166,624 220,690
----------- -----------
1,848,268 2,112,172
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
JAPAN -- 31.12%
41,000 Amada
(Hand/Machine Tools)....................... $ 439,326 $ 440,981
42,000 Asahi Glass Co.
(Buiding Materials)........................ 474,728 501,504
31,000 Canon, Inc.
(Business Equipment)....................... 567,555 644,244
12,000 Canon Sales
(Business & Public Services)............... 311,653 333,607
37,000 Citizen Watch Co. (Jewelry)................. 290,068 307,912
33,000 Dai Nippon Printing (Publishing &
Printing).................................. 546,213 637,681
27,000 Daiichi Pharmaceutical
Co. Ltd.
(Pharmaceutical)........................... 404,391 415,915
38,000 Daikin Kogyo Co.
(Machinery &
Engineering)............................... 353,980 415,641
19,000 Daiwa House Industries
(Manufacturing/Housing).................... 292,258 294,413
15,400 Fanuc Co.
(Electronic Components).................... 667,567 612,013
26,000 Fujitsu
(Computer Equipment)....................... 283,290 236,988
77,000 Hitachi Ltd.
(Electrical &
Electronics)............................... 809,326 715,887
15,000 Honda Motor Co.
(Auto Related)............................. 278,268 388,296
47,000 Inax (Building Materials)................... 453,897 466,958
12,000 Isetan
(Retail - Department Store)................ 173,480 181,570
17,000 Ito-Yokado Co.
(Retail - Grocery)......................... 936,749 1,024,246
18,000 Kaneka Corp. (Chemicals).................... 118,327 120,919
43,000 Keio Teito Electric Railway
(Transportation)........................... 252,319 254,763
44,000 Kintetsu
(Kinki Nippon Railway)
(Transportation)........................... 341,992 316,434
39,000 Kirin Brewery Co. Ltd. (Brewery)............ 459,171 476,347
8,000 Kokuyo (Office/Business).................... 196,002 220,946
30,000 Kuraray Co. Ltd. (Chemicals)................ 318,410 336,341
8,000 Maeda Road Construction (Engineering &
Construction).............................. 155,710 137,818
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
JAPAN (CONTINUED)
5,000 Marui Co.
(Retail - Department
Store)..................................... $ 91,206 $ 110,747
59,000 Matsushita Electric Co. (Electronic
Components)................................ 958,049 1,097,074
41,000 Mitsubishi Paper Mills (Forest Products &
Paper)..................................... 247,200 255,993
61,000 NGK Insulators
(Industrial Components).................... 588,994 683,894
3,300 Nintendo (Toys)............................. 227,504 245,447
25,000 Nippon Denso Co. Ltd. (Electrical &
Electronics)............................... 468,662 542,339
23,000 Nippon Meat Packers
(Food Processing).......................... 321,871 327,044
27,000 Nippon Steel Corp. (Steel).................. 88,645 92,535
22,000 Okumura (Construction)...................... 200,894 183,684
154,000 Osaka Gas Corp. (Utilities)................. 532,395 562,884
7,000 Pioneer Electronics (Electrical &
Electronics)............................... 128,557 166,530
26,000 Sankyo Pharmaceutical (Pharmaceuticals)..... 588,973 673,047
9,000 Secom Co.
(Business &
Public Services)........................... 577,952 593,929
12,000 Seino Transport
(Trucking & Leasing)....................... 197,994 189,226
71,000 Sekisui House (Manufacturing/Housing)....... 878,753 808,951
32,000 Shinmaywa Industries
(Auto Related)............................. 286,022 326,679
10,400 Sony Corp.
(Electrical &
Electronics)............................... 576,894 683,475
31,000 Sumitomo Electric
(Metal Fabricate/Hardware)................. 393,699 443,624
41,000 Sumitomo Trust & Banking (Financial)........ 782,543 792,271
26,000 Takeda Chemical Industries
(Pharmaceuticals).......................... 373,164 459,758
8,000 TDK Corp.
(Electrical &
Electronics)............................... 421,360 476,894
31,200 The Bank Of Tokyo-Mitsubishi, Ltd.
(Financial - Bank)......................... 638,383 722,341
35,000 Tokio Marine & Fire (Insurance)............. 414,761 465,773
15,200 Tokyo Electric Power (Utilities)............ 403,236 385,161
26,000 Tokyo Steel (Steel)......................... 509,201 509,525
27,000 Tonen Corp. (Oil & Gas)..................... 402,080 396,226
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
148,000 Toray Industries Inc. (Chemical)............ $ 948,014 $ 1,019,852
89,000 Toshiba Corp.
(Electrical &
Electronics)............................... 662,501 632,759
19,000 Toyo Suisan Kaisha
(Food Processing).......................... 194,529 232,066
12,000 Toyota Motor Corp.
(Auto Related)............................. 243,885 299,699
18,000 Yamazaki Baking Co., Ltd. (Food
Processing)................................ 331,220 333,060
----------- -----------
22,803,821 24,193,911
----------- -----------
MALAYSIA -- 2.19%
8,000 Genting BHD (Entertainment)................. 74,080 62,525
18,000 Hume Industries
(Building Materials)....................... 90,378 88,016
61,000 Kuala Lumpur
(Misc - Materials)......................... 133,619 154,028
42,000 Land & General Holdings (Forest Products &
Paper)..................................... 103,747 103,527
22,000 Malayan Banking (Financial)................. 200,157 211,623
23,000 Malaysia International Shipping
(Transportation)........................... 68,757 71,443
10,000 Nestle Malaysia
(Food Processing).......................... 77,240 80,561
33,000 Public Bank BHD (Financial)................. 84,026 91,263
9,000 Resorts World Berhad (Entertainment)........ 53,775 51,583
73,000 Sime Darby Berhad
(Holding Company).......................... 194,284 201,884
32,000 Telecom Malaysia (Telecommunications)....... 275,110 284,729
60,000 Tenaga Nasional (Utilities)................. 246,309 252,505
9,000 YTL Corporation Berhad (Construction)....... 45,396 46,894
----------- -----------
1,646,878 1,700,581
----------- -----------
NETHERLANDS -- 6.02%
8,338 ABN-Amro Holdings NV (Financial)............ 334,665 447,324
700 Akzo Nobel (Chemicals)...................... 77,827 83,841
1,320 DSM NV (Chemical)........................... 108,467 131,041
2,000 Hoogovens & Staalf (Steel).................. 78,745 74,031
18,790 International Nederlanden Group
(Financial)................................ 437,847 560,156
10,834 Koninklijke NV (Telecommunications)......... 388,875 409,908
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
NETHERLANDS (CONTINUED)
6,550 Philips Electronics (Electronic
Components)................................ $ 273,427 $ 212,911
2,200 Royal Dutch Petroleum -ADR+ (Oil & Gas)..... 283,358 338,250
8,870 Royal Dutch Petroleum
(Oil & Gas)................................ 1,091,556 1,369,411
4,660 Unilever NV
(Food Processing).......................... 603,607 674,136
5,500 Vendex International N.V. (Retail).......... 191,021 191,666
12,100 Verenigde Ned Uitgev
Ver Bezit
(Publishing & Printing).................... 168,166 187,800
----------- -----------
4,037,561 4,680,475
----------- -----------
NEW ZEALAND -- 2.99%
486,900 Brierly Investment Co. (Multi-Industries)... 406,172 460,132
213,400 Carter Holt Harvey (Forest Products &
Paper)..................................... 480,516 486,634
106,400 Fletcher Challenge Paper Ltd. (Forest
Products & Paper)*......................... 188,235 205,473
52,700 Fletcher Challenge Energy Ltd. (Oil &
Gas)*...................................... 147,476 116,206
52,700 Fletcher Challenge Building Ltd.
