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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
December 31, 1997
1933 Act File No. 87762
1940 Act File No. 811-8918
Form N-1A
Securities and Exchange Commission
Washington, D.C. 20549
Form N-1A
Registration Statement Under the Securities Act of 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [x]
and/or
Registration Statement Under the Investment Company Act of 1940 [x]
Amendment No. 9
(Check appropriate box or boxes.)
THE HIRTLE CALLAGHAN TRUST
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(Exact Name of Registrant as Specified in Charter)
575 E. Swedesford Road, Wayne PA 19087
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(Address of Principal Executive Offices) (Zip Code)
610-254-9596
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(Registrant's Telephone Number, including Area Code)
Laura Anne Corsell, Esq (With Copy To):
c/o Hirtle Callaghan & Co. Inc. Audrey Talley, Esq.
575 Swedesford Road Drinker Biddle & Reath
Wayne, PA 19087 1345 Chestnut Street
Philadelphia, PA, 19107-2700
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this
Registration Statement
It is proposed that this filing will become effective (check appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on _______ pursuant to paragraph (a)(i) of rule 485
[X] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
An indefinite number of Registrant's securities has been registered pursuant to
Rule 24f-2 under the Investment Company Act of 1940; the notice required by
that rule was filed on August 29, 1997.
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CROSS REFERENCE SHEET
(Required by Rule 481(a) under the Securities Act of 1933)
Part A -- Information required in a Prospectus Prospectus Heading
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Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page;
Management of the
Trust;Investment Objectives
and Policies; Investment
Practices and Risk
Considerations; General
Item 5. Management of the Fund Management of the
Trust
Item 5A. Management Discussion and Analysis [Annual Report]
Item 6. Capital Stock and other Securities General
Item 7. Purchase of Securities Being Offered Purchases and Redemptions
Item 8. Redemption or Repurchase Purchases and Redemptions
Item 9. Legal Proceedings Not Applicable
Part B -- Information required in a Statement Statement of Additional
of Additional Information Heading
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Cover Page; Management of
the Trust
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Item 13. Investment Objectives and Policies Further Information on
Investment Policies;
Hedging through the use
of Options; Hedging
through the use of Futures
Contracts; Hedging
through the use of
Currency-related
Instruments; Investment
Restriction
Item 14. Management of the Registrant Management of the Trust
Item 15. Control Persons and Principal Management of the Trust;
Holders of Securities Performance and Other
Information
Item 16. Investment Advisory and Other Management of the Trust
Services
Item 17. Brokerage Allocation Portfolio Transactions
and Valuation
Item 18. Capital Stock and Other Securities General (in Prospectus)
Item 19. Purchase, Redemption and Pricing of Additional Purchase and
Securities Being Offered Redemption Information;
Portfolio Transactions
and Valuation
Item 20. Tax Status Dividends, Distributions
and Taxes
Item 21. Underwriters Management of the Trust
Item 22. Calculation of Performance Data Not Applicable
Item 23. Financial Statements Independent Accountants
and Financial Statements
Part C - Other Information
Information required to be included in Part C is set forth under the
appropriate item so numbered in Part C of this Registration Statement.
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THE HIRTLE CALLAGHAN TRUST
575 E. Swedesford Road
Wayne PA 19087
March _____, 1998
The Hirtle Callaghan Trust ("Trust"), a diversified, open-end management
investment company, was organized in 1994 by Hirtle, Callaghan & Co., Inc.
("Hirtle Callaghan") to enhance Hirtle Callaghan's ability to acquire the
services of independent specialist money management organizations for the
clients Hirtle Callaghan serves. The Trust currently consists of seven
separate investment portfolios (each a "Portfolio"). Day-to-day portfolio
management services are provided to each of the Trust's five Portfolios by one
or more independent investment advisory organizations ("Investment Managers"),
selected by, and under the general supervision of, the Trust's Board of
Trustees ("Board"). Shares of the Trust are available exclusively to
investors ("Eligible Investors") who are clients of Hirtle Callaghan or
clients of financial intermediaries, such as investment advisers, acting in a
fiduciary capacity with investment discretion, that have established
relationships with Hirtle Callaghan.
The Trust currently consists of seven separate Portfolios, as listed below:
The Value Equity Portfolio seeks total return by investing in equity
securities.
The Growth Equity Portfolio seeks capital appreciation by investing in equity
securities.
The Small Capitalization Equity Portfolio seeks long term capital
appreciation by investing primarily in equity securities of smaller companies.
The International Equity Portfolio seeks total return by investing in a
diversified portfolio of equity securities of non-U.S. issuers.
The Limited Duration Municipal Bond Portfolio seeks a high level of current
income exempt from Federal income tax, consistent with the preservation of
capital by investing primarily in a diversified portfolio of securities issued
by municipalities and related entities. The Portfolio expects to maintain an
overall duration of less than 4 years.
The Fixed Income Portfolio seeks a high level of current income by investing
primarily in a diversified portfolio of debt securities, including U.S. and
non-U.S. government securities, corporate debt securities and asset-backed
issues. The Portfolio expects to maintain a dollar weighted effective average
portfolio maturity of between five and ten years.
The Intermediate Term Municipal Bond Portfolio seeks a high level of current
income exempt from Federal income tax, consistent with the preservation of
capital by investing primarily in securities issued by municipalities and
related entities. The Portfolio expects to maintain a dollar weighted
effective average portfolio maturity of between five and ten years.
This prospectus contains concise information about the Trust that a
prospective investor needs to know before investing in any of the Portfolios.
Please read it carefully and keep it for future reference. A Statement of
Additional Information, dated March _____, 1998, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
prospectus. It may be obtained upon request free of charge by contacting the
Trust at 575 E. Swedesford Road, Suite 205, Wayne, PA 19087, (610) 254-9596.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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EXPENSE INFORMATION
Table 1: Shareholder Transaction Expenses: NONE
Table 2: Annual Operating Expenses (as a percentage of average net assets) *
[TO BE SUPPLIED BY AMENDMENT]
The preceding table of annual operating expenses is designed to assist
investors in understanding expenses borne by investors as shareholders of the
Trust, either directly or indirectly.
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
[TO BE SUPPLIED BY AMENDMENT]
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.
As shown above in Table 1, none of the Trust's Portfolios impose any
shareholder transaction fees in connection with either the purchase or
redemption of shares. Investors who acquire shares of the Trust through a
program of services offered by a financial intermediary, such as an investment
adviser or bank, may be subject to charges for services. All such charges are
in addition to those expenses borne by the Trust and described in the
foregoing tables, or reflected in the Example shown. Investors should contact
any such financial intermediary for information concerning what, if any,
additional fees may be charged. For more complete descriptions of the various
costs and expenses, see "Management of the Trust," in this prospectus.
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FINANCIAL HIGHLIGHTS
(Selected per share data and rations for a share outstanding throughout each
period)
The following information has been audited with respect to the periods ended
June 30, 1996 and June 30, 1997 by __________, the Trust's independent
accountants, whose report thereon appears in the Trust's Annual Report to
Shareholders for the period ended June 30, 1997. The Annual Report to
Shareholders is incorporated by reference in the Trust's Statement of
Additional Information, which is available, without charge, upon request.
Information with respect to the six month period ended December 31, 1997 is
unaudited.
[TO BE SUPPLIED BY AMENDMENT]
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INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a brief description of the investment objective and
policies of each of the Trust's Portfolios, as well as the identity of the
Investment Manager(s) responsible for making day-to-day investment decisions
for each Portfolio. More detailed information about the Investment Managers
appears in this prospectus under the heading "Management of the Trust."
Further information about the types of instruments in which each Portfolio may
invest, and the risks associated with such investments, appears in this
prospectus under the heading "Investment Practices and Risk Considerations"
and in the related Statement of Additional Information. The Statement of
Additional Information also lists those investment restrictions to which the
various Portfolios are subject under the Investment Company Act of 1940
("Investment Company Act"). Unless otherwise noted, the investment objectives
and policies of the respective Portfolios as set forth below are not
fundamental and may be changed or modified by the Trust's Board without a
shareholder vote.
As further described in this prospectus under the heading "Management of the
Trust," investment discretion with respect to the assets of each Portfolio is
vested with one or more Investment Managers retained by the Trust. While the
Trust's Board is ultimately responsible for all matters relating to the Trust,
day-to-day decisions with respect to the purchase and sale of securities in
accordance with a Portfolio's investment objectives and policies are the
responsibility of the Investment Managers retained from time to time by the
Trust on behalf of the respective Portfolios. As is the case with any
investment in securities, an investment in any of the Portfolios involves
certain risks and there can be no assurance that any Portfolio will achieve
its objective.
The Equity Portfolios. Each of the Portfolios described below ("Equity
Portfolios") seeks to active its investment objective by investing primarily
in equity securities. In general, the prices of equity securities fluctuate
over time and, accordingly, an investment in any of the Equity Portfolios may
be more suitable for long-term investors who can bear the risk of short-term
principal fluctuation. Further information about equity related securities
appears in this prospectus under the heading "Investment Practices and Risk
Considerations: About Equity Securities.
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The Value Equity Portfolio. The investment objective of this Portfolio
is to provide total return consisting of capital appreciation and current
income. The Portfolio seeks to achieve this objective primarily through
investment in a diversified portfolio of equity securities. In selecting
securities for the Portfolio, the Investment Managers will generally emphasize
equity securities with a relatively lower price-earnings ratio but higher
dividend income than the average range for stocks included in the Standard &
Poor's 500 Stock Index; dividends paid by The Value Equity Portfolio can
generally be expected to be higher than those paid by The Growth Equity
Portfolio. Up to 15% of the Portfolio's total assets may be invested in
convertible securities; up to 15% of the Portfolio's total assets may be
invested in American Depository Receipts. " Hotchkis and Wiley and
Institutional Capital Corporation currently serve as Investment Managers for
The Value Equity Portfolio.
The Growth Equity Portfolio. The investment objective of this Portfolio
is to provide capital appreciation, with income as a secondary consideration.
The Portfolio will seek to achieve this objective by investing primarily in a
diversified portfolio of equity securities traded on registered exchanges or
in the over-the-counter market in the U.S. In selecting securities for the
Portfolio, the Investment Managers will generally emphasize equity securities
with long-term earnings growth potential and relatively higher price-earnings
ratios than the average range for stocks included in the Standard & Poor's 500
Stock Index. Although dividend paying securities will be considered for
inclusion in the Portfolio, dividends paid by The Growth Equity Portfolio can
generally be expected to be lower than those paid by The Value Equity
Portfolio. Up to 10% of the Portfolio's total assets may be invested in
convertible securities. In addition, a maximum of 20% of the Portfolio's
total assets may be invested in securities of non-U.S. issuers. Further
information about the special considerations applicable to international
investments appears in this prospectus under the heading "Investment Practices
and Risk Considerations: About Foreign Securities." Jennison Associates
Capital Corporation and Goldman Sachs Asset Management Company, Inc.
currently serve as Investment Managers for The Growth Equity Portfolio.
The Small Capitalization Equity Portfolio. The investment objective of
this Portfolio is to provide long term capital appreciation by investing
primarily in equity securities of smaller companies. Companies in which the
Portfolio may invest are those which, in the view of one or more of the
Portfolio's Investment Managers, have demonstrated, or have the potential
for, strong capital appreciation potential due to their relative market
position, anticipated earnings, changes in management or other factors. Under
normal market conditions, at least 65% of the Portfolio's total assets will be
invested in equity securities of companies with capitalizations of less than
$1.0 billion at the time of purchase; up to 35% of the Portfolio's total
assets may be invested in the equity securities of companies with larger
capitalizations. Clover Capital Management, Inc. and Frontier Capital
Management Company currently serve as Investment Managers for The Small
Capitalization Equity Portfolio.
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The International Equity Portfolio. The investment objective of this
Portfolio is to maximize total return, consisting of capital appreciation and
current income, by investing primarily in a diversified portfolio of equity
securities of non-U.S. issuers. Under normal market conditions, at least 65%
of the Portfolio's total assets will be invested in equity securities of
issuers located in at least three countries other than the United States.
Further information about the special considerations applicable to
international investments appears in this prospectus under the heading
"Investment Practices and Risk Considerations: About Foreign Securities."
Brinson Partners, Inc. currently serves as Investment Manager for The
International Equity Portfolio.
The International Equity Portfolio is designed to invest in the equity
securities of non-U.S. issuers that are believed to be undervalued in relation
to the issuer's assets, cash flow, earnings and revenues based upon the
Investment Manager's research and proprietary valuation systems. Although the
Portfolio may invest anywhere in the world, the Portfolio is expected to
invest primarily in the equity markets included in the Morgan Stanley Capital
International Europe, Australia, Far East Index ("EAFE"). Currently, these
markets are Japan, the United Kingdom, Germany, France, Canada, Italy, the
Netherlands, Australia, Switzerland, Spain, Hong Kong, Belgium, Singapore,
Malaysia, Sweden, Denmark, Norway, New Zealand, Austria, Finland and Ireland.
Securities of non-U.S. issuers purchased by the Portfolio may be purchased on
U.S. registered exchanges, the over-the-counter markets or in the form of
sponsored or unsponsored American Depositary Receipts traded on registered
exchanges or NASDAQ or sponsored or unsponsored European Depositary Receipts.
Securities may also be purchased on recognized foreign exchanges or on
over-the- counter markets overseas. In addition, the Portfolio may enter into
forward foreign currency exchange contracts, buy or sell options, futures or
options on futures relating to foreign currencies and may purchase securities
indexed to currency baskets in order to hedge against fluctuations in the
relative value of the currencies in which securities held by the Portfolio are
denominated. Further information about the Portfolio's use of these
instruments appears in this prospectus under the heading "Investment Practices
and Risk Considerations: About Hedging Strategies." The International Equity
Portfolio may also invest in high-quality short-term debt instruments
(including repurchase agreements) denominated in U.S. or foreign currencies
for temporary purposes. Further information about the Portfolio's temporary
investment practices appears in this prospectus under the heading "Investment
Practices and Risk Considerations: About Temporary Investment Practices."
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The Fixed-Income Portfolios. Each of the Portfolios
described below ("Fixed Income Portfolios")
seeks to active its investment objective by investing primarily
in fixed income securities. Morgan Grenfell Capital Management Incorporated
currently serves as Investment Manager for each of these Portfolios. In
selecting fixed income investments (including municipal securities), the
Investment Manager seeks to identify fixed income securities and sectors which
it believes to be undervalued relative to the market and alternative sectors
rather than forecasting changes in the interest rate environment. Fixed
income securities may be undervalued for a variety of reasons, such as market
inefficiencies relating to lack of market information about particular
securities and sectors, supply and demand shifts and lack of market
penetration by some issuers. Further information about investing in fixed
income securities, including the impact of maturity policies on investment
risk, appears in this prospectus in the section entitled "Investment Practices
and Risk Considerations." Relevant subheadings include, "About Fixed Income
Securities," and "About Temporary Investment Practices." Information
relating to the municipal securities in which The Limited Duration Municipal
Bond and the Intermediate Term Municipal Bond Portfolios ("Municipal
Portfolios") invest appears under the heading ""Investment Practices and Risk
Considerations: About Tax-Exempt Securities."
The Limited Duration Municipal Bond Portfolio. The investment objective
of this Portfolio is to provide a high level of current income exempt from
Federal income tax, consistent with the preservation of capital. The
Portfolio seeks to achieve this objective by investing primarily in a
diversified portfolio of municipal bonds (i.e., debt securities issued by
municipalities and related entities, the interest on which is exempt from
Federal income tax). It is a fundamental policy of the Portfolio that, under
normal circumstances, at least 80% of its net assets will be invested in such
securities (collectively, "Tax- Exempt Securities"). Tax-Exempt Securities
may include general obligation bonds and notes, revenue bonds and notes
(including industrial revenue bonds and municipal lease obligations), as well
as participation interests relating to such securities. In order to maintain
liquidity or in the event that the Investment Manager determines that
securities meeting the Portfolio's investment objective and policies are not
otherwise readily available for purchase, the Portfolio is authorized to
invest up to 20% of its total assets in taxable instruments.
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It is anticipated that the average credit quality of all Tax-Exempt Securities
purchased for the Portfolio will be comparable to securities rated "Aa" by
Moody's Investors Service ("Moody's"), or "AA" by Standard & Poor's
Corporation ("S&P"), respectively (or, in the case of municipal notes and
commercial paper, corresponding ratings assigned to such instruments). The
Portfolio is also, however, authorized to invest in Tax-Exempt Securities
that, at the time of investment, are rated at least investment grade (e.g.
"Baa" or better by Moody's, "BBB" by S&P or, if unrated, are determined by
the Portfolio's Investment Manager to be of comparable quality to securities
that have received such ratings). Securities rated "Baa" or "BBB" may be said
to have speculative characteristics in that changes in economic conditions or
other circumstances may be more likely to weaken the issuer's capacity to make
principal and interest payments than is the case with respect to securities
that have received higher ratings. The municipal notes in which the Portfolio
may invest will be limited to those obligations which are rated, at the time
of purchase, at least MIG-1 or VMIG-1 by Moody's or SP-1 by S&P or, if
unrated, are determined by the Investment Manager to be of comparable quality
to securities that have received such ratings. Tax-exempt commercial paper
must be rated at least A-1 by S&P or Prime -1 by Moody's at the time of
investment or, if not rated, determined by the Portfolio's Investment Manager
to be of comparable quality to issues that have received such ratings. Taxable
investments, if any, will be limited to those rated "Aa" or "AA" by Moody's or
S&P, respectively (or, in the case of securities not rated by these services
or unrated, of comparable quality).
Tax-Exempt Securities purchased for the Portfolio will have varying
maturities, but under normal circumstances the Portfolio will have an overall
duration of less than 4 years. Duration is a concept that incorporates a
bond's yield, coupon interest payments, final maturity and call features into
one measure that is used by investment professionals as a more precise
alternative to the concept of term-to-maturity. As a point of reference, the
maturity of a current coupon bond with a 3 year duration is approximately 3.5
years and the maturity of a current coupon bond with a 6 year duration is
approximately 9 years. Changes in interest rates can adversely affect the
value of an investment in the Portfolio. As an example, a one percent increase
in interest rates could result in a four percent decrease in the value of a
portfolio with a duration of four years. When interest rates are falling, a
fixed income portfolio with a shorter duration generally will not generate as
high a level of total return as one with a longer duration. When interest
rates are flat, shorter duration portfolios generally will not generate as
high a level of total return as longer duration portfolios. Because of its
shorter portfolio maturity, The Limited Duration Municipal Bond Portfolio can
be expected to be less volatile in response to changes in interest rates than
The Intermediate Term Municipal Bond Portfolio. Its yield, however, can also
be expected to be lower than its longer term counterpart.
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The Intermediate Term Municipal Bond Portfolio. The investment objective
of The Intermediate Term Municipal Bond Portfolio is to provide a high level
of current income exempt from Federal income tax consistent with the
preservation of capital. The Portfolio seeks to achieve its objective by
investing primarily in a diversified portfolio of municipal bonds with
characteristics similar to those in which The Limited Duration Municipal Bond
Portfolio invests, except that the Intermediate Term Municipal Bond Portfolio
expects to maintain a dollar weighted effective average remaining portfolio
maturity of 5 to 10 years. It is a fundamental policy of the Portfolio that,
under normal circumstances, at least 80% of its net assets will be invested in
Tax-Exempt Securities; the Portfolio is, however, authorized to invest up to
20% of its total assets in taxable instruments to maintain liquidity or in the
event that the Investment Manager determines that securities meeting the
Portfolio's investment objective and policies are not otherwise readily
available for purchase. Because of its longer portfolio maturity, The
Intermediate Term Municipal Bond Portfolio can be expected to be more volatile
in response to changes in interest rates than The Limited Duration Municipal
Bond Portfolio. Its yield, however, can also be expected to be higher than
its shorter-term counterpart.
The Fixed Income Portfolio. The investment objective of the Fixed Income
Portfolio is to seek a high level of income consistent with the preservation
of capital. The Fixed Income Portfolio expects to maintain a dollar weighted
effective average remaining portfolio maturity of 5 to 10 years, but may
purchase securities with any stated remaining maturity. The Fixed Income
Portfolio will normally invest at least 80% of its assets in fixed income
securities of all types, including U.S. Government securities; custodial
receipts evidencing interests in such securities; corporate bonds and
debentures; mortgage-backed securities and asset-backed securities; U.S.
dollar denominated securities of foreign governments, their political
subdivisions, agencies or instrumentalities, as U.S. dollar denominated
obligations of supra-national entities; taxable municipal securities, and
state, municipal or private activity bonds; equipment lease and trust
certificates; and repurchase agreements involving any of the foregoing.
Certain of these securities may have floating or variable rates of interest or
include put features that afford their holders the right to sell the security
at face value prior to maturity. Investments in U.S. dollar denominated
securities of non-U.S. issuers will not exceed 25% of its total assets. Under
normal conditions the Fixed Income Portfolio may hold up to 20% of its total
assets in cash or money market instruments in order to maintain liquidity, or
in the event that the Investment Manager determines that securities meeting
the Portfolio's investment objective and policies are not otherwise readily
available for purchase.
