<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
The Hirtle Callaghan Trust
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
X No fee required
Fee computed on a table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
THE HIRTLE CALLAGHAN TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF
THE GROWTH EQUITY PORTFOLIO AND THE VALUE EQUITY PORTFOLIO
TO BE HELD ON JANUARY 12, 1998
TO THE SHAREHOLDERS:
A Special Meeting of shareholders of The Growth Equity Portfolio ("Growth
Portfolio") and shareholders of The Value Equity Portfolio ("Value Portfolio")
of The Hirtle Callaghan Trust (the "Trust") will be held on January 12, 1998,
at the Trust's principal office, located at 575 East Swedesford Road, Wayne,
PA 19087-1613, at 10:00 a.m.
At the Special Meeting, shareholders of the Growth Portfolio will be asked:
(1) To approve the engagement of Goldman Sachs Asset Management ("GSAM")
to provide portfolio management services to the Growth Portfolio pursuant
to a portfolio management agreement between the Trust and GSAM ("GSAM
Agreement"); and
(2) To approve an amendment of the GSAM Agreement pursuant to which GSAM
would be compensated on a performance fee basis.
At the Special Meeting, shareholders of the Value Portfolio will be asked:
(3) To approve an amendment to the Portfolio Management Agreement between
the Trust and Institutional Capital Corporation ("ICAP") relating to The
Value Equity Portfolio, which amendment will increase the fee to which ICAP
is entitled for its services to The Value Equity Portfolio.
Shareholders of the Growth Portfolio and the Value Portfolio will also
transact such further business as may properly come before the meeting or any
adjournment thereof.
Shareholders of record of the Growth Portfolio or of the Value Portfolio at
the close of business on November 21, 1997 are entitled to notice of the
Special Meeting and any adjournments thereof. If you attend the meeting, you
may vote your shares in person. If you do not expect to attend the meeting,
please fill in, date, sign and return the proxy in the enclosed envelope which
requires no postage if mailed in the United States.
It is important that you return your signed proxy promptly so that a quorum
may be assured.
BY ORDER OF THE BOARD OF TRUSTEES OF THE HIRTLE CALLAGHAN TRUST
<PAGE>
THE HIRTLE CALLAGHAN TRUST
575 EAST SWEDESFORD ROAD.
WAYNE, PA 19087-1613
PROXY STATEMENT
The enclosed form(s) of Proxy is solicited by the Board of Trustees (the
"Board") of The Hirtle Callaghan Trust (the "Trust"), with respect to The
Growth Equity Portfolio (the "Growth Portfolio") and The Value Equity
Portfolio ("Value Portfolio"). Proxies so solicited are intended for use at a
special meeting of shareholders of the Growth Portfolio and the Value
Portfolio (collectively, the "Portfolios") or any adjournment of that meeting
(the "Special Meeting"), to be held on January 12, 1998, at 575 East
Swedesford Road, Wayne, PA 19087-1613. The purpose of the Special Meeting is
to consider the approval of certain portfolio management arrangements, as set
forth in the Notice of Meeting accompanying this proxy statement and more
fully described below ("Proposals"). It is anticipated that this Proxy
Statement and form of proxy will first be mailed to shareholders on or about
December 12, 1997.
Only persons who were shareholders of record of at least one of the
Portfolios as of November 21, 1997 ("Record Date") are entitled to notice of
the Special Meeting.
Persons who were shareholders of record of the Growth Portfolio on the
Record Date are entitled to vote at the Special Meeting with regard to
Proposals 1 and 2, each relating to the investment advisory arrangements with
Goldman Sachs Asset Management ("GSAM") relating to the Growth Portfolio. On
the Record Date, the Growth Portfolio had outstanding 11,608,540.215 shares,
each share being entitled to one vote. The presence of the holders of 40% of
the outstanding shares of the Growth Portfolio on the Record Date, represented
in person or by proxy, shall constitute a quorum for the purpose of conducting
the business at the Special Meeting with respect to the Growth Portfolio.
Persons and groups known by management to own beneficially 5% or more of the
shares of the Growth Portfolio are listed in this Proxy Statement under the
heading "Information about the Trust."
Persons who were shareholders of record of the Value Portfolio on the Record
date are entitled to vote at the Special Meeting with respect to Proposal 3,
relating to investment advisory arrangements with Institutional Capital
Corporation ("ICAP") relating to the Value Portfolio. On the Record Date, the
Value Portfolio had outstanding 8,903,576.289 shares, each share being
entitled to one vote. The presence of the holders of 40% of the outstanding
shares of the Value Portfolio on the Record Date, represented in person or by
proxy, shall constitute a quorum for the purpose of conducting the business at
the Special Meeting with respect to the Value Portfolio. Persons and groups
known by management to own beneficially 5% or more of the shares of the Value
Portfolio are listed in this Proxy Statement under the heading "Information
about the Trust."
The table below summarizes the several proposals to be presented at the
Meeting and the Portfolio to which each relates.
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS ENTITLED TO VOTE
-------- -----------------------------
<S> <C>
Proposal No. 1:
Proposal to Approve the GSAM engagement Growth Portfolio shareholders
Proposal No. 2:
Proposal to Approve the Performance Fee
Amendment Growth Portfolio shareholders
Proposal No. 3:
Proposal to Approve an Increase in the
Advisory Fee Paid to ICAP Value Portfolio shareholders
</TABLE>
If the accompanying form of Proxy is executed properly and returned, shares
represented by such Proxy will be voted at the Special Meeting in accordance
with the instructions on the form of Proxy. If no instructions
1
<PAGE>
are specified, shares will be voted FOR the approval of the Proposals. If the
votes required to approve Proposals are not received, the persons named as
proxies on the accompanying form of proxy may propose one or more adjournments
of the Special Meeting to permit further solicitation of proxies. When voting
on any proposed adjournment, the persons named as proxies on the enclosed form
of proxy will vote in favor of the proposed adjournment unless otherwise
directed. A shareholder can revoke the proxy prior to its use by appearing at
the Special Meeting and voting in person, by giving written notice of such
revocation to the Trust or by returning a subsequently dated form of proxy to
the Trust.
Copies of the Trust's most recent annual report, dated June 30, 1997
including financial statements, have previously been delivered to shareholders
of the Trust. Shareholders of the Trust may obtain without charge additional
copies of such reports by writing to the Trust at 575 East Swedesford Road,
Wayne, PA 19087-1613.
INTRODUCTION
SUMMARY OF PROPOSALS RELATING TO THE GROWTH PORTFOLIO. Since the Growth
Portfolio commenced operations on August 8, 1995, until September 29, 1997,
Westfield Capital Management (hereinafter, "Westfield" or the "Prior Manager")
served, pursuant to the terms of a separate agreement ("Prior Agreement"), as
one of two investment advisory organizations retained by the Trust to provide
portfolio management services for the Growth Portfolio. As more fully
described below, the Board determined that it would be in the best interests
of the Growth Portfolio to replace the Prior Manager with another investment
management organization.
Accordingly, at a meeting of the Board held on September 12, 1997, the Board
approved the termination of the Prior Agreement and the engagement of GSAM, a
separate operating division of Goldman, Sachs & Co., ("Goldman Sachs") under
an agreement between GSAM and the Trust ("GSAM Agreement"). Under the
Investment Company Act of 1940 ("Investment Company Act"), if shareholder
approval of the GSAM Agreement is not obtained within 120 days of the date on
which the GSAM Agreement became effective, the GSAM Agreement will terminate.
The GSAM Agreement became effective, and the Prior Agreement terminated, on
September 29, 1997. Under the GSAM Agreement, GSAM is compensated for
providing portfolio management services to the Growth Portfolio at the same
rate at which the Prior Manager was compensated for its services; all other
provisions of the GSAM Agreement are substantially the same as those of the
Prior Agreement. A copy of the GSAM Agreement appears as Exhibit A to this
Proxy Statement. The GSAM Agreement is discussed below, as Proposal I.
The Board has also considered and approved an amendment ("Performance Fee
Amendment") to the GSAM Agreement that would permit GSAM to be compensated on
a performance fee basis. The Performance Fee Amendment in the form described
in this Proxy Statement was ultimately approved by the Board, subject to the
approval of the Growth Portfolio's shareholders. If the Performance Fee
Amendment is implemented, it could, under certain circumstances, increase or
decrease the fee paid to GSAM, when compared to the current fixed fee
arrangement. A copy of the form of Performance Fee Amendment appears as
Exhibit B to this Proxy Statement. The Performance Fee Amendment is discussed
below, as Proposal II.