(Building & Materials)*.................... 156,486 102,854
7,917 Fletcher Forestry (Forest Products &
Paper)..................................... 22,872 9,813
3,100 New Zealand Telecom -ADR+
(Telecommunications)....................... 192,345 206,925
174,800 Telecom Corp of New Zealand
(Telecommunications)....................... 739,244 732,583
----------- -----------
2,333,346 2,320,620
----------- -----------
SPAIN -- 2.99%
4,100 Banco Bilbao Vizcaya (Financial)............ 124,547 166,074
5,210 Banco Central Hisponoamericano (Financial).. 112,530 106,127
900 Banco Popular Espanol (Financial)........... 150,838 160,431
3,600 Banco Santander S.A. (Financial)............ 158,069 168,017
1,500 BCO Santander S.A. (Financial Services)..... 140,356 167,759
15,100 Compania Sevillana de Electricadad
(Utilities)................................ 101,763 139,062
4,800 Empresa Nac Electric (Utilities)............ 250,829 299,321
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
SPAIN (CONTINUED)
1,200 Fomento De Construcciones (Construction).... $ 98,759 $ 99,274
30,600 Iberdrola S.A. (Utilities).................. 249,608 314,048
2,300 Repsol S.A. - ADR+
(Oil & Gas)................................ 75,038 79,925
3,400 Repsol S.A. (Oil & Gas)..................... 102,947 118,216
19,900 Telfonica de Espana (Telecommunications).... 264,903 366,534
2,800 Vallehermoso SA
(Real Estate).............................. 49,155 55,288
5,300 Viscofan
(Food Processing).......................... 82,668 83,764
----------- -----------
1,962,010 2,323,840
----------- -----------
SWITZERLAND -- 2.39%
100 BBC-Brown Boveri (Electronics).............. 118,647 123,711
254 Ciba - Giegy AG (Pharmaceuticals)........... 233,758 309,558
1,614 CS Holding Co. (Financial).................. 148,815 153,494
431 Nestle SA
(Food Processing).......................... 452,925 492,207
35 Roche Holding
AS - Genusshein (Pharmaceuticals).......... 258,116 266,982
205 Schweiz Bankgesellschaft (Financial)........ 200,125 200,691
78 Societe Generale Surveillance (Commercial
Services).................................. 152,607 186,694
455 Zurich Versicherung (Insurance)............. 117,297 123,995
----------- -----------
1,682,290 1,857,332
----------- -----------
UNITED KINGDOM -- 16.10%
62,800 Asda Group
(Retail - Grocery)......................... 102,895 113,547
34,900 Bass plc (Brewery).......................... 376,674 438,193
42,300 Bat Industries (Tobacco).................... 342,783 328,905
19,100 Booker plc
(Food Processing).......................... 119,691 111,755
136,500 British Gas plc (Utilities)................. 558,135 381,326
79,141 British Petroleum Co. plc (Oil & Gas)....... 606,134 693,357
135,800 British Steel plc (Steel/Iron).............. 369,579 346,703
133,600 British Telecom plc (Telecommunications).... 793,025 717,422
17,833 Charter (Multi-Industries).................. 245,216 258,225
72,400 Coats Viyella
(Textiles & Apparel)....................... 227,717 193,267
58,000 FKI plc (Electronics)....................... 148,559 153,027
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES COST VALUE
------ ---- -----
<C> <S> <C> <C>
UNITED KINGDOM (CONTINUED)
156,700 General Electric plc (Electrical &
Electronics)............................... $ 809,812 $ 843,898
22,800 Glaxo Wellcome plc (Pharmaceuticals)........ 298,687 301,485
89,900 Grand Metropolitan plc (Wine & Spirits)..... 593,892 595,771
70,600 Guinness (Wine & Spirits)................... 533,593 512,793
77,400 Hanson plc
(Holding Company).......................... 250,879 214,423
64,100 Hillsdown Holdings
(Food Processing).......................... 186,147 173,101
117,200 House of Fraser (Retail -Department Store).. 280,476 316,496
21,400 Legal & General Group plc (Insurance)....... 202,490 222,194
29,600 Lloyds Abbey Life (Insurance)............... 202,674 234,749
172,700 Lloyds TSB Group plc (Financial)............ 740,538 844,296
42,100 Marks & Spencers plc (Retail - Dept Store).. 283,134 304,481
37,100 Mirror Group plc (Publishing & Printing).... 94,929 118,037
32,500 National Power (Utilities).................. 254,175 262,288
36,700 National Westminster Bank (Financial)....... 342,182 350,864
20,700 Ocean Group (Transportation)................ 111,326 146,818
31,300 P & O Steam (Transportation)................ 254,629 236,087
21,800 Reckitt & Colman (Household Products)....... 232,450 227,700
16,400 Redland (Building Materials)................ 98,900 102,066
23,000 RJB Mining plc (Mining)..................... 190,766 197,399
67,500 Rolls Royce (Aerospace/Defense)............. 190,942 234,662
33,000 Royal Insurance (Insurance)................. 182,147 203,840
17,600 RTZ Corp. (Mining).......................... 254,759 260,314
21,400 Scottish Hydro
(Utilities - Electric)..................... 111,192 98,642
116,700 Sears (Retail - Department Store)........... 187,960 179,307
94,300 Sedgwick Group (Insurance).................. 191,326 201,968
25,500 Smithkline Beecham (Pharmaceuticals)........ 251,634 272,481
86,600 Tesco
(Retail - Grocery)......................... 408,429 395,145
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL COST VALUE
--------- ---- -----
<C> <S> <C> <C>
UNITED KINGDOM (CONTINUED)
23,600 Thames Water (Utilities)............... $ 197,203 $ 207,676
13,000 Unilever
(Food Processing)..................... 246,349 258,251
31,500 Vodafone (Telecommunications).......... 118,813 117,087
20,000 W.H. Smith (Retail -Department Store).. 119,998 147,440
----------- -----------
12,312,839 12,517,486
----------- -----------
TOTAL -- COMMON STOCK.................. 67,997,647 71,815,329
----------- -----------
SHORT-TERM INVESTMENT -- 6.35%
$4,940,000 Banker Trust Co. Time Deposit, 5.3125%,
Due 7/01/96........................... 4,940,000 4,940,000
----------- -----------
TOTAL INVESTMENTS --98.74%............. $72,937,647++ 76,755,329
===========
Cash and Other Assets Less
Liabilities --1.26%................... 976,546
-----------
TOTAL NET ASSETS --100.00%............. $77,731,875
===========
</TABLE>
* Non-income producing security.
+ American Depository Receipts.
** Passive Foreign Investment Company.
++ The cost for Federal income tax purposes is substantially the same.
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
MUNICIPAL OBLIGATIONS -- 86.20%
ALABAMA -- 0.62%
NR/NR $ 180,000 Pell City Alabama Industrial
Development, Shelby Steel
Fabricators, 7.70%, 09/01/01
(LOC - Southtrust Bank)+....... $ 182,581 $ 182,830
----------- -----------
ARIZONA -- 2.23%
NR/NR 350,000 La Paz County Industrial
Development, Morgan Trailer MFG
Co., 8.00%, 12/01/06
(Pre-Refunded 12/01/96 @ 100)+. 354,909 354,263
NR/A- 300,000 Valley Housing Development
Revenue, Section 8 Assistance,
8.00%, 10/01/20................ 307,285 304,341
----------- -----------
662,194 658,604
----------- -----------
ARKANSAS -- 1.12%
Aa/NR 320,000 Arkansas State Development
Finance Authority, 9.375%,
08/01/14....................... 330,721 330,285
----------- -----------
CALIFORNIA -- 3.14%
NR/A+ 500,000 City of Vallejo Housing
Authority, Multi-Family Housing
Revenue, 5.00%, 06/01/07
(Mandatory put 06/01/99 @ 100)
(Surety Bond - Continental
Casualty)...................... 500,000 500,000
NR/A 425,000 Los Angeles Community
Redevelopment Agency Housing
Revenue, 5.50%, 12/01/05....... 425,000 425,000
----------- -----------
925,000 925,000
----------- -----------
COLORADO -- 1.94%
Aa/NR 385,000 Aurora Colorado Housing
Authority, Single-Family Mtg.