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The Fixed Income Portfolio invests primarily in fixed income securities that,
at the time of purchase, are either rated in one of three highest rating
categories assigned by Moody's, S&P or other ratings organizations, or
unrated securities determined by the Investment Manager to be of comparable
quality. However, the Portfolio may also invest up to 15% of its assets in
fixed income securities that are, at the time of purchase, either rated within
the fourth highest rating category assigned by Moody's or S&P, or, if unrated
by these, determined by the Investment Manager to be of comparable quality.
See "About Fixed Income Securities". In the event any security held by the
Fixed Income Portfolio is downgraded below the rating categories set forth
above, the Investment Manager will review the security and determine whether
to retain or dispose of that security. Fixed income securities rated in one of
the four highest ratings categories and unrated securities determined by the
Investment Manager to be of comparable quality are referred herein as
"investment grade fixed income securities." Fixed income securities in the
lowest investment grade category are considered medium grade securities. Such
securities have speculative characteristics, involve greater risk of loss than
higher quality securities, and are more sensitive to changes in the issuer's
capacity to pay.
INVESTMENT PRACTICES AND RISK CONSIDERATIONS
Although the Trust's Portfolios have different investment objectives and
policies, certain investment practices may be used by one or more of the
Portfolios. A general description of each such practice is set forth below,
together with the Portfolios to which each practice is available.
About Equity Securities. Each of the Equity Portfolios invests primarily in
equity securities. For purposes of the investment policies of these
Portfolios, the term "equity securities" includes total common and preferred
stock and rights and warrants to purchase other equity securities. A maximum
of 15% of the assets of The Value Equity Portfolio and up to 10% of the total
assets of The Growth Equity Portfolio may be invested in convertible issues,
the market value of which tend to move together with the market value of the
underlying common stock as a result of the conversion feature. Both The
International Equity Portfolio and The Small Capitalization Equity Portfolio
are also authorized to invest up to 5% of their respective total assets in
similar convertible issues, although these Portfolios have no present
intention of doing so. In general, investments in equity securities and
convertible issues are subject to market risks that may cause their prices to
fluctuate over time. Additionally, the value of securities, such as warrants
and convertible issues, is also affected by prevailing interest rates, the
credit quality of the issuer and any call provisions. Convertible issues
purchased for any Portfolio will be limited to those issues that are either
rated (or, unrated securities that, in the judgment of the relevant Investment
Manager, are comparable in quality to securities rated) investment grade or
better by Moody's or S&P or other ratings organization. Please refer to
"About Fixed Income Securities" in this section of the prospectus for further
information about such organizations and their ratings. Fluctuations in the
value of equity securities in which a Portfolio invests will cause the net
asset value of that Portfolio to fluctuate.
The Small Capitalization Equity Portfolio invests primarily in equity
securities issued by smaller companies, generally with capitalizations of less
than $1.0 billion. Equity securities of smaller companies involve greater risk
than is customarily associated with investments in larger, more established
companies. This increased risk may be due to the fact that such companies
often have limited markets and financial resources, narrow product lines and
lack of depth of management. The securities of smaller companies are often
traded in the over-the-counter markets and, if listed on national or regional
exchanges, may not be traded in volumes typical for such exchanges. Thus, the
securities of smaller companies are likely to be less liquid, and subject to
more abrupt or erratic price movements than larger, more established
companies. Further information about securities that may be illiquid appears
under the heading "About Illiquid Securities," below.
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About Foreign Securities. The International Equity Portfolio invests
primarily in equity securities of non-U.S. issuers, which securities may be
traded in the U.S. or abroad and which may be denominated in foreign
currencies; it may also invest in short-term debt instruments denominated in
foreign currencies under unusual market conditions. The Growth Equity
Portfolio may also invest in non-U.S. equity issues. The Fixed-Income
Portfolio may invest up to 25% of its assets in debt securities of non-U.S.
issuers, which securities may be denominated in U.S. or foreign currencies.
Equity securities of overseas issuers are subject to the same risks, described
above, applicable to equity securities in general. In addition, both debt
and equity securities of foreign issuers may involve risks which are not
ordinarily associated with investing in domestic securities. Such factors
include the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting
standards; less liquidity and more volatility in foreign securities markets;
the possibility of expropriation; the imposition of foreign withholding and
other taxes; the impact of foreign political, social or diplomatic
developments; limitations on the movement of funds or other assets between
different countries; difficulties in invoking legal process abroad and
enforcing contractual obligations; and the difficulty of assessing economic
trends in foreign countries. In addition, changes in foreign exchange rates
will affect the value of securities denominated or quoted in foreign
currencies relative to the U.S. dollar. Exchange rate movements can be large
and can endure for extended periods of time, affecting either favorably or
unfavorably the value of securities held in the Portfolio and, thus, the
Portfolio's net asset value per share. Securities transactions effected in
markets overseas are generally subject to higher fixed commissions than may be
negotiated on U.S. exchanges. Custody arrangements for the Portfolio's foreign
securities will be more costly than those associated with domestic securities
of equal value. Certain foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes is recoverable, the non- recovered portion of foreign withholding taxes
will reduce the Portfolio's income.
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The Value Equity Portfolio may invest in American Depositary Receipts
("ADRs"). ADRs are dollar-denominated receipts generally issued in registered
form by domestic banks, that represent the deposit with the bank of a security
of a foreign issuer. ADRs, which are publicly traded on U.S. exchanges and in
the over-the-counter markets, may be sponsored by the foreign issuer of the
underlying security or may be unsponsored. The International Equity Portfolio
and The Growth Equity Portfolio are also permitted to invest in ADRs.
Additionally, these portfolios may invest in European Depositary Receipts
("EDRs"). EDRs are similar to ADRs but are issued and traded in Europe. EDRs
are generally issued in bearer form and denominated in foreign currencies and,
for this reason, are subject to the currency risks described above. For
purposes of the Trust's investment policies, ADRs and EDRs are deemed to have
the same classification as the underlying securities they represent. Thus, an
ADR or EDR representing ownership of common stock will be treated as common
stock. ADR or EDR programs may be sponsored or unsponsored. Unsponsored
programs are subject to certain risks. In contrast to sponsored programs,
where the foreign issuer of the underlying security works with the depository
institution to ensure a centralized source of information about the underlying
company, including any annual or other similar reports to shareholders,
dividends and other corporate actions, unsponsored programs are based on a
service agreement between the depository institution and holders of ADRs or
EDRs issued by the program; thus investors bear expenses associated with
certificate transfer, custody and dividend payments. In addition, there may be
several depository institutions involved in issuing unsponsored ADRs or EDRs
for the same underlying issuer. Such duplication may lead to market confusion
because there would be no central source of information for buyers, sellers
and intermediaries, and delays in the payment of dividends and information
about the underlying issuer or its securities could result.
About Fixed Income Securities. Each of the Fixed-Income Portfolios invests
primarily in fixed income securities (sometimes referred to as "debt
securities") and the performance of these Portfolios is subject to certain
risks associated with investments in such securities.
Interest rate risk is the risk that the value of an investment will fluctuate
in response to changes in interest rates. Generally, the value of debt
securities will tend to decrease when interest rates rise and increase when
interest rates fall, with shorter term securities generally less sensitive to
interest rate changes than longer term securities. In periods of declining
interest rates, the yield of a Portfolio that invests in fixed income
securities will tend to be higher than prevailing market rates, and in periods
of rising interest rates, the yield of the Portfolio will tend to be lower.
Also, when interest rates are falling, the inflow of net new money to such a
Portfolio will likely be invested in portfolio instruments producing lower
yields than the balance of the Portfolio; in periods of rising interest rates,
the opposite can be true. The net asset value of a Portfolio investing in
fixed income securities can generally be expected to change as general levels
of interest rates fluctuate. The value of fixed income securities held by a
Portfolio generally varies inversely with changes in interest rates. The
market value of fixed income securities with longer effective maturities are
more sensitive to interest rate changes than those with shorter effective
maturities.
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Credit risk is the risk that an issuer (or in the case of certain securities,
the guarantor or counterparty) will be unable to make principal and interest
payments when due. The creditworthiness of an issuer may be affected by a
number of factors including the financial condition of the issuer (or
guarantor) and, in the case of foreign issuers, the financial condition of the
region. Debt securities (including convertible issues) may be rated by one or
more nationally recognized rating organization, such as S&P and Moody's (each
an "NRSRO"). Such ratings represent the judgment of the relevant NRSRO with
regard to the safety of principal and interest payments; they do not, however,
evaluate the risks of fluctuations in market value, are not a guarantee of
quality and may be subject to change even after the Trust has acquired the
security. Also, an NRSRO may fail to make timely changes in credit ratings in
response to subsequent events, so that an issuer's current financial
conditions may be better or worse than the rating indicates. If a security's
rating is reduced while it is held by the Trust, the appropriate Investment
Manager will consider whether the Trust should continue to hold the security
but is not required to dispose of it. A summary of the ratings categories of
Moody's and S&P appears in the Appendix to the Statement of Additional
Information.
The creditworthiness of the issuers of fixed-income securities is monitored by
the Investment Manager of the Fixed-Income Portfolios with reference to ratings,
if any, assigned to individual fixed income issues by NRSROs, as well as other
factors deemed relevant to the Investment Manager.The Fixed-Income Portfolios
may purchase debt securities that have not been assigned ratings by an NRSRO
but are determined by the relevant Investment Manager to be of a quality
comparable to rated securities that the Portfolio is permitted to purchase.
Fixed-income securities may be purchased on a "when-issued" basis. When
securities are purchased on a when-issued or delayed delivery basis, the
Portfolio must maintain, in a segregated account until the settlement date,
cash, U.S. Government securities or high-grade, liquid obligations in an
amount sufficient to meet the purchase price (or enter into offsetting
contracts for the forward sale of other securities it owns). The purchase of
securities on a when-issued or delayed delivery basis involves a risk of loss
if the value of the security to be purchased declines prior to the settlement
date. Although purchases of securities on a when-issued or delayed delivery
basis are expected to be made only with the intention of acquiring those
securities for the investment portfolio of the purchasing Portfolio,
when-issued or delayed delivery securities may be sold prior to settlement if
the purchasing Portfolio's Investment Manager deems it appropriate to do so.
The market value of when-issued securities may increase or decrease prior to
settlement as a result of changes in interest rates or other factors and
short-term gains or losses may be realized on any sales of such when-issued
securities.
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About Taxable Fixed Income Securities. Those instruments in which the Fixed
Income Portfolio may invest include those described below. Further information
is available in the Statement of Additional Information relating to the Trust.
U.S. Government Securities. U.S. Government securities are obligations
issued or guaranteed as to both principal and interest by the U.S. Government,
its agencies, instrumentalities or sponsored enterprises ("U.S. Government
securities"). Some U.S. Government securities, such as U.S. Treasury bills,
notes and bonds, are supported by the full faith and credit of the United
States. Others, such as obligations issued or guaranteed by U.S. Government
agencies or instrumentalities are supported either by (i) the full faith and
credit of the U.S. Government (such as securities of the GNMA), (ii) the
right of the issuer to borrow from the U.S. Treasury (such as securities of
the Federal Home Loan Banks), (iii) the discretionary authority of the U.S.
Government to purchase the agency's obligations (such as securities of the
Federal National Mortgage Association), or (iv) only the credit of the
issuer. Separately traded principal and interest components of securities
guaranteed or issued by the U.S. Government or its agencies, instrumentalities
or sponsored enterprises may also be acquired if such components are traded
independently under the Separate Trading of Registered Interest and Principal
of Securities program ("STRIPS") or any similar program sponsored by the U.S.
Government. STRIPS are sold as zero coupon securities. See "Zero Coupon
Securities."
Custodial Receipts. Custodial Receipts are interests in separately
traded interest and principal component parts of U.S. Government securities
that are issued by banks or brokerage firms and are created by depositing U.S.
Government securities into a special account at a custodian bank. The
custodian holds the interest and principal payments for the benefit of the
registered owners of the certificates or receipts. The custodian arranges for
the issuance of the certificates or receipts evidencing ownership and
maintains the register. Custodial receipts include Treasury Receipts ("TRs"),
Treasury Investment Growth Receipts ("TIGRs"), and Certificates of Accrual on
Treasury Securities ("CATS"). TIGRs and CATS are interests in private
proprietary accounts while TRs and STRIPS (see "U.S. Government Securities"
above) are interests in accounts sponsored by the U.S. Treasury. Receipts are
sold as zero coupon securities; for more information, see "Zero Coupon
Securities."
Zero Coupon Securities. STRIPS and custodial receipts (TRs, TIGRs and
CATS) are sold as zero coupon securities, that is, fixed income securities
that have been stripped of their unmatured interest coupons. Zero Coupon
Securities are sold at a (usually substantial discount) and redeemed at face
value at their maturity date without interim cash payments of interest or
principal. The amount of this discount is accreted over the life of the
security, and the accretion constitutes the income earned on the security for
both accounting and tax purposes. Because a Portfolio must distribute the
accreted amounts in order to qualify for favorable tax treatment, it may have
to sell portfolio securities to generate cash to satisfy the applicable
distribution requirements. As a result of these features, the market prices
of zero coupon securities are generally more volatile than the market prices
of securities that have similar maturity but that pay interest periodically.
Zero coupon securities are likely to respond to a greater degree to interest
rate changes than are non-zero coupon securities with similar maturity and
credit qualities.
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Mortgage-Backed and Asset-Backed Securities. Mortgage-backed securities
represent direct or indirect participation in, or are collateralized by and
payable from, mortgage loans secured by real property. Mortgage-backed
securities in which The Fixed Income Portfolio may invest include those issued
or guaranteed by U.S. Government agencies or instrumentalities such as the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation("FHLMC").
The Portfolio may also invest in mortgage-backed securities issued by
non-governmental entities, including collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits ("REMICS").
Asset-backed securities represent participation in, or are secured by and
payable from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and
receivables from revolving credit (credit card) agreements and other
categories or receivables. Such securities are generally issued by trusts and
special purpose corporations. Asset-backed securities present certain risks
that are not presented by mortgage-backed securities because asset-backed
generally do not have the benefit of a security interest in collateral that is
comparable to mortgage assets. In addition, there is the possibility that, in
some cases, recoveries on repossessed collateral may not be available to
support payments on these securities. M any mortgage and asset-backed
securities may be considered derivative instruments.
Mortgage-backed and asset-backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans.
Accordingly, the market values of such securities will vary with changes in
market interest rates generally and in yield differentials among various kinds
of U.S. Government securities and other mortgage-backed and asset-backed securit
ies. For example, during periods of declining interest rates, prepayment of
loans underlying mortgage-backed and asset-backed securities can be expected
to accelerate, and thus impair a Portfolio's ability to reinvest the returns
of principal at comparable yields. In periods of rising interest rates,
however, the rate at which the underlying mortgages are pre-paid is likely to
be reduced. As a result, the effective maturity and volatility of the
mortgaged-backed security involved would increase, as would the n the value of
the security itself. Under unusual circumstances, the ability of a Portfolio
to dispose of such mortgage or asset-backed issues could be impaired.
Mortgage Dollar Rolls. The Fixed Income Portfolio may enter into
mortgage "dollar rolls." This transaction involved the sale of securities by
the Portfolio for delivery in the current month and a simultaneous contract to
repurchase substantially similar (same type, coupon and maturity) securities
on a specified future date. During the roll period, the Portfolio forgoes
principal and interest paid on the securities. The Portfolio is compensated,
however, by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") or fee
income and by the interest earned on the cash proceeds of the initial sale. A
"covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position that matures
on or before the forward settlement date of the dollar roll transaction. The
Portfolio may enter into both covered and uncovered rolls.
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Municipal Securities. The Fixed Income Portfolio may, consistent with
its investment policies, invest in the types of municipal securities listed
below under the heading "Tax-Exempt Securities" but unlike the Municipal
Portfolio, municipal securities may be acquired by The Fixed Income Portfolio
without regard to the tax character of interest paid on any such security.
Foreign Government Securities. The foreign government securities in
which The Fixed Income Portfolio may invest generally consist of debt
obligations issued or guaranteed by national, state or provincial governments
or similar political subdivisions. Foreign government securities also include
debt obligations of supranational or quasi-governmental entities.
Quasi-governmental and supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the "World Bank"), the Japanese Development
Bank, the Asian Development Bank and the InterAmerican Development Bank.
Foreign government securities also include mortgage-related securities issued
or guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies. Investment in debt obligations of a
government, its agencies or instrumentalities involve the risks associated
with any investment in debt securities as well as the risks associated with an
investment in foreign securities, as described above. In addition,
investments in foreign government securities involve the risk that the
governmental entity may not be willing or able to repay the principal and/or
interest when due in accordance with the terms of such debt. A governmental
entity's ability or willingness to repay principal and interest due in a
timely manner may be affected by, among other factors, its cash flow
situation, the availability of sufficient foreign exchange on the date a
payment is due, the extent of its foreign reserves, the relative size of the
debt service burden to the economy as a whole and the political constraints to
which a governmental entity may be subject.
About Tax-Exempt Securities. Each of the Municipal Portfolios intends to
invest substantially all of their assets in Tax-Exempt Securities, including
municipal bonds, notes and related instruments. In determining whether to
invest in a particular Tax Exempt Security, the Portfolio's Investment Manager
will rely on the opinion of bond counsel for the issuer as to the validity of
the security and the exemption of interest on such security from Federal and
relevant state income taxes, and will not make an independent investigation of
the basis for any such opinion. Municipal bonds are debt obligations which
are typically issued with maturities of five years or more, issued by local,
state and regional governments or other governmental authorities. Municipal
bonds may be issued for a wide range of purposes, including construction of
public facilities, funding operating expenses, funding of loans to public
institutions; or refunding outstanding municipal debt. Municipal bonds may be
"general obligations" of their issuers, the repayment of which is secured by
the issuer's pledge of full faith, credit and taxing power. "Revenue" or
"special tax" bonds, such as municipal lease obligations and industrial
revenue bonds are obligations that are payable from revenues derived from a
particular facility or a special excise or other tax. Trusts for repayment of
revenue bonds are generally limited to revenues from the underlying project or
facility. As a consequence, the credit quality of such obligations is
ordinarily dependent on the credit quality of the private user or operator of
the project or facility rather than the governmental issuer of the obligation.
Municipal lease obligations likewise may not be backed by the issuing
municipality's credit and may involve risks not normally associated with
investments in Tax-Exempt Securities. For example, interest on municipal
lease obligations may become taxable if the lease is assigned. The Portfolio
may also incur losses if the municipal issuer does not appropriate funds for
lease payments on an annual basis, which may result in termination of the
lease and possible default. Municipal leases may also be illiquid. Further
information about securities that may be illiquid is included in this section
under the heading "About Illiquid Securities."
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The Municipal Portfolios may also invest in Tax-Exempt Securities, the
proceeds of which are directed, at least in part, to private, for-profit
organizations. Although the interest from such bonds is exempt from regular
Federal income tax, the interest may be treated as tax preference items for
purposes of the alternative minimum tax if the bond was issued after August 7,
1986; such bonds are often referred to as "AMT Bonds." The alternative minimum
tax is a special separate tax that applies to a limited number of taxpayers
who have certain adjustments to income or tax preference items. Municipal
notes are obligations issued by local, state and regional governments to meet
their short-term funding requirements. Municipal notes may be short-term debt
obligations which are issued pending receipt of taxes or other revenues, and
retired upon receipt of such revenues. Such securities include bond
anticipation notes, revenue anticipation notes and tax and revenue
anticipation notes. Other types of municipal notes in which the Portfolio may
invest are issued to fund municipal operations on a temporary or revolving
basis and may include construction loan notes, short-term discount notes,
tax-exempt commercial paper demand notes and similar instruments.
Long term fixed rate municipal bonds that have been coupled with puts granted
by a third party financial institution may also be purchased for the Municipal
Portfolios. Such instruments, which may be represented by custodial receipts
or trust certificates, are designed to enhance the liquidity and shorten the
duration of the underlying bond. Under certain circumstances, however, such
as the downgrading of the underlying bond or a change in its tax-exempt
status, the associated put will terminate automatically and the weighted
average maturity of the Portfolios may increase.
A "Participation interest" is a floating or variable rate security issued by a
financial institution. These instruments represent interests in municipal
bonds or other municipal obligations held by the issuing financial
institution. Participation interests are generally backed by an irrevocable
letter of credit or guarantee by a bank (which may or may not be the issuing
financial institution). The letter of credit feature is usually designed to
enhance the credit quality of the underlying municipal obligations. In
addition, participation interests generally carry a demand feature. These
demand features permit the Portfolios to tender the participation interest
back to the issuing financial institution and are usually designed to provide
liquidity for the Portfolio in the event of a downgrade in the credit quality
of the instrument or default in the underlying municipal obligation. The
Portfolio may acquire stand-by commitments, also known as "liquidity puts"
solely for the purpose of facilitating portfolio liquidity. These instruments
give the Portfolio the right to sell specified securities back to the seller,
at the option of the Portfolio, at a specified price. It is expected that
such stand-by commitments will be available without the payment of any direct
or indirect consideration. However, if advisable in the judgment of the
Investment Manager of the Portfolios, the Portfolios may pay for such
commitments at the time the underlying security is acquired.