If both the GSAM Agreement and the Performance Fee Amendment are approved by
the shareholders of the Growth Portfolio, the Performance Fee Amendment will
become effective on the first day of the month following the date of the
shareholder approval and, unless sooner terminated, the GSAM Agreement will
remain in force, as amended, until September 29, 1999. The GSAM Agreement, as
amended, will continue in effect from year to year thereafter in accordance
with its terms for so long as it is approved annually by the Trust's Board of
Trustees. If the GSAM Agreement (Proposal I) is approved but the Performance
Fee Amendment (Proposal II) is not approved, the GSAM Agreement will continue
in effect and GSAM will be entitled to compensation for its services at the
rate currently specified in that agreement. If Proposal I is not approved, the
GSAM Agreement will terminate. Finally, shareholders should be aware that
Proposal II is contingent on the approval of Proposal I. Thus, if Proposal II
is approved but Proposal I is defeated, the GSAM Agreement will terminate, as
noted above. In the event of
2
<PAGE>
termination of the GSAM Agreement, the Board will meet to determine what
action should be taken with respect to the management of that portion of the
Growth Portfolio's assets that are currently managed by GSAM.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS I AND II.
SUMMARY OF PROPOSALS RELATING TO THE VALUE PORTFOLIO. Since the commencement
of its operations on August 25, 1995, Institutional Capital Corporation
("ICAP") has provided portfolio management services for at least one-half of
the total assets of the Value Portfolio. Under the terms of its portfolio
management agreement with the Value Portfolio, ICAP is currently entitled to
receive as compensation for its services a fee calculated at the annual rate
of .30% of the average net assets of that portion of the Value Portfolio
("ICAP Account") from time to time allocated to ICAP by the Trust's Board.
ICAP has requested, and the Board has approved, subject to the approval of the
shareholders of the Value Portfolio, an increase of .05% (or 5 basis points)
in the rate at which the advisory fee payable to ICAP is calculated. Under the
Investment Company Act, such fee increase may not take effect unless and until
it is approved by a majority of the outstanding shares of the Value Portfolio.
A copy of the proposed amendment to the ICAP Agreement appears as Exhibit C to
this Proxy Statement. The proposal to increase ICAP's fee is discussed below,
as Proposal III.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL III
PROPOSAL I: APPROVAL OF THE GSAM AGREEMENT
SUMMARY AND BACKGROUND. The investment objective of the Growth Portfolio is
to provide capital appreciation, with income as a secondary consideration. The
Growth Portfolio seeks 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
Growth Portfolio, the Growth Portfolio's Investment Managers 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 ("S&P Index"), a widely
followed, unmanaged index of common stocks. When it commenced operations in
August, 1995, the Growth Portfolio was served by two separate investment
management organizations: Westfield and Jennison Associates Capital Corp.
Although investment managers are each required to adhere to the Growth
Portfolio's investment objective, policies and restrictions, it is the
intention of the Board that each will do so in the context of its own
management style. As part of its overall responsibility to supervise these
managers, the Board attempts to ensure that the respective portfolio
management styles are complementary. Hirtle Callaghan & Co., Inc. ("Hirtle
Callaghan") is responsible for monitoring the overall investment performance
of each of the Trust's several Portfolios, including the Growth Portfolio, as
well as the performance of those investment advisory organizations retained by
the Trust to provide portfolio management services to the portfolios.
For much of the period since the Growth Portfolio's inception, that portion
of the Growth Portfolio allocated to Westfield began to underperform the S&P
Index. Westfield's performance also lagged the performance of the Russell 1000
Growth Stock Index (the "Russell 1000 Growth Index"), an unmanaged index of
common stocks that includes a broader range of common stock issues than the
S&P Index. Although the overall benchmark for the Growth Portfolio's
performance is the S&P Index, the Growth Portfolio's stated investment policy
is to invest primarily in equity securities with long-term earnings growth
potential and relatively higher price earning ratios than the average range
for stocks included in the S&P Index. This, in Hirtle Callaghan's view, means
that the performance of the Growth Portfolio, or of its individual managers,
relative to the Russell 1000 Growth Index is an appropriate factor to consider
in assessing whether the Growth Portfolio is positioned to capture the asset
class in which it is designed to focus. After conducting an extensive manager
search, Hirtle Callaghan recommended to the Board that GSAM be retained to
replace Westfield. This recommendation was approved at a meeting of the Board
held on September 12, 1997. At that meeting, the Board, including a majority
of those
3
<PAGE>
Trustees ("Independent Trustees") who are not "interested persons" of the
Trust within the meaning of the Investment Company Act, also approved the GSAM
Agreement.
FACTORS CONSIDERED BY THE BOARD OF TRUSTEES. During the course of its
deliberations, the Board considered the recommendations and investment
analysis of Hirtle Callaghan, as summarized above. The Board also discussed
information provided to it relating to the management style and past
performance record of GSAM, as well as information relating to the nature and
quality of the services to be provided by GSAM, the background and experience
of those individuals who would be responsible for making day-to-day investment
decisions with respect to assets of the Growth Portfolio and fees paid to GSAM
by other registered investment companies to which GSAM provides investment
advisory services. The Board also considered the fact that the terms and
conditions set forth in the GSAM Agreement are substantially the same as those
contained in the Prior Agreement and, in particular, that the advisory fee to
be paid to GSAM was the same as the advisory fee paid by the Growth Portfolio
to Westfield. The Trustees also discussed the fact that Westfield had entered
into an agreement pursuant to which the firm would be acquired by a subsidiary
of Private Bancorp, Inc., a bank holding company whose shares are publicly
traded.
The Board was also advised by counsel regarding its responsibilities under
Section 15(c) of the Investment Company Act and the requirements of Section
15(a) of that Act. In particular, it was noted that Section 15 of the
Investment Company Act normally would prohibit any person from serving as an
investment adviser to a registered investment company unless the written
contract has been approved by the shareholders of that company. Counsel also
discussed the exception to this requirement contained in rule 15a-4 under the
Investment Company Act. Under that provision, an adviser may provide advisory
services to an investment company pursuant to a written contract approved by
the investment company's board of directors (including those directors who are
not "interested persons" of the company or the adviser) in the event that a
prior advisory contract is terminated by action of such company's board.
However, such contract must be approved within 120 days of its effective date
by the shareholders of the affected company.
COMPARISON OF THE GSAM AGREEMENT AND PRIOR AGREEMENTS. The terms and
conditions set forth in the GSAM Agreement are, in all material respects, the
same as those contained in the Prior Agreement except for the description of
the portfolio manager, the effective and termination dates, and the
modification of certain indemnification provisions included in the GSAM
Agreement. Both agreements require the portfolio manager, subject to the
overall supervision of the Board, to provide a continuous investment program
for the assets of the Growth Portfolio, or that portion of such assets as may
be, from time to time, allocated to it. Under both agreements, the named
portfolio manager is responsible, among other things, for the provision of
investment research, management of all investments and the selection of
brokers and dealers through which securities transactions are executed, as
well as the maintenance of certain records required under relevant provisions
of the Investment Company Act. The agreements each also provide that the
portfolio manager will not be liable to the Trust for any error of judgment or
mistake of law on the part of the portfolio manager for any loss sustained by
the Trust in connection with the purchase or sale of any instrument on behalf
of the Growth Portfolio, 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 the portfolio manager. Each of the agreements also
provides for its termination, at any time and without penalty, either by the
Trust or by the portfolio manager, in each case upon sixty days' written
notice, and its termination in the event of an "assignment" as defined in the
Investment Company Act.
The GSAM Agreement was signed on September 18, 1997 and became effective on
September 29, 1997, the date on which the Prior Agreement was terminated, in
accord with 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 GSAM Agreement is approved by the shareholders of the Growth
Portfolio within 120 days of such effective date. Thereafter, the GSAM
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 Growth Portfolio's
outstanding voting securities; and (ii) the affirmative vote, cast in person
at a meeting called for the purpose of voting on such continuance, of a
majority of the Trust's Independent Trustees. Section 5 of the
4
<PAGE>
GSAM Agreement provides that the indemnification obligation of the portfolio
manager with respect to information provided to the Trust by GSAM 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 ("SEC") and unless the
portfolio manager is notified in writing of any claim for indemnification
within specified periods. That section also provides that the Trust will
indemnify the Portfolio Manager with respect to information included in
filings made with the SEC by the Trust, other than information relating to,
and provided in writing by, the Portfolio Manager.
During the fiscal year ended June 30, 1997, Westfield received from the
Growth Portfolio investment advisory fees of $179,941 in accordance with the
Prior Agreement. The Prior Agreement was last approved by the Board (including
the Independent Trustees) at a meeting of the Board held on May 6, 1997, and
by the Trust's initial shareholder on July 21, 1995. The Prior Agreement also
provided for the indemnification of the Trust under substantially the same
conditions set forth in the GSAM Agreement, but did not condition this
obligation on the notice and review conditions included in the GSAM Agreement.
In addition, the Prior Agreement did not include the limited indemnification
of Westfield by the Trust that is included in the GSAM Agreement.
INFORMATION ABOUT GSAM. As noted above, GSAM, the principal offices of which
are located at One New York Plaza, New York, New York 10004, is a separate
operating division of Goldman Sachs. As of August 31, 1997, GSAM, together
with its investment advisory affiliates, managed total assets in excess of
$124.1 billion. Robert C. Jones, Victor Pinter and Kent Clark will be
responsible for making day-to-day investment decisions for that portion of the
Growth Portfolio allocated to GSAM. Mr. Jones, a chartered financial analyst
and Managing Director of GSAM has been an officer and investment professional
with GSAM since 1989. Mr. Pinter, Vice President joined GSAM in 1990. Mr.