Revenue, 7.30%, 05/01/10....... 412,039 407,138
Aa/AA 95,000 Colorado Housing Finance
Authority, Series B-3, 4.125%,
02/01/22
(Optional put 08/01/96 @
100)+.......................... 95,000 94,961
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
Aa/AA+ $ 70,000 Colorado Housing Finance
Authority, Series A., 5.90%,
11/01/96....................... $ 70,223 $ 70,178
----------- -----------
577,262 572,277
----------- -----------
CONNECTICUT -- 2.61%
A2/NR 145,000 Connecticut State Development
Authority, Health Care Project,
5.50%, 09/01/97
(Surety Bond - Aetna/Cigna
etc.).......................... 145,920 145,181
AAA 605,000 Connecticut State Resource
Recovery Authority, GTR
Bridgeport System, 6.75%,
11/15/99 (Escrowed to
Maturity)...................... 628,631 625,419
----------- -----------
774,551 770,600
----------- -----------
DELAWARE -- 2.38%
Aaa/AAA 25,000 Dover Delaware Water & Sewer
Revenue, Series B., 6.80%,
07/01/96 (MBIA)................ 25,000 25,006
NR 600,000 Wilmington Delaware Hospital
Revenue, Osteopathic Hospital
Series A., 10.00%, 10/01/03
(Pre-Refunded 10/01/98 @ 102).. 675,580 677,250
----------- -----------
700,580 702,256
----------- -----------
FLORIDA -- 0.90%
A/A 50,000 Miami Florida Parking Facility
Revenue, Series A., 5.50%,
10/01/96....................... 50,220 50,161
Aaa/NR 200,000 Orange County Housing Authority,
Revenue, 8.10%, 11/01/21 (GNMA
Collateral)+................... 214,162 214,000
----------- -----------
264,382 264,161
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
MUNICIPAL OBLIGATIONS
(CONTINUED)
GEORGIA -- 2.40%
Aa3/AA- $ 200,000 Cobb County Housing Authority,
Multi-Family Housing Revenue,
7.50%, 01/01/97
(LOC - Sun Trust).............. $ 202,320 $ 202,156
AAA 500,000 Fulton County Housing Authority,
Single Family Revenue, 6.20%,
03/01/13
(GNMA Collateral)+............. 503,657 505,000
----------- -----------
705,977 707,156
----------- -----------
ILLINOIS -- 8.80%
A1/AA- 100,000 Illinois State, General
Obligation Bonds, 4.75%,
08/01/99....................... 99,700 100,048
NR/AA 1,500,000 Illinois State Industrial
Development Financial
Authority, Revenue, 5.00%,
11/01/00
(Asset GTY).................... 1,500,000 1,477,500
Aaa/AAA 500,000 St. Clair County Public Building
Revenue, 8.00%, 12/01/05 (MBIA)
(Escrowed to Maturity)......... 508,504 507,820
A/NR 495,000 Woodridge Mortgage Revenue,
Series 1992-1, 7.25%,
12/01/10....................... 519,465 508,613
----------- -----------
2,627,669 2,593,981
----------- -----------
INDIANA -- 1.45%
A/NR 335,000 Indiana Health Facility
Financing Authority, Revenue,
9.25%, 10/01/17
(Pre-Refunded 10/01/97 @ 102).. 364,004 362,219
Aaa/AAA 65,000 Reid Memorial Hospital, 6.25%,
05/01/00 (AMBAC) (Escrowed to
Maturity)...................... 66,944 65,731
----------- -----------
430,948 427,950
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
KENTUCKY -- 0.21%
AAA/NR $ 60,000 University of Kentucky Revenue,
Series A., 7.50%, 08/01/97
(Pre-Refunded 08/01/96 @ 103).. $ 62,139 $ 61,975
----------- -----------
LOUISIANA -- 1.45%
NR/AAA 435,000 Jefferson Parish Home Mortgage
Authority, Series A., 4.85%,
12/01/01
(FNMA/GNMA Collateral)+........ 435,099 428,475
----------- -----------
MARYLAND -- 1.27%
NR/A+ 375,000 Montgomery County Housing
Authority, Multi-Family
Revenue, 6.00%, 02/01/07
(Mandatory put 02/01/97 @ 100)
(Insured by New England
Mutual)........................ 375,655 375,165
----------- -----------
MASSACHUSETTS-0.92%
Aaa/AAA 50,000 Boston Massachusetts General
Obligation, Series A., 5.90%,
07/01/96 (MBIA)................ 50,000 50,000
Aaa/AAA 55,000 Massachusetts State Industrial
Finance Agency, Brandeis
University Series C., 6.40%,
10/01/96 (MBIA)................ 55,389 55,304
Aaa/AAA 40,000 Massachusetts State Water
Reserve Authority, Series A.,
5.75%, 12/01/96 (Escrowed to
Maturity)...................... 40,348 40,312
A/A 50,000 Massachusetts State Water
Reserve Authority, Series A.,
5.60%, 07/15/96................ 50,038 50,031
NR/A- 75,000 Plymouth County Massachusetts,
Certificates of Participation,
Series A., 6.10%, 04/01/98..... 77,565 76,594
----------- -----------
273,340 272,241
----------- -----------
MINNESOTA -- 1.41%
NR/A- 400,000 Apple Valley Housing
Development, Revenue, 7.40%,
08/01/98 (LOC - Banque
Paribas)....................... 413,879 415,500
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
MICHIGAN -- 5.75%
A/A $1,600,000 Michigan State Housing
Development Authority, Home
Improvement Series B., 7.65%,
12/01/12+...................... $ 1,694,946 $ 1,694,000
----------- -----------
MISSISSIPPI -- 1.29%
Aaa/NR 385,000 Mississippi Home Corp. Mortgage
Access Program, Single-Family
Mtg. Revenue, Series A., 4.50%,
06/01/99 (GNMA MBS
Collateral)+................... 384,731 379,225
----------- -----------
MISSOURI -- 2.09%
Aaa/AAA 595,000 St. Louis County, Single-Family
Mtg. Revenue, 9.25%, 10/01/16
(AMBAC)........................ 608,507 615,825
----------- -----------
NEW HAMPSHIRE -- 0.08%
Aa/AA+ 25,000 New Hampshire State Business
Finance Authority, Manchester
Airport Project, 5.35%,
01/01/97+...................... 25,101 25,030
----------- -----------
NEW JERSEY -- 3.82%
A/AA 1,100,000 Jersey City School Board
Revenue, 7.90%, 08/01/06....... 1,135,015 1,125,278
----------- -----------
NEW YORK -- 1.90%
Aa/AA 500,000 New York State Dorm Authority
Revenue, Cornell University,
6.875%, 07/01/06............... 510,000 510,000
Aa/NR 50,000 New York State Mortgage Agency
Revenue, Homeowner Mortgage
Series SS., 6.90%, 10/01/96+... 50,334 50,294
----------- -----------
560,334 560,294
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
MUNICIPAL OBLIGATIONS
(CONTINUED)
OHIO -- 1.62%
A/A $ 465,000 Cleveland Ohio Airport Systems
Revenue, 7.00%, 01/01/06....... $ 480,287 $ 476,062
----------- -----------
OKLAHOMA -- 0.66%
Aaa/AAA 190,000 Tulsa Oklahoma International
Airport, Revenue, 6.20%,
06/01/00 (Escrowed to
Maturity)...................... 194,872 194,988
----------- -----------
PUERTO RICO -- 0.34%
A1/A 50,000 Puerto Rico Commonwealth, Public
Improvement, 6.00%, 07/01/96
(LOC - Fuji Bank LTD).......... 50,000 50,000
Aaa/AAA 50,000 Puerto Rico Electric Power
Authority, Series M., 6.70%,
07/01/96 (BIG)................. 50,000 50,000
----------- -----------
100,000 100,000
----------- -----------
PENNSYLVANIA -- 23.11%
A1/A 50,000 Butler County Hospital
Authority, Revenue, 7.50%,
07/01/96 (LOC - Fuji Bank
LTD)........................... 50,000 50,011
Aa/AA 25,000 Chester County Solid Waste
Revenue, Series B., 6.65%,
01/01/98 (Cnty. GTD)........... 25,583 25,812
A/NR 500,000 Cumberland Valley School
District, Series A., 5.90%,
09/01/98....................... 501,134 501,085
NR/A 100,000 Dauphin County Industrial
Development Authority, Brubaker
Tool Corp., 7.10%, 12/01/02
(LOC - Marine Bank)+........... 100,994 100,751
Aa3/AA- 40,000 Delaware County Industrial
Development Authority, Series
A., 7.65%, 12/01/01
(LOC - Bank of America)........ 41,757 41,841
Aa3/AA 690,000 Delaware County Industrial
Development Authority, Series
A., 8.10%, 12/01/13
(LOC - Bank of America)........ 718,154 717,262
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
PENNSYLVANIA (CONTINUED)
NR/NR $ 120,000 Edgewood Pennsylvania School
District, 5.90%, 08/01/99
(Escrowed to Maturity)......... $ 122,510 $ 120,044
MIG1/NR 200,000 Ephrata Pennsylvania School
District, 5.40%, 12/15/97...... 201,609 201,280
NR/NR 50,000 Erie Public School Authority
School Revenue, 6.50%, 09/01/97
(Escrowed to Maturity)......... 50,746 50,500
A1/NR 120,000 Haverford School District
Revenue, 3.99%, 06/01/97
(Escrowed to Maturity)......... 115,756 115,694
NR 100,000 Montgomery County Industrial
Development, Meadowood Corp.,
5.00%, 12/01/96................ 100,000 99,956
Aaa/AAA 15,000 Neshaminy Pennsylvania School
District, 6.00%, 06/01/98
(FGIC)......................... 15,000 15,116
Aa/AA 550,000 Pennsylvania Housing Finance
Authority, Single Family Mtg.