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About Temporary Investment Practices. It is the intention of the Trust that eac
h of the Portfolios be fully invested in accordance with its respective
investment objectives and policies at all times. To maintain liquidity
pending investment, however, each of the Portfolios are authorized to invest
up to 20% of their respective assets in short-term money market instruments
issued, sponsored or guaranteed by the U.S. Government, its agencies or
instrumentalities or repurchase agreements secured by such securities
(collectively, "U.S. Government Securities"), or short-term money market
instruments of other issuers, which may include corporate commercial paper,
and variable and floating rate debt instruments, that have received, or are
comparable in quality to securities that have received, one of the two highest
ratings assigned by at least one NRSRO. The International Equity Portfolio is
also permitted to invest in U.S. Government Securities or short-term money
market instruments of other issuers denominated in U.S. dollars or other
currencies to maintain liquidity pending investment. Investments in
short-term instruments denominated in foreign currencies are subject to the
same risk considerations as described above under the heading "About Foreign
Securities." All such investments will be subject to the same quality
standards as those applicable to short-term investments made on behalf of the
Trust's domestic portfolios. Under extraordinary market or economic
conditions, all or any portion of a Portfolio's assets may be invested in
short-term money market instruments for temporary defensive purposes. Further
information about those instruments that each of the Portfolios may use for
temporary investment purposes appears in the Statement of Additional
Information, under the heading "Further Information on Investment Policies."
About Illiquid Securities. A Portfolio may not purchase illiquid securities
if, at the time of such purchase, more than 15% of the value of the
Portfolio's net assets will be invested in illiquid securities. Illiquid
securities are those that cannot be disposed of promptly within seven days and
in the usual course of business at the prices at which they are valued. Such
securities include, but are not limited to, time deposits and repurchase
agreements with maturities longer than seven days. Variable rate demand notes
with demand periods in excess of seven days, securities issued with
restrictions on their disposition ("restricted issues") and municipal lease
obligations, which may be unrated, will be deemed illiquid unless a
Portfolio's Investment Manager determines that such securities are readily
marketable and could be disposed of within seven days promptly at the prices
at which they are valued. In the case of municipal lease obligations, this
determination will be made by the Portfolio's Investment Manager in accordance
with guidelines established by the Trust's Board. The liquidity of restricted
issues and, in particular, the availability of an adequate dealer or
institutional trading market for those restricted issues ("Rule 144A
Securities") that are not registered for sale to the general public but can be
resold to institutional investors, will be determined by each Portfolio's
Investment Manager in accordance with guidelines established by the Trust's
Board. The institutional market for Rule 144A Securities is relatively new
and liquidity of the investments in such securities could be impaired if
trading does not further develop or declines. Factors relevant to the
liquidity of a particular instrument include the frequency of trades and
availability of dealer quotes, the number of dealers and market makers active
in the issue and the nature of marketplace trades (e.g. mechanics of transfer
and solicitation of offers).
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About Hedging Strategies. Each of the Portfolios may engage in certain
strategies ("Hedging Strategies") designed to reduce certain risks that would
otherwise be associated with their respective securities investments, and/or
in anticipation of futures purchases and to gain market exposure pending direct
investment in securities. These strategies include the
use of options on securities and securities indices,
options on stock index and interest rate futures contracts
and options on such futures contracts. The Growth Equity, International
Equity and Fixed Income Portfolios may also use forward foreign currency
contracts in connection with the purchase and sale of those securities,
denominated in foreign currencies, in which each is permitted to invest. In
addition, The International Equity Portfolio and The Fixed Income Portfolio
may use foreign currency options and foreign currency futures to hedge against
fluctuations in the relative value of the currencies in which securities held
by these Portfolios are denominated. A Portfolio may invest in the
instruments noted above (collectively, "Hedging Instruments") only in a
manner consistent with its investment objective and policies. A Portfolio may
not invest more than 10% of its total assets in option purchases and may not
commit more than 5% of its net assets to margin deposits on futures contracts
and premiums for options on futures contracts. The Portfolios may not use
Hedging Instruments for speculative purposes. Further information relating to
the use of Hedging Instruments, and the limitations on their use, appears in
the Statement of Additional Information.
There are certain overall considerations to be aware of in connection with the
use of Hedging Instruments in any of the Portfolios. The ability to predict
the direction of the securities or currency markets and interest rates
involves skills different from those used in selecting securities. Although
the use of various Hedging Instruments is intended to enable each of the
Portfolios to hedge against certain investment risks, there can be no
guarantee that this objective will be achieved. For example, in the event
that an anticipated change in the price of the securities (or currencies) that
are the subject of the strategy does not occur, it may be that the Portfolio
employing the Hedging Strategy would have been in a better position had it not
used such a strategy at all. Moreover, even if the Investment Manager
correctly predicts interest rate or market price movements, a hedge could be
unsuccessful if changes in the value of the option or futures position do not
correspond to changes in the value of investments that the position was
designed to hedge. Liquid markets do not always exist for certain Hedging
Instruments and lack of a liquid market for any reason may prevent a Portfolio
from liquidating an unfavorable position. In the case of an option, the
option could expire before it can be sold, with the resulting loss of the
premium paid by a Portfolio for the option. In the case of a futures
contract, a Portfolio would remain obligated to meet margin requirements until
the position is closed. In addition, options that are traded over-the-counter
differ from exchanged traded options in that they are two-party contracts with
price and other terms negotiated between the parties. For this reason, the
liquidity of these instruments may depend on the willingness of the counter
party to enter into a closing transaction. In the case of currency related
instruments, such as foreign currency options, options on foreign currency
futures, and forward foreign currency contracts, it is generally not possible
to structure transactions to match the precise value of the securities
involved since the future value of the securities will change during the
period that the arrangement is outstanding. As a result, such transactions
may preclude or reduce the opportunity for gain if the value of the hedged
currency changes relative to the U.S. dollar. Like over-the-counter options,
such instruments are essentially contracts between the parties and the
liquidity of these instruments may depend on the willingness of the counter
party to enter into a closing transaction.
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About Other Permitted Instruments. Each of the Portfolios may borrow money
from a bank for temporary emergency purposes, and may enter into reverse
repurchase agreements. A reverse repurchase agreement, which is considered a
borrowing for purposes of the Investment Company Act, involves the sale of a
security by the Trust and its agreement to repurchase the instrument at a
specified time and price. Accordingly, the Trust will maintain a segregated
account consisting of cash, U.S. Government securities or high-grade, liquid
obligations, maturing not later than the expiration of the reverse repurchase
agreement, to cover its obligations under reverse repurchase agreements. To
avoid potential leveraging effects of a Portfolio's borrowings, additional
investments will not be made while aggregate borrowings, including reverse
repurchase agreements, are in excess of 5% of a Portfolio's total assets.
Borrowings outstanding at any time will be limited to no more than one-third
of a Portfolio's total assets. Each of the Portfolios may lend portfolio
securities to brokers, dealers and financial institutions provided that cash,
or equivalent collateral, equal to at least 100% of the market value (plus
accrued interest) of the securities loaned is maintained by the borrower with
the lending Portfolio. During the time securities are on loan, the borrower
will pay to the Portfolio any income that may accrue on the securities. The
Portfolio may invest the cash collateral and earn additional income or may
receive an agreed upon fee from the borrower who has delivered equivalent
collateral. No Portfolio will enter into any securities lending transaction
if, at the time the loan is made, the value of all loaned securities, together
with any other borrowings, equals more than one-third of the value of that
Portfolio's total assets.
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, which are listed on the American Stock Exchange, are
interests in a unit investment trust ("UIT") that may be obtained from the UIT
or purchased in the secondary market. Further information about these and
other derivative instruments is contained in the Statement of Additional
Information.
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MANAGEMENT OF THE TRUST
The Board of Trustees. The Trust's Board is responsible for the overall
supervision and management of the business and affairs of the Trust, including
(i) the selection and general supervision of the Investment Managers that
provide day-to-day portfolio management services to the Trust's several
Portfolios; and (ii) for Portfolios for which more than one Investment Manager
has been retained, allocation of that Portfolio's assets among such Investment
Managers. In particular, the Board may, from time to time, allocate portions
of a Portfolio's assets between or among several Investment Managers, each of
whom may have a different investment style and/or security selection
discipline. The Board also may reallocate a Portfolio's assets among such
Investment Managers or terminate particular Investment Managers, if the Board
deems it appropriate to do so in order to achieve the overall objectives of
the Portfolio involved. The Board may also retain additional Investment
Managers on behalf of a Portfolio subject to the approval of the shareholders
of that Portfolio in accordance with the Investment Company Act.
The Investment Managers. As indicated above, day-to-day investment decisions
for each of the Portfolios are the responsibility of one or more Investment
Managers retained by the Trust. In accordance with the terms of individual
investment advisory contracts relating to the respective Portfolios, and
subject to the general supervision of the Trust's Board, each of the
Investment Managers is responsible for providing a continuous program of
investment management to, and placing all orders for, the purchase and sale of
securities and other instruments on behalf of the respective Portfolios they
serve.
Brinson Partners, Inc. ("Brinson") serves as Investment Manager for The
International Equity Portfolio. For its services to the Portfolio, Brinson
receives a fee, based on the average daily net asset value of that portion of
the Portfolio's assets managed by it, at an annual rate of 0.40%. Brinson, the
principal offices of which are located at 209 South LaSalle Street, Chicago,
Illinois 60604-1295, and its predecessor entities have provided investment
management services for international equity assets since 1974. The day-to-day
management of The International Equity Portfolio is the responsibility of a
team of Brinson's investment professionals; investment decisions are made by
committee and no person has primary responsibility for making recommendations
to the committee. Brinson had discretionary assets of approximately $81.3
billion under management as of June 30, 1997, of which approximately $1.9
billion represented assets of U.S. mutual funds. Brinson is a wholly-owned
indirect subsidiary of Swiss Bank Corporation, an internationally diversified
organization with operations in many aspects of the financial services
industry.
Clover Capital Management, Inc. ("Clover Capital") serves as an Investment
Manager for The Small Capitalization Equity Portfolio. For its services to the
Portfolio, Clover Capital receives a fee, based on the average daily net asset
value of that portion of the Portfolio's assets managed by it, at an annual
rate of 0.45%. Clover Capital, the principal offices of which are located at
11 Tobey Village Office Park, Pittsford, New York 14534, was incorporated in
1986. Michael E. Jones and Geoffrey H. Rosenberger are primarily responsible
for making day-to-day investment decisions for that portion of the Portfolio's
assets assigned to Clover Capital. Mr. Jones and Mr. Rosenberger are the
founders of Clover Capital and have served as Managing Directors of Clover
Capital since the firm's inception. Mr. Jones, a chartered financial analyst,
is a research analyst and portfolio manager. Mr. Rosenberger, also a chartered
financial analyst, manages Clover Capital's overall research effort. Clover
Capital had, as of August 31, 1997, assets of approximately $2.1 billion
under management, of which approximately $197 million represented assets of
mutual funds.
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Hotchkis and Wiley ("Hotchkis") serves as an Investment Manager for The Value
Equity Portfolio since August 1996. For its services to the Portfolio,
Hotchkis receives a fee, based on the average daily net asset value of that
portion of the Portfolio's assets managed by it, at an annual rate of 0.30%.
Hotchkis, the principal offices of which are located at 800 West Sixth Street,
Los Angeles, California, 90017, and its predecessor entities have provided
investment management services for equity assets since 1980. Sheldon
Lieberman is responsible for making day-to-day investment decisions for that
portion of The Value Equity Portfolio allocated to Hotchkis and Wiley. Before
joining Hotchkis and Wiley in 1994, Mr. Lieberman was the Chief Investment
Officer for the Los Angeles County Employees Retirement Association. Prior to
that, he was Manager of Trust Investments at Lockheed Corporation. As of
August 31, 1997, Hotchkis and Wiley managed total assets of approximately
$11.6 billion, of which approximately $2.6 billion represented assets of
mutual funds. Hotchkis, a division of Merrill Lynch Asset Management LP, is
controlled by Merrill Lynch & Co., Inc.
Frontier Capital Management Company ("Frontier") serves as an Investment
Manager for The Small Capitalization Equity Portfolio. For its services to
the Portfolio, Frontier receives a fee based on the average daily net asset
value of that portion of the Portfolio's assets managed by it, at an annual
rate of 0.45%. Frontier, the principal offices of which are located at 99
Summer Street, Boston, Massachusetts 02110, was established in 1980. Michael
Cavarretta is responsible for making the day-to-day investment decisions for
that portion of the Portfolio's assets assigned to Frontier. Mr. Cavarretta
has been an investment professional with Frontier since 1988. Before joining
Frontier, Mr. Cavarretta was a financial analyst with General Electric Co. and
attended Harvard Business School (M.B.A. 1988). Frontier had, as of June 30,
1997, approximately $3.0 billion in assets under management, of which
approximately $108 million represented assets of mutual funds.
Goldman Sachs Asset Management ("GSAM") serves as Investment Manager for the
Growth Equity Portfolio. For its services to the Portfolio, GSAM currently
receives a fee of 0.30%. The firm's 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 affiliates,
managed total assets of 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 Equity 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
and Mr. Clarke, each of whom is a Vice President of GSAM, joined GSAM in 1990
and 1992, respectively.
The Trust has conditionally approved an amendment to the GSAM Agreement
("Performance Fee Amendment"). Under the Performance Fee Amendment, GSAM would
be compensated based, in part, on the investment results achieved by it.
Under the amendment, to the GSAM Agreement that would permit GSAM to be
compensated on a performance fee basis. Implementation of the Performance Fee
Amendment, however, is subject to receipt of certain assurances from the staff
of the SEC that such implementation will not be viewed by the SEC staff as
inconsistent with the requirements of the Investment Advisers Act. There can
be no assurance that such relief will be granted by the SEC. 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 and could result in the payment of incentive
compensation during periods of declining markets. Further information about
the Performance Fee Amendment appears in the Statement of Additional
Information.
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Institutional Capital Corporation ("ICAP") serves as an Investment Manager for
The Value Equity Portfolio. For its services to the Portfolio, ICAP receives
a fee, based on the average daily net asset value of that portion of the
Portfolio's assets managed by it, at an annual rate of 0.35%. ICAP, the
principal offices of which are located at 225 West Wacker, Chicago, Illinois
60606, has provided investment management services for equity assets since
1970. Investment decisions for those assets of the Portfolio assigned to ICAP
are made by a team of ICAP investment professionals; investment decisions are
made by committee and no single individual has primary responsibility for
making recommendations to the committee. ICAP had assets of approximately
$9.3 billion under management as of August 31, 1997, of which approximately
$1.7 billion represented assets of mutual funds.
Jennison Associates Capital Corp. ("Jennison") serves as an Investment Manager
for The Growth Equity Portfolio. For its services to the Portfolio, Jennison
receives a fee, based on the average daily net asset value of that portion of
the Portfolio's assets managed by it, at an annual rate of 0.30%. Jennison,
the principal offices of which are located at 466 Lexington Avenue, New York,
New York 10017, was established in 1969. Robert B. Corman, Senior
Vice-President and a director of Jennison, is responsible for making
day-to-day investment decisions for the portion of the Portfolio's assets
assigned to Jennison. Mr. Corman, who is a chartered financial analyst, has
been an officer and investment professional with Jennison since 1981. As of
June 30, 1997, Jennison had approximately $34.9 billion under management, of
which approximately $5.6 billion represented assets of mutual funds. Jennison
is a wholly-owned subsidiary of Prudential Insurance Company of America.
Morgan Grenfell Capital Management Incorporated ("Morgan Grenfell") serves as
Investment Manager for The Limited Duration Municipal Bond Portfolio, The
Intermediate Term Municipal Bond Portfolio and The Fixed Income Portfolio. For
its services to each of the Intermediate Term Municipal Bond Portfolio and the
Fixed Income Portfolio, Morgan Grenfell receives, based of the average daily
net assets value of each such portfolio an annual fee of 0.25% . For its
services to the Limited Duration Municipal Bond Portfolio, Morgan Grenfell
receives a fee of .20% of the average net asset value of that Portfolio..
Morgan Grenfell, whose principal offices are located at 885 Third Avenue, New
York, New York 10022, has been active in managing municipal securities since
1989. David Baldt, an Executive Vice-President of Morgan Grenfell is
primarily responsible for making the day-to-day investment decisions for each
of the Trust's Fixed-Income Portfolios. Mr. Baldt has managed fixed income
investments since 1973, and has been with Morgan Grenfell since 1989. As of
September 30, 1997, Morgan Grenfell managed assets of approximately $8.9
billion, of which approximately $1.5 billion represented assets of mutual
funds. Morgan Grenfell is an indirect, wholly-owned subsidiary of
Deutschebank, A.G., a German financial services conglomerate.
Consulting Arrangement. Pursuant to an agreement with the Trust, ("HCCI
Consulting Agreement"), Hirtle Callaghan continuously monitors the performance
of various investment management organizations, including the Investment
Managers. The HCCI Consulting Agreement provides that Hirtle Callaghan will
make its officers available to serve as officers and/or Trustees of the Trust,
and maintain office space sufficient for the Trust's principal office. For its
services under The HCCI Consulting Agreement, Hirtle Callaghan is entitled to
receive an annual fee of .05% of each Portfolio's average net assets. Hirtle
Callaghan's principal offices are located at 575 East Swedesford Road, Wayne,
Pennsylvania 19087. Hirtle Callaghan was organized in 1988 and has no history
of operation prior to that date. Hirtle Callaghan is registered as an
investment adviser under the Investment Advisers Act of 1940 and, as of August
31, 1997, had approximately $1.6 billion of assets under management. Hirtle
Callaghan is controlled by Jonathan Hirtle and Donald E. Callaghan, each of
whom also serves on the Trust's Board and as an officer of the Trust.
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Administration, Distribution, and Related Services. BISYS Fund Services, L.P.
("BISYS") 3435 Stelzer Road, Columbus, Ohio 43219 has been retained, pursuant
to a separate Administrative Services Contract with the Trust, to serve as
the Trust's administrator. Services performed by BISYS in that capacity
include, but are not limited to: (a) general supervision of the operation of
the Trust and coordination of services performed by the various service
organizations retained by the Trust; (b) regulatory compliance, including the
compilation of information for documents and reports furnished to the
Securities and Exchange Commission and corresponding state agencies; (c)
assistance in connection with the preparation and filing of the Trust's
registration statement and amendments thereto; and (d) maintenance of the
Trust's registration in the various states in which shares of the Trust are
offered. Pursuant to separate contracts, BISYS or its affiliates also serve as
the Trust's transfer and dividend disbursing agent, as well as the Trust's
accounting agent and receives fees for such services. For its services, BISYS
receives a single all-inclusive fee payable. ("Omnibus Fee"). The Omnibus
Fee is to be computed daily and paid monthly in arrears, at an annual rate of
.10% of the aggregate average daily 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 daily
net assets of the Limited Duration Municipal Bond, Fixed Income and
Intermediate Term Municipal Bond Portfolios and of any additional portfolios
that invest primarily in debt securities that may be created in the future by
the Trust.
BISYS performs similar services for mutual funds other than the Trust. BISYS
and its affiliated companies are wholly-owned by The BISYS Group, Inc., a
publicly-held company which is a provider of information processing, loan
servicing and 401(k) administration and record keeping services to and through
banking and other financial organizations. Affiliates of BISYS also serve as
the Trust's distributor. Bankers Trust Company has been retained by the Trust
to serve as custodian for the assets of each of the Portfolios.
Expenses. The Trust pays all expenses incurred in its operation, other than
those expenses expressly assumed by Hirtle Callaghan, the Investment Managers
or other service organizations. Those Trust expenses that can be readily
identified as belonging to a particular Portfolio will be paid by that
Portfolio. General expenses of the Trust that are not so identified will be
allocated among the Portfolios based on their relative net assets at the time
those expenses are accrued. The Trust's principal expenses are the fees
payable to the Investment Managers; the Omnibus fee payable to BISYS for
administration, transfer agency and portfolio accounting services; fees for
domestic and international custody of the Trust's assets payable to Bankers
Trust Company; fees for independent auditing and for legal services; fees for
filing reports and registering shares with regulatory bodies; and consulting
fees payable to Hirtle Callaghan.
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PURCHASES AND REDEMPTIONS
General Information About Purchases. Shareholder accounts in the Trust may be
established only by, and shares of each of the Portfolios are available
exclusively to, Eligible Investors. Shares are sold at net asset value and
without sales charge. Payment for purchases of Trust shares may be made by
wire transfer or by check drawn on a U.S. bank. All purchases must be made in
U.S. dollars. The Trust reserves the right to reject any purchase order.