Clarke, a Vice President of GSAM, joined the firm in 1992; prior to 1992, he
was studying for a Ph.D. in finance at the University of Chicago.
The following table sets forth certain information about other registered
investment companies, the investment objectives and policies of which are
similar to those of the Growth Portfolio, for which GSAM provides portfolio
management services.
<TABLE>
<CAPTION>
ASSETS AT
FUND ADVISORY FEE* OCTOBER 31, 1997
---- ------------------ ----------------
(AS A % OF ASSETS) (MILLIONS)
<S> <C> <C>
Goldman Sachs CORE US Equity Fund...... .75% $153.2
Goldman Sachs Growth and Income Fund... .70% $1,300
Goldman Sachs Mid-Cap Equity Fund...... .75% $247.6
Goldman Sachs CORE Large Cap Growth
Fund.................................. .75% $ 43.4
</TABLE>
- --------
* Figures shown do not take into account fee waivers, if any, for the
companies listed.
Goldman Sachs is a worldwide investment banking firm and has its principal
business address at 85 Broad Street, New York, New York 10004. The principal
executive officers of Goldman Sachs are Jon S. Corzine and Henry M. Paulson.
The principal occupation of Messrs. Corzine and Paulson is the management of
Goldman Sachs. The general partners of Goldman Sachs are The Goldman Sachs
Group, L.P. (a Delaware Limited Partnership) ("GSGLP") and The Goldman, Sachs
& Co. L.L.C. (a Delaware limited liability company) ("GSCLLC"). The principal
business address of the executive officers and general partners is 85 Broad
Street, New York, New York 10004. The Goldman Sachs Corporation ("GSC") is the
parent company of both GSGLP and GSCLLC. GSGLP is also a parent of GSCLLC. GSC
is the sole general partner of GSGLP.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL I. Approval of the GSAM Agreement
requires the approval of a "majority of the outstanding voting securities" of
the Growth Portfolio. Under the Investment Company Act, this term means the
lesser of (i) 67% of the outstanding shares represented at a meeting at which
more than 50% of the outstanding shares are present in person or represented
by proxy, or (ii) more than 50% of the Growth Portfolio's outstanding voting
securities. If the GSAM Agreement is not approved by the Growth Portfolio's
shareholders at the Special Meeting (including any adjournments thereof), that
agreement will terminate.
5
<PAGE>
PROPOSAL II: APPROVAL OF THE PERFORMANCE FEE AMENDMENT
SUMMARY AND BACKGROUND. During the course of the Board's deliberations
regarding the GSAM Agreement, the Board was apprised of GSAM's concern
regarding the level of the advisory fee paid to the Prior Manager. Following a
review of the existing fee structure under the GSAM and Prior Agreements, and
based on the recommendation of Hirtle Callaghan, the Trustees approved a new
fee structure, known as a "fulcrum fee" arrangement. If Proposal II is
approved by shareholders of the Growth Portfolio, the fee schedule currently
applicable under the GSAM Agreement will be replaced with the fee schedule set
forth in Exhibit B to this proxy statement. Other than the fee schedule, all
other provisions of the GSAM Agreement would remain as described in Proposal
I. The Trustees and Hirtle Callaghan believe that the new fee structure could
provide an effective means to reward good relative performance for the Growth
Portfolio, while enabling the Growth Portfolio to realize the benefit of lower
fees when fund performance has not reached desired levels.
DESCRIPTION OF THE PERFORMANCE FEE AMENDMENT. Under the Performance Fee
Amendment, GSAM would be entitled to receive a base fee ("Base Fee")
calculated at the annual rate of .30% (or 30 basis points) of the average net
assets of that portion of the Growth Portfolio's assets assigned to GSAM
("GSAM Account") plus or minus a specified adjustment designed to reflect the
performance of the GSAM Account relative to the performance of the Russell
1000 Growth Index plus 30 basis points. This 30 basis point "performance
hurdle" is designed to assure that GSAM will earn a performance adjustment
only with respect to the value that its portfolio management adds to the GSAM
Account. Shareholders should be aware, however, that one consequence of the
Performance Fee Amendment is that GSAM could earn a positive performance
adjustment in declining markets provided that the decline in the Gross Total
Return of the GSAM Account is less than the decline in the total return of the
Russell 1000 Growth Index. A detailed description of the various features of
the Performance Fee Amendment, together with sample calculations and examples,
appear below.
Initial Period. Under the Performance Fee Amendment, GSAM's fee would be
adjusted to reflect the performance of the Account only after the Performance
Fee Amendment has been in effect for 12 months ("Initial Period") following
the date ("Effective Date") on which the Performance Fee Amendment becomes
effective. For the first three quarters of the Initial Period, GSAM would be
entitled to receive a Base Fee of .075% of the average net assets of the GSAM
Account (or 7.5 basis points). At the end of the fourth quarter of the Initial
Period, GSAM would be entitled to receive a fee equal to .075% of the average
net assets of the GSAM Account plus or minus the applicable performance
adjustment for the Initial Period. This adjustment would be calculated by
multiplying the average net assets of the GSAM Account for the Initial Period
by a factor ("Performance Component") equal to 25% of the difference between
(i) the total return of the GSAM Account, calculated without regard to
expenses incurred in the operation of the GSAM Account ("Gross Total Return")
during the Initial Period, and (ii) the total return of the Russell 1000
Growth Index ("Index Return") during the Initial Period plus a performance
hurdle of 30 basis points.
Subsequent Quarterly Periods. For each quarter following the fourth quarter
of the Initial Period, GSAM would receive a quarterly fee of 7.5 basis points
plus or minus 1/4 of the Performance Component multiplied by the average net
assets of the GSAM Account for the immediately preceding 12 month period, on a
"rolling basis." This means that, at each quarterly fee calculation, the Gross
Total Return of the GSAM Account, the Index Return and the average net assets
of the GSAM Account for the most recent quarter will be substituted for the
corresponding values of the earliest quarter included in the prior fee
calculation.
Maximum Performance Adjusted Fee. Under the Performance Fee Amendment, the
Base Fee, as adjusted by application of the Performance Component
("Performance Adjusted Fee") is limited such that the annual advisory fee
received by GSAM will not exceed .50% of the average net assets (or 50 basis
points) of the GSAM Account. Due to the performance hurdle noted above, this
maximum fee level would be attained only to the extent that the GSAM Account
outperforms the Russell 1000 Growth Index by a factor of at least 110 basis
points. The maximum payment to GSAM for any quarter (other than the fourth
quarter of the Initial Period) will be limited to not more than .125% of the
average net assets of the GSAM Account (or 12.5 basis points).
6
<PAGE>
Minimum Contractual Fee. The minimum fee payable to GSAM with respect to any
annual period and with respect to any single quarter are also limited under
the Performance Fee Amendment. These minimum payments ("Minimum Contractual
Fee") are .10% of the average net assets of the GSAM Account (or 10 basis
points) with respect to the Initial Period and each subsequent annual period,
and .025% of such assets (or 2.5 basis points) with respect to any single
quarter. Due to the performance hurdle noted above, this minimum fee level
would be reached only in the event that the GSAM Account underperforms the
Russell 1000 Growth Index by a factor of at least 50 basis points.
Recoupment Feature. The Performance Fee Amendment provides for a "recoupment
feature" with respect to the Initial Period. If the aggregate of the payments
to GSAM made with respect to the first four quarters following the Effective
Date exceed the Performance Adjusted Fee to which GSAM would be entitled with
respect to the Initial Period, advisory fees payable to GSAM with respect to
each succeeding quarter will be reduced until the difference between the
aggregate quarterly fees received by GSAM with respect to the Initial Period
and such Performance Adjusted Fee is fully recouped by the GSAM Account. In
accordance with the Minimum Contractual Fee provision noted above, however, no
quarterly payment to GSAM will be less than 2.5 basis points.
EFFECT OF THE PERFORMANCE FEE AMENDMENT. As indicated above, the advisory
fee payable to GSAM at the end of each of the first three fiscal quarters of
the Initial Period would be paid at the Base Fee rate and would not be
increased or decreased to reflect the performance of the GSAM Account. At the
end of the fourth fiscal quarter following the Effective Date, however, GSAM
would be entitled to receive a Performance Adjusted Fee based on the
performance of the GSAM Account during the full twelve months of the Initial
Period. Hypothetical examples of how the Performance Adjusted Fee would be
calculated at the end of the Initial Period are set forth in the tables below.
