Filing pursuant to Rule 497(e)
for The Hirtle Callaghan Trust
1933 Act File No. 33-87762
1940 Act File No. 811-8918
THE HIRTLE CALLAGHAN TRUST
Supplement of May 6, 1998
to the Statement of Additional Information
dated September 15, 1997, for
Portfolio Management Agreements
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Geewax, Terker & Co. ("Geewax") serves as the Investment Manager for that
portion of The Small Capitalization Equity Portfolio previously managed by
Clover Capital Management, Inc. The Agreement between Geewax and the Trust
relating to The Small Capitalization Portfolio ("Geewax Agreement") was first
approved by a majority of the Board, including a majority of the Independent
Trustees at a special meeting of the Board held on March 18, 1998. The Geewax
Agreement, which reduces the investment advisory fees payable by The Small
Capitalization Portfolio, became effective as permitted under Rule 15a-4 of the
Investment company Act, on April 1, 1998. Shareholders of The Small
Capitalization Portfolio will be asked to approved the Geewax Agreement at a
meeting of shareholders to be held on June 15, 1998.
If approved by shareholders, the Geewax Agreement will remain in effect until
the second anniversary of its effective date, and will continue in effect
thereafter from year to year so long as such continuation is approved, at a
meeting called for the purpose of voting on such continuance, at least annually
(i) by vote of a majority of the Trust's Board or the vote of the holders of a
majority of the outstanding securities of the Trust; and (ii) by a majority of
the Independent Trustees, by vote cast in person. The terms and conditions set
forth in the Geewax Agreement are identical to those contained in the Initial
Contracts except for the description of the portfolio manager, the effective and
termination dates, and the modification of certain notice provisions relating to
the obligation of Geewax to indemnify the Trust under certain circumstances.
Specifically, Section 5 of the Geewax Agreement provides that the
indemnification obligation of the portfolio manager with respect to information
provided to the Trust by Geewax in writing for use in the Trust's registration
statement and certain other documents shall not apply unless the portfolio
manager has had an opportunity to review such documents for a specified period
of time prior to the date on which they are filed with the SEC and unless the
portfolio manager is notified in writing of any claim for indemnification within
specified periods.
GSAM serves as an Investment Manager for The Growth Equity Portfolio pursuant to
a contract ("GSAM Agreement") that was approved by the Board (including the
Independent Trustees) on September 12, 1997, and by the shareholders of The
Value Equity Portfolio on January 12, 1998. The GSAM Agreement first became
effective on October 1, 1997, the day on which a corresponding portfolio
management agreement
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THE HIRTLE CALLAGHAN TRUST
May 6, 1998 Supplement to the Statement of Additional Information of September
15, 1997
between the Trust and Westfield Capital Management was terminated. The GSAM
Agreement will remain in effect until its second anniversary, and will continue
in effect thereafter from year to year so long as such continuation is approved,
at a meeting called for the purpose of voting on such continuance, at least
annually (i) by vote of a majority of the Trust's Board or the vote of the
holders of a majority of the outstanding securities of the Trust; and (ii) by a
majority of the Independent Trustees, by vote cast in person. The terms and
conditions set forth in the GSAM Agreement are identical to those contained in
the Portfolio Management Contracts except for the description of the portfolio
manager, the effective and termination dates, and the modification of certain
notice provisions relating to the obligation of GSAM to indemnify the Trust
under certain circumstances. Specifically, Section 5 of the 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 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.
The Board, at its meeting held on November 21, 1997, and the shareholders of The
Growth Equity Portfolio, at a meeting held on January 12, 1997, also
conditionally approved an amendment ("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"). After an initial one year period, the Base Fee would be
increased or decreased at an annual rate of 25% of the net value added by GSAM
over the total return of the Russell 1000 Growth Index plus 30 basis points
during the 12 months immediately preceding the calculation date. 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. GSAM's total compensation under the
Performance Fee Amendment could not exceed 50 basis points with respect to any
12 month period; the minimum annual fee that would be payable to GSAM under the
amended agreement is 10 basis points. In addition, the Performance Fee Amendment
will not take effect unless and until certain relief is obtained from the SEC
from certain rules adopted by the SEC. The relief sought would permit the
proposed performance compensation to be based on the gross performance of that
portion of the Portfolio's assets assigned by the Board to GSAM. There can be no
assurance that the SEC will grant such relief. If the Performance Fee Amendment
is implemented, it could increase or decrease the fee currently payable to GSAM
and GSAM could earn a positive performance adjustment in declining markets if
the decline in the total return of GSAM Account is less than the decline in the
total return of the Russell 1000 Growth Index.
An amendment to the Portfolio Management Agreement between the Trust and
Institutional Capital Corporation ("ICAP") was approved by shareholders of The
Value Equity Portfolio on January 12, 1998, and by the Trust's Board on November
21, 1997. Pursuant to the amendment, the fee payable to ICAP by The Value Equity
Portfolio was increased from .30% of the average net assets of that portion of
the
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THE HIRTLE CALLAGHAN TRUST
May 6, 1998 Supplement to the Statement of Additional Information of September
15, 1997
Portfolio managed by ICAP to .35% of such assets. The amendment first became
effective on February 2, 1998.
Other Hedging Instruments
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As permitted under the Investment Company Act, a Portfolio may invest up to 5%
of its net assets in securities of other investment companies but may not
acquire more than 3% of the voting securities of the investment company.
Generally, the Portfolios do not make such investments. The Growth Equity
Portfolio does, however, invest in certain instruments known as Standard &
Poor's Depositary Receipts or "SPDRs" as part of its overall hedging strategies.
Such strategies are designed to reduce certain risks that would otherwise be
associated with the investments in the types of securities in which the
Portfolio invests and/or in anticipation of future purchases, including to
achieve market exposure pending direct investment in securities, provided that
the use of such strategies are not for speculative purposes and are otherwise
consistent with the investment policies and restrictions adopted by the
Portfolio. SPDRs are interests in a unit investment trust ("UIT") that may be
obtained from the UIT or purchased in the secondary market (SPDRs are listed on
the American Stock Exchange). The UIT will issue SPDRs in aggregations known as
"Creation Units" in exchange for a "Portfolio Deposit" consisting of (a) a
portfolio of securities substantially similar to the component securities
("Index Securities") of the Standard & Poor's 500 Composite Stock Price Index
("S&P Index"), (b) a cash payment equal to a pro rata portion of the dividends
accrued on the UIT's portfolio securities since the last dividend payment by the
UIT, net of expenses and liabilities, and (c) a cash payment or credit, called a
"Balancing Amount") designed to equalize the net asset value of the S&P Index
and the net asset value of a Portfolio Deposit. SPDRs are not individually
redeemable, except upon termination of the UIT. To redeem, the Portfolio must
accumulate enough SPDRs to reconstitute a Creation Unit. The liquidity of small
holdings of SPDRs, therefore, will depend upon the existence of a secondary
market. Upon redemption of a Creation Unit, the Portfolio will receive Index
Securities and cash identical to the Portfolio Deposit required of an investor
wishing to purchase a Creation Unit that day. The price of SPDRs is derived from
and based upon the securities held by the UIT. Accordingly, the level of risk
involved in the purchase or sale of a SPDR is similar to the risk involved in
the purchase or sale of traditional common stock, with the exception that the
pricing mechanism for SPDRs is based on a basket of stocks. Disruptions in the
markets for the securities underlying SPDRs purchased or sold by the Funds could
result in losses on SPDRs. Trading in SPDRs involves risks similar to those
risks involved in the writing of options on securities.