Purchase orders may be received by the Trust's transfer agent on any day the
Trust is open for business ("Business Day"). The Trust is open every day,
Monday through Friday, that the New York Stock Exchange is open for trading,
which excludes the following business holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Trust reserves the right to
reject any purchase order and will not issue share certificates. Purchases of
shares of the Portfolios will be executed at the net asset value per share
next computed after receipt by the Trust of a purchase order placed on behalf
of an Eligible Investor and after the order has been accepted by the Trust. If
such a purchase order is received prior to 4 P.M. Eastern Time on any Business
Day, the purchase will be executed at the net asset value per share determined
as of the close of trading on the New York Stock Exchange on that Business
Day--normally 4:00 P.M. Eastern Time. Purchase orders received after 4 P.M.
Eastern Time will be executed at the net asset value per share as determined
on the following Business Day.
General Information About Redemptions. Shares may be redeemed on any Business
Day. Shares will be redeemed at the net asset value next computed after
receipt of a redemption request in proper form by the transfer agent. The
Trust reserves the right to redeem the account of any shareholder if as a
result of redemptions, the aggregate value of shares held in a Portfolio falls
below a minimum of $5,000 after 30 days notice and provided that, during such
30 day period, such aggregate value is not increased to at least such minimum
level. Under extraordinary conditions, as provided under the rules of the
Securities and Exchange Commission, payment for shares redeemed may be
postponed, or the right of redemption suspended.
Redemptions may be made in number of shares or a stated dollar amount by
sending a written request to the Trust's transfer agent at the address shown
on the first page of this prospectus. Redemption requests must be signed in
the exact name in which the shares are registered; redemption requests for
joint accounts require the signature of each joint owner. For redemption
requests of $25,000 or more, each signature must be guaranteed by a commercial
bank or trust company which is a member of the Federal Deposit Insurance
Corporation, a member firm of a national securities exchange and certain other
securities dealers and credit unions. Guarantees must be signed by an
authorized signatory of the guarantor institution and "Signature Guaranteed"
must appear with the signature.
Proceeds of redemption requests transmitted by mail will normally be paid by
check and mailed to the shareholder's address as indicated on the Trust's
books. Redemption proceeds of $2,500 or more may be transferred electronically
to the bank account number, if any, recorded on the Trust's books. Wire
redemption requests received prior to 1:00 P.M. on any Business Day will be
effected on that Business Day and wired to your bank on the following Business
Day. The Trust ordinarily will make payment for all shares redeemed within
seven days after receipt of a redemption request in proper form. Payment of
redemption proceeds for shares purchased by check may be delayed for a period
of up to fifteen days after their purchase, pending a determination that the
check has cleared.
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Additional Information About Purchases and Redemptions. The Trust does not
impose investment minimums or sales charges of any kind. It is expected,
however, that shares of the Trust will be acquired through a program of
services offered by a financial intermediary, such as an investment adviser or
bank, and that shares will be held, of record, in the name of such
intermediary or a related entity. Intermediaries may impose service or
advisory fees, which are in addition to those expenses borne by the Trust and
described in this prospectus under the heading "Expense Information."
Investors should contact such intermediary for information concerning what, if
any, additional fees may be charged.
The Trust may, at its discretion, permit investors to purchase shares of a
Portfolio through an exchange of securities. Any securities exchanged must
meet the investment objectives, policies and limitations of the Portfolio
involved, must have a readily ascertainable market value, must be liquid and
must not be subject to restrictions on resale. The market value of any
securities exchanged plus any cash, must be at least $250,000. Shares
acquired through any such exchange will not be redeemed until the transfer of
securities to the Trust has settled -- usually within 15 days following the
purchase by exchange. The Trust may, at its discretion, pay any portion of
the redemption amount by a distribution "in kind" of securities held in a
Portfolio's investment portfolio. Investors will incur brokerage charges on
the sale of these portfolio securities.
Shareholder Reports and Inquiries. Shareholders will receive semi-annual
reports containing unaudited financial statements as well as annual reports
containing financial statements which have been audited by the Trust's
independent accountants. Each shareholder will be notified annually as to the
Federal tax status of distributions made by the Portfolios in which such
shareholder is invested. Shareholders may contact the Trust by calling the
telephone number, or by writing to the Trust at the address, shown on the
first page of this prospectus
PORTFOLIO TRANSACTIONS AND VALUATION
Portfolio Transactions. Subject to the general supervision of the Board, each
of the Investment Managers is responsible for placing orders for securities
transactions for the Portfolio they serve. Purchases and sales of equity
securities will normally be conducted through brokerage firms entitled to
receive commissions for effecting such transactions. In placing orders, it is
the policy of the Trust to ensure that the most favorable execution for its
transactions is obtained. Where such execution may be obtained from more than
one broker or dealer, securities transactions may be directed to those who
provide research, statistical and other information to the Trust or the
Investment Managers. Purchases and sales of debt securities are expected to
occur primarily with issuers, underwriters or major dealers acting as
principals. Such transactions are normally effected on a net basis and do not
involve payment of brokerage commissions. The Trust has no obligation to
enter into securities transactions with any particular dealer, issuer,
underwriter or other entity. In addition, the Board may, to the extent
consistent with the Investment Company Act and other applicable law, authorize
Investment Managers to direct transactions to service organizations retained
by the Trust or their affiliates; under appropriate circumstances, such
transactions may be used for the purpose of offsetting fees otherwise payable
by the Trust for custody, transfer agency or other services.
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Valuation. The net asset value per share of the Portfolios is determined once
on each Business Day as of the close of the New York Stock Exchange, which is
normally 4 P.M. Eastern Time. Each Portfolio's net asset value per share is
calculated by adding the value of all securities and other assets of the
Portfolio, subtracting its liabilities and dividing the result by the number
of its outstanding shares. Those assets that are traded on an exchange or in
the over-the-counter market are valued based upon market quotations.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Trust's
Board. Other assets for which market quotations are not readily available are
valued at their fair value as determined in good faith by the Trust's
Trustees. With the approval of the Board, any of the Portfolios may use a
pricing service, bank or broker- dealer experienced in such matters to value
the Portfolio's securities. A more detailed discussion of net asset value and
security valuation is contained in the Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividend and Capital Gain Distribution Options. It is anticipated that The
Value Equity Portfolio, The Growth Equity Portfolio and The Small
Capitalization Equity Portfolio will declare and distribute dividends from net
investment income on a quarterly basis. The Limited Duration Municipal Bond,
Intermediate Term Municipal Bond and Fixed Income Portfolios will declare and
distribute dividends from net investment income daily, with payments on a
monthly basis. The International Equity Portfolio will declare dividends from
net investment income semi-annually. Net realized capital gains, if any, will
be distributed at least annually for each Portfolio. Unless another
distribution option is elected, dividends and capital gain distributions will
be credited to shareholder accounts in additional shares of the Portfolio with
respect to which they are paid. Elections may be made by writing to the Trust
c/o its Transfer Agent. Elections must be received in writing by the transfer
agent at least five days prior to the payable date of the dividend in order
for the election to be effective for that dividend and on or before the record
date of a distribution in order to be effective for that distribution. In the
event that a shareholder redeems all shares in an account between the record
date and the payable date, the value of dividends or gain distributions
declared and payable will be paid in cash regardless of the existing election.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders on December 31 of such year, provided
such dividends are paid during January of the following year. Investors
should also be careful to consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time may
reflect the amount of the forthcoming distribution. Those investors
purchasing just prior to a distribution may nevertheless be taxed on the
entire amount of the distribution received, although the distribution may have
the effect of reducing the market value of shares below the shareholder's
cost. The Trust will provide written notices to shareholders annually
regarding the tax status of distributions made by each Portfolio.
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Federal Taxes. The following discussion is only a brief summary of some of
the important Federal tax considerations generally affecting the Portfolios
and their shareholders and is not intended as a substitute for careful tax
planning. Dividends and distributions may also be taxable under state and
local tax laws. In addition, shareholders who are nonresident alien
individuals, foreign trusts or estates, foreign corporations or foreign
partnerships may be subject to different tax treatment under U.S. Federal
income tax laws than shareholders who are U.S. residents. Furthermore, future
legislative or administrative changes or court decisions may materially affect
the tax consequences of investing in one or more Portfolios of the Trust.
Accordingly, shareholders are urged to consult their tax advisers with
specific reference to his or her particular tax situation.
Each Portfolio intends to qualify annually to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended ("Code"). In order to do so, each Portfolio must distribute at least
90% of its taxable income annually, and must derive at least 90% of its gross
income from its investment activities. So long as a Portfolio qualifies for
this tax treatment, that Portfolio will be not be subject to Federal income
tax on amounts distributed to shareholders.
Shareholders, however, will be subject to income or capital gains taxes on
distributed amounts (except for dividends that are treated as tax-exempt
dividends such as those expected to be paid by the Municipal Portfolios),
regardless of whether such dividends and/or distributions are paid in cash or
reinvested in additional shares. Distributions paid by a Portfolio out of long
term capital gains are taxable to those investors subject to income tax as
long-term capital gains, regardless of the length of time an investor has
owned shares in the Portfolio. All other distributions, to the extent they
are taxable, are taxed to shareholders as ordinary income. A redemption of
shares of any Portfolio may also result in a capital gain or loss to the
redeeming shareholder. A loss incurred upon redemption of shares of any
Portfolio of the Trust (other than the Municipal Portfolios) held for six
months or less will be treated as long-term capital loss to the extent of
capital gain dividends received with respect to such shares.
Tax Matters Relating to the Municipal Portfolios. As a matter of fundamental
policy, The Limited Duration Municipal Bond and The Intermediate Term
Municipal Bond Portfolios intend to invest a sufficient portion of its assets
in municipal bonds and notes so that it will qualify to pay "exempt-interest
dividends." Exempt- interest dividends distributed to shareholders are
excluded from a shareholder's gross income for Federal tax purposes. Under
certain circumstances, receipt of exempt-interest dividends may be relevant to
shareholders in determining their tax liability. Dividends paid from gains
realized by the Portfolio from the disposition of a tax-exempt bond that was
acquired after April 30, 1993 for a price less than the principal amount of
the bond is taxable to shareholders as ordinary income to the extent of the
accrued market discount. Exempt interest dividends paid by the Municipal
Portfolios, although exempt from regular income tax in the hands of a
shareholder of the Portfolio, are includable in the tax base for determining
the extent to which a shareholder's Social Security Benefits would be subject
to Federal income tax. Shareholders are required to disclose their receipt of
tax-exempt interest on their Federal income tax returns. In addition, a
portion of such dividends may be derived from income on "private activity"
municipal bonds and therefore may be a preference item under Federal tax law
and subject to the Federal alternative minimum tax. A loss incurred upon the
redemption of shares of the Municipal Portfolios held for six months or less
will be disallowed to the extent of exempt-interest dividends paid with
respect to such shares; any loss not so disallowed will be treated as a
long-term capital loss to the extent of capital gain dividends received with
respect to such shares.
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Tax Matters Relating to International Investments. Foreign currency gains and
losses realized by a Portfolio, including those from forward currency exchange
contracts and certain futures and options on foreign currencies, will increase
or decrease the Portfolio's investment company taxable income available to be
distributed to shareholders as ordinary income. If foreign currency losses
exceed other investment company taxable income during a taxable year, the
Portfolio would not be able to make any ordinary dividend distributions, and
any distributions made before the losses were realized but in the same taxable
year would be recharacterized as a return of capital to shareholders, thereby
reducing each shareholder's basis in shares of that Portfolio. A Portfolio may
be subject to foreign withholding taxes on income from certain foreign
securities, if any, held. If more than 50% of the total assets of this
Portfolio is invested in securities of foreign corporations, the Portfolio may
elect to pass-through to its shareholders their pro rata share of foreign
taxes paid by such Portfolio. If this election is made, shareholders will be
(i) required to include in their gross income their pro rata share of foreign
source income (including any foreign taxes paid by the Portfolio), and (ii)
entitled to either deduct (as an itemized deduction in the case of
individuals) their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. income tax,
subject to certain limitations under the Code.
Back-up Withholding; Dividends-Received Deduction. The Trust is required to
withhold 31% of taxable dividends, capital gains distributions, and
redemptions paid to shareholders who have not provided the Trust with their
certified taxpayer identification number in compliance with regulations
adopted by the Internal Revenue Service. Dividends paid from net investment
income by the Equity Portfolios will generally qualify in part for the
corporate dividends-received deduction available to corporate investors. The
portion of the dividends so qualified, however, depends on the aggregate
qualifying dividend income received by each such Portfolio from domestic
(U.S.) sources. Further information about tax matters relating to the Trust,
including its foreign investments, appears in the Statement of Additional
Information under the heading "Dividends, Distributions and Taxes."
PERFORMANCE INFORMATION
Yield and Effective Yield. From time to time, each of the Portfolios may
quote its "yield" and/or its "total return" in sales literature and in
presentations to prospective investors. These figures are based on historical
earnings and are not intended to indicate future performance. To arrive at a
Portfolio's "yield," the net investment income generated by an investment in
the Portfolio during a 30 day (or one month) period, is determined and the
resulting figure is annualized, (i.e. assumed to be the amount of income
generated each week over a 52-week period) and expressed as a percentage of
the initial investment. The "effective yield" of a Portfolio is calculated in
a similar manner but, when annualized, the income earned by an investment in
the Portfolio is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The yield of any investment is generally a function of
prevailing interest rates, portfolio quality and maturity, type of investment
and operating expenses. The yield on shares of the Portfolio will fluctuate
and is not necessarily representative of future results. The Municipal
Portfolios may also quote its tax-equivalent yield; this figure is calculated
by determining the pre-tax yield which, after being taxed at a stated rate,
would be equivalent to the yield determined as described above.
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Average Annual Total Return. This figure shows the average percentage change
in value of a particular investment from the beginning date of the measuring
period to the end of the measuring period. The calculations required to
determine average total return will reflect changes in net asset value per
share and assume that any income dividends and/or capital gains distributions
made during the period were reinvested. Figures will be given for recent one,
five and ten year periods (if applicable), and may be given for other periods
as well (such as from commencement of operations, or on a year-by-year
basis). In addition, each Portfolio may present its total return over
different periods by means of aggregate, average, year-by-year or other types
of total return figures, or compare the yield or total return of a Portfolio
to those of other mutual funds with similar investment objectives and to other
relevant indices. For example, the performance of any of the Portfolios may
be compared to the data prepared by Lipper Analytical Services, Inc., a
widely-recognized independent service that monitors the performance of mutual
funds. The Portfolios may also compare their individual performance records
to those of relevant indices, such as the Standard & Poor's 500 Stock Index,
the Russell 1000 Growth Stock Index, and the Morgan Stanley Capital
International Europe, Australia, Far East Index ("EAFE").
GENERAL
The Trust was organized as a Delaware business trust on December 15, 1994, and
is registered with the Securities and Exchange Commission as an open-end
diversified, series, management investment company. The Trust currently
offers shares of seven investment portfolios, each with a different objective
and differing investment policies. The Trust may organize additional
investment portfolios in the future. The Trust is authorized to issue an
unlimited number of shares, each with a par value of $.001. Under the Trust's
Amended and Restated Declaration of Trust, the Board has the power to classify
or reclassify any unissued shares from time to time, and to increase the
number of authorized shares. Each share of the respective Portfolios
represents an equal proportionate interest in that Portfolio. Each share is
entitled to one vote for the election of Trustees and any other matter
submitted to a shareholder vote. Voting rights are not cumulative and,
accordingly, the holders of more than 50% of the aggregate shares of the Trust
may elect all of the Trustees. Shares of the Trust do not have preemptive or
conversion rights and, when issued for payment as described in this
prospectus, shares of the Trust will be fully paid and non-assessable.
The Trust is authorized to issue two classes of shares in each of its
portfolios. Class A shares and Class B shares have identical rights and
preferences; the only difference between the two classes is that each has
established a separate CUSIP number, which aids those investment managers
whose clients purchase shares of the Trust in tracking information relating to
their clients' accounts.
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 communications in such matters.
<PAGE>
<PAGE>
THE HIRTLE CALLAGHAN TRUST
TABLE OF CONTENTS
Expense Information
Financial Highlights
Investment Objectives and Policies
The Equity Portfolios
The Value Equity Portfolio
The Growth Equity Portfolio
The Small Capitalization Equity Portfolio
The International Equity Portfolio
The Fixed-Income Portfolios
The Limited Duration Municipal Bond Portfolio
The Intermediate Term Municipal Bond Portfolio
The Fixed Income Portfolio
Investment Practices and Risk Considerations
About Equity Securities
About Foreign Securities
About Fixed Income Securities
About Taxable Fixed Income Securities
About Tax-Exempt Securities
About Temporary Investment Practices
About Illiquid Securities
About Hedging Strategies
About Other Permitted Instruments
Management of the Trust
Purchases and Redemptions
Portfolio Transactions and Valuation
Dividends, Distributions and Taxes
Performance Information
General
No person has been authorized to give any information or to make
representations not contained in this prospectus in connection with any
offering made by this prospectus and, if given or made, such information must
not be relied upon as having been authorized by the Trust or its distributor.
This prospectus does not constitute an offering by the Trust or by its
distributor in any jurisdiction in which such offering may not lawfully be
made.
<PAGE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
The Hirtle Callaghan Trust
575 E. Swedesford Road
Wayne, PA 19087
This statement of additional information is designed to supplement information
contained in the prospectus relating to The Hirtle Callaghan Trust ("Trust").
The Trust is an open-end, diversified, series, management investment company
registered under the Investment Company Act of 1940 ("Investment Company
Act"). This document, although not a prospectus, is incorporated by reference
in its entirety in the Trust's prospectus and should be read in conjunction
with the Trust's prospectus dated March , 1998. A copy of that prospectus
is available by contacting the Trust at 610-254-9596.
<TABLE>
<CAPTION>
Statement of Additional Information Heading PAGE Corresponding Prospectus Heading
- ------------------------------------------- ____ --------------------------------
<S> <C>
Management of the Trust Management of the Trust; General;
Expense Information
Further Information About the Trust's Investment Investment Objectives and Policies
Policies Investment Practices and Risk
Considerations
Hedging through the Use of Options Investment Practices and Risk
Considerations: About Hedging
Strategies
Hedging through the Use of Investment Practices and Risk
Futures Contracts and Related Instruments Considerations: About Hedging
Strategies
Hedging through the Use of Investment Practices and Risk
Currency-Related Instruments Considerations: About Hedging
Strategies
Investment Restrictions Investment Objectives and Policies
Investment Practices and Risk
Considerations
Additional Purchases and Redemption Information Purchases and Redemptions
Portfolio Transactions and Valuation Portfolio Transactions and Valuation
Dividends, Distributions and Taxes Dividends, Distributions and Taxes
Performance Information Performance Information
Financial Statements and Independent Accountants
Ratings Appendix
</TABLE>
This Statement of Additional Information does not contain all of the
information set forth in the registration statement filed by the Trust with
the Securities and Exchange Commission ("SEC") under the Securities Act of
1933. Copies of the registration statement may be obtained at a reasonable
charge from the SEC or may be examined, without charge, at its offices in
Washington, D.C.
The Trust's Annual Report to Shareholders dated June 30, 1997 accompanies this
Statement of Additional Information and is incorporated by reference herein.
The date of this Statement of Additional Information is________ 1998.
<PAGE>
<PAGE>
MANAGEMENT OF THE TRUST
Trustees and Officers. The Trust's Board of Trustees ("Board") is responsible
for the overall supervision and management of the business and affairs of the
Trust, including (i) the selection and general supervision of those investment
advisory organizations ("Investment Managers") retained by the Trust to
provide portfolio management services to each of its separate investment
portfolios (each a "Portfolio"); and (ii) for Portfolios for which more than
one Investment Manager has been retained, allocation of that Portfolio's
assets among such Investment Managers. In particular, the Board may, from
time to time, allocate portions of a Portfolio's assets between or among
several Investment Managers, each of whom may have a different investment
style and/or investment selection discipline. The Board also may reallocate a
Portfolio's assets among such Investment Managers, or terminate particular
Investment Managers, if the Board deems it appropriate to do so in order to
achieve the overall objectives of the Portfolio involved. In addition, the
Board may retain additional Investment Managers on behalf of a Portfolio
subject to the approval of the shareholders of that Portfolio in accordance
with the Investment Company Act. Day-to-day operations of the Trust are the
responsibility of the Trust's officers, who are elected by, and serve at the
pleasure of, the Board. The name and principal occupation for the past five
years of each of the Trust's current officers and trustees are set forth
below; unless otherwise indicated, the business address of each is 575 East
Swedesford Road Wayne, PA 19087.
[TABLE SUBJECT TO COMPLETION BY AMENDMENT]
<TABLE>
<CAPTION>
Name, Business Address and Age Position with the Trust Principal Occupation for
the Last Five Years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Donald E. Callaghan Chairman of the Board of For more than the past five years,
Trustees and President Principal, Hirtle Callaghan & Co., Inc.