Hypothetical Performance Adjustment, assuming a Positive Performance
Adjustment. Table 1A below shows the manner in which the value added by GSAM
would be determined for purposes of calculating the advisory fee payable to
GSAM at the end of the Initial Period, under circumstances that would result
in a net increase in advisory fees payable to GSAM:
TABLE 1A
<TABLE>
<S> <C>
Gross Total Return of GSAM Account for the Initial Period........... 11.00%
Index Return for the Initial Period................................. 10.00%
plus performance hurdle of 30 basis points........................ .30%
------
10.30%
Value Added by GSAM with respect to the Initial Period.............. .70%
</TABLE>
Assuming the facts shown in the hypothetical example above, GSAM would have
received a quarterly base fee of .075% of the average net assets of the GSAM
Account (7.5 basis points) for each of the first three quarters of the Initial
Period. For the fourth quarter, GSAM would be entitled to receive a
Performance Adjusted Fee of 7.5 basis points of the average net assets plus
25% of value added by GSAM during the Initial Period (25% X 70 basis points =
17.5 basis points). Thus, the payment to GSAM at the end of the fourth quarter
would be the Base Fee of .075% of the average net assets of the GSAM Account
plus a performance adjustment of .175% of such assets, for a total payment of
25 basis points or .25% of the average net assets of the GSAM Account. The
total Performance Adjusted Fee paid to GSAM for the Initial Period would be
.475% of the average net assets of the GSAM Account for the Initial Period.
Pro forma Expense Impact. Table 1B shows below shows the amount of the
advisory fee that would have been paid to GSAM had the GSAM Account
outperformed the Russell 1000 Growth Index to the extent shown in the
hypothetical example set forth in Table 1A during the fiscal year ended June
30, 1997. Also shown is the
7
<PAGE>
fee that would have been payable under the flat fee arrangement currently in
effect, as well as the pro forma expense ratio of the Growth Portfolio as a
whole in both cases. Note that such pro forma calculations assume that
$80,480,620 (one-half of the Growth Portfolio's assets as of June 30, 1997)
were subject to the Performance Fee Amendment.
TABLE 1B
<TABLE>
<S> <C>
Performance Adjusted Current GSAM Fee of .30%
Fee to GSAM*.................. $382,228 of average net assets.......... 241,441
Resulting Pro forma Expense Ratio Resulting Expense Ratio for the
for the Total Portfolio**..... .63% Total Portfolio**............... .55%
</TABLE>
- --------
* Effective annual rate of .475% of subject assets, calculated as shown in
Table 1A.
** Figure shown includes all expenses, other than extraordinary expenses and
brokerage commissions.
Hypothetical Performance Adjustment, assuming a negative Performance
Adjustment. The following table shows the manner in which the value added by
GSAM would be determined for purposes of calculating the advisory fee payable
to GSAM at the end of the Initial Period under circumstances that would result
in a net decrease in advisory fees payable to GSAM. In this example, the
hypothetical Gross Total Return of the GSAM Account is the same as is shown in
Table 1A, but the Index Return for the period is higher than in the prior
example.
TABLE 2A
<TABLE>
<S> <C>
Gross Total Return of GSAM Account for the Initial Period........... 11.00%
Index Return........................................................ 11.00%
plus performance hurdle of 30 basis points........................ .30%
-----
11.30%
Total Return Added by GSAM with respect to the Initial Period....... -.30%
</TABLE>
Assuming the facts shown in the hypothetical above, GSAM would have received
a quarterly payment under the Base Fee of .075% (7.5 basis points) of the
average net assets of the GSAM Account for each of the first three quarters of
the Initial Period. For the fourth quarter, GSAM would be entitled to receive
a Performance Adjusted Fee equal to .075% of the average net assets of the
GSAM Account less 25% of the shortfall in the GSAM Account during the prior 12
month period--in this case, 25% X -30 basis points = -7.5 basis points. Thus,
factoring in this downward adjustment, the fourth quarter payment would be the
Base Fee installment of .075% of the average nets assets of the GSAM Account
less the performance adjustment of .075% of such assets, for a total fourth
quarter payment of 0 and a Performance Adjusted Fee for the entire Initial
Period of 22.5 basis points.
Giving effect to the Minimum Contractual Fee provision, however, GSAM would
actually receive a fourth quarter payment in the amount of the Minimum
Contractual Fee of .025% of the average net assets of the GSAM Account, or 2.5
basis points. The resulting excess over the actual Performance Adjusted Fee
with respect to the Initial Period would be recouped by the GSAM Account by
reducing the fee payable to GSAM with respect to the succeeding quarters,
provided that no quarterly payment to GSAM would be less than 2.5 basis
points.
Pro forma Expense Impact. Table 2B below shows the amount of the advisory
fee that would have been paid to GSAM had the GSAM Account underperformed the
Russell 1000 Growth Index to the extent shown in the hypothetical example set
forth in Table 2A during the fiscal year ended June 30, 1997. Also shown is
the fee
8
<PAGE>
that would have been payable under the flat fee arrangement currently in
effect, as well as the pro forma expense ratio of the Growth Portfolio as a
whole in both cases. Note that such pro forma calculations assume that
$80,480,620 (one-half of the Growth Portfolio's assets as of June 30, 1997),
were subject to the Performance Fee Amendment.
TABLE 2B
<TABLE>
<S> <C>
Performance Adjusted Fee to Current GSAM Fee of .30% of
GSAM*........................... $181,081 average net assets................ $241,441
Resulting Pro forma Expense Ratio Resulting Expense Ratio for the
for the Total Portfolio**....... .48% Total Portfolio**.................. .55%
</TABLE>
- --------
* Effective annual rate of .225% of subject assets, calculated as shown in
Table 2A.
** Figure shown includes all expenses, other than extraordinary expenses and
brokerage commissions.
Comparative Annual Operating Expenses. The table and example shown below are
designed to assist investors in understanding the various costs and expenses
of investing in shares of the Growth Portfolio in the event that the
Performance Fee Amendment is implemented. The table and accompanying example
are designed to correspond with the tables that appear on page 2 of the
prospectus for The Hirtle Callaghan Trust. Neither should be considered a
representation of past or future expenses of performance and actual expenses
may vary from year to year and may be higher or lower than those shown.
The following table provides data concerning the Portfolio's management fees
and expenses as a percentage of average net assets for the fiscal year ended
June 30, 1997. Figures shown reflect expenses under the GSAM Contract as
currently in effect and expenses that would be incurred if the Performance Fee
Amendment had been in effect during that period, and assuming that the Growth
Portfolio outperformed the Russell 1000 Growth Index by a factor of 1.0% (or
100 basis points) as shown in Table 1B. Figures shown reflect expenses
incurred during the fiscal year ended June 30, 1997.
<TABLE>
<CAPTION>
UNDER GSAM AGREEMENT UNDER PERFORMANCE FEE
CURRENTLY IN EFFECT AMENDMENT
-------------------- ---------------------
<S> <C> <C>
Management Fees................. .35% .48%
Other Expenses.................. .20% .20%
Total Portfolio................. .55% .68%
Operating Expenses..............
</TABLE>
EXAMPLE: The following illustrates the expenses on a $1,000 investment,
under the fees and expenses shown in the table above, assuming (1) 5% annual
return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
UNDER GSAM AGREEMENT UNDER PERFORMANCE
CURRENTLY IN EFFECT FEE AMENDMENT
-------------------- -----------------
<S> <C> <C>
1 year.............................. $ 6 $ 6
3 years............................. $18 $20
5 years............................. $31 $34
10 years............................ $69 $76
</TABLE>
The preceding example assumes that all dividends and distributions are
reinvested and that the percentage totals shown in Table 2: "Annual 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.
9
<PAGE>
FACTORS CONSIDERED BY THE BOARD OF TRUSTEES. During the course of their
deliberations with respect to the Performance Fee Amendment, the Trustees
considered representations made by Hirtle Callaghan to the effect that, at the
Growth Portfolio's current asset levels, the fee to be paid by the Growth
Portfolio to GSAM was not competitive with fees received by GSAM from other
investment advisory clients similar to the Growth Portfolio, the particular
investment style to be followed by GSAM in managing that portion of the Growth
Portfolio's assets assigned to it, the nature and quality of the services
historically provided by that firm to its clients and its depth and resources.
The Board also considered that, as a result of the 30 basis point performance
hurdle, GSAM would earn a positive performance adjustment only to the extent
that its activities resulted in sufficient value added to cover the scheduled
Base Fee with respect to the immediately preceding 12 month period. In
addition, the Board reviewed the use of the Russell Growth 1000 Index as the
basis for the performance Index. The Russell Growth 1000 Index is a subset of
a broader index, compiled by the Frank Russell Company, and is designed to
measure the performance of certain equity securities that have higher price-
to-book ratios and higher forcasted growth rates than average range for stocks
included in the S&P Index. The average market capitalization of the Russell
Growth 1000 Index is $ 7.6 billion.