Series 27, 8.10%, 10/01/10+.... 571,368 564,437
A1/AA- 1,690,000 Pennsylvania State General
Obligation, Revenue, 5.50%,
10/01/97....................... 1,709,758 1,699,667
A1/AA- 1,210,000 Pennsylvania State Highway
General, Revenue, 5.50%,
10/01/97....................... 1,224,146 1,216,921
Aaa/AAA 500,000 Philadelphia Hospital & High Ed
Authority, Moss Rehabilitation
Hospital Revenue, 6.90%,
07/01/00 (AMBAC)............... 524,335 538,750
Aaa/AAA 25,000 Pittsburgh General Obligation
Bonds, Series B., 7.00%,
03/01/01 (FGIC)
(Partial Pre-Refunded 03/01/97
@ 102)......................... 25,801 25,886
NR/A 400,000 Scranton-Lackawanna Health &
Welfare Authority, St. Josephs
Hospital, 7.75%, 12/15/15
(LOC - PNC).................... 409,887 408,104
NR/AAA 320,000 Windber Area Authority Hospital
Revenue, Windber Hospital
Project, 4.75%, 02/01/00 (FHA). 319,600 319,600
----------- -----------
6,828,138 6,812,717
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
TEXAS -- 0.84%
Aa/AA $ 250,000 Texas State, General Obligation
Bonds, 3.75%, 08/01/97......... $ 247,650 $ 248,845
----------- -----------
TENNESSEE -- 4.25%
Aaa/NR 845,000 Hamilton County Industrial
Development Authority, Multi-
Family Housing Revenue, 6.25%,
10/01/08 (Mandatory put
10/01/97 @ 100) (LOC - Guardian
S & L)......................... 848,632 851,338
NR/A+ 400,000 Hendersonville Industrial
Development Authority, Multi-
Family Housing Revenue, 5.375%,
02/01/06 (Mandatory put
02/01/98 @ 100) (Surety Bond
Continental Casualty).......... 403,280 402,200
----------- -----------
1,251,912 1,253,538
----------- -----------
UTAH -- 0.07%
Aaa/AAA 20,000 Utah Board of Regents Student
Loan Revenue, Series D., 7.00%,
11/01/96 (AMBAC)+.............. 20,191 20,183
----------- -----------
WASHINGTON -- 0.17%
Aa/AA- 50,000 Washington State Public Power
Supply System, Series B.,
6.90%, 07/01/96................ 50,000 50,000
----------- -----------
WEST VIRGINIA -- 2.88%
A/A 845,000 West Virginia Board of Regions,
University of Virginia, 6.60%,
04/01/06....................... 851,471 850,053
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
LIMITED DURATION MUNICIPAL BOND PORTFOLIO
Portfolio of Investments (continued) -- June 30, 1996
<TABLE>
<CAPTION>
CREDIT PRINCIPAL
RATINGS* AMOUNT COST VALUE
-------- --------- ---- -----
<C> <C> <S> <C> <C>
MUNICIPAL OBLIGATIONS
(CONTINUED)
WISCONSIN -- 1.17%
Aa/AA $ 345,000 Wisconsin Housing & Economic
Development Authority, Series
B., 6.625%, 09/01/20
(Gemic Pool insured)+......... $ 346,105 $ 345,000
----------- -----------
VIRGINIA -- 3.31%
NR/A+ 100,000 Chesapeake Redevelopment &
Housing Authority, Multi-
Family Housing Revenue, 7.75%,
7/01/16 (Mandatory put
07/01/96 @ 100) (LOC - Nations
Bank of Va.).................. 100,000 100,000
NR 595,000 King George County Industrial
Development Authority, King
County Elementary School,
4.875%, 08/01/98.............. 592,755 591,281
NR/AA 275,000 Virginia State Water and Sewer
Revenue, Series B., 8.70%,
11/01/11 (FNMA GIC)........... 288,600 285,359
----------- -----------
981,355 976,640
----------- -----------
TOTAL MUNICIPAL OBLIGATIONS.... 25,502,592 25,416,134
----------- -----------
SHORT TERM INVESTMENTS -- 8.81%
N/A 1,298,460 Bankers Trust Tax Free Money
Market........................ 1,298,460 1,298,460
N/A 1,298,460 Provident Institutional Funds.. 1,298,460 1,298,460
----------- -----------
TOTAL SHORT TERM INVESTMENTS... 2,596,920 2,596,920
----------- -----------
TOTAL INVESTMENTS -- 95.01%.... $28,099,512++ 28,013,054
===========
Cash and Other Assets Less
Liabilities -- 4.99%.......... 1,471,691
-----------
TOTAL ASSETS 100.00%........... $29,484,745
===========
</TABLE>
* See page 29 for Credit Ratings.
+ Subject to Alternative Minimum Tax.
++ The cost for Federal income tax purposes is substantially the same.
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Portfolio of Investments (continued) -- June 30, 1996
CREDIT RATINGS (UNAUDITED)
<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
------- -----------------
<C> <C> <S>
Aaa AAA Instrument judged to be of the highest quality
and carrying the smallest amount of investment
risk.
Aa AA Instrument judged to be of high quality by all
standards.
A A Instrument judged to be adequate by all
standards.
MIG1 SP1 Instrument judged to be of the best quality with
strong protection.
NR NR Not Rated. In the opinion of the investment
advisor, instrument judged to be of comparable
investment quality to rated securities which
may be purchased by the Portfolio.
</TABLE>
For items possessing the strongest investment attributes of their category,
Moody's gives that letter a rating followed by a number. The Standard & Poor's
ratings may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Abbreviations used in this statement:
<TABLE>
<S> <C>
AMBAC....................... American Municipal Bond Assurance Corporation
<CAPTION>
BIG......................... Bond Investors Guaranty
FGIC........................ Financial Guaranty Insurance Corporation
FHA......................... Federal Housing Authority
FNMA........................ Federal National Mortgage Association
General Electric Mortgage Insurance
GEMIC....................... Corporation
GNMA........................ Government National Mortgage Association
GTD......................... Guaranteed
GTY......................... Guaranty
LOC......................... Letter of Credit
MBIA........................ Municipal Bond Insurance Association
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Statements of Assets and Liabilities June 30, 1996
<TABLE>
<CAPTION>
SMALL LIMITED
VALUE GROWTH CAPITALIZATION INTERNATIONAL DURATION
----- ------ -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at value (cost
$62,811,284; $97,587,005;
$53,000,572; $67,997,648;
$25,502,592, respectively). $66,492,853 $108,088,189 $57,253,360 $71,815,329 $25,416,134
Short-term investments (cost
$4,747,472; $3,401,000;
$5,248,911; $4,490,000;
$2,596,920, respectively).. 4,747,472 3,401,000 5,248,911 4,940,000 2,596,920
Cash........................ 414,320 0 0 121,904 1,039,092
Foreign cash (cost $0; $0;
$0; $474,652; $0,
respectively).............. 0 0 0 474,595 0
Dividends and interest
receivable................. 145,256 92,309 78,119 306,075 423,620
Receivable for investments
sold....................... 0 1,715,463 124,117 226,511 0
Receivable from sponsor..... 0 0 1,263 0 6,961
Receivable from forward
contracts.................. 0 0 0 203,399 0
Foreign tax reclaim......... 0 0 0 66,849 0
Unrealized appreciation on
foreign currency and
forward contracts.......... 0 0 0 1,019,310 0
Unamortized organizational
expenses (Note 2E)......... 25,506 25,220 25,725 25,388 26,297
----------- ------------ ----------- ----------- -----------
Total Assets.............. 71,825,407 113,322,181 62,731,495 79,199,360 29,509,024
----------- ------------ ----------- ----------- -----------
LIABILITIES
Payable for securities
purchased.................. 259,790 2,500,712 1,165,012 1,357,259 0
Payable to custodian........ 0 174,477 3,220 0 0
Payable for forward
contracts.................. 0 0 0 20,460 0
Advisory fee payable (Note
3)......................... 20,243 31,465 24,727 27,604 5,545
Administrative services fee
payable (Note 3)........... 4,338 6,743 3,709 4,601 1,663
Transfer agent fee payable
(Note 3)................... 1,490 1,492 1,583 1,648 1,178
Other accrued expenses...... 36,914 70,732 30,706 55,913 15,893
----------- ------------ ----------- ----------- -----------
Total Liabilities......... 322,775 2,785,621 1,228,957 1,467,485 24,279
----------- ------------ ----------- ----------- -----------
NET ASSETS................... $71,502,632 $110,536,560 $61,502,538 $77,731,875 $29,484,745
=========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Statements of Assets and Liabilities (continued) -- June 30, 1996
<TABLE>
<CAPTION>
SMALL LIMITED
VALUE GROWTH CAPITALIZATION INTERNATIONAL DURATION
----- ------ -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Capital stock............... $ 6,228 $ 9,930 $ 5,558 $ 6,906 $ 2,948
Additional paid-in capital.. 64,485,086 101,701,922 56,229,582 71,069,437 29,645,881
Accumulated undistributed
net investment
income/(loss) on
investments................ 27 (45) 172 0 (28,162)
Accumulated undistributed
realized gain/(loss) on
investments and foreign
currency................... 3,329,722 (1,676,431) 1,014,438 1,818,598 (49,464)
Net unrealized
appreciation/(depreciation)
on investments and foreign
currency translations...... 3,681,569 10,501,184 4,252,788 4,836,934 (86,458)
----------- ------------ ----------- ----------- -----------
NET ASSETS................... $71,502,632 $110,536,560 $61,502,538 $77,731,875 $29,484,745
=========== ============ =========== =========== ===========
SHARES OF BENEFICIAL INTEREST
Shares of beneficial
interest outstanding....... 6,228,426 9,930,197 5,557,917 6,906,122 2,947,568
=========== ============ =========== =========== ===========
Net asset value per share
outstanding................ $11.48 $11.13 $11.07 $11.26 $10.00
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Statements of Operations
<TABLE>
<CAPTION>
VALUE GROWTH SMALL CAPITALIZATION INTERNATIONAL LIMITED DURATION
AUGUST 25, 1995 AUGUST 8, 1995 SEPTEMBER 5, 1995 AUGUST 17, 1995 OCTOBER 10, 1995
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
THROUGH THROUGH THROUGH THROUGH THROUGH
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996 1996 1996
--------------- -------------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Investment Income
Interest................... $ 86,298 $ 165,647 $ 159,106 $ 125,330 $ 815,649
Dividends (net of
withholding tax of $350,
$630, $0, $120,485, $0,
respectively)............. 1,463,690 578,756 557,137 1,126,075 0
---------- ----------- ---------- ---------- ---------
1,549,988 744,403 716,243 1,251,405 815,649
---------- ----------- ---------- ---------- ---------
Expenses:
Advisory (Note 3).......... 146,057 204,427 152,465 195,488 30,513
Administrative services
(Note 3).................. 48,686 68,142 33,881 48,872 15,263
Fund accounting fees and
expenses
(Note 3).................. 30,042 33,348 32,997 55,252 28,549
Consulting (Note 3)........ 24,343 34,071 16,940 24,436 7,628
Legal...................... 6,861 10,428 4,781 6,650 2,496
Reports to shareholders.... 5,232 11,572 4,797 5,821 987
Audit...................... 13,378 16,815 9,114 12,371 5,377
Registration............... 30,720 51,010 28,400 32,600 19,200
Custodian.................. 12,193 15,843 11,078 42,742 3,304
Trustees................... 2,907 2,907 2,907 2,907 2,907
Transfer agent fees and
expenses (Note 3)......... 3,987 4,036 3,869 4,260 2,451
Amortization of
organizational expenses... 5,234 5,520 5,015 5,352 4,443