Ross H. Goodman Trustee For more than the past five years,
Mr. Goodman has been Vice
President of American Industrial
Management & Sales, Inc.
*Jonathan J. Hirtle Trustee For more than the past five years,
Principal, Hirtle Callaghan & Co., Inc.
Jarrett Burt Kling Trustee For more than the past five years,
Mr. Kling has been associated with CRA
Real Estate Securities, L.P. and its
affiliate, Radnor Advisers, Inc. a
Mr. Kling is general partner of TDH II
and a special limited partner of TDH III
(venture capital limited partnerships)
since 1983.
*David M. Spungen Trustee For more than the past five years,
1926 Arch Street Mr. Spungen has been associated
Philadelphia, PA 19103-1484 with The CMS Companies (financial
services).Mr. Spungen currently
serves as Director of CMS
Capital Management, (a division of CMS
Investment Resources, Inc.)
Richard W. Wortham, III Trustee For more than the past five years,
President, Video Rental of
Pennsylvania, Inc. and its parent,
Houston VMC, Inc. Mr.
Wortham is also a trustee of the
Wortham Foundation and
the Museum of Fine Arts, Houston.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Robert Zion Vice President and Treasurer Mr. Zion is a Principal of Hirtle
Callaghan, and has been
employed by that firm
for more than the last
five years.
Laura Anne Corsell, Esq. Secretary Ms. Corsell is an attorney in
7307 Elbow Lane private practice. From 1989
Philadelphia, PA 19119 through 1994, Ms. Corsell was
associated with the law firm of
Ballard Spahr Andrews and
Ingersoll, as counsel.
*Indicates a Trustee who is an "interested person" of the Trust within the
meaning of the Investment Company Act.
</TABLE>
Each of those members of the Board who are not "interested persons" of the
Trust within the meaning of the Investment Company Act ("Independent
Trustees") receive from the Trust a fee of $1,000.00 per meeting of the Board
attended and are reimbursed for expenses incurred in connection with each such
meeting. Those members of the Board who are "interested persons" of the Trust
and the Trust's officers receive no compensation from the Trust for performing
the duties of their respective offices. The table below, which is required to
be included in this Statement of Additional by the SEC, shows the aggregate
compensation received from the Trust by each of the Independent Trustees
during the fiscal year ending June 30, 1997 (excluding reimbursed expenses).
<TABLE>
<S> <C> <C> <C> <C>
Pension/ Estimated
Aggregate Retirement Benefits Upon
Name and Compensation Benefits Retirement From Total Compensation
Position From Trust From Trust From Trust From Trust
- ---------------------- ------------ ---------- --------------- ------------------
Ross H. Goodman $3000.00 $0.0 $0.0 $3000.00
Jarrett Burt Kling 3000.00 0.0 0.0 3000.00
Richard W. Wortham, III 3000.00 0.0 0.0 3000.00
</TABLE>
As permitted under the Trust's Amended and Restated Declaration and Agreement
of Trust and by-laws, the Board has established an executive committee and has
appointed Messrs. Callaghan, Hirtle and Spungen to serve on that committee.
Under the Trust's by-laws, the executive committee is authorized to act for
the full Board in all matters for which the affirmative vote of a majority of
the Board of the Trust's Independent Trustees is not required under the
Investment Company Act or other applicable law. All of the officers and
trustees of the Trust own in the aggregate, less than one percent of the
outstanding shares of the shares of the respective Portfolios of the Trust.
During the fiscal year ended June 30, 1997, Ms. Corsell received fees for
legal services rendered to the Trust (including related out-of-pocket
expenses) of $49,324.00.
<PAGE>
<PAGE>
Investment Advisory Arrangements. As described in the prospectus, Hirtle,
Callaghan & Co., Inc. ("Hirtle Callaghan") has entered into a written
consulting agreement with the Trust ("HCCI Consulting Agreement"). The HCCI
Consulting Agreement was approved by the Trust's initial shareholder on July
21, 1995, following the approval of the Trust's Board (including a majority of
the Trust's Independent Trustees) at a meeting of the Board held on July 20,
1995; that agreement was last approved by the Trust's Board on May 6, 1997.
The HCCI Consulting Agreement will remain in effect until its second
anniversary, unless sooner terminated and will continue from year to year so
long as such continuation is approved, at a meeting called for the purpose of
voting on such continuance, at least annually (i) by vote of a majority of the
Trust's Board or the vote of the holders of a majority of the outstanding
securities of the Trust; and (ii) by a majority of the Independent Trustees,
by vote cast in person. The HCCI Consulting Agreement may be terminated at
any time, without penalty, either by the Trust or by Hirtle Callaghan, upon
sixty days' written notice and will automatically terminate in the event of
its assignment as defined in the Investment Company Act. The HCCI Consulting
Agreement permits the Trust to use the name "Hirtle Callaghan." In the event,
however, the HCCI Consulting Agreement is terminated, Hirtle Callaghan has the
right to require the Trust to discontinue any references to the name "Hirtle
Callaghan" and to change the name of the Trust as soon as is reasonably practica
ble. The HCCI Consulting Agreement further provides that HCCI will not be
liable to the Trust for any error, mistake of judgment or of law, or loss
suffered by the Trust in connection with the matters to which the HCCI
Consulting Agreement relates (including any action of any Hirtle Callaghan
officer or employee in connection with the service of any such officer or
employee as an officer of the Trust), whether or not any such action was taken
in reliance upon information provided to the Trust by Hirtle Callaghan, except
losses that may be sustained as a result of willful misfeasance, reckless
disregard of its duties, bad faith or gross negligence on the part of Hirtle
Callaghan.
Portfolio Management Contracts. The Trust has also entered into
investment advisory contracts on behalf of each of the Portfolios with one or
more of the Investment Managers. Other than the agreement between the Trust
and Hotchkis and Wiley ("Hotchkis") relating to The Value Equity Portfolio and
the agreement between the Trust and Goldman Sachs Asset Management ("GSAM"),
each such contract (collectively, the "Portfolio Management Contracts") was
approved by the Trust's initial shareholder on July 21, 1995, following that
approval of the Trust's Board (including the Independent Trustees) at a
meeting of the Board held on July 20, 1995; each such agreement was last
approved by the Trust's Board on May 6, 1997. Each such contract will remain
in effect from year to year so long as such continuation is approved, at a
meeting called to vote on such continuance, at least annually (i) by vote of a
majority of the Trust's Board or the vote of the holders of a majority of the
outstanding securities of the Trust; and (ii) by a majority of the Independent
Trustees, by vote cast in person. Each of the Portfolio Management Contracts
may be terminated at any time, without penalty, either by the Trust or by the
respective Investment Managers named in the contract, in each case upon sixty
days' written notice, and each will automatically terminate in the event of
its assignment, as that term is defined in the Investment Company Act. Each
of the Portfolio Management Contracts provides that the named Investment
Manager will, subject to the overall supervision of the Board, provide a
continuous investment program for the assets of the Portfolio to which such
contract relates, or that portion of such assets as may be, from time to time
allocated to such Investment Manager. The Portfolio Managers are responsible,
among other things, for the provision of investment research and management of
all investments and other instruments and the selection of brokers and dealers
through which securities transactions are executed. Each of the Portfolio
Management Contracts provides that the named Investment Manager will not be
liable to the Trust for any error of judgment or mistake of law on the part of
the Investment Manager, or for any loss sustained by the Trust in connection
with the purchase or sale of any instrument on behalf of the named Portfolio,
except losses that may be sustained as a result of willful misfeasance,
reckless disregard of its duties, misfeasance, bad faith or gross negligence
on the part of the named Investment Manager.
<PAGE>
<PAGE>
Agreement with Hotchkis relating to The Value Equity Portfolio. Hotchkis
serves as an Investment Manager for The Value Equity Portfolio pursuant to a
contract ("Hotchkis Agreement") that was approved by the Board (including the
Independent Trustees) on July 19, 1996, and by the shareholders of The Value
Equity Portfolio on October 23, 1996. The Hotchkis Agreement first became
effective on November 12, 1996. The Hotchkis 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
Hotchkis Agreement are identical to those contained in the Portfolio
Management Contracts except for the description of the portfolio manager, the
effective and termination dates, and the modification of certain notice
provisions relating to the obligation of Hotchkis to indemnify the Trust under
certain circumstances. Specifically, Section 5 of the Hotchkis Agreement
provides that the indemnification obligation of the portfolio manager with
respect to information provided to the Trust by Hotchkis L.P. in writing for
use in the Trust's registration statement and certain other documents shall
not apply unless the portfolio manager has had an opportunity to review such
documents for a specified period of time prior to the date on which they are
filed with the SEC and unless the portfolio manager is notified in writing of
any claim for indemnification within specified periods. From July 29, 1996,
until November 12, 1996, Hotchkis' predecessor limited partnership served as a
portfolio manager of The Value Equity Portfolio pursuant to an agreement
("15a-4 Agreement") approved by the Board at a meeting held on July 19, 1996.
The 15a-4 Agreement became effective on July 29, 1996, the date on which a
similar contract ("Prior Agreement") with a former portfolio manager for the
Portfolio was terminated, and was approved by the shareholders of The Value
Equity Portfolio on October 23, 1996, in the manner contemplated under rule
15a-4 of the Investment Company Act. The 15a-4 Agreement is identical to the
Hotchkis Agreement except for the name of the advisory organization and the
terms relating to effective dates. The Hotchkis Agreement is identical to
the Prior Agreement except for the name of the advisory organization,
effective dates and the modification of notice provisions relating to the
Trust's right of indemnification, as noted above. Prior to November 12, 1996,
Hotchkis was an independent California limited partnership. On November 11,
1996, all of the interests in that partnership were acquired by Merrill Lynch
& Co., ("ML") and the limited partnership became a division of Merrill Lynch
Asset Management LP., a company controlled ML. In accordance with the
Investment Company Act, the consummation of that acquisition terminated the
15a-4 Agreement; at the same time, and in accordance with the terms of the
15a-4 Agreement and the Hotchkis Agreement, the Hotchkis Agreement became
effective. ML is a public company whose shares are traded on the New York
Stock Exchange.
<PAGE>
<PAGE>
Agreement with Institutional Capital Corporation relating to The Value
Equity Portfolio. 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 Portfolio managed by ICAP to .35% of such
assets. The amendment first became effective on February 2, 1998.
Agreement with Goldman Sachs Asset Management relating to The Growth
Equity Portfolio. 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 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.
<PAGE>
<PAGE>
Investment Advisory Fees. For the fiscal year ended June 30, 1997, Hirtle
Callaghan received advisory fees from each of the Portfolios, calculated at an
annual rate of .05%, as follows: The Value Equity Portfolio, $44,605; The
Growth Equity Portfolio, $ 65,417; The Small Capitalization Portfolio,
$41,020; The International Equity, Portfolio, $52,703; and The Limited
Duration Municipal Bond Portfolio, $16,428. For the fiscal year ended June 30,
1996, Hirtle Callaghan received advisory fees from each of the Portfolios,
calculated at an annual rate of .05%, as follows: The Value Equity Portfolio,
$24,343; The Growth Equity Portfolio, $34,071; The Small Capitalization
Portfolio, $16,940; The International Equity, Portfolio, $24,436; and The
Limited Duration Municipal Bond Portfolio, $7,628. The foregoing figures
reflect voluntary expense reimbursements by Hirtle Callaghan to the Small
Capitalization and Limited Duration Portfolios of $24,082 and $36,701,
respectively for the year ended June 30 1996.
The following table sets forth the investment advisory fee received from the
specified Portfolio by each of its respective Investment Managers during the
fiscal years ended June 30, 1997 and June 30, 1996, respectively:
<TABLE>
<CAPTION>
Actual Fee Paid for
Investment Manager Portfolio Advisory Fee Rate 1 fiscal year ended
1997 1996
- ----------------- --------- ----------------- ---------------------
<S> <C> <C> <C>
Institutional Value Equity .30% of average $150,281 $ 94,103
Capital Corporation net assets
Hotchkis & Wiley Value Equity .30% of average $118,592 -0-
net assets
Jennison Associates Growth Equity .30% of average $210,125 102,397
Capital Corp. net assets
Westfield Capital Growth Equity .30% of average $179,941 102,030
Management Co. net assets
Clover Capital Small Cap .45% of average $185,827 86,448
Management, Inc. net assets
Frontier Capital Small Cap .45% of average $187,263 66,017
Management Co. net assets
Brinson Partners International .40% of average $424,428 95,488
net assets
Morgan Grenfell Limited .20% of average $64,927 30,513
Capital Management Duration net assets
Incorporate
- -------------------
(1) Rate shown applies to that portion of the indicated portfolio's assets
allocated to the specified Investment Manager.
(2) The fee payable to ICAP by The Value Equity Portfolio was increased .35%
of that portion of the average daily net assets of The Value Equity Portfolio
managed by ICAP. Such increase first became effective on February 2, 1998.
(3) Effective July 29, 1996, Hotchkis and Wiley replaced Cowen Asset
Management. For the fiscal year ended June 30, 1996, The Growth Equity
Portfolio paid advisory fees to Cowen Asset Management in the amount of
$51,954 of that portfolio's average net assets.
(4) Effective October 1, 1997, Goldman Sachs Asset Management replaced
Westfield Capital Management, Inc. GSAM received no compensation from the
Trust for the relevant periods.
(5) No information is provided for the Fixed Income Portfolio or the
Intermediate Term Municipal Bond Portfolio, neither of which had commenced
operations during the relevant periods.
</TABLE>
<PAGE>
<PAGE>
Other Matters. BISYS Fund Services LP ("BISYS") serves as the Trust's
principal underwriter pursuant to an agreement approved by the Board on July
19, 1996. BISYS does not receive any underwriting fees or other compensation
for serving as the distributor of the Trust's shares. Pursuant to separate
agreements, BISYS has also, since January 1, 1997, provided administrative and
other services for the Trust; these services and relevant agreements are
described in the Trust's prospectus. For the fiscal year ended June 30, 1997,
BISYS received for such services, fees from each of the Portfolios, as
follows: The Value Equity Portfolio, $89,565; The Growth Equity Portfolio, $
130,138; The Small Capitalization Portfolio, $41,020; The International
Equity, Portfolio, $52,703; and The Limited Duration Municipal Bond Portfolio,
$31,952 (all of which was voluntarily waived by BISYS).
FURTHER INFORMATION ABOUT THE TRUST'S INVESTMENT POLICIES
As stated in the prospectus, the Trust currently consists of seven portfolios,
each with its own invesetment objectives and policies. These portfolios are
The Value Equity, Growth Equity, Small Capitalization Equity and International
Equity Portfolios (collectively, the "Equity Portfolios") and The Fixed
Income, Limited Duration Municipal Bond and Intermediate Municipal Bond
Portfolios (collectively, the "Fixed-Income Portfolios").
The following discussion supplements
the discussion of the investment policies of each of the
Portfolios as set forth in the prospectus and the types of securities and
other instruments in which the respective Portfolios may invest.
Repurchase Agreements. As noted in the prospectus, among the instruments that
each of the Portfolios may use for temporary investment purposes are
repurchase agreements. Under the terms of a typical repurchase Agreement, a
Portfolio would acquire an underlying debt security for a relatively short
period (usually not more than one week), subject to an obligation of the
seller to repurchase that security and the obligation of the Portfolio to
resell that security at an agreed-upon price and time. Repurchase agreements
could involve certain risks in the event of default or insolvency of the other
party, including possible delays or restrictions upon the Portfolio's ability
to dispose of the underlying securities. The Investment Manager for each
Portfolio, in accordance with guidelines adopted by the Board, monitors the
creditworthiness of those banks and non-bank dealers with which the respective
Portfolios may enter into repurchase agreements. The Trust also monitors the
market value of the securities underlying any repurchase agreement to ensure
that the repurchase obligation of the seller is adequately collateralized.
Repurchase agreements may be entered into with primary dealers in U.S.
Government Securities who meet credit guidelines established by the Board
(each a "repo counterparty"). Under each repurchase Agreement, the repo
counterparty will be required to maintain, in an account with the Trust's
custodian bank, securities that equal or exceed the repurchase price of the
securities subject to the repurchase Agreement. A Portfolio will generally
enter into repurchase agreements with short durations, from overnight to one
week, although securities subject to repurchase agreements generally have
longer maturities. A Portfolio may not enter into a repurchase agreement with
more than seven days to maturity if, as a result, more than 15% of the value
of its net assets would be invested in illiquid securities including such
repurchase agreements. For purposes of the Investment Company Act, a
repurchase agreement may be deemed a loan to the repo counterparty. It is not
clear whether, in the context of a bankruptcy proceeding involving a repo
counterparty, a court would consider a security acquired by a Portfolio
subject to a repurchase Agreement as being owned by that Portfolio or as being
collateral for such a "loan." If a court were to characterize the transaction
as a loan, and a Portfolio has not perfected a security interest in the
security acquired, that Portfolio could be required to turn the security
acquired over to the bankruptcy trustee and be treated as an unsecured
creditor of the repo counterparty. As an unsecured creditor, the Portfolio
would be at the risk of losing some or all of the principal and income
involved in the transaction. In the event of any such bankruptcy or insolvency
proceeding involving a repo counterparty with whom a Portfolio has outstanding
repurchase agreements a Portfolio may encounter delays and incur costs before
being able to sell securities acquired subject to such repurchase agreements.
Any such delays may involve loss of interest or a decline in price of the
security so acquired.
<PAGE>
<PAGE>
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the repo counterparty may fail to repurchase the security. However,
a Portfolio will always receive as collateral for any repurchase agreement to
which it is a party securities acceptable to it, the market value of which is
equal to at least 100% of the repurchase price, and the Portfolio will make
payment against such securities only upon physical delivery or evidence of
book entry transfer of such collateral to the account of its custodian bank.
If the market value of the security subject to the repurchase agreement falls
below the repurchase price the Trust will direct the repo counterparty to
deliver to the Trust's custodian additional securities so that the market
value of all securities subject to the repurchase agreement will equal or
exceed the repurchase price.
Variable and Floating Rate Instruments. As noted in the prospectus, among the
instruments that each of the Portfolios may use for temporary investment
purposes are short-term variable rate instruments (including floating rate
instruments) from banks and other issuers. In addition, each of the Income
Portfolios may purchase longer-term variable and floating rate instruments in
furtherance of the investment objectives of the respective Income
Portfolios. A "variable rate instrument" is one whose terms provide for the
adjustment of its interest rate on set dates and which, upon such adjustment,
can reasonably be expected to have a market value that approximates its par
value. A "floating rate instrument" is one whose terms provide for the
adjustment of its interest rate whenever a specified interest rate changes and
which, at any time, can reasonably be expected to have a market value that
approximates its par value. These instruments may include variable amount
master demand notes that permit the indebtedness to vary in addition to
providing for periodic adjustments in the interest rates.
Variable rate instruments are generally not rated by nationally recognized
ratings organizations (each, an "NRSRO"). The appropriate Investment Manager
will consider the earning power, cash flows and other liquidity ratios of the
issuers and guarantors of such instruments and, if the instrument is subject
to a demand feature, will continuously monitor their financial ability to meet
payment on demand. Where necessary to ensure that a variable or floating rate
instrument is equivalent to the quality standards applicable to a Portfolio's
fixed income investments, the issuer's obligation to pay the principal of the
instrument will be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend. Any bank providing such a bank letter, line
of credit, guarantee or loan commitment will meet the Portfolio's investment
quality standards relating to investments in bank obligations. A Portfolio
will invest in variable and floating rate instruments only when the
appropriate Investment Manager deems the investment to involve minimal credit
risk. The Investment Manager will also continuously monitor the
creditworthiness of issuers of such instruments to determine whether a
Portfolio should continue to hold the investments.
The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and a
Portfolio could suffer a loss if the issuer defaults or during periods in
which a Portfolio is not entitled to exercise its demand rights. Variable and
floating rate instruments held by a Portfolio will be subject to the
Portfolio's limitation on investments in illiquid securities when a reliable
trading market for the instruments does not exist and the Portfolio may not dema
nd payment of the principal amount of such instruments within seven days. If
an issuer of a variable rate demand note defaulted on its payment obligation,
a Portfolio might be unable to dispose of the note and a loss would be
incurred to the extent of the default.
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Custodial Receipts. The Fixed Income Portfolio may acquire U.S. Government
Securities and their unmatured interest coupons that have been separated
("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government Securities, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate
of Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
generally held in book-entry form at a Federal Reserve Bank. Counsel to the
underwriters of these certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying U.S. Government Securities for federal tax and securities purposes.
In the case of CATS and TIGRS, the Internal Revenue Service ( the "IRS") has
reached this conclusion for the purpose of applying the tax diversification
requirements applicable to regulated investment companies such as the
Portfolios. CATS and TIGRS are not considered U.S. Government Securities by
the staff of the Commission. Further, the IRS conclusion noted above is
contained only in a general counsel memorandum, which is an internal document
of no precedential value or binding effect, and a private letter ruling, which
also may not be relied upon by the Portfolios. The Trust is not aware of any
binding legislative, judicial or administrative authority on this issue.