The Board was also advised by counsel regarding the requirements of the
Investment Advisers Act of 1940 ("Investment Advisers Act") as they relate to
incentive compensation such as is contemplated by the Performance Fee
Amendment. The Board reviewed with counsel and management rules adopted by the
SEC under the Investment Advisers Act that contemplates that a performance
adjustment will be calculated based on the change in the net asset value per
share of the fund involved. The Board also considered the fact that under the
Performance Fee Amendment, GSAM's performance would be measured against the
gross performance achieved in that portion of the Growth Portfolio allocated
to GSAM and thus that performance compensation calculated in the manner
contemplated by the Performance Fee Amendment might be viewed as inconsistent
with the Investment Advisers Act. In light of the foregoing, it was determined
that, if approved by the shareholders of the Growth Portfolio, the Performance
Fee Amendment would not become effective until the first calendar quarter
following receipt of assurances from the staff of the SEC that the method by
which the Performance Component is proposed to be computed will not be viewed
by the SEC staff as inconsistent with the requirements of the Investment
Advisers Act or corresponding exemptive relief. There can be no assurance that
such relief will be granted by the SEC.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL II. Approval of the Performance Fee
Amendment requires the approval of a "majority of the outstanding voting
securities" of the Growth Portfolio. Under the Investment Company Act, this
term means the lesser of (i) 67% of the outstanding shares represented at a
meeting at which more than 50% of the outstanding shares are present in person
or represented by proxy, or (ii) more than 50% of the Growth Portfolio's
outstanding voting securities. If the Performance Fee Amendment is not
approved by the Growth Portfolio's shareholders at the Special Meeting, and
Proposal I is approved, the fulcrum fee arrangement described above will not
take effect and the GSAM Agreement will continue in effect in accordance with
its terms, as described in Proposal I.
PROPOSAL III: APPROVAL OF ADVISORY FEE INCREASE IN THE VALUE PORTFOLIO
SUMMARY AND BACKGROUND. Since the commencement of its operations on August
25, 1995, the Value Portfolio has retained Institutional Capital Corporation
("ICAP") to provide portfolio management services to a portion of the assets
of the Value Portfolio. Under the terms of its portfolio management agreement
("Agreement"), ICAP is currently entitled to receive as compensation for its
services a fee calculated at the annual rate of .30% of the average net assets
of that portion of the Value Portfolio ("ICAP Account") from time to time
allocated to ICAP by the Board. ICAP has requested, and the Board of Trustees
has approved, subject to the approval of the shareholders of the Value
Portfolio, an increase of .05% (or 5 basis points) in the advisory fee payable
to ICAP. Under the Investment Company Act, such fee increase may not take
effect unless and until it is approved by a majority of the outstanding shares
of the Value Portfolio. A copy of the proposed amendment to the ICAP Agreement
appears as Exhibit C to this Proxy Statement. The proposal to increase ICAP's
fee is discussed below, as Proposal III.
10
<PAGE>
EFFECT OF THE PROPOSED FEE INCREASE. The table below illustrates the impact
that the proposed fee increase would have had on the Value Portfolio had it
been in effect with respect to the fiscal year ended June 30, 1997.
<TABLE>
<CAPTION>
NET ASSETS ACTUAL FEE PAID TO ICAP PRO FORMA FEE
OF ICAP ACCOUNT (CALCULATED AS .30% OF AVERAGE (CALCULATED AS .35% OF AVERAGE
AS OF 6/30/97 NET ASSETS OF THE ICAP ACCOUNT) NET ASSETS OF THE ICAP ACCOUNT)
--------------- ------------------------------ ------------------------------
<S> <C> <C>
$73,771,454.85 $150,281 $175,328
</TABLE>
The following table provides data concerning the management fees and
expenses the would be experienced by the Value Portfolio the fiscal year ended
June 30, 1997, had the proposed increased fee been effect during that period.
Figures shown reflect expenses as currently in effect and expenses that would
be incurred if the Fee Amendment had been in effect during that period.
<TABLE>
<CAPTION>
UNDER THE CURRENT IF PROPOSED
FEE SCHEDULE INCREASE IS APPROVED
----------------- --------------------
<S> <C> <C>
Management Fees..................... .35% .38%
Other Expenses...................... .20% .20%
Total Portfolio..................... .55% .58%
Operating Expenses..................
</TABLE>
EXAMPLE: The example below illustrates the expenses on a $1,000 investment,
under the fees and expenses shown in the table above, assuming (1) 5% annual
return and (2) redemption at the end of each time period. The example assumes
that all dividends and distributions are reinvested and that the percentage
totals shown in Table 2: "Annual 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.
<TABLE>
<CAPTION>
UNDER FEE SCHEDULE UNDER INCREASE
CURRENTLY IN EFFECT FEE ARRANGEMENT
------------------- ---------------
<S> <C> <C>
1 year................................. $ 6 $ 6
3 years................................ $18 $19
5 years................................ $31 $32
10 years............................... $69 $73
</TABLE>
FACTORS CONSIDERED BY THE BOARD. At a special meeting of the Board held on
November 21, 1997, the Board considered and approved, subject to the approval
of the shareholders of the Value Portfolio, an amendment to the ICAP Agreement
that would increase from .30% of the average net assets of the ICAP Account to
.35% of the average net assets of the ICAP Account, the rate at which the
advisory fee payable to ICAP is calculated. During the course of its
deliberations, the Board reviewed the management style and performance record
of ICAP, information provided to it by ICAP regarding the profitability of the
ICAP Agreement to ICAP, as well as information relating to the nature and
quality of the services to be provided by ICAP and the background and
experience of those individuals responsible for making day-to-day investment
decisions with respect to the ICAP Account. In particular, the Board was
apprised that the rate at which the advisory fee payable to ICAP by other
registered investment companies are calculated at a rate materially higher
than that currently provided for in the ICAP Agreement and that ICAP's
performance had significantly exceeded the benchmark S&P Index during the same
period. The Board also considered the representation of officers of Hirtle
Callaghan to the effect that ICAP had expressed the intention of terminating
the ICAP Agreement if the fees payable to it for its services to the ICAP
Account were not adjusted in the manner proposed. At its meeting, the Board
was also advised by counsel regarding its responsibilities under Section 15(c)
of the Investment Company Act and the requirements of Section 15(a) of that
Act.
INFORMATION ABOUT ICAP. 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;
11
<PAGE>
investment decisions are made by committee and no single individual has
primary responsibility for making recommendations to the committee. ICAP had
assets of approximately $9.3 billion under management as of August 31, 1997,
of which approximately $1.7 billion represented assets of mutual funds. For
the fiscal year ended June 30, 1997, ICAP received advisory fees from the
Value Portfolio in the amount of $150,281.
ICAP provides investment advisory services to seven investment company
portfolios. Of these, five are managed by ICAP in a manner that is
sufficiently similar to the manner in which the ICAP Account is managed to
warrant a fee comparison. The following table sets forth certain information
about these portfolios.
<TABLE>
<CAPTION>
ASSETS AT
FUND** OCTOBER 31, 1997 ADVISORY FEE*
------ ---------------- -------------
(MILLIONS) (SCHEDULED FEE ON THE EQUITY PORTION OF ASSETS ONLY:)
<C> <C> <S>
Nuveen Growth and Income Stock Fund $735.4 .35% on the first $500 million of average net
Nuveen Balanced Stock and Bond Fund $73.7 assets; .30% on next $500 million of such
Nuveen Balanced Municipal and Stock Fund $45.2 assets; and .25% on assets over $1 billion
ICAP Discretionary Equity Portfolio $156.9 These funds are structured with a single
ICAP Equity Portfolio $328.8 fee of .80% of average net assets payable to
ICAP, from which fee ICAP pays all other fund
expenses. Effective advisory fee to ICAP for
the period ended December 31, 1996 was
.48% of average net assets
</TABLE>
- --------
* Figures shown do not take into account fee waivers, if any, in effect for
the companies listed.
** ICAP provides advisory services only with respect to the equity portion of
the investment portfolio of the listed companies.
INFORMATION ABOUT THE ICAP AGREEMENT. The terms and conditions set forth in
the ICAP Agreement are, in all material respects, the same as those contained
in the Prior Agreement except for the description of the portfolio manager,
the effective and termination dates, and the modification of certain
indemnification provisions included in the ICAP Agreement. Both agreements
require the portfolio manager, subject to the overall supervision of the
Board, to provide a continuous investment program for the assets of the Value
Portfolio, or that portion of such assets as may be, from time to time,
allocated to it. Under both agreements, the named portfolio manager is
responsible, among other things, for the provision of investment research,
management of all investments and the selection of brokers and dealers through
which securities transactions are executed, as well as the maintenance of
certain records required under relevant provisions of the Investment Company
Act. The agreements each also provide that the portfolio manager will not be
liable to the Trust for any error of judgment or mistake of law on the part of
the portfolio manager for any loss sustained by the Trust in connection with
the purchase or sale of any instrument on behalf of the Value Portfolio,
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
the portfolio manager. Each of the agreements also provides for its
termination, at any time and without penalty, either by the Trust or by the
portfolio manager, in each case upon sixty days' written notice, and its
termination in the event of an "assignment" as defined in the Investment
Company Act. The ICAP Agreement was approved by the Trust's initial
shareholder on July 21, 1995, and was last approved by the Trust's Board
(including a majority of the Trust's Independent Trustees) at a meeting of the
Board held on May 6, 1997.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL III. Approval of the Proposal III
requires the approval of a "majority of the outstanding voting securities" of
the Value Portfolio. Under the Investment Company Act, this term means the
lesser of (i) 67% of the outstanding shares represented at a meeting at which
more than 50% of the outstanding shares are present in person or represented
by proxy, or (ii) more than 50% of the Growth Portfolio's outstanding voting
securities. If Proposal III is not approved by the Value Portfolio's
shareholders at the Special Meeting (including any adjournments thereof), the
ICAP Agreement will continue in effect, and ICAP will continue to be
compensated at the current rate of .30% of the average daily net assets of the
ICAP Account.