Miscellaneous.............. 1,444 4,056 1,654 14,488 1,562
---------- ----------- ---------- ---------- ---------
Total expenses before
waivers................... 331,084 462,175 307,898 451,239 124,680
Less: expenses
waived/reimbursed by
Administrator and
Custodian................. (24,365) (32,878) (43,630) (54,960) (43,821)
---------- ----------- ---------- ---------- ---------
Net expenses............... 306,719 429,297 264,268 396,279 80,859
---------- ----------- ---------- ---------- ---------
Net investment income....... 1,243,269 315,106 451,975 855,126 734,790
---------- ----------- ---------- ---------- ---------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Statements of Operations (continued)
<TABLE>
<CAPTION>
VALUE GROWTH SMALL CAPITALIZATION INTERNATIONAL LIMITED DURATION
AUGUST 25, 1995 AUGUST 8, 1995 SEPTEMBER 5, 1995 AUGUST 17, 1995 OCTOBER 10, 1995
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
THROUGH THROUGH THROUGH THROUGH THROUGH
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996 1996 1996
--------------- -------------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Net realized gain/(loss) on
investments................ $ 3,455,493 $ (1,676,431) $ 1,014,438 $ 721,509 $ (49,464)
Net realized gain on foreign
currency transactions...... 0 0 0 1,672,504 0
Net unrealized
appreciation/(depreciation)
of investments............. 3,681,569 10,501,184 4,252,788 3,817,681 (86,458)
Net unrealized gain on
foreign currency
transactions............... 0 0 0 1,019,253 0
---------- ----------- ---------- ---------- ---------
Net realized and unrealized
gain/(loss) on investments
and foreign currency
transactions............... 7,137,062 8,824,753 5,267,226 7,230,947 (135,922)
---------- ----------- ---------- ---------- ---------
Net increase in net assets
resulting from operations.. $8,380,331 $ 9,139,859 $5,719,201 $8,086,073 $ 598,868
========== =========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
VALUE GROWTH SMALL CAPITALIZATION INTERNATIONAL LIMITED DURATION
AUGUST 25, 1995 AUGUST 8, 1995 SEPTEMBER 5, 1995 AUGUST 17, 1995 OCTOBER 10, 1995
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
THROUGH THROUGH THROUGH THROUGH THROUGH
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996 1996 1996
--------------- -------------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income....... $ 1,243,269 $ 315,106 $ 451,975 $ 855,126 $ 734,790
Net realized gain/(loss) on
investments and foreign
currency transactions...... 3,455,493 (1,676,431) 1,014,438 2,394,013 (49,464)
Net unrealized
appreciation/(depreciation)
of investments and foreign
currency transactions...... 3,681,569 10,501,184 4,252,788 4,836,934 (86,458)
----------- ------------ ----------- ----------- ------------
Net increase in net assets
resulting from operations.. 8,380,331 9,139,859 5,719,201 8,086,073 598,868
----------- ------------ ----------- ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income.. (1,243,242) (315,151) (451,803) (1,399,229) (762,952)
From realized gains......... (125,771) 0 0 (31,312) 0
----------- ------------ ----------- ----------- ------------
Decrease in net assets
resulting from
distributions to
shareholders............... (1,369,013) (315,151) (451,803) (1,430,541) (762,952)
----------- ------------ ----------- ----------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of
shares..................... 71,825,228 116,643,472 62,623,020 73,530,380 43,425,188
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions.......... 1,323,521 283,304 399,593 1,306,700 703,436
Net asset value of shares
redeemed................... (8,677,435) (15,234,924) (6,807,473) (3,780,737) (14,499,795)
----------- ------------ ----------- ----------- ------------
Net increase in net assets
from capital share
transactions............... 64,471,314 101,691,852 56,215,140 71,056,343 29,628,829
----------- ------------ ----------- ----------- ------------
Total increase in net
assets..................... 71,482,632 110,516,560 61,482,538 77,711,875 29,464,745
NET ASSETS:
Beginning of period......... 20,000 20,000 20,000 20,000 20,000
----------- ------------ ----------- ----------- ------------
End of period............... $71,502,632 $110,536,560 $61,502,538 $77,731,875 $ 29,484,745
=========== ============ =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Notes to Financial Statements -- June 30, 1996
1. DESCRIPTION. The Hirtle Callaghan Trust (the "Trust") was incorporated in
Delaware on December 15, 1994. The Trust is currently comprised of five
portfolios: The Value Equity Portfolio ("Value") (commencement date August 25,
1995), The Growth Equity Portfolio ("Growth") (commencement date August 8,
1995), The Small Capitalization Equity Portfolio ("Small Cap") (commencement
date September 5, 1995), The International Equity Portfolio ("International")
(commencement date August 17, 1995), and The Limited Duration Municipal Bond
Portfolio ("Limited Duration") (commencement date October 10, 1995)
(collectively the "Portfolios"). The Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-ended management
series investment company. Each Portfolio operates as a diversified fund.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies followed by the Portfolios:
A. Portfolio Valuation. The net asset value per share of the Portfolios
is determined once on each Business Day as of the close of the New York
Stock Exchange, which is normally 4 p.m. Eastern Time. Each Portfolio's net
asset value per share is calculated by adding the value of all securities
and other assets of the Portfolio, subtracting its liabilities and dividing
the result by the number of its outstanding shares. Those assets that are
traded on an exchange or in the over-the-counter market are valued based
upon market quotations. Short-term obligations with maturities of 60 days
or less are valued at amortized cost, which constitutes fair value as
determined by the Trust's Board of Trustees. Other assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith by the Trust's Trustees. With the approval of the
Board, any of the Portfolios may use a pricing service, bank, or broker-
dealer experienced in such matters to value the Portfolio's securities.
B. Securities Transactions and Investment Income. Securities transactions
are recorded on a trade date basis. Realized gains and losses from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including
amortization of premium and accretion of discount on investments, is
accrued daily, as earned.
C. Dividend and Capital Gain Distributions to Shareholders. The Limited
Duration Portfolio declares dividends from net investment income daily and
distributes them on a monthly basis. The Value, Growth, and Small Cap
Portfolios declare and distribute dividends from net investment income on a
quarterly basis. The International Portfolio declares and distributes
dividends from net investment income on a semi-annual basis. Net realized
capital gains, if any, will be distributed at least annually for each
Portfolio.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Notes to Financial Statements (continued) -- June 30, 1996
D. Federal Income Taxes. It is the policy of each of the Portfolios to
qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. By so qualifying, the Portfolios
will not be subject to Federal income taxes to the extent that they
distribute all of their taxable and tax-exempt income for the fiscal year.
The Portfolios also intend to meet the distribution requirements to avoid
the payment of an excise tax. Accordingly, no provision for taxes is
recorded.
E. Organizational Expenses. Costs incurred in connection with the
organization and initial registration of the Portfolios have been deferred
and are being amortized on a straight-line basis over sixty months,
beginning with each Portfolio's commencement of operations. In the event
any of the initial shares of the Portfolios are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro rata
portion of any unamortized organization expenses in the proportion as the
number of shares being redeemed bears to the number of initial shares
outstanding at the time of redemption.
F. Determination of Net Asset Value and Calculation of Expenses. Expenses
directly attributable to a Portfolio are charged to that Portfolio. Other
expenses are allocated proportionately among the Portfolios in relation to
the net assets of each Portfolio or on another reasonable basis.
G. Foreign Exchange Transactions. The books and records of the Portfolios
are maintained in U.S. dollars, non-U.S. denominated amounts are translated
into U.S. dollars as follows, with the resultant exchange gains and losses
recorded in the Statements of Operations:
(i) market value of investment securities and other assets and
liabilities at the exchange rate on the valuation date,
(ii) purchases and sales of investment securities, income and
expenses at the exchange rate prevailing on the respective date of such
transactions.
H. Use of Estimates. Estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets, and any other parameters used in
determining these estimates could cause results to differ from these
amounts.
I. Other. The Portfolios maintain cash balances with their custodian and
receive a reduction of their custody fees and expenses for the amount of
interest earned on such uninvested cash balances. For financial reporting
purposes, for the period ended June 30, 1996, the amounts recorded on the
Statements of Operations as both custodian fees and reimbursements of
expenses were $12,193, $15,843, $11,078, $42,742, and $3,304 for the Value,
Growth, Small Cap, International and Limited Duration Portfolios,
respectively.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Notes to Financial Statements (continued) -- June 30, 1996
3. INVESTMENT ADVISORY, CONSULTING AND ADMINISTRATIVE CONTRACTS. The Trust
has entered into investment advisory contracts (the "Portfolio Management
Contracts") on behalf of each of the Portfolios with one or more Investment
Managers. Each Investment Manager is responsible for providing a continuous
program of investment management to, and placing all orders for, purchase and
sale of securities and other instruments on behalf of the respective
Portfolios they serve. Each Investment Manager is paid a fee based on average
net assets, calculated and accrued daily and paid monthly at annual rates of
0.30% for the Value and Growth Portfolios, 0.45% for the Small Cap Portfolio,
0.40% for the International Portfolio, and 0.20% for the Limited Duration
Portfolio. For the period ended June 30, 1996, the Investment Managers earned
fees of $146,057, $204,427, $152,465, $195,488, and $30,513, for the Value,
Growth, Small Cap, International and Limited Duration Portfolios,
respectively.