When-Issued Securities. As noted in the prospectus, Fixed Income Securities
may be purchased on a "when-issued" basis. The price of securities purchased
on a when-issued basis, which may be expressed in yield terms, is fixed at the
time the commitment to purchase is made, but delivery and payment for the
when- issued securities takes place at a later date. Normally, the
settlement date occurs within one month of the purchase. During the period
between purchase and settlement, no payment is made by the purchaser to the
issuer and no interest accrues to the purchaser. Thus, to the extent that
assets are held in cash pending the settlement of a purchase of securities,
the purchaser would earn no income. At the time a commitment to purchase a
security on a when-issued basis is made, the transaction is recorded and the
value of the security will be reflected in determining net asset value. The
market value of the when-issued securities may be more or less than the
purchase price. The Trust does not believe that net asset value or income
will be adversely affected by the purchase of securities on a when-issued
basis.
Municipal Securities. As stated in the prospectus, The Limited Duration
Municipal Bond Portfolio and The Intermediate Term Municipal Bond Portfolio
(collective, the "Municipal Portfolios"), and to a lesser extent, The Fixed
Income Portfolio, may invest in municipal securities. Muncipal securities
consist of bonds, notes and other instrument issued by or on behalf of states,
terriotires and possessions of the United States (including the district of
Columbia) and their policitcal subdivisions, agencies or instrumentalities,
the interests on which is exempt from regular federal tax. Municipal
securities may also be issued on a taxable basis.
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The two principal classifications of the obligations of the issuers with
respect to "general obligations" and/or "revenue obligations. may be backed by
a letter of credit, guarantee or insurance. General obligations and revenue
obligations may be issued in a variety of forms, including commercial paper,
fixed, variable and floating rate securities, tender option bonds, auction
rate bonds and capital appreciation bonds. In addition to general obligations
and revenue obligations, there is a variety of hybrid and special types of
municipal securities. There are also numerous differences in the credit
backing of municipal securities both within and between these two principal
classifications. For the purpose of applying a Portfolio's investment
restrictions, the identification of the issuer of a municipal security which
is not a general obligation is made by the appropriate Investment Manager
based on the characteristics of the municipal security, the most important of
which is the source of funds for the payment of principal and interest on such
securities.
An entire issue of municipal securities may be purchased by one or a small
number of institutional investors such as a Portfolio. Thus, the issue may not
be said to be publicly offered. Unlike some securities that are not publicly
offered, a secondary market exists for many municipal securities that were not
publicly offered initially and such securities can be readily marketable. The
obligations of an issuer to pay the principal of and interest on a municipal
security are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Act, and laws, if any, that may be enacted by Congress or state
legislatures extending the time for payment of principal or interest or
imposing other constraints upon the enforcement of such obligations. There is
also the possibility that, as a result of litigation or other conditions, the
power or ability of the issuer to pay when due principal of or interest on a
municipal security may be materially affected.
Municipal Leases, Certificates of Participation and Other Participation
Interests. Municipal leases frequently involve special risks not normally
associated with general obligation or revenue bonds, some of which are
summarized in the prospectus. In addition, leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased
asset to pass eventually to the governmental issuer) have evolved as a means
for governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The debt
issuance limitations are deemed to be inapplicable because of the inclusion in
many leases or contracts of "non-appropriation" clauses that relieve the
governmental issuer of any obligation to make future payments under the lease
or contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. Thus, a Portfolio's
investment in municipal leases will be subject to the special risk that the
governmental issuer may not appropriate funds for lease payments. In
addition, such leases or contracts may be subject to the temporary abatement
of payments in the event the issuer is prevented from maintaining occupancy of
the leased premises or utilizing the leased equipment. Although the
obligations may be secured by the leased equipment or facilities, the
disposition of the property in the event of nonappropriation or foreclosure
might prove difficult, time consuming and costly, and result in an
unsatisfactory or delayed recoupment of a Portfolio's original investment.
Certificates of participation represent undivided interests in municipal
leases, installment purchase contracts or other instruments. The certificates
are typically issued by a trust or other entity which has received an
assignment of the payments to be made by the state or political subdivision
under such leases or installment purchase contracts.
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Certain municipal lease obligations and certificates of participation may be
deemed illiquid for the purpose of the Portfolios' respective limitations on
investments in illiquid securities. Other municipal lease obligations and
certificates of participation acquired by a Portfolio may be determined by the
appropriate Investment Manager, pursuant to guidelines adopted by the Trustees
of the Trust, to be liquid securities for the purpose of such Portfolio's
limitation on investments in illiquid securities. In determining the liquidity
of municipal lease obligations and certificates of participation, the
Appropriate Investment Manager will consider a variety of factors including:
(1) the willingness of dealers to bid for the security; (2) the number of
dealers willing to purchase or sell the obligation and the number of other
potential buyers; (3) the frequency of trades or quotes for the obligation;
and (4) the nature of the marketplace trades. In addition, the Appropriate
Investment Manager will consider factors unique to particular lease
obligations and certificates of participation affecting the marketability
thereof. These include the general creditworthiness of the issuer, the
importance to the issuer of the property covered by the lease and the
likelihood that the marketability of the obligation will be maintained
throughout the time the obligation is held by a Portfolio. No Portfolio may
invest more than 5% of its net assets in municipal leases. Each of the Income
Portfolios may purchase participations in municipal securities held by a commerc
ial bank or other financial institution. Such participations provide a
Portfolio with the right to a pro rata undivided interest in the underlying
municipal securities. In addition, such participations generally provide a
Portfolio with the right to demand payment, on not more than seven days
notice, of all or any part of the Portfolio's participation interest in the
underlying municipal security, plus accrued interest.
Municipal Notes. Municipal securities in the form of notes generally are
used to provide for short-term capital needs, in anticipation of an issuer's
receipt of other revenues or financing, and typically have maturities of up to
three years. Such instruments may include Tax Anticipation Notes, Revenue
Anticipation Notes, Bond Anticipation Notes, Tax and Revenue Anticipation
Notes and Construction Loan Notes. Tax Anticipation Notes are issued to
finance the working capital needs of governments. Generally, they are issued
in anticipation of various tax revenues, such as income, sales, property, use
and business taxes, and are payable from these specific future taxes. Revenue
Anticipation Notes are issued in expectation of receipt of other kinds of
revenue, such as federal revenues available under federal revenue sharing
programs. Bond Anticipation Notes are issued to provide interim financing
until long-term bond financing can be arranged. In most cases, the long-term
bonds then provide the funds needed for repayment of the notes. Tax and
Revenue Anticipation Notes combine the funding sources of both Tax
Anticipation Notes and Revenue Anticipation Notes. Construction Loan Notes are
sold to provide construction financing. These notes are secured by mortgage
notes insured by the Federal Housing Authority; however, the proceeds from the
insurance may be less than the economic equivalent of the payment of principal
and interest on the mortgage note if there has been a default. The obligations
of an issuer of municipal notes are generally secured by the anticipated
revenues from taxes, grants or bond financing. An investment in such
instruments, however, presents a risk that the anticipated revenues will not
be received or that such revenues will be insufficient to satisfy the issuer's
payment obligations under the notes or that refinancing will be otherwise
unavailable.
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Tax-Exempt Commercial Paper. Issues of tax-exempt commercial paper
typically represent short-term, unsecured, negotiable promissory notes. These
obligations are issued by state and local governments and their agencies to
finance working capital needs of municipalities or to provide interim
construction financing and are paid from general revenues of municipalities or
are refinanced with long-term debt. In most cases, tax-exempt commercial paper
is backed by letters of credit, lending agreements, note repurchase agreements
or other credit facility agreements offered by banks or other institutions.
Pre-Refunded Municipal Securities. The principal of and interest on
municipal securities that have been pre-refunded are no longer paid from the
original revenue source for the securities. Instead, after pre-refunding the
source of such payments is typically an escrow fund consisting of obligations
issued or guaranteed by the U.S. Government. The assets in the escrow fund are
derived from the proceeds of refunding bonds issued by the same issuer as the
pre-refunded municipal securities. Issuers of municipal securities use this
advance refunding technique to obtain more favorable terms with respect to
securities that are not yet subject to call or redemption by the issuer. For
example, advance refunding enables an issuer to refinance debt at lower market
interest rates, restructure debt to improve cash flow or eliminate restrictive
covenants in the indenture or other governing instrument for the pre-refunded
municipal securities. However, except for a change in the revenue source from
which principal and interest payments are made, the pre-refunded municipal
securities remain outstanding on their original terms until they mature or are
redeemed by the issuer. Pre-refunded municipal securities are usually
purchased at a price which represents a premium over their face value.
Tender Option Bonds. A tender option bond is a municipal security
(generally held pursuant to a custodial arrangement) having a relatively long
maturity and bearing interest at a fixed rate substantially higher than
prevailing short-term tax-exempt rates. The bond is typically issued in
conjunction with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof.
As consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax-exempt rate. However, an
institution will not be obligated to accept tendered bonds in the event of
certain defaults or a significant downgrade in the credit rating assigned to
the issuer of the bond. The liquidity of a tender option bond is a function of
the credit quality of both the bond issuer and the financial institution
providing liquidity. Tender option bonds are deemed to be liquid unless, in
the opinion of the Appropriate Investment Manager, the credit quality of the
bond issuer and the financial institution is deemed, in light of the
Portfolio's credit quality requirements, to be inadequate. Each Municipal
Portfolio intends to invest only in tender option bonds the interest on which
will, in the opinion of bond counsel, counsel for the issuer of interests
therein or counsel selected by the appropriate Investment Manager, be exempt
from regular federal income tax. However, because there can be no assurance
that the IRS will agree with such counsel's opinion in any particular case,
there is a risk that a Municipal Portfolio will not be considered the owner of
such tender option bonds and thus will not be entitled to treat such interest
as exempt from such tax. Additionally, the federal income tax treatment of
certain other aspects of these investments, including the proper tax treatment
of tender option bonds and the associated fees, in relation to various
regulated investment company tax provisions is unclear. Each Municipal
Portfolio intends to manage its portfolio in a manner designed to eliminate or
minimize any adverse impact from the tax rules applicable to these
investments.
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Auction Rate Securities. Auction rate securities consist of auction rate
municipal securities and auction rate preferred securities issued by
closed-end investment companies that invest primarily in municipal securities.
Provided that the auction mechanism is successful, auction rate securities
usually permit the holder to sell the securities in an auction at par value at
specified intervals. The dividend is reset by "Dutch" auction in which bids
are made by broker-dealers and other institutions for a certain amount of
securities at a specified minimum yield. The dividend rate set by the auction
is the lowest interest or dividend rate that covers all securities offered for
sale. While this process is designed to permit auction rate securities to be
traded at par value, there is the risk that an auction will fail due to
insufficient demand for the securities.
Dividends on auction rate preferred securities issued by a closed-end fund may
be designated as exempt from federal income tax to the extent they are
attributable to tax-exempt interest income earned by the fund on the
securities in its portfolio and distributed to holders of the preferred
securities, provided that the preferred securities are treated as equity
securities for federal income tax purposes and the closed-end fund complies
with certain requirements under the Internal Revenue Code of 1986, as amended
(the "Code"). For purposes of complying with the 20% limitation on each
Municipal Portfolio's investments in taxable investments, auction rate
preferred securities will be treated as taxable investments unless
substantially all of the dividends on such securities are expected to be
exempt from regular federal income taxes.
A Portfolio's investments in auction rate preferred securities of closed-end
funds are subject to limitations on investments in other U.S. registered
investment companies, which limitations are prescribed by the 1940 Act. These
limitations include prohibitions against acquiring more than 3% of the voting
securities of any other such investment company, and investing more than 5% of
the Portfolio's assets in securities of any one such investment company or
more than 10% of its assets in securities of all such investment companies. A
Portfolio will indirectly bear its proportionate share of any management fees
paid by such closed-end funds in addition to the advisory fee payable directly
by the Portfolio.
Private Activity Bonds. Certain types of municipal securities, generally
referred to as industrial development bonds (and referred to under current tax
law as private activity bonds), are issued by or on behalf of public
authorities to obtain funds for privately-operated housing facilities,
airport, mass transit or port facilities, sewage disposal, solid waste
disposal or hazardous waste treatment or disposal facilities and certain local
facilities for water supply, gas or electricity. Other types of industrial
development bonds, the proceeds of which are used for the construction,
equipment, repair or improvement of privately operated industrial or
commercial facilities, may constitute municipal securities, although the
current federal tax laws place substantial limitations on the size of such
issues. The interest from certain private activity bonds owned by a Portfolio
(including a Municipal Portfolio's distributions attributable to such
interest) may be a preference item for purposes of the alternative minimum
tax.
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Mortgage-Backed Securities. As stated in the Prospectus, The Fixed Income
Portfolio may invest in mortgage-backed securities, including derivative
instruments. Mortgage-backed securities represent direct or indirect
participations in or obligations collateralized by and payable from mortgage
loans secured by real property. A Portfolio may invest in mortgage-backed
securities issued or guaranteed by U.S. Government agencies or
instrumentalities such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") and the Federal
Home Loan Mortgage Corporation ("FHLMC"). Obligations of GNMA are backed by
the full faith and credit of the U.S. Government. Obligations of FNMA and
FHLMC are not backed by the full faith and credit of the U.S. Government but
are considered to be of high quality since they are considered to be
instrumentalities of the United States. The market value and yield of these
mortgage-backed securities can vary due to market interest rate fluctuations
and early prepayments of underlying mortgages. These securities represent
ownership in a pool of Federally insured mortgage loans with a maximum
maturity of 30 years. The scheduled monthly interest and principal payments
relating to mortgages in the pool will be "passed through" to investors.
Government mortgage-backed securities differ from conventional bonds in that
principal is paid back to the certificate holders over the life of the loan
rather than at maturity. As a result, there will be monthly scheduled payments
of principal and interest.
Only The Fixed Income Portfolio may invest in mortgage-backed securities
issued by non-governmental entities including collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs").
CMOs are securities collateralized by mortgages, mortgage pass-throughs,
mortgage pay-through bonds (bonds representing an interest in a pool of
mortgages where the cash flow generated from the mortgage collateral pool is
dedicated to bond repayment), and mortgage-backed bonds (general obligations
of the issuers payable out of the issuers' general funds and additionally
secured by a first lien on a pool of single family detached properties). Many
CMOs are issued with a number of classes or series which have different
maturities and are retired in sequence. Investors purchasing such CMOs in the
shortest maturities receive or are credited with their pro rata portion of the
unscheduled prepayments of principal up to a predetermined portion of the
total CMO obligation. Until that portion of such CMO obligation is repaid,
investors in the longer maturities receive interest only. Accordingly, the
CMOs in the longer maturity series are less likely than other mortgage
pass-throughs to be prepaid prior to their stated maturity. Although some of
the mortgages underlying CMOs may be supported by various types of insurance,
and some CMOs may be backed by GNMA certificates or other mortgage
pass-throughs issued or guaranteed by U.S. Government agencies or
instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs
in that they issue multiple classes of securities, including "regular"
interests and "residual" interests. The Portfolios do not intend to acquire
residual interests in REMICs under current tax law, due to certain
disadvantages for regulated investment companies that acquire such
interests.
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Mortgage-backed securities are subject to unscheduled principal payments
representing prepayments on the underlying mortgages. Although these
securities may offer yields higher than those available from other types of
securities, mortgage-backed securities may be less effective than other types
of securities as a means of "locking in" attractive long-term rates because of
the prepayment feature. For instance, when interest rates decline, the value
of these securities likely will not rise as much as comparable debt securities
due to the prepayment feature. In addition, these prepayments can cause the
price of a mortgage-backed security originally purchased at a premium to
decline in price to its par value, which may result in a loss.
Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life.
The appropriate Investment Manager believes that the estimated average life is
the most appropriate measure of the maturity of a mortgage-backed security.
Accordingly, in order to determine whether such security is a permissible
investment, it will be deemed to have a remaining maturity of three years or
less if the average life, as estimated by the appropriate Investment Manager,
is three years or less at the time of purchase of the security by a Portfolio.
An average life estimate is a function of an assumption regarding anticipated
prepayment patterns. The assumption is based upon current interest rates,
current conditions in the appropriate housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants
could produce somewhat different average life estimates with regard to the
same security. Although the appropriate Investment Manager will monitor the
average life of the portfolio securities of each Portfolio with a portfolio
maturity policy and make needed adjustments to comply with such Portfolios'
policy as to average dollar weighted portfolio maturity, there can be no
assurance that the average life of portfolio securities as estimated by the
appropriate Investment Manager will be the actual average life of such
securities.
Asset-Backed Securities. As stated in the Prospectus, the Fixed Income
Portfolio may invest in asset-backed securities, which represent
participations in, or are secured by and payable from, pools of assets
including company receivables, truck and auto loans, leases and credit card
receivables. The asset pools that back asset-backed securities are securitized
through the use of privately-formed trusts or special purpose corporations.
Payments or distributions of principal and interest may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution unaffiliated with the trust
or corporation, or other credit enhancements may be present. Certain asset
backed securities may be considered derivative instruments. As stated in the
Prospectus, no Portfolio will invest 25% or more of its total assets in
asset-backed securities.
Foreign Government Securities. The foreign government securities in which The
Fixed Income Portfolio may invest generally consist of debt obligations issued
or guaranteed by national, state or provincial governments or similar
political subdivisions. The Portfolio may invest in foreign government securitie
s in the form of American Depositary Receipts. Foreign government securities
also include debt securities of supranational entities. Currently, the Fixed
Income Portfolio intends to invest only in obligations issued or guaranteed by
the Asian Development Bank, the Inter-American Development Bank, the
International Bank for Reconstruction and Development (the "World Bank"), the
African Development Bank, the European Coal and Steel Community, the European
Economic Community, the European Investment Bank and the Nordic Investment
Bank. Foreign government securities also include mortgage-related securities
issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.
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Commercial Paper. Commercial paper is a short-term, unsecured negotiable
promissory note of a U.S. or non-U.S. issuer. Each of the Portfolios may
purchase commercial paper for temporary purposes; the Fixed-Income Portfolios
may acquire these instruments as described in the Prospectus. Each Portfoliomay
similarly invest in variable rate master demand notes which typically are
issued by large corporate borrowers and which provide for variable amounts of
principal indebtedness and periodic adjustments in the interest rate. Demand
notes are direct lending arrangements between a Portfolio and an issuer, and
are not normally traded in a secondary market. A Portfolio, however, may
demand payment of principal and accrued interest at any time. In addition,
while demand notes generally are not rated, their issuers must satisfy the
same criteria as those that apply to issuers of commercial paper. The
appropriate Investment Manager will consider the earning power, cash flow and
other liquidity ratios of issuers of demand notes and continually will monitor
their financial ability to meet payment on demand. See also Variable and
Floating Rate Instruments," above.
Bank Obligations. Each of the Portfolios may purchase certain bank obligations
for temporary purposes;the Fixed-Income Portfolios may acquire these
instruments as described in the Prospectus. Such instruments may include
certificates of deposit, time deposits and bankers' acceptances. Certificates
of Deposit ("CDs") are short-term negotiable obligations of commercial banks.
Time Deposits ("TDs") are non-negotiable deposits maintained in banking
institutions for specified periods of time at stated interest rates. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers usually in
connection with international transactions. U.S. commercial banks organized
under federal law are supervised and examined by the Comptroller of the
Currency and are required to be members of the Federal Reserve System and to
be insured by the Federal Deposit Insurance Corporation (the "FDIC"). U.S.
banks organized under state law are supervised and examined by state banking
authorities but are members of the Federal Reserve System only if they elect
to join. Most state banks are insured by the FDIC (although such insurance may
not be of material benefit to a Portfolio, depending upon the principal amount
of CDs of each bank held by the Portfolio) and are subject to federal
examination and to a substantial body of federal law and regulation. As a
result of governmental regulations, U.S. branches of U.S. banks, among other
things, generally are required to maintain specified levels of reserves, and
are subject to other supervision and regulation designed to promote financial
soundness. U.S. savings and loan associations, the CDs of which may be
purchased by the Portfolios, are supervised and subject to examination by the
Office of Thrift Supervision. U.S. savings and loan associations are insured
by the Savings Association Insurance Portfolio which is administered by the
FDIC and backed by the full faith and credit of the U.S. Government.
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HEDGING THROUGH THE USE OF OPTIONS.
As indicated in the prospectus, each of the Portfolios may, consistent with
its investment objectives and policies, use options on securities and
securities indexes to reduce the risks associated with the types of securities
in which each is authorized to invest and/or in anticipation of future
purchases, including to achieve market exposure, pending direct investment
in securities. A Portfolio may use
options only in a manner consistent with its investment
objective and policies and may not invest more than 10% of its total assets in
option purchases. Options may be used only for the purpose of reducing
investment risk and not for speculative purposes. The following discussion
sets forth certain information relating to the types of options that the
Portfolios may use, together with the risks that may be associated with their
use.