12
<PAGE>
MANAGEMENT OF THE TRUST
INFORMATION ABOUT HIRTLE CALLAGHAN. Pursuant to a written agreement ("HCCI
Consulting Agreement") Hirtle Callaghan continuously monitors the performance
of various investment management organizations, including the several
portfolio managers retained by the Trust. The HCCI Consulting Agreement
provides that Hirtle Callaghan will make its officers available to serve as
officers and/or Trustees of the Trust, and maintain office space sufficient
for the Trust's principal office. For its services under the HCCI Consulting
Agreement, Hirtle Callaghan is entitled to receive an annual fee of .05% of
each Portfolio's average net assets. For the fiscal year ended June 30, 1997,
Hirtle Callaghan received advisory fees from the Value Portfolio and the
Growth Portfolio in the amount of $44,605 and $ 65,417, respectively. Hirtle
Callaghan's principal offices are located at 575 East Swedesford Road, Wayne,
Pennsylvania 19087. Hirtle Callaghan was organized in 1988. A registered
investment adviser under the Investment Advisers Act, Hirtle Callaghan had, as
of June 30, 1997 had approximately $1.6 billion in assets under management.
Hirtle Callaghan is controlled by Jonathan Hirtle and Donald E. Callaghan,
each of whom also serves on the Trust's Board. Mr. Callaghan also serves as
President of the Trust. Robert J. Zion, a principal of Hirtle Callaghan,
serves as Treasurer and Vice President of the Trust. The HCCI Consulting
Agreement was approved by the Trust's initial shareholder on July 21, 1995,
and was last approved by the Trust's Board (including a majority of the
Trust's Independent Trustees) at a meeting of the Board held on May 6, 1997.
ADMINISTRATION, DISTRIBUTION AND RELATED SERVICES. BISYS Fund Services, Inc.
and certain of its affiliated companies ("BISYS") currently provide
administration, transfer agency, distribution and accounting services to the
Trust pursuant to the terms of separate agreements between BISYS and the
Trust. For the administration, transfer agency and fund accounting services it
provides to the Trust, BISYS receives an omnibus fee, which fee is computed
daily and paid monthly in arrears, at an annual rate of .10% of the aggregate
average net assets of the Value Equity, Growth Equity, Small Capitalization
Equity and International Equity Portfolios and of any additional portfolios
that invest primarily in equity securities that may be created by the Trust in
the future and .08% of the aggregate average net assets of the Limited
Duration Municipal Bond Portfolio and of any additional portfolios that invest
primarily in debt securities that may be created in the future by the Trust.
OTHER MATTERS. 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.
The table below shows the name and address of record of each person known to
the Trust to hold, as of record or beneficially, 5% or more of shares of the
Growth Portfolio as of the Record Date. Hirtle Callaghan may be deemed to
have, or share, investment and/or voting power with respect to more than 50%
of the shares of the Trust's portfolios, with respect to which shares Hirtle
Callaghan disclaims beneficial ownership.
<TABLE>
<CAPTION>
GROWTH EQUITY VALUE EQUITY
NAME AND ADDRESS OF RECORD HOLDERS PORTFOLIO PORTFOLIO
---------------------------------- ------------- -------------
<S> <C> <C>
Bankers Trust Company 8,906,097.093 5,753,967.748
1 Bankers Trust Plaza (76.72%) (64.63%)
New York, N.Y. 10006
PNC Bank, N.A.-- 757,657.023 1,079,842.742
P.O. Box 7780-1888 6.53% (12.13%)
Philadelphia, PA 19182
Northern Trust Company 930,144.182 911,644.459
P.O. Box 92956 (8.01%) (10.24%)
Chicago, IL 60675
</TABLE>
13
<PAGE>
A properly executed and returned form of Proxy marked with an abstention
will be considered present at the Special Meeting for the purpose of
determining the existence of a quorum. If any form of proxy received by the
Trust that withholds authority to vote represents a "broker non-vote," shares
represented by such form of proxy will not be counted for purposes of
determining whether or not a quorum is present at the Special Meeting and will
not be deemed "votes cast" with respect to any matter with respect to which
authority to vote is withheld. As used in this Proxy Statement, "broker non-
vote" means a form of proxy, executed by a broker or other nominee, indicating
that the nominee has not received instructions from the beneficial owner or
other person entitled to vote shares on a particular matter with respect to
which the broker or nominee does not have discretionary power. Abstentions and
broker non-votes will thus not constitute a vote "for" or "against" any
matter, but will have the same effect as a negative vote with respect to
matters which require the approval of a requisite percentage of the
outstanding shares of the relevant Portfolio.
By Order of the Board of Trustees
14
<PAGE>
EXHIBIT A
(RE GROWTH PORTFOLIO)
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 18th day of September, 1997, between Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., a New York
limited partnership, and THE HIRTLE CALLAGHAN TRUST, a Delaware business trust
("Trust").
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 (each referred to
hereinafter as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Trust desires to retain the Portfolio Manager to provide a
continuous program of investment management for The Growth 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 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 (including, subject to
Section 3 of this Agreement, Goldman Sachs & Co.,) through which securities
transactions in the Account shall be executed. The Trust agrees that the
Portfolio Manager shall manage the Account in accordance with the objectives,
policies, and limitations set forth in the Trust's current prospectus and
statement of additional information. 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
A-1
<PAGE>
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 such 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 by
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. (i) 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 at the
most favorable execution and net price available. 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 may 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, subject to the
provisions of the Investment Company Act and the Trust's approved procedures.
The Trust shall provide a list of such affiliated brokers and dealers to
Portfolio Manager and will immediately advise Portfolio Manager of any changes
in such list.
(ii) The Portfolio Manager may, on occasions when it deems the purchase or
sale of a security to be in the best interests of the Trust as well as its
other clients, aggregate, to the extent permitted by applicable laws and
rules, the securities to be sold or purchased in order to obtain the most
favorable execution and net price. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in the manner it considers to be the
most equitable and consistent with its obligations to the Trust and to such
other clients. The Portfolio Manager is not, however, required to aggregate
securities orders.
4. EXPENSES AND COMPENSATION. For its services under this Agreement,
Portfolio Manager shall be entitled to receive a fee in accordance with the
Schedule A of this Agreement.
5. LIMITATION OF LIABILITY AND INDEMNIFICATION. (a) Neither the Portfolio
Manager nor any person that is an "affiliated person" of the Portfolio Manager
or any of its affiliated companies (collectively, "Associated
A-2
<PAGE>
Persons") shall 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 or
such Associated Persons 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 written information provided by Portfolio Manager to
the Trust (including, without limitation, information contained in Portfolio
Manager's then current Form ADV) concerning the Portfolio Manager and its
Associated Persons 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 Filing"), provided that a copy of any
such filing is provided to Portfolio Manager at least 10 days prior to the
date on which it will become effective, in the case of a registration
statement or, in the case of proxy statements and/or shareholders report, at
least 10 days prior to the date on which such document is first distributed
shareholders for the purpose of obtaining Portfolio Manager's consent pursuant
to Section (v). 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), incurred: (i)
as a result of any untrue statement, or alleged untrue statement, of a
material fact made by Portfolio Manager in such written information; and/or
(ii) as a result of the omission, or the alleged omission, in such written
information of any material fact necessary in order to make the statements
made, in the light of the circumstances under which they are made, not
misleading ("Material Omission"), provided that the Trust has relied upon such
statement or Material Omission in preparing any SEC Filing. Portfolio Manager
shall not be required to indemnify any person under this Section 5 to the
extent that Portfolio Manager relied upon an untrue statement or Material
Omission made by an officer or Trustee of the Trust or where such untrue
statement or Material Omission was made in reliance upon information furnished
to the Portfolio Manager in writing by such officer or Trustee, or by the
Trust's custodian bank, administrator or accounting agent.
(c) The Trust agrees to indemnify and hold harmless the Portfolio Manager
and its Associated Persons from any claims, liabilities and expenses,
including reasonable attorneys' fees, incurred as a result of any untrue
statement of a material fact which relates to information in any SEC filing,
or any omission to state in such written information a material fact necessary
to make such statements not misleading ("material omission"), contained in any
information in such SEC filings not supplied by the Portfolio Manager pursuant
to Section 5(b) hereof.