The Investment Managers are as follows:
Value Portfolio -- Cowen Asset Management; Institutional Capital
Corporation.
Growth Portfolio -- Jennison Associates Capital Corp.; Westfield
Capital Management Company, Inc.
Small Cap Portfolio -- Clover Capital Management, Inc.; Frontier
Capital Management Company.
International Portfolio -- Brinson Partners, Inc.
Limited Duration Portfolio -- Morgan Grenfell Capital Management
Incorporated.
Pursuant to a consulting agreement between the Trust and Hirtle Callaghan &
Co., Inc. ("HCCI") (the "HCCI Consulting Agreement"), HCCI is paid a fee
calculated and accrued daily and paid monthly at annual rates of 0.05% of
average net assets per Portfolio. HCCI will make its officers available to
serve as officers and/or Trustees of the Trust, provide office space
sufficient for the Trust's principal office, and monitor the performance of
various investment management organizations, including the Investment
Managers. HCCI does not have investment discretion with respect to Trust
assets but is an adviser to the Trust for purposes of the 1940 Act. For the
period ended June 30, 1996, HCCI earned fees of $24,343, $34,071, $16,940,
$24,436, and $7,628, for the Value, Growth, Small Cap, International and
Limited Duration Portfolios, respectively.
Furman Selz LLC ("Furman Selz") provides the Portfolios with administrative,
fund accounting, dividend and capital gain distribution disbursing and
transfer agency services, pursuant to an administrative agreement (the
"Administrative Agreement"). The services under the Administrative Agreement
are subject to the supervision of the Trust's Board of Trustees and officers
and include day-to-day administration of matters related to the corporate
existence of the Trust, maintenance of its records, preparation of reports,
supervision of the Portfolios' arrangements with their custodian and
assistance in the preparation of the Trust's Registration Statement under
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Notes to Financial Statements (continued) -- June 30, 1996
Federal and state laws. Pursuant to the Administration Agreement, the
Portfolios' pay Furman Selz a monthly fee for its services which, on an
annualized basis, will not exceed 0.10% of the average daily net assets of
each Portfolio and is accrued daily. For the period ended June 30, 1996,
Furman Selz earned administrative fees of $48,686, $68,142, $33,881, $48,872,
and $15,263, for the Value, Growth, Small Cap, International and Limited
Duration Portfolios, respectively. Furman Selz waived fees of $12,172,
$17,035, $8,470, $12,218, and $3,816, for the Value, Growth, Small Cap,
International and Limited Duration Portfolios, respectively.
Pursuant to a Services Agreement between the Trust and Furman Selz, Furman
Selz provides the Portfolios with transfer and dividend and capital gain
disbursing agent services, for which it receives a fee of $15.00 per account
per year, plus certain out-of-pocket expenses. For the period ended June 30,
1996, Furman Selz earned transfer agency fees and expenses of $3,987, $4,036,
$3,869, $4,260, and $2,451, for the Value, Growth, Small Cap, International
and Limited Duration Portfolios, respectively.
Pursuant to a Fund Accounting Agreement between the Trust and Furman Selz,
Furman Selz assists the Portfolios in calculating net asset values and
provides certain other accounting services for each Portfolio for an annual
fee of $30,000 per Portfolio, plus certain out-of-pocket expenses. For the
period ended June 30, 1996, Furman Selz earned fund accounting fees and
expenses of $30,042, $33,348, $32,997, $55,252, and $28,549, for the Value,
Growth, Small Cap, International and Limited Duration Portfolios,
respectively.
The ratio of expenses to average net assets for each Portfolio was as
follows: Value -- 0.63%, Growth -- 0.63%, Small Cap -- 0.78%, International --
0.81%, and Limited Duration -- 0.53%. These ratios reflect a voluntary
expense reimbursement by HCCI, to the Small Cap and Limited Duration
Portfolios in the amounts of $24,082 and $36,701, respectively.
4. SECURITIES TRANSACTIONS.
A. Purchase and sale transactions. The aggregate amount of purchases and
sales of investment securities, other than short-term securities, for the
period ended June 30, 1996, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -----------
<S> <C> <C>
Value................... $105,535,264 $46,179,531
Growth.................. 155,403,898 56,140,462
Small Cap............... 65,813,769 13,826,262
International........... 75,300,673 7,853,324
Limited Duration........ 47,771,758 22,083,536
</TABLE>
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Notes to Financial Statements (continued) -- June 30, 1996
B. Federal Income Tax Basis. Cost for book and Federal income tax
purposes were substantially identical as of June 30, 1996. Gross unrealized
appreciation and depreciation on investment securities at June 30, 1996,
based on cost for Federal income tax purposes is as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION /
APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ --------------
<S> <C> <C> <C>
Value............................. $ 4,868,771 $(1,187,202) $ 3,681,569
Growth............................ 13,225,308 (2,724,124) 10,501,184
Small Cap......................... 7,157,979 (2,905,191) 4,252,788
International..................... 5,391,124 (1,573,443) 3,817,681
Limited Duration.................. 28,080 (114,538) (86,458)
</TABLE>
5. CAPITAL SHARE TRANSACTIONS. The Trust is authorized to issue unlimited
shares of capital stock with a par value of $0.001 each. Transactions in
shares of the Portfolios for the period ended June 30, 1996, were as follows:
<TABLE>
<CAPTION>
LIMITED
VALUE GROWTH SMALL CAP INTERNATIONAL DURATION
----- ------ --------- ------------- --------
<S> <C> <C> <C> <C> <C>
Beginning balance....... 2,000 2,000 2,000 2,000 2,000
--------- ---------- --------- --------- ----------
Shares sold............. 6,895,902 11,354,869 6,172,293 7,134,694 4,319,896
Shares issued in rein-
vestment of dividends
and distributions...... 118,398 26,496 39,271 120,738 70,048
Shares redeemed......... (787,874) (1,453,168) (655,647) (351,310) (1,444,376)
--------- ---------- --------- --------- ----------
Net increase in shares.. 6,226,426 9,928,197 5,555,917 6,904,122 2,945,568
--------- ---------- --------- --------- ----------
Ending balance.......... 6,228,426 9,930,197 5,557,917 6,906,122 2,947,568
========= ========== ========= ========= ==========
</TABLE>
6. DERIVATIVE INSTRUMENTS. The International Portfolio may invest in various
financial instruments including positions in forward currency contracts,
currency swaps and purchased foreign currency options. The Portfolio enters
into such contracts for the purpose of hedging exposure to changes in foreign
currency exchange rates on their portfolio holdings.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Notes to Financial Statements (continued) -- June 30, 1996
A forward foreign exchange contract is a commitment to sell or buy a foreign
currency at a future date at a negotiated exchange rate. The Portfolio bears
the market risk which arises from possible changes in foreign exchange values.
Risks may arise from the potential inability of counterparties to meet the
terms of their contracts and from unanticipated movements in the value of the
foreign currency relative to the U.S. dollar. Forward foreign exchange
contracts may involve market or credit risk in excess of the amounts reflected
on the Portfolio's statement of assets and liabilities.
The gain or loss from the difference between the cost of original contracts
and the amount realized upon closing of such contracts is included in net
realized gain on foreign currency transactions. Fluctuations in the value of
forward contracts held at June 30, 1996, are recorded for financial reporting
purposes as unrealized gains and losses by the Portfolio.
The table below indicates the International Portfolio's outstanding forward
positions at June 30, 1996:
<TABLE>
<CAPTION>
Contract Maturity Value on Value on June Unrealized
Currency Amount Date Origination Date 30, 1996 Appreciation
-------------------- ------------- -------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sell Belgian Francs 47,200,000 08/19/96 $(1,554,078) $(1,510,778) $ 43,300
Buy Canadian Dollars 6,718,431 08/16/96 4,914,067 4,933,949 19,882
Sell French Francs 28,200,000 08/19/96 (5,565,039) (5,487,720) 77,319
Sell German DeutscheMarks 6,300,000 08/16/96 (4,279,494) (4,148,613) 130,881
Buy Italian Lira 8,500,000,000 08/16/96 5,332,210 5,516,245 184,035
Sell Japanese Yen 867,000,000 08/16/96 (8,276,730) (7,955,592) 321,138
Sell Dutch Guilder 7,700,000 08/16/96 (4,673,472) (4,523,673) 149,799
Buy Swedish Krone 9,442,300 08/16/96 1,400,000 1,419,555 19,555
Sell Swiss Francs 1,375,000 08/16/96 (1,140,992) (1,103,149) 37,843
Buy British Pounds 862,813 08/16/96 1,300,000 1,338,136 38,136
----------
$1,021,888
==========
</TABLE>
7. CAPITAL LOSS CARRYOVERS. At June 30, 1996, the Growth and Limited
Duration Portfolios had net capital loss carryovers of $1,527,636 and $48,759,
respectively, which will be available through June 2004 to offset future
capital gains, if any, of the respective Portfolios.