About Options on Securities. A call option is a short-term contract pursuant
to which the purchaser of the option, in return for a premium,
has the right to buy the security underlying the option at a
specified price at any time during the term of the option. The writer of the
call option, who receives the premium, has the obligation, upon exercise of
the option during the option period, to deliver the underlying security
against payment of the exercise price. A put option is a similar contract
that gives its purchaser, in return for a premium, the right to sell the
underlying security at a specified price during the term of the option. The
writer of the put option, who receives the premium, has the obligation, upon
exercise of the option during the option period, to buy the underlying
security at the exercise price. Options may be based on a security, a
securities index or a currency. Options on securities are generally settled by
delivery of the underlying security whereas options on a securities index or
currency are settled in cash. Options may be traded on an exchange or in the
over-the-counter markets.
Option Purchases. Call options on securities may be purchased in order
to fix the cost of a future purchase. In addition, call options may be used
as a means of participating in an anticipated advance of a security on a more
limited risk basis than would be possible if the security itself were
purchased. In the event of a decline in the price of the underlying security,
use of this strategy would serve to limit the amount of loss, if any, to the
amount of the option premium paid. Conversely, if the market price of the
underlying security rises and the call is exercised or sold at a profit, that
profit will be reduced by the amount initially paid for the call.
Put options may be purchased in order to hedge against a decline in market
value of a security held by the purchasing portfolio. The put effectively
guarantees that the underlying security can be sold at the predetermined
exercise price, even if that price is greater than the market value at the
time of exercise. If the market price of the underlying security increases,
the profit realized on the eventual sale of the security will be reduced by
the premium paid for the put option. Put options may also be purchased on a
security that is not held by the purchasing portfolio in anticipation of a
price decline in the underlying security. In the event the market value of
such security declines below the designated exercise price of the put, the
purchasing portfolio would then be able to acquire the underlying security at
the market price and exercise its put option, thus realizing a profit. In
order for this strategy to be successful, however, the market price of the
underlying security must decline so that the difference between the exercise
price and the market price is greater than the option premium paid.
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Option Writing. Call options may be written (sold) by the Portfolios.
Generally, calls will be written only when, in the opinion of a Portfolio's
Investment Manager, the call premium received, plus anticipated appreciation
in the market price of the underlying security up to the exercise price of the
call, will be greater than the appreciation in the price of the underlying
security.
Put options may also be written. This strategy will generally be used when it
is anticipated that the market value of the underlying security will remain
higher than the exercise price of the put option or when a temporary decrease
in the market value of the underlying security is anticipated and, in the view
of a Portfolio's Investment Manager, it would not be appropriate to acquire
the underlying security. If the market price of the underlying security rises
or stays above the exercise price, it can be expected that the purchaser of
the put will not exercise the option and a profit, in the amount of the
premium received for the put, will be realized by the writer of the put.
However, if the market price of the underlying security declines or stays
below the exercise price, the put option may be exercised and the portfolio
that sold the put will be obligated to purchase the underlying security at a
price that may be higher than its current market value. All option writing
strategies will be employed only if the option is "covered." For this purpose,
"covered" means that, so long as the Portfolio that has written (sold) the
option is obligated as the writer of a call option, it will (1) own the
security underlying the option; or (2) hold on a share-for-share basis a call
on the same security, the exercise price of which is equal to or less than the
exercise price of the call written. In the case of a put option, the
Portfolio that has written (sold) the put option will (1) maintain cash or
cash equivalents in an amount equal to or greater than the exercise price; or
(2) hold on a share-for share basis, a put on the same security as the put
written provided that the exercise price of the put held is equal to or
greater than the exercise price of the put written.
Options on Securities Indices. Options on securities indices may by used
in much the same manner as options on securities. Index options may serve as
a hedge against overall fluctuations in the securities markets or market
sectors, rather than anticipated increases or decreases in the value of a
particular security. Thus, the effectiveness of techniques using stock index
options will depend on the extent to which price movements in the securities
index selected correlate with price movements of the portfolio to be hedged.
Options on stock indices are settled exclusively in cash.
Risk Factors Relating to the Use of Options Strategies. The premium paid
or received with respect to an option position will reflect, among other
things, the current market price of the underlying security, the relationship
of the exercise price to the market price, the historical price volatility of
the underlying security, the option period, supply and demand, and interest
rates. Moreover, the successful use of options as a hedging strategy depends
upon the ability to forecast the direction of market fluctuations in the
underlying securities, or in the case of index options, in the market sector
represented by the index selected.
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Under normal circumstances, options traded on one or more of the several
recognized options exchanges may be closed by effecting a "closing purchase
transaction," i.e. by purchasing an identical option with respect to the
underlying security in the case of options written and by selling an identical
option on the underlying security in the case of options purchased. A closing
purchase transaction will effectively cancel an option position, thus
permitting profits to be realized on the position, to prevent an underlying
security from being called from, or put to, the writer of the option or, in
the case of a call option, to permit the sale of the underlying security. A
profit or loss may be realized from a closing purchase transaction, depending
on whether the overall cost of the closing transaction (including the price of
the option and actual transaction costs) is less or more than the premium
received from the writing of the option. It should be noted that, in the
event a loss is incurred in a closing purchase transaction, that loss may be
partially or entirely offset by the premium received from a simultaneous or
subsequent sale of a different call or put option. Also, because increases in
the market price of an option will generally reflect increases in the market
price of the underlying security, any loss resulting from a closing purchase
transaction is likely to be offset in whole or in part by appreciation of the
underlying security held. Options will normally have expiration dates between
three and nine months from the date written. The exercise price of the
options may be below, equal to, or above the current market values of the
underlying securities at the time the options are written. Options that
expire unexercised have no value. Unless an option purchased by a Portfolio
is exercised or a closing purchase transaction is effected with respect to
that position, a loss will be realized in the amount of the premium paid.
HEDGING THROUGH THE USE OF FUTURES CONTRACTS AND RELATED INSTRUMENTS.
As indicated in the prospectus, each of the Portfolios may, consistent with
its investment objectives and policies, use futures contracts and options on
futures contracts to reduce the risks associated with the types of securities
in which each is authorized to invest and/or in anticipation of future
purchases. A Portfolio may invest in futures-related instruments only for
hedging purposes and not for speculation and only in a manner consistent with
its investment objective and policies. In particular, a Portfolio may not
commit more than 5% of its net assets, in the aggregate, to margin deposits on
futures contracts or premiums for options on futures contracts. The following
discussion sets forth certain information relating to the types of futures
contracts that the Portfolios may use, together with the risks that may be
associated with their use.
About Futures Contracts and Options on Futures Contracts. A futures contract
is a bilateral agreement pursuant to which one party agrees to make, and the
other party agrees to accept, delivery of the specified type of security or
currency called for in the contract at a specified future time and at a
specified price. In practice, however, contracts relating to financial
instruments or currencies are closed out through the use of closing purchase
transactions before the settlement date and without delivery or the underlying
security or currency. In the case of futures contracts based on a securities
index, the contract provides for "delivery" of an amount of cash equal to the
dollar amount specified multiplied by the difference between the value of the
underlying index on the settlement date and the price at which the contract
was originally fixed.
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Stock Index Futures Contracts. A Portfolio may sell stock index futures
contracts in anticipation of a general market or market sector decline that
may adversely affect the market values of securities held. To the extent that
securities held correlate with the index underlying the contract, the sale of
futures contracts on that index could reduce the risk associated with a market
decline. Where a significant market or market sector advance is anticipated,
the purchase of a stock index futures contract may afford a hedge against not
participating in such advance at a time when a Portfolio is not fully
invested. This strategy would serve as a temporary substitute for the purchase
of individual stocks which may later be purchased in an orderly fashion.
Generally, as such purchases are made, positions in stock index futures
contracts representing an equivalent securities would be liquidated.
Futures Contracts on Debt Securities. Futures contracts on debt
securities, often referred to as "interest rate futures," obligate the seller
to deliver a specific type of debt security called for in the contract, at a
specified future time. A public market now exists for futures contracts
covering a number of debt securities, including long-term U.S. Treasury bonds,
ten-year U.S. Treasury notes, and three-month U.S. Treasury bills, and
additional futures contracts based on other debt securities or indices of debt
securities may be developed in the future. Such contracts may be used to hedge
against changes in the general level of interest rates. For example, a
Portfolio may purchase such contracts when it wishes to defer a purchase of a
longer-term bond because short-term yields are higher than long-term yields.
Income would thus be earned on a short-term security and minimize the impact
of all or part of an increase in the market price of the long-term debt
security to be purchased in the future. A rise in the price of the long-term
debt security prior to its purchase either would be offset by an increase in
the value of the contract purchased by the Portfolio or avoided by taking
delivery of the debt securities underlying the futures contract. Conversely,
such a contract might be sold in order to continue to receive the income from
a long-term debt security, while at the same time endeavoring to avoid part or
all of any decline in market value of that security that would occur with an
increase in interest rates. If interest rates did rise, a decline in the
value of the debt security would be substantially offset by an increase in the
value of the futures contract sold.
Options on Futures Contracts. An option on a futures contract gives the
purchaser the right, in return for the premium, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put) at a specified price at any time during the period of
the option. The risk of loss associated with the purchase of an option on a
futures contract is limited to the premium paid for the option, plus
transaction cost. The seller of an option on a futures contract is obligated
to a broker for the payment of initial and variation margin in amounts that
depend on the nature of the underlying futures contract, the current market
value of the option, and other futures positions held by the Portfolio. Upon
exercise of the option, the option seller must deliver the underlying futures
position to the holder of the option, together with the accumulated balance in
the seller's futures margin account that represents the amount by which the
market price of the underlying futures contract exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
involved. If an option is exercised on the last trading day prior to the
expiration date of the option, settlement will be made entirely in cash equal
to the difference between the exercise price of the option and the value at
the close of trading on the expiration date.
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Risk Considerations Relating to Futures Contracts and Related
Instruments. Participants in the futures markets are subject to certain
risks. Positions in futures contracts may be closed out only on the exchange
on which they were entered into (or through a linked exchange): no secondary
market exists for such contracts. In addition, there can be no assurance that
a liquid market will exist for the contracts at any particular time. Most
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses. In such
event, and in the event of adverse price movements, a Portfolio would be
required to make daily cash payments of variation margin. In such
circumstances, an increase in the value of that portion of the securities
being hedged, if any, may partially or completely offset losses on the futures
contract.
As noted above, there can be no assurance that price movements in the futures
markets will correlate with the prices of the underlying securities positions.
In particular, there may be an imperfect correlation between movements in the
prices of futures contracts and the market value of the underlying securities
positions being hedged. In addition, the market prices of futures contracts
may be affected by factors other than interest rate changes and, as a result,
even a correct forecast of interest rate trends might not result in a
successful hedging strategy. If participants in the futures market elect to
close out their contracts through offsetting transactions rather than by
meeting margin deposit requirements, distortions in the normal relationship
between debt securities and the futures markets could result. Price
distortions could also result if investors in the futures markets opt to make
or take delivery of the underlying securities rather than engage in closing
transactions because such trend might result in a reduction in the liquidity
of the futures market. In addition, an increase in the participation of
speculators in the futures market could cause temporary price distortions.
The risks associated with options on futures contracts are similar to those
applicable to all options and are summarized above under the heading "Hedging
Through the Use of Options: Risk Factors Relating to the Use of Options
Strategies." In addition, as is the case with futures contracts, there can be
no assurance that (1) there will be a correlation between price movements in
the options and those relating to the underlying securities; (2) a liquid
market for options held will exist at the time when a Portfolio may wish to
effect a closing transaction; or (3) predictions as to anticipated interest
rate or other market trends on behalf of a Portfolio will be correct.
Margin Requirements and Limitations Applicable to Futures Related
Transactions. When a purchase or sale of a futures contract is made by a
Portfolio, that Portfolio is required to deposit with its custodian (or
broker, if legally permitted) a specified amount of cash or U.S. Government
securities ("initial margin"). The margin required for a futures contract is
set by the exchange on which the contract is traded and may be modified during
the term of the contract. The initial margin is in the nature of a performance
bond or good faith deposit on the futures contract which is returned to the
Portfolio upon termination of the contract, assuming all contractual
obligations have been satisfied. The Portfolio expects to earn interest
income on its initial margin deposits. A futures contract held by a Portfolio
is valued daily at the official settlement price of the exchange on which it
is traded. Each day the Portfolio pays or receives cash, called "variation
margin" equal to the in daily change in value of the futures contract. This
process is known as "marking to market." Variation margin does not represent
a borrowing or loan by the Portfolio but is instead a settlement between the
Portfolio and the broker of the amount one would owe the other if the futures
contract expired. In computing daily net asset value, the Portfolio will value
its open futures positions at market.
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A Portfolio will not enter into a futures contract or an option on a futures
contract if, immediately thereafter, the aggregate initial margin deposits
relating to such positions plus premiums paid by it for open futures option
positions, less the amount by which any such options are "in-the-money," would
exceed 5% of the Portfolio's total assets. A call option is "in-the-money"
if the value of the futures contract that is the subject of the option exceeds
the exercise price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of the option.
Segregation Requirements.
Futures Contracts. When purchasing a futures contract, a Portfolio will
maintain, either with its custodian bank or, if permitted, a broker, and will
mark-to-market on a daily basis, cash, U.S. Government securities, or other
highly liquid securities that, when added to the amounts deposited with a
futures commission merchant as margin, are equal to the market value of the
futures contract. Alternatively, a Portfolio may "cover" its position by
purchasing a put option on the same futures contract with a strike price as
high or higher than the price of the contract held by the Portfolio. When
selling a futures contract, a Portfolio will similarly maintain liquid assets
that, when added to the amount deposited with a futures commission merchant as
margin, are equal to the market value of the instruments underlying the
contract. Alternatively, a Portfolio may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based), or by holding a call option
permitting a Portfolio to purchase the same futures contract at a price no
higher than the price of the contract written by that Portfolio (or at a
higher price if the difference is maintained in liquid assets with the Trust's
custodian).
Options on Futures Contracts. When selling a call option on a futures
contract, a Portfolio will maintain, either with its custodian bank or, if
permitted, a broker, and will mark-to-market on a daily basis, cash, U. S.
Government securities, or other highly liquid securities that, when added to
the amounts deposited with a futures commission merchant as margin, equal the
total market value of the futures contract underlying the call option.
Alternatively, the Portfolio may cover its position by entering into a long
position in the same futures contract at a price no higher than the strike
price of the call option, by owning the instruments underlying the futures
contract, or by holding a separate call option permitting the Portfolio to
purchase the same futures contract at a price not higher than the strike price
of the call option sold by the Portfolio.
When selling a put option on a futures contract, the Portfolio will similarly
maintain cash, U.S. Government securities, or other highly liquid securities
that equal the purchase price of the futures contract, less any margin on
deposit. Alternatively, the Portfolio may cover the position either by
entering into a short position in the same futures contract, or by owning a
separate put option permitting it to sell the same futures contract so long as
the strike price of the purchased put option is the same or higher than the
strike price of the put option sold by the Portfolio.
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HEDGING THROUGH THE USE OF CURRENCY RELATED INSTRUMENTS.
As indicated in the prospectus, The Growth Equity Portfolio may use forward
foreign currency exchange contracts in connection with permitted purchases and
sales of securities of non-U.S. issuers. In addition, The International
Equity Portfolio and The Fixed Income Portfolio may, consistent with
their respective investment objectives and policies,
use such contracts as well as certain other currency related instruments to
reduce the risks associated with the types of securities in which it is
authorized to invest and to hedge against fluctuations in the relative value
of the currencies in which securities held by The International Equity
Portfolio are denominated. The following discussion sets forth certain
information relating to forward currency contracts and other currency related
instruments, together with the risks that may be associated with their use.
About Currency Transactions and Hedging. The International Equity Portfolio
and The Fixed Income Portfolio are authorized to purchase and sell options,
futures contracts and options thereon relating to foreign currencies and
securities denominated in foreign currencies. Such instruments may be traded
on foreign exchanges, including foreign over-the- counter markets.
Transactions in such instruments may not be regulated as effectively as
similar transactions in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities. The value
of such positions also could be adversely affected by: (i) foreign political,
legal and economic factors; (ii) lesser availability than in the United States
of data on which to make trading decisions; (iii) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States; and (iv) lesser trading volume.
Foreign currency exchange transactions may be entered into for the purpose of
hedging against foreign currency exchange risk arising from the Portfolio's
investment or anticipated investment in securities denominated in foreign
currencies. The International Equity Portfolio may also purchase and sell
options relating to foreign currencies to increase exposure to a foreign
currency or to shift foreign currency exposure from one country to another.
Foreign Currency Options and Related Risks. The International Equity
Portfolio and The Fixed Income Portfolio may take positions in options on
foreign currencies to hedge against the risk of foreign exchange rate
fluctuations on foreign securities the Portfolio holds in its portfolio or
intends to purchase. For example, if the Portfolio were to enter into a
contract to purchase securities denominated in a foreign currency, it could
effectively fix the maximum U.S. dollar cost of the securities by purchasing
call options on that foreign currency. Similarly, if the Portfolio held
securities denominated in a foreign currency and anticipated a decline in the
value of that currency against the U.S. dollar, it could hedge against such a
decline by purchasing a put option on the currency involved. The markets in
foreign currency options are relatively new, and the Portfolio's ability to
establish and close out positions in such options is subject to the
maintenance of a liquid secondary market. There can be no assurance that a
liquid secondary market will exist for a particular option at any specific
time. In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally. The
quantities of currencies underlying option contracts represent odd lots in a
market dominated by transactions between banks, and as a result extra
transaction costs may be incurred upon exercise of an option. There is no
systematic reporting of last sale information for foreign currencies or any
regulatory requirement that quotations be firm or revised on a timely basis.
Quotation information is generally representative of very large transactions
in the interbank market and may not reflect smaller transactions where rates
may be less favorable. Option markets may be closed while round-the-clock
interbank currency markets are open, and this can create price and rate
discrepancies.
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Forward Foreign Currency Exchange Contracts. The Growth Equity and Fixed
Income Portfolios may use forward contracts to protect against uncertainty in
the level of future exchange rates in connection with specific transactions.
For example, when the Portfolio enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when the Portfolio
anticipates the receipt in a foreign currency of dividend or interest payments
on a security that it holds, the Portfolio may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of the payment, by
entering into a forward contract for the purchase or sale of the foreign
currency involved in the underlying transaction in exchange for a fixed amount
of U.S. dollars or foreign currency. This may serve as a hedge against a
possible loss resulting from an adverse change in the relationship between the
currency exchange rates during the period between the date on which the
security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received. The International Equity
Portfolio may also use forward contracts in connection with specific
transactions. In addition, it may use such contracts to lock in the U.S.
dollar value of those positions, to increase the Portfolio's exposure to
foreign currencies that the Investment Manager believes may rise in value
relative to the U.S. dollar or to shift the Portfolio's exposure to foreign
currency fluctuations from one country to another. For example, when the
Investment Manager believes that the currency of a particular foreign country
may suffer a substantial decline relative to the U.S. dollar or another
currency, it may enter into a forward contract to sell the amount of the
former foreign currency approximating the value of some or all of the
Portfolio's portfolio securities denominated in such foreign currency. This
investment practice generally is referred to as "cross-hedging."
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. Accordingly, it may be
necessary for a Portfolio to purchase additional foreign currency on the spot
(i.e., cash) market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency the
Portfolio is obligated to deliver and if a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received
upon the sale of the portfolio security if its market value exceeds the amount
of foreign currency the Portfolio is obligated to deliver. The projection of
short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
Forward contracts involve the risk that anticipated currency movements will
not be accurately predicted, causing the Portfolio to sustain losses on these
contracts and transaction costs. A Portfolio may enter into forward contracts
or maintain a net exposure to such contracts only if: (1) the consummation of
the contracts would not obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio's securities and other assets
denominated in that currency; or (2) the Portfolio maintains cash, U.S.
Government securities or other liquid securities in a segregated account in an
amount which, together with the value of all the Portfolio's securities
denominated in such currency, equals or exceeds the value of such contracts.
At or before the maturity date of a forward contract that requires the
Portfolio to sell a currency, the Portfolio may either sell a portfolio
security and use the sale proceeds to make delivery of the currency or retain
the security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Portfolio will obtain, on
the same maturity date, the same amount
of the currency that it is obligated to deliver.
Similarly, the Portfolio may close out a forward contract requiring it to
purchase a specified currency by entering into another contract entitling it
to sell the same amount of the same currency on the maturity date of the first
contract. As a result of such an offsetting transaction, a Portfolio would
realize a gain or a loss to the extent of any change in the exchange rate
between the currencies involved between the execution dates of the first and
second contracts. The cost to a Portfolio of engaging in forward contracts
varies with factors such as the currencies involved, the length of the
contract period and the prevailing market conditions. Because forward
contracts are usually entered into on a principal basis, no fees or
commissions are involved. The use of forward contracts does not eliminate
fluctuations in the prices of the underlying securities the Portfolio owns or
intends to acquire, but it does fix a rate of exchange in advance. In
addition, although forward contracts limit the risk of loss due to a decline
in the value of the hedged currencies, they also limit any potential gain that
might result should the value of the currencies increase.