(d) The Portfolio Manager shall not be liable for (i) any acts of any other
portfolio manager to the Portfolio or the Trust with respect to the portion of
the assets of the Account not managed by the Portfolio Manager; and (ii) acts
of the Portfolio Manager which result from acts of the Trust, including, but
not limited to, a failure of the Trust to provide accurate and current
information with respect to any records maintained by Trust or any other
portfolio manager to the Portfolio. The Trust agrees that the Portfolio
Manager shall manage the Account as if it was a separate operating series and
shall comply with (a) the objectives, policies, and limitations for the
Account set forth in the Trust's current prospectus and statement of
additional information, and (b) applicable laws and regulations (including,
but not limited to, the investment objectives, policies and restrictions
applicable to the Account and qualification of the Account as a regulated
investment company under the Internal Revenue Code of 1986, as amended) with
respect to the portion of the assets of the Account not allocated to the
Portfolio Manager. In no event shall the Portfolio Manager or its Associated
Persons have any liability arising from the conduct of the Trust and any other
portfolio manager with respect to the portion of the Portfolio's assets not
allocated to the Portfolio Manager.
6. PERMISSIBLE INTEREST. Subject to and in accordance with the Trust's
Declaration of Trust and Bylaws and corresponding governing documents of
Portfolio Manager, Trustees , officers, agents and shareholders of the
A-3
<PAGE>
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 agreement between Westfield
Capital Management Company and the Trust is terminated ("Effective Date") and
shall continue in effect thereafter, unless sooner terminated, for two years
provided that this Agreement is approved by the shareholders of the Portfolio
on or before the 120th day after such Effective Date. Thereafter, this
Agreement shall continue in effect, unless sooner terminated, 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 automatically upon its assignment.
For purposes of this Agreement, the terms "majority of the outstanding
voting securities," "assignment, " "affiliated person" and "interested person"
shall have the meanings set forth in the Investment Company Act.
8. CONFIDENTIALITY; USE OF NAME. (i) 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, and which information has not
been developed by Portfolio Manager. 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 or as
required by law. 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.
(ii) It is acknowledged and agreed that the names "Hirtle Callaghan,"
"Hirtle Callaghan Chief Investment Officers" (which is a registered trademark
of Hirtle Callaghan & Co., Inc. ("HCCI")), and derivative of either, as well
as any logo that is now or shall later become associated with either name
("Marks") are valuable property of 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
(other than to indicate that it is acting as Portfolio Manager to Account)
without the prior written consent of the Trust.
(iii) The Trust will not publish or distribute any information regarding the
provision of investment advisory services by the Portfolio Manager pursuant to
this Agreement. Notwithstanding the foregoing, the Trust may, without the
prior written consent of the Portfolio Manager, distribute information
regarding the provision of investment advisory services by the Portfolio
Manager (a) to the Trust's Board of Trustees, committees of the Board and
officers of the Trust; (b) to the Trust's administrator, fund accounting
agent, custodian banks, counsel and auditors; (c) to HCCI; and (d) to persons
to whom, and in documents in which, disclosure of such information is required
by law.
(iv) All information and advice by the Portfolio Manager for the Account
will be treated as confidential by the Trust and will not be disclosed without
the Portfolio Manager's prior written consent to third parties except
A-4
<PAGE>
(a) to the Trust's Board of Trustees, committees of the Board and officers of
the Trust; (b) to the Trust's administrator, fund accounting agent, custodian
banks, counsel and auditors; (c) to HCCI; and (d) to persons to whom, and in
documents in which, disclosure of such information is required by law.
(v) The Trust will not publish or use in advertising, publicity or otherwise
the name of the Portfolio Manager or any of its affiliates, or any trade name,
trademark, trade device, service mark, symbol or any abbreviation, contraction
or simulation thereof of the Portfolio Manager or its affiliates, without the
prior written consent of the Portfolio Manager, provided, however, that this
limitation does not include the inclusion in the Trust's registration
statement of information provided to the Trust in writing by Portfolio
Manager.
(vi) 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" with respect
to the Portfolio 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 as it relates to the Account during the prior year; and that
either (i) that no violation of such code as it relates to the Account
occurred or (ii) if such a violation occurred, that appropriate action was
taken in response to such violation. Upon the written request of the Trust,
Portfolio Manager shall permit the Trust, or it designated agents, to
examine the reports required to be made by Portfolio Manager under rule
17j-1(c)(1) under the Investment Company Act as it relates to the Account.
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
reasonable efforts 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
Associated Persons 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 services of the Portfolio Manager to
the Trust are not to be deemed exclusive, and the Portfolio Manager is free to
render similar services to others so long as its services to the Trust are not
impaired thereby. The Portfolio Manager will be deemed to be an independent
contractor and will, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Trust in any way or otherwise be
deemed an agent of the Trust.
Without limiting the foregoing, the Trust understands that the Portfolio
Manager now acts, will continue to act, or may act in the future, as
investment adviser or investment sub-adviser to fiduciary and other managed
accounts, including other investment companies and that the Trust has no
objection to the Portfolio Manager so
A-5
<PAGE>
acting, provided that the Portfolio Manager duly performs all obligations
under this Agreement. The Trust also understands that the Portfolio Manager
may give advice and take action with respect to any of its other clients or
for its own account which may differ from the timing or nature of action taken
by the Portfolio Manager with respect to the Trust. Nothing in this Agreement
imposes upon the Portfolio Manager any obligation to purchase or sell or to
recommend for purchase or sale, with respect to the Account, any security
which the Portfolio Manager or its Associated Persons may purchase or sell for
its or their own account(s) or for the account of any other client.
11. DELIVERY OF INFORMATION AND REPORTS. The Trust agrees to furnish to the
Portfolio Manager current prospectuses, statements of additional information,
proxy statements, reports of shareholders, certified copies of financial
statements, charter documents and such other information with regard to the
affairs of the Trust and Account as the Portfolio Manager may reasonably
request. The Portfolio Manager agrees to render to the Trust such periodic and
special reports regarding its activities under this Agreement as the Trust may
reasonably request. The Trust represents that it has received Parts I and II
of the Portfolio Manager's Form ADV.
12. 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:
If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087-1937
If to Portfolio Manager:
Goldman Sachs Asset Management
One New York Plaza
85 Broad Street
New York, New York 10004
Attention: Howard B. Surloff, Esq.
13. 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 Growth Equity
Portfolio. Portfolio Manager further agrees that it will not seek 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.
A-6
<PAGE>
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.
Goldman, Sachs & Co., on behalf of
Goldman Sachs Asset Management
By: /s/
-----------------------------
ATTEST:
- ----------------------------------
The Hirtle Callaghan Trust
By: /s/
-----------------------------
ATTEST:
- ----------------------------------
A-7
<PAGE>
SCHEDULE A
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. For the purpose of
accruing compensation, the net assets of the Account will be determined in the
manner provided in the then-current prospectus of the Trust.
Portfolio Manager shall pay all expenses incurred by GSAM in the performance
of its duties under this Agreement and shall not be required to pay any other
expenses of the Trust, including but not limited to brokerage and transactions
costs incurred by the Trust. In the event of termination of this Agreement,
all compensation due to the Portfolio Manager through the date of termination
will be calculated on a pro-rated basis through the date of termination and
paid within fifteen business days of the date of termination.
Goldman, Sachs & Co.,on behalf of
Goldman Sachs Asset Management
Date: October 18, 1997 By: /s/
------------------------------
The Hirtle Callaghan Trust
Date: October 18, 1997 By: /s/
-------------------------------
A-8
<PAGE>
EXHIBIT B
(RE GROWTH PORTFOLIO)
AMENDMENT
AMENDMENT effective as of , to that certain Portfolio Management
Agreement dated September 18, 1997, ("Agreement") between Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., a New York
limited partnership ("Portfolio Manager") and The Hirtle Callaghan Trust, a
Delaware business trust ("Trust").
WHEREAS, the Trust has retained the Portfolio Manager to provide to a
continuous program of investment management for a portion of the assets of The
Growth Equity Portfolio of the Trust ("Account") pursuant to the Agreement;
the Trust desires to compensate the Portfolio Manager for its services based,
in part, on the performance achieved by the Portfolio Manager for the Account;
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 to amend the Agreement by deleting Schedule A in its entirety and
replacing it with the following new Schedule A:
SCHEDULE A: PERFORMANCE COMPENSATION FORMULA
Initial Period. Under the Performance Fee Amendment, GSAM's fee would be
adjusted to reflect the performance of the Account only after the Performance
Fee Amendment has been in effect for 12 months ("Initial Period") following
the date ("Effective Date") on which the Performance Fee Amendment becomes
effective.
For the first three quarters of the Initial Period, GSAM shall receive a
Base Fee of .075% of the average net assets of the GSAM Account (or 7.5 basis
points). For the fourth quarter of the Initial Period, GSAM shall receive a
fee equal to .075% of the average net assets of the GSAM Account plus or minus
a Performance Component multiplied by the average net assets of the GSAM
Account for the Initial Period. The Performance Component shall be calculated
by (a) computing the difference between (i) the total return of the GSAM
Account without regard to expenses incurred in the operation of the GSAM
Account ("Gross Total Return") during the Initial Period, and (ii) the return
of the Russell 1000 Growth Index ("Index Return") during the Initial Period
plus 30 basis points; and (b) multiplying the resulting factor by 25%.