8. SUBSEQUENT EVENTS. On July 1, 1996, Furman Selz announced that it had
entered into an agreement pursuant to which its mutual funds division would be
acquired by BISYS Group, Inc. ("BISYS") subject to certain conditions. It is
anticipated that, following consummation of that transaction, services
currently provided to the Trust by Furman Selz will be provided to the Trust
by BISYS and certain of its affiliates under terms and conditions
substantially the same as those currently in effect with respect to such
services.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Notes to Financial Statements (continued) -- June 30, 1996
As of July 29, 1996, Cowen Asset Management ceased providing portfolio
management services to the Value Portfolio; on that same date, a portfolio
management agreement between the Trust and Hotchkis and Wiley, L.P.
("Hotchkis") became effective. Pursuant to that agreement and subject to the
approval of the shareholders of the Value Portfolio within 120 days of the
effective date, Hotchkis provides portfolio management services for the Value
Portfolio under the same terms and conditions as the prior manager. Merrill
Lynch & Co., Inc. ("ML") has agreed to acquire all of the partnership interest
in Hotchkis, subject to certain conditions. Subject to the approval of the
shareholders of the Trust, it is anticipated that Hotchkis will continue to
serve as a portfolio manager for the Value Portfolio following the acquisition
of Hotchkis by ML.
<PAGE>
THE HIRTLE CALLAGHAN TRUST
Financial Highlights
<TABLE>
<CAPTION>
VALUE GROWTH SMALL CAPITALIZATION INTERNATIONAL LIMITED DURATION
AUGUST 25, 1995 AUGUST 8, 1995 SEPTEMBER 5, 1995 AUGUST 17, 1995 OCTOBER 10, 1995
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
THROUGH THROUGH THROUGH THROUGH THROUGH
JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1996
--------------- -------------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- -------- ------- ------- -------
Income from Investment
Operations:
Net investment income..... 0.22 0.04 0.10 0.16 0.35
Net realized and
unrealized gain on
investments and foreign
currency transactions.... 1.51 1.13 1.07 1.35 0.01
------- -------- ------- ------- -------
Total from investment
operations............... 1.73 1.17 1.17 1.51 0.36
------- -------- ------- ------- -------
Less Distributions:
From net investment
income................... (0.22) (0.04) (0.10) (0.24) (0.36)
From realized gains....... (0.03) 0.00 0.00 (0.01) 0.00
------- -------- ------- ------- -------
Total distributions....... (0.25) (0.04) (0.10) (0.25) (0.36)
------- -------- ------- ------- -------
Net Asset Value, End of
Period.................... $ 11.48 $ 11.13 $ 11.07 $ 11.26 $ 10.00
======= ======== ======= ======= =======
Total Return............... 17.28% 11.69% 11.82% 15.15% 3.60%
Net Assets End of Period
(in thousands)............ $71,503 $110,537 $61,503 $77,732 $29,485
Ratios to Average Net
Assets of:
Net investment income*.... 2.55% 0.46% 1.33% 1.75% 4.78%
Expenses net of
waivers/reimbursements*.. 0.63% 0.63% 0.78% 0.81% 0.53%
Expenses before
waivers/reimbursements*.. 0.68% 0.68% 0.90% 0.92% 0.81%
Portfolio Turnover Rate.... 92% 80% 38% 15% 116%
</TABLE>
- ----------------
* Annualized.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the Hirtle Callaghan Trust:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Value Equity, Growth Equity,
Small Capitalization, International Equity and Limited Duration Municipal Bond
Portfolios of the Hirtle Callaghan Trust (the "Trust") as of June 30, 1996,
and the related statements of operations, changes in net assets and financial
highlights for each of the respective periods then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1996, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios comprising the Hirtle Callaghan Trust as of
June 30, 1996, and the results of their operations, the changes in their net
assets and their financial highlights for each of the respective periods then
ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
August 23, 1996
<PAGE>
APPENDIX A
Ratings for Corporate Debt Securities
<TABLE>
<CAPTION>
Moody's Investors Service, Inc. Standard & Poor's Corporation
<S> <C>
Aaa AAA
Judged to be of the best quality; smallest This is the highest rating assigned by S&P to a
degree of investment risk debt obligation and indicates an extremely strong
capacity to pay principal and interest.
Aa AA
Judged to be of high quality by all Also qualify as high-quality debt obligations.
standards; together with Aaa group, Capacity to pay principal and interest is very
comprise what are generally known as strong
"high grade bonds"
A A
Possess many favorable investment Strong capacity to pay principal and interest,
attributes and are to be considered as although securities in this category are somewhat
upper medium grade obligations more susceptible to the adverse effects of changes
in circumstances and economic conditions.
Baa BBB
Medium grade obligations, i.e. Bonds rated BBB are regarded as having an adequate
they are neither highly protected nor capacity to pay principal and interest. Although
poorly secured. Interest payments they normally exhibit adequate protection
and principal security appear parameters, adverse economic conditions or
adequate for present but certain changing circumstances are more likely to lead to
protective elements may be lacking or a weakened capacity to pay principal and interest
unreliable over time. Lacking in for bonds in this category than for bonds in the A
outstanding investment characteristics and category.
have speculative characteristics as well
Ba BB
Judged to have speculative elements: their Bonds rated BB are regarded, on balance, as
future cannot be considered as well predominantly speculative with respect to the
assured. Often the protection of issuer's capacity to pay interest and repay
interest and principal payments principal in accordance with the terms of the
may every moderate and thereby not well obligation. While such bonds will likely have some
safeguarded during both good and bad quality and protective characteristics, these are
times over the future. Uncertainty outweighed by large uncertainties or major risk
of position characterize bonds exposures to adverse conditions.
in this class
</TABLE>
<PAGE>
RATINGS FOR MUNICIPAL SECURITIES
The following summarizes the two highest ratings used by Standard & Poor's
Corporation for short term notes:
SP-1 -- Loans bearing this designation evidence a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a (+) designation.
SP-2 -- Loans bearing this designation evidence a satisfactory capacity to
pay principal and interest.
The following summarizes the two highest ratings used by Moody's Investors
Service, Inc. for short term notes:
MIG-1/VIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the
market for refinancing, or both.
MIG-1/VIG-2 -- Obligations bearing these designations are of the high
quality, with margins of protection ample although not so large as in the
preceding group.
The following summarizes the two highest ratings used by Standard & Poor's
Corporation for commercial paper:
Commercial Paper rated A-1 by Standard & Poor's Corporation indicated that
the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is strong, but the relative degree of safety is
not as high as for issues designated A-1.
The following summarizes the two highest ratings used by Moody's Investors
Service, Inc. for commercial paper:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many
of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is
maintained.
<PAGE>
Part C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Included in Part A of the Registration Statement:
Expense Information
Condensed Financial Information
(b) Included in Part B of the Registration Statement:
Audited Balance Sheet
Financial Statement for the period ended June 30, 1996
(c) Auditors' Report
[To be supplied by amendment.]
(b) Exhibits:
1 (a) Certificate of Trust filed on December 15, 1994 with the
Secretary of State of Delaware
(Incorporated herein by reference to Items (b)(i) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on December 19, 1994.)
1 (b) Amended and Restated Declaration and Agreement of Trust (as
amended November 9, 1995) FILED HEREWITH
(2) Bylaws of the Trust (as amended November 9, 1995)
FILED HEREWITH
(3) /[voting trust agreement]/
Not Applicable.
(4) /[instruments defining right of securityholders]/
Not Applicable.
(5) (a) Portfolio Management Contracts between the Trust and each
Investment Manager for the several Portfolios of the Trust.
(Incorporated herein by reference to Items (b)(5) contained in
Registrant's Registration Statement (No. 33-87636) as filed
with the Securities and Exchange Commission on July 24, 1995.)
(b) Consulting Agreement between the Trust and Hirtle, Callaghan
& Co., Inc.
(Incorporated herein by reference to Items (b)(5) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on July 24, 1995.)
(c)Portfolio Management Contracts between the Trust and Hotchkis
and Wiley. FILED HEREWITH
<PAGE>
(6) (a) Distribution Agreement between Furman, Selz LLC
(formerly, Furman Selz, Incorporated) and the Trust.
(Incorporated herein by reference to Items (b)(6) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on July 24, 1995.)
(b) Distribution Agreement between BISYS Fund Services [to
be filed by amendment].
(7) [bonus, pension and profit-sharing plans]
Not Applicable.
(8) Custodian Agreement between Bankers Trust Company and the Trust.
(Incorporated herein by reference to Items (b)(8) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on July 24, 1995.)
(9) (a)(i) Administration Agreement between the Trust and Furman,
Selz LLC (formerly, Furman Selz, Incorporated).
(Incorporated herein by reference to Items (b)(9) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on July 24, 1995.)
(a)(ii) Transfer Agency and Service Agreement between the Trust
and Furman, Selz LLC (formerly, Furman Selz, Incorporated)
(Incorporated herein by reference to Items (b)(9) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on July 24, 1995.)
(a)(iii) Accounting Services Agreement between Furman Selz LLC
(formerly, Furman Selz, Incorporated) and the Trust.