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Although those International Equity Portfolio values its assets daily in terms
of U.S. dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Portfolio may convert
foreign currency from time to time, and investors should be aware of the costs
of currency conversion. Although foreign exchange dealers do not charge a fee
for conversion, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Portfolio at one rate,
while offering a lesser rate of exchange should the Portfolio desire to resell
that currency to the dealer.
Other Hedging Instruments. 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 (the "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.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and policies of the Portfolios, each
Portfolio is subject to certain investment restrictions both in accordance
with various provisions of the Investment Company Act and guidelines adopted
by the Trust's Board. These investment restrictions are summarized below.
The following investment restrictions (1 though 9) are fundamental and cannot
be changed with respect to any Portfolio without the affirmative vote of a
majority of the Portfolio's outstanding voting securities as defined in the
Investment Company Act.
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A Portfolio may not:
1. Purchase the securities of any issuer, if as a result of such purchase,
more than 5% of the total assets of the Portfolio would be invested in the
securities of that issuer, or purchase any security if, as a result of such
purchase, a Portfolio would hold more than 10% of the outstanding voting
securities of an issuer, provided that up to 25% of the value of the Trust's
assets may be invested without regard to this limitation, and provided further
that this restriction shall not apply to investments in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements secured by such obligations, or securities issued by
other investment companies.
2. Borrow money, except that a Portfolio (i) may borrow amounts, taken in
the aggregate, equal to up to 5% of its total assets, from banks for
temporary purposes (but not for leveraging or investment) and (ii) may engage
in reverse repurchase agreements for any purpose, provided that (i) and (ii)
in combination do not exceed 33 1/3% of the value of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than
borrowings).
3. Mortgage, pledge or hypothecate any of its assets except in connection
with any permitted borrowing, provided that this restriction does not
prohibit escrow, collateral or margin arrangements in connection with a
Portfolio's permitted use of options, futures contracts and similar
derivative financial instruments described in the Trust's prospectus.
4. Issue senior securities, as defined in the Investment Company Act,
provided that this restriction shall not be deemed to prohibit a Portfolio
from making any permitted borrowing, mortgage or pledge, and provided further
that the permitted use of options, futures contracts and similar derivative
financial instruments described in the Trust's prospectus shall not
constitute issuance of a senior security.
5. Underwrite securities issued by others, provided that this restriction
shall not be violated in the event that the Portfolio may be considered an
underwriter within the meaning of the Securities Act of 1933 in the
disposition of portfolio of securities.
6. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments, provided that this shall not prevent a
portfolio from investing in securities or other instruments backed by real
real estate or securities of companies engaged in the real estate business.
7. Purchase or sell commodities or commodity contracts, unless acquired as a
result of ownership of securities or other instruments, provided that a
Portfolio may purchase and sell futures contracts relating to financial
instruments and currencies and related options in the manner described in the
Trust's prospectus.
8. Make loans to others, provided that this restriction shall not be
construed to limit (a) purchases of debt securities or repurchase agreements
in accordance with a Portfolio's investment objectives and policies; and (b)
loans of portfolio securities in the manner described in the Trust's
prospectus.
9. Invest more than 25% of the market value of its assets in the securities of
companies engaged in any one industry provided that this restriction does not
apply to obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, repurchase agreements secured by such obligations or
securities issued by other investment companies.
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The following investment restrictions (10 through 15) reflect policies that
have been adopted by the Trust, but which are not fundamental and may be
changed by the Trust's Board, without shareholder vote.
A Portfolio may not:
10. Invest in any issuer for purposes of exercising control or management.
11. Make short sales of securities or maintain a short position, or purchase
securities on margin, provided that this restriction shall not preclude the
Trust from obtaining such short-term credits as may be necessary for the
clearance of purchases and sales of its portfolio securities, and provided
further that this restriction will not be applied to limit the use by a
Portfolio of options, futures contracts and similar derivative financial
instruments in the manner described in the Trust's prospectus.
12. Invest in securities of other investment companies except as permitted
under the Investment Company Act.
An investment restriction applicable to a particular Portfolio shall not be
deemed violated as a result of a change in the market value of an investment,
the net or total assets of that Portfolio, or any other later change provided
that the restriction was satisfied at the time the relevant action was taken.
In order to permit the sale of its shares in certain states, the Trust may
make commitments more restrictive than those described above. Should the
Trust determine that any such commitment may no longer be appropriate, the
Board will consider whether to revoke the commitment and terminate sales of
its shares in the state involved.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion to suspend the continued
offering of the Trust's shares and to reject purchase orders in whole or in
part when in the judgment of the Board such action is in the best interest of
the Trust.
Payments to shareholders for shares of the Trust redeemed directly from the
Trust will be made as promptly as possible but no later than seven days after
receipt by the Trust's transfer agent of the written request in proper form,
with the appropriate documentation as stated in the prospectus, except that
the Trust may suspend the right of redemption or postpone the date of payment
during any period when (a) trading on the New York Stock Exchange is
restricted as determined by the SEC or such Exchange is closed for other than
weekends and holidays; (b) an emergency exists as determined by the SEC making
disposal of portfolio securities or valuation of net assets of the Trust not
reasonably practicable; or for such other period as the SEC may permit for the
protection of the Trust's shareholders.
Each of the Portfolios reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of the
Trust's shares by making payment in whole or in part in readily marketable
securities chosen by the Trust and valued in the same way as they would be
valued for purposes of computing each Portfolio's net asset value. If such
payment were made, an investor may incur brokerage costs in converting such
securities to cash. The value of shares on redemption or repurchase may be
more or less than the investor's cost, depending upon the market value of the
Trust's portfolio securities at the time of redemption or repurchase.
PORTFOLIO TRANSACTIONS AND VALUATION
Subject to the general supervision of the Board, the Investment Managers of
the respective Portfolios are responsible for placing orders for securities
transactions for each of the Portfolios. Securities transactions involving
stocks will normally be conducted through brokerage firms entitled to receive
commissions for effecting such transactions. In placing portfolio
transactions, an Investment Manager will use its best efforts to choose a
broker or dealer capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities,
and other factors. In placing brokerage transactions, the respective
Investment Managers may, however, consistent with the interests of the
Portfolios they serve, select brokerage firms on the basis of the research,
statistical and pricing services they provide to the Investment Manager. In
such cases, a Portfolio may pay a commission that is higher than the
commission that another qualified broker might have charged for the same
transaction, providing the Investment Manager involved determines in good
faith that such commission is reasonable in terms either of that transaction
or the overall responsibility of the Investment Manager to the Portfolio and
<PAGE>
<PAGE>
such manager's other investment advisory clients. Transactions involving
debt securities and similar instruments are expected to occur primarily with
issuers, underwriters or major dealers acting as principals. Such
transactions are normally effected on a net basis and do not involve payment
of brokerage commissions. The price of the security, however, usually
includes a profit to the dealer. Securities purchased in underwritten
offerings include a fixed amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. When securities are
purchased directly from or sold directly to an issuer, no commissions or
discounts are paid.
The table below reflects the aggregate dollar amount of brokerage commissions
paid by each of the portfolios of the Trust paid the during the fiscal years
indicated.
Portfolio Aggregate Brokerage Commissions
for the Fiscal Years ended
1997 1996
- ----------------- ----------- -------------
[S] [C] [C]
Value Equity $179,053 $137,963
Growth Equity 258,337 238,948
Small Cap 227,730 147,928
International Equity 250,705 144,359
Limited Duration -0- -0-
The Trust has adopted procedures pursuant to which each portfolio is permitted
to allocate brokerage transactions to affiliates of the various Investment
Managers. Under such procedures, commissions paid to any such affiliate must
be fair and reasonable compared to the commission, fees or other remuneration
paid to other brokers in connection with comparable transactions. Several of
the Trust's Investment Managers are affiliated with brokerage firms to which
brokerage transactions may, from time to time, be allocated. The table below
reflects the aggregate dollar amount of commissions paid to each such firm, as
well as similar information about transactions allocated to Furman Selz, LLC,
(which served as the Trust's principal underwriter prior to January 1, 1997)
by the Portfolios during the period. Information shown is expressed both as a
percentage of the total amount of commission dollars paid by each portfolio
and as a percentage of the total value of all brokerage transactions effected
on behalf of each portfolio. "NA" indicates that during the relevant period,
indicated broker was not considered an affiliate of the specified portfolio.
<TABLE>
<CAPTION>
Affiliated Portfolio
Broker 1 -------------------------------------------------------
For Value For Growth For Small For Int'l For Limited
Equity Equity Cap Equity Equity Duration
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- --------- ------------ --------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cowen & Co.2
% of commissions -0- 34% -0- .02% -0- -0- -0- -0- -0- -0-
% of transactions -0- .94% -0- .05% -0- -0- -0- -0- -0- -0-
Prudential
Securities3
% of commissions NA NA 1.36 1.45% NA NA NA NA NA NA
% of transactions NA NA 1.38% .70% NA NA NA NA NA NA
Merrill Lynch & Co.4
% of commissions .80% NA 2.21% NA 1.51%% NA 2.08% NA -0- NA
% of transactions .61% NA 5.47% NA 1.56% NA 2.74% NA -0- NA
Furman Selz LLC5
% of commissions -0- -0- -0- 4.20% -0- -0- -0- -0- -0- -0-
% of transactions -0- -0- -0- 1.26% -0- -0- -0- -0- -0- -0-
- -------
</TABLE>
<PAGE>
<PAGE>
1. Other brokers deemed to be affiliated with certain Portfolios are:
with respect to The International Portfolio, companies affiliated with
Swiss Bank, of which Brinson Partners is a wholly-owned subsidiary, and
with respect to the Income Portofolios, companies
affiliated with Deutchebank, the parent company of Morgan Grenfell Capital
Management Incorporated. No brokerage transactions were
affected through such companies during the periods reflected in the
above table by the relevant Portfolios.
2. Cowen Asset Management, which served as an Investment Manager of The Value
Equity Portfolio prior to August 1, 1996, is a division of Cowen & Co.
3. Both Prudential Securities and Jennison Associates Capital Management Corp.,
which serves as an Investment Manager of The Value Equity Portfolio,
are wholly-owned subsidiaries of Prudential Insurance Company of America.
4. Figures shown include all brokers affiliated with Merrill Lynch & Co.
Merrill Lynch Asset Management, LLP, ("MLAM") of which Hotchkis and Wiley
is a division. MLAM is a wholly, indirect subsidiary of Merrill Lynch & Co.
5. Furman Selz LLC served as the Trust's principal underwriter
prior to January 1, 1997.
In no instance will portfolio securities be purchased from or sold to
Investment Managers, Hirtle Callaghan or any affiliated person of the
foregoing entities except to the extent permitted by applicable law or an
order of the SEC. Investment decisions for the several Portfolios are made
independently from those of any other client accounts (which may include
mutual funds) managed or advised by an Investment Manager. Nevertheless, it
is possible that at times identical securities will be acceptable for both a
Portfolio of the Trust and one or more of such client accounts. In such
cases, simultaneous transactions are inevitable. Purchases and sales are then
averaged as to price and allocated as to amount according to a formula deemed
equitable to each such account. While in some cases this practice could have
a detrimental effect upon the price or value of the security as far as a
Portfolio is concerned, in other cases it is believed that the ability of a
Portfolio to participate in volume transactions may produce better executions
for such Portfolio.
Portfolio Turnover. Changes may be made in the holdings of any of the
Portfolios consistent with their respective investment objectives and policies
whenever, in the judgment of the relevant Investment Manager, such changes are
believed to be in the best interests of the Portfolio involved. It is
anticipated that the annual portfolio turnover rate for a Portfolio will not
exceed 100% under normal circumstances. The portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of portfolio
securities by the average monthly value of a Portfolio's securities. For
purposes of this calculation, portfolio securities exclude all securities
having a maturity when purchased of one year or less. The portfolio turnover
rate for each of the Portfolios that has more than one Investment Manager will
be an aggregate of the rates for each individually managed portion of that
Portfolio. Rates for each portion, however, may vary significantly. The
portfolio turnover rate for each of the Trust's Portfolios for the fiscal year
ended June 30, 1997 were: for the Value Equity Portfolio, 97.30%; for the
Growth Equity Portfolio, 80.47%; for the Small Capitalization Equity
Portfolio, 54.16%; for the International Portfolio, 29.85% and for the Limited
Duration Municipal Bond Portfolio, 44.57%. The portfolio turnover rates for
the portfolios for the period beginning with the commencement of the
respective portfolio's operations and ending on June 30, 1996, were as
follows: for the Value Equity Portfolio, 92.00%; for the Growth Equity
Portfolio, 80.00%; for the Small Capitalization Equity Portfolio, 38.00%;
and for the International Portfolio, 15.00%.
The portfolio turnover rate for the Limited Duration Municipal
Bond Portfolio for the same period was 116.00%. This rate is
due to the fact that securities may be sold by the Investment Manager
in order to adjust the overall duration or average effective of the
overall portfolio. The portfolio turnover rate for The Fixed Income
and Intermediate Term Municipal Bond Portfolios is similarly expected
to exceed 100%.
<PAGE>
<PAGE>
Valuation. The net asset value per share of the Portfolios is determined
once on each Business Day as of the close of the New York Stock Exchange,
which is normally 4 P.M. New York City time, on each day the New York Stock
Exchange is open for trading. The Trust does not expect to determine the net
asset value of its shares on any day when the Exchange is not open for trading
even if there is sufficient trading in its portfolio securities on such days
to materially affect the net asset value per share.
In valuing the Trust's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such
day. Readily marketable securities traded only in the over-the-counter market
and not on NASDAQ are valued at the current or last bid price. If no bid is
quoted on such day, the security is valued by such method as the Board shall
determine in good faith to reflect the security's fair value. All other
assets of each Portfolio are valued in such manner as the Board in good faith
deems appropriate to reflect their fair value. The net asset value per share
of each of the Trust's Portfolios is calculated as
follows: All liabilities incurred or accrued are deducted from the valuation
of total assets which includes accrued but undistributed income; the resulting
net asset value is divided by the number of shares outstanding at the time of
the valuation and the result (adjusted to the nearest cent) is the net asset
value per share.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. As noted in the prospectus, each Portfolio will
distribute substantially all of its net investment income and net realized
capital gains, if any. It is anticipated that The Value Portfolio, The Growth
Portfolio and The Small Capitalization Equity Portfolio will declare and
distribute dividends from net investment income on a quarterly basis. The
Limited Duration Municipal Bond Portfolio will declare dividends daily, with
payments on a monthly basis. The International Equity Portfolio will declare
dividends semi-annually. The Trust expects to distribute any undistributed
net investment income and capital gains for the 12-month period ended each
October 31, on or about December 31 of each year.<PAGE>
Tax Information. Each of the Trust's Portfolios is treated as a separate
entity for federal income tax purposes. Each Portfolio intends to qualify and
elect to be treated as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code") for the fiscal year
ending June 30, 1996 and intends to continue to so qualify. Accordingly, it
is the policy of each Portfolio to distribute to its shareholders by December
31 of each calendar year (i) at least 98% of its ordinary income for such
year; (ii) at least 98% of the excess of its realized capital gains over its
realized capital losses for the 12-month period ending on October 31 during
such year; and (iii) any amounts from the prior calendar year that were not
distributed. The following discussion and related discussion in the
prospectus do not purport to be a complete description of all tax implications
of an investment in the Trust. In addition, such information relates solely
to the application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. A shareholder should consult
with his or her own tax adviser for more information about Federal, state,
local or foreign taxes. Each shareholder who is not a U.S. person should
consider the U.S. and foreign tax consequences of ownership of shares of the
Trust, including the possibility that such a shareholder may be subject to a
U.S. withholding tax on amounts constituting ordinary income.
Distributions of net investment income and short-term capital gains are
taxable to shareholders as ordinary income. Distributions paid by a Portfolio
out of long-term capital gain are taxable to those investors who are subject
to income tax as long term capital gain. In the case of corporate
shareholders, a portion of the distributions may qualify for the
dividends-received deduction to the extent the Trust designates the amount
distributed by any Portfolio as a qualifying dividend. The aggregate amount
so designated cannot, however, exceed the aggregate amount of qualifying
dividends received by that Portfolio for its taxable year. It is expected
that dividends from domestic corporations will be part of the gross income for
one or more of the Portfolios and, accordingly, that part of the distributions
by such Portfolios may be eligible for the dividends-received deduction for
corporate shareholders. However, the portion of a particular Portfolio's gross
income attributable to qualifying dividends is largely dependent on that
Portfolio's investment activities for a particular year and therefore cannot
be predicted with any certainty. The deduction may be reduced or eliminated
if shares of such Portfolio held by a corporate investor are treated as
debt-financed or are held for less than 46 days.
<PAGE>
<PAGE>
Distributions of net investment income and short-term capital gains are
taxable to shareholders as long-term capital gains, regardless of the length
of time they have held their shares. Capital gains distributions are not
eligible for the dividends-received deduction referred to in the previous
paragraph. Distributions of any net investment income and net realized capital
gains will be taxable as described above, whether received in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for federal income tax purposes in each share so
received equal to the net asset value of a share on the reinvestment date.
Distributions are generally taxable when received. However, distributions
declared in October, November or December to shareholders of record on a date
in such a month and paid the following January are taxable as if received on
December 31. Distributions are includable in alternative minimum taxable
income in computing a shareholder's liability for the alternative minimum
tax.
A redemption of Trust shares may result in recognition of a taxable gain or
loss. Any loss realized upon a redemption of shares within six months from
the date of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gains
during such six-month period. Any loss realized upon a redemption may be
disallowed under certain wash sale rules to the extent shares of the same
Trust are purchased (through reinvestment of distributions or otherwise)
within 30 days before or after the redemption or exchange.
The Trust is required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds
from the redemption or exchange of Trust shares, except in the case of exempt
shareholders, which includes most corporations. Pursuant to the backup
withholding provisions of the Code, distributions of any taxable income and
capital gains and proceeds from the redemption of Trust shares may be subject
to withholding of federal income tax at the rate of 31 percent in the case of
non- exempt shareholders who fail to furnish the Trust with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld. Corporate and other exempt shareholders should provide the Trust
with their taxpayer identification numbers or certify their exempt status in
order to avoid possible erroneous application of backup withholding. The Trust
reserves the right to refuse to open an account for any person failing to
provide a certified taxpayer identification number.
Tax Matters Relating to the Use of Certain Hedging Instruments and Foreign
Investments. Certain of the Portfolios may write, purchase or sell certain
options, futures and foreign currency contracts. Such transactions are subject
to special tax rules that may affect the amount, timing and character of
distributions to shareholders. Unless a Portfolio is eligible to make, and
makes, a special election, any such contract that is a "Section 1256 contract"
will be "marked-to-market" for Federal income tax purposes at the end of each
taxable year, i.e., each contract will be treated for tax purposes as though
it had been sold for its fair market value on the last day of the taxable
year. In general, unless the special election referred to in the previous
sentence is made, gain or loss from transactions in Section 1256 contracts
will be 60% long term and 40% short term capital gain or loss. Additionally,
Section 1092 of the Code, which applies to certain "straddles," may affect the
tax treatment of income derived by a Portfolio from transactions in option,
futures and foreign currency contracts. In particular, under this provision,
a Portfolio may, for tax purposes, be required to postpone recognition of
losses incurred in certain closing transactions.
Section 988 of the Code contains special tax rules applicable to certain
foreign currency transactions that may affect the amount, timing, and
character of income, gain or loss recognized by the Trust. Under these rules,
foreign exchange gain or loss realized with respect to foreign
currency-denominated debt instruments, foreign currency forward contracts,
foreign currency-denominated payables and receivables, and foreign currency
options and futures contracts (other than options, futures, and foreign
currency contracts that are governed by the mark-to-market and 60%-40% rules
of Section 1256 of the Code and for which no election is made) is treated as
ordinary income or loss. Under the Code, dividends or gains derived by a
Portfolio from any investment in a "passive foreign investment company"
("PFIC")-- a foreign corporation 75 percent or more of the gross income of
which consists of interest, dividends, royalties, rents, annuities or other
"passive income" or 50 percent or more of the assets of which produce "passive
income" -- may subject a Portfolio to U.S. federal income tax even with
respect to income distributed by the Portfolio to its shareholders. In
addition, any such tax will not itself give rise to a deduction or credit to
the Portfolio or to any shareholder. In order to avoid the tax consequences
described above, those Portfolios authorized to invest in foreign securities
will attempt to avoid investments in PFICs.
<PAGE>
<PAGE>
PERFORMANCE AND OTHER INFORMATION
From time to time, a Portfolio may state its total return in sales literature
and investor presentations