Subsequent Quarterly Periods. For each quarter following the fourth quarter
of the Initial Period, GSAM would receive a quarterly fee of 7.5 basis points
plus or minus 1/4 of the Performance Component (calculated in the same manner
as set forth with respect to the Initial Period and set forth above)
multiplied by the average net assets of the GSAM Account for the immediately
preceding 12 month period, on a "rolling basis." This means that, at each
quarterly fee calculation, the Gross Total Return of the GSAM Account, the
Index Return and the average net assets of the GSAM Account for the most
recent quarter will be substituted for the corresponding values of the
earliest quarter included in the prior fee calculation.
Maximum Performance Adjusted Fee. Notwithstanding the formula set forth
above, the maximum fee to which GSAM shall be entitled with respect to any 12
month period shall be .50% of the average net assets of the GSAM Account (or
50 basis points). The maximum fee to which GSAM shall be entitled with respect
to any quarter (other than the fourth quarter of the Initial Period) shall be
.125% of the average net assets of the GSAM Account (or 12.5 basis points).
Due to the performance hurdle noted above, this maximum fee level would be
attained only to the extent that the GSAM Account outperforms the Russell 1000
Growth Index by a factor of at least 110 basis points.
Minimum Contractual Fee. The minimum fee payable to GSAM with respect to any
annual period (including the Initial Period) shall be .10% of the average net
assets of the GSAM Account (or 10 basis points);
B-1
<PAGE>
the minimum fee payable with respect to any single quarter shall be .025% of
the average net assets of the GSAM Accounts (or 2.5 basis points). Due to the
performance hurdle noted above, this minimum fee level would be reached only
in the event that the GSAM Account underperforms the Russell 1000 Growth Index
by a factor of at least 50 basis points.
Recoupment Feature. If the aggregate of the payments to GSAM made with
respect to the first four quarters following the Effective Date exceed the
Performance Adjusted Fee to which GSAM would be entitled with respect to the
Initial Period, advisory fees payable to GSAM with respect to each succeeding
quarter will be reduced until the difference between the aggregate quarterly
fees received by GSAM with respect to the Initial Period and such Performance
Adjusted Fee is fully recouped by the GSAM Account. In accord with the Minimum
Contractual Fee provision noted above, however, no quarterly payment to GSAM
will be less than 2.5 basis points.
Expenses; Effectiveness. Portfolio Manager shall pay all expenses incurred
by it in the performance of its duties under the Agreement and shall not be
required to pay any other expenses of the Trust, including but not limited to
brokerage and transactions costs incurred by the Trust. In the event of
termination of this Agreement, all compensation due to the Portfolio Manager
through the date of termination will be calculated on a pro-rated basis
through the date of termination and paid within fifteen business days of the
date of termination. This Amendment shall become effective as of the first
date written above.
Goldman, Sachs & Co., on behalf of The Hirtle Callaghan Trust on behalf
Goldman Sachs Asset Management of The Growth Equity Portfolio
By: By:
---------------------------------- ----------------------------------
Date: Date:
-------------------------------- --------------------------------
B-2
<PAGE>
EXHIBIT C
(RE VALUE PORTFOLIO)
AMENDMENT
AMENDMENT effective as of , to that certain Portfolio Management
Agreement, ("Agreement") between Institutional Capital Corporation ("Portfolio
Manager") and The Hirtle Callaghan Trust, a Delaware business trust ("Trust").
WHEREAS, the Trust has retained the Portfolio Manager to provide to a
continuous program of investment management for a portion of the assets of The
Value Equity Portfolio of the Trust ("Account") pursuant to the Agreement and
the parties have agreed to increase the rate at which the advisory fee payable
to the Portfolio Manager for its services is calculated;
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. The Agreement shall be amended by deleting paragraph 4 of the Agreement
in its entirety and substituting there for the following:
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, including
without limitation, brokerage expenses. For its services under this
Agreement, Portfolio Manager shall be entitled to receive a fee at the
annual rate of .35% of the average daily net asset value of the Account,
which fee shall be payable monthly.
2. This Amendment shall become effective as of the first business day of the
month following the date on which the shareholders of The Value Equity
Portfolio this Amendment shall have been approved in accordance with the
provisions of the Investment Company Act of 1940 by the Board of Trustees of
the Trust and by the shareholders of The Value Equity Portfolio.
Institutional Capital Corporation The Hirtle Callaghan Trust on behalf
of The Value Equity Portfolio
By: By:
-------------------------------- ---------------------------------
Date: Date:
------------------------------ -------------------------------
C-1
<PAGE>
PROXY
The Value Equity Portfolio
of The Hirtle Callaghan Trust
Special Meeting of Shareholders
January 12, 1997
This Proxy is Solicited on Behalf of the Board of Trustees
----------------------------------------------------------
The undersigned appoints, Donald E. Callaghan and Robert J. Zion, and each of
them, attorneys and proxies, with full power of substitution in each, to vote
and act on behalf of the undersigned at the special meeting of shareholders of
The Hirtle Callaghan Trust (the "Trust") representing interests in the Trust's
Value Equity Portfolio at the offices of Hirtle, Callaghan & Co., Inc., 575 East
Swedesford Road., Wayne, PA 19807-1937 on January 12 1998, at 10 a.m., and at
all adjournments, according to the number of shares of Common Stock which the
undersigned could vote if present, upon such subjects as may properly come
before the meeting, all as set forth in the notice of the meeting and the proxy
statement furnished therewith. Unless otherwise marked below, this proxy is
given WITH authority to vote FOR the proposal indicated below. The undersigned
further confers upon such attorneys and proxies discretionary authority to vote
for and in the name of the undersigned and with all of the powers the
undersigned would possess if personally present, all the Portfolio shares of
the undersigned in the Trust at said meeting. The Board of Trustees recommends
that you vote "FOR" each of the proposals below.
(1) To approve an amendment to the Portfolio Management Agreement between the
Trust and Institutional Capital Corporation ("ICAP") relating to The Value
Equity Portfolio, which amendment will increase the fee to which ICAP is
entitled for its services to The Value Equity Portfolio.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
IMPORTANT: WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS ATTORNEY OR AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
PLEASE SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE - NO POSTAGE REQUIRED.
PLEASE MAIL PROMPTLY TO SAVE THE TRUST FURTHER SOLICITATION EXPENSE. THE RECEIPT
OF THE NOTICE OF MEETING AND PROXY STATEMENT IS ACKNOWLEDGED BY EXECUTION OF
THIS PROXY.
Dated:________________, 199_
The Value Equity Portfolio
______________________________
Signature and Title
______________________________
Signature, if held jointly
________________________ shares
Sign, Date and Return the Proxy
Promptly Using the Enclosed Envelope to: BISYS Fund Services, Attn: Amy Kaup,
125 W. 55th St., 11th Floor,
New York, New York 10019
<PAGE>
PROXY
The Growth Equity Portfolio
of The Hirtle Callaghan Trust
Special Meeting of Shareholders
January 12, 1998
This Proxy is Solicited on Behalf of the Board of Trustees
----------------------------------------------------------
The undersigned appoints, Donald E. Callaghan and Robert J. Zion, and each of
them, attorneys and proxies, with full power of substitution in each, to vote
and act on behalf of the undersigned at the special meeting of shareholders of
The Hirtle Callaghan Trust (the "Trust") representing interests in the Trust's
Growth Equity Portfolio at the offices of Hirtle, Callaghan & Co., Inc., 575
East Swedesford Road., Wayne, PA 19087-1937 on January 12, 1998, as 10 a.m. and
at all adjournments, according to the number of shares of Common Stock which the
undersigned could vote if present, upon such subjects as may properly come
before the meeting, all as set forth in the notice of the meeting and the proxy
statement furnished therewith. Unless otherwise marked below, this proxy is
given WITH authority to vote FOR each of the proposals noted below. The
undersigned further confers upon such attorneys and proxies discretionary
authority to vote for and in the name of the undersigned and with all of the
powers the undersigned would possess if personally present, all the Portfolio
shares of the undersigned in the Trust at said meeting. The Board of Trustees
recommends that you vote "FOR" each of the proposals below.
(1) To approve the engagement of Goldman Sacks Asset Management ("GSAM") to
provide portfolio management services to the Growth Portfolio pursuant to a
portfolio management agreement between the Trust and GSAM ("GSAM Agreement").
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
(2) To approve an amendment of the GSAM engagement pursuant to which GSAM would
be compensated on a performance fee basis.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
IMPORTANT: WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS ATTORNEY OR AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
PLEASE SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE - NO POSTAGE REQUIRED.
PLEASE MAIL PROMPTLY TO SAVE THE TRUST FURTHER SOLICITATION EXPENSE. THE RECEIPT
OF THE NOTICE OF MEETING AND PROXY STATEMENT IS ACKNOWLEDGED BY EXECUTION OF
THIS PROXY.
Dated:________________, 199_
The Growth Equity Portfolio
______________________________
Signature and Title
______________________________
Signature, if held jointly
________________________ shares
Sign, Date and Return the Proxy
Promptly Using the Enclosed Envelope to: BISYS Fund Services, Attn: Amy Kaup,
125 W. 55th St., 11th Floor,
New York, New York 10019