(Incorporated herein by reference to Items (b)(5) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on July 24, 1995.)
(9)(b) Registrant's Agreements with BISYS Fund Services
(b)(i) Adminstration Agreement
(b)(ii) Transfer Agency Agreement
(b)(iii) Fund Accounting Agreement
(10) Opinion of Stradley, Ronon, Stevens & Young.
(Incorporated herein by reference to Items (b)(5) contained in
Registrant's Registration Statement (No. 33-87636) as filed with
the Securities and Exchange Commission on July 24, 1995.)
(11) Consent of Accountants.
[To be filed by amendment.]
(12) [omitted financial statements] Not Applicable.
(13) [agreements regarding initial capital]
Not Applicable.
<PAGE>
(14) [model retirement plans]
Not Applicable.
(15) [Rule 12b-1 plan]
Not Applicable.
(16) [computation for Item 22 performance]
Not Applicable.
(17) Financial Data Schedule [See Item 27, below]
(18) [plan pursuant to rule 18f-3]
Not Applicable.
(24) Powers of Attorney
(Incorporated herein by reference to Item 24 contained in
Post-effective Amendment No. 2, filed with the Securities
and Exchange Commission on February 9, 1996.)
(27) Financial Data Schedules (Rule 483 under the Securities Act of
1933) FILED HEREWITH.
Item 25. Persons Controlled by or Under Common Control with Registrant.
--------------------------------------------------------------
None.
Item 26. Number of Holders of Securities.
--------------------------------
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
as of ______, 1996
-------------- -----------------------------------------
<S> <C> <C>
Units of beneficial
interest, par value $.001 The Value Equity Portfolio To be filed by amendment.
The Growth Equity Portfolio To be filed by amendment.
The Small Capitalization Equity
Portfolio To be filed by amendment.
The International Equity Portfolio To be filed by amendment.
The Limited Duration Municipal
Bond Portfolio To be filed by amendment.
</TABLE>
Item 27. Indemnification.
----------------
Reference is made to Article VII of the Trust's Amended and Restated
Agreement and Declaration of Trust and to Article VI of the Trust's By-Laws,
which are incorporated herein by reference. Pursuant to Rule 484 under the
Securities Act of 1933 (the "Act"), as amended, the Trust furnishes the
following undertaking:
<PAGE>
Insofar as indemnification for liabilities arising under the Act may be
permitted to trustees, officers and controlling persons of the Trust pursuant to
the foregoing provisions, or otherwise, the Trust has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Trust of expenses incurred or paid by a trustee, officer
or controlling person of the Trust in the successful defense of any action, suit
or proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Trust will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisers.
------------------------------------------------------
Information relating to the business and other connections of each of the
Trust's Investment Managers and each director, officer or partner of such
managers are hereby incorporated by reference from each such manager's Form ADV,
as filed with the Securities and Exchange Commission, as follows:
<TABLE>
<CAPTION>
Investment Manager SEC File No. 801- ADV Item No.
- ------------------------------------------------------------------------------
<S> <C> <C>
Brinson Partners, Inc. 34910 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Frontier Capital Management Co. 15724 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Jennison Associates Capital Corp. 5608 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Institutional Capital Corporation 40779 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Westfield Capital Management, Inc. 34350 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Clover Capital Management Inc. 27041 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Morgan Grenfell Capital Management Inc. 27291 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Hotchkis and Wiley [to be filed by amendment]
Merrill Lynch Asset Management LP [to be filed by amendment]
</TABLE>
Hirtle, Callaghan & Co., Inc. ("HCCI") has entered into a Consulting
Agreement with the Trust. Although HCCI is a registered investment adviser,
HCCI does not have investment discretion with regard to the assets of the Trust.
Information regarding the business and other connections of HCCI's officers and
directors is incorporated by reference to Part I (Items 8, 10 and 12) and Part
II (Items 6 - 9 and 13) of HCCI's Form ADV, File No. 801-32688 which has been
filed with the Securities and Exchange Commission.
<PAGE>
Item 29. Principal Underwriters.
-----------------------
(a) BISYS Fund Services, Inc. ("BISYS") serves as the principal
underwriter for the Trust. BISYS also serves as a principal underwriter for the
the following investment companies [to be filed by amendment]
(b) The following table sets forth the indicated information with
respect to each director and officer of BISYS. Unless otherwise noted, the
business address for each such person is 3435 Stelzer Road, Columbus, Ohio
43219:
<TABLE>
<CAPTION>
Name Positions and Offices with Positions with Trust
- ---- Underwriter --------------------
-----------
<S> <C> <C>
[To be supplied by amendment.]
</TABLE>
(c) Not Applicable.
Item 30. Location of Accounts and Records.
---------------------------------
(a) Bankers Trust Company, 130 Liberty Street, One Bankers Trust Plaza,
New York, New York 10006 (records relating to its function as custodian.)
(b) Furman, Selz LLC (Mutual Funds Group) or its successor service
provider BISYS Fund Services, 230 Park Avenue, New York, New York 10161
(records relating to its function as administrator, accounting agent,
transfer and dividend disbursing agent and distributor.)
(c) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219.
(d) Records relating to the activities of each of the investment managers
on behalf of the indicated portfolio are maintained as follows:
<PAGE>
<TABLE>
<CAPTION>
Investment Manager Location of Accounts and
------------------ Records
------------------------
<S> <C>
The International Equity Portfolio
- ----------------------------------
Brinson Partners, Inc. 209 South LaSalle Street
Chicago, IL 60604-1295
The Small Capitalization Equity Portfolio
- ------------------------------------------
Clover Capital Management, Inc. 11 Tobey Village Office Park
Pittsford, NY 14534
Frontier Capital Management 99 Summer Street
Company Boston, MA 02110
The Value Equity Portfolio
- --------------------------
Hotchkis and Wiley 800 West Sixth Street
Los Angeles, California 90017
Institutional Capital 225 West Wacker
Corporation Suite 2400
Chicago, IL 60606
The Growth Equity Portfolio:
- ---------------------------
Jennison Associates Capital Corp. 466 Lexington Ave.
New York, NY 10017
Westfield Capital Management One Financial Center
Company, Inc. Boston, MA 02111
</TABLE>
<TABLE>
<S> <C>
The Limited Duration Municipal Bond Portfolio:
- ---------------------------------------------
Morgan Grenfell Capital 885 Third Avenue
Management Incorporated New York, NY 10022-4802
and 1435 Walnut Street
(4th Fl.) Philadelphia, PA
19102
</TABLE>
Item 31. Management Services.
--------------------
None.
Item 32. Undertakings.
-------------
Not Applicable.
--------------
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 3 to be signed on its behalf by the undersigned, thereto duly
authorized in the City of Wayne, and the Commonwealth of Pennsylvania on the
October 10, 1996.
THE HIRTLE CALLAGHAN TRUST
BY: /s/ Donald E. Callaghan
---------------------------
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<S> <C> <C>
/s/ Treasurer and Vice-President October 10, 1996
------------------------- (Principal Financial Officer)
Robert Zion
/s/ Trustee October 10, 1996
-------------------------
Donald E. Callaghan
/s/ * Trustee October 10, 1996
-------------------------
Richard W. Wortham, III
/s/ * Trustee October 10, 1996
-------------------------
Ross H. Goodman
/s/ * Trustee October 10, 1996
-------------------------
Jarrett Burt Kling
/s/ * Trustee October 10, 1996
-------------------------
David M. Spungen
/s/ * Trustee October 10, 1996
-------------------------
Jonathan J. Hirtle
</TABLE>
* signed by Donald E. Callaghan, pursuant to power of attorney (included as
Exhibit 24 to Post-Effective Amendment No. 2, filed with the Securities and
Exchange Commission on February 8, 1996)
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:
<PAGE>
(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
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 2
<PAGE>
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
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 3
<PAGE>
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, the 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
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 4
<PAGE>
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)
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 by 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.
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 5
<PAGE>
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 SEC 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.
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 6
<PAGE>
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.
ATTEST: Hotchkis and Wiley
/s/ By: /s/ Hotchkis and Wiley
Chief Financial Officer
ATTEST: The Hirtle Callaghan Trust
/s/ By: /s/ The Hirtle Callaghan Trust
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 7
<PAGE>
EXHIBIT B
FORM OF AGREEMENT (POST ACQUISITION)
THE FORM OF AGREEMENT BELOW IS MARKED TO SHOW CHANGES FROM THE HOTCHKIS
AGREEMENT.
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this __________day of __________ 1996, between HOTCHKIS and
WILEY, ("Portfolio Manager"), a division of Merrill Lynch Asset Management,
L.P. 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.
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 8
<PAGE>
(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.
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 9
<PAGE>
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.
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 10
<PAGE>
(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, the 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
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 11
<PAGE>
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
agreement between Portfolio Manager's predecessor limited partnership and the
Trust 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 continuefor two years following such effective date, 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 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 by HCCI. Portfolio Manager agrees that it will not use any Mark without
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 12
<PAGE>
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) 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
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 13
<PAGE>
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.
Portfolio Management Agreement -- Hotchkis
The Value Equity Portfolio
7/22/96
Page 14
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<PAGE>
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<NAME> HIRTLE CALLAGHAN VALUE EQUITY PORTFOLIO
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<PAGE>
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<PAGE>
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<PAGE>
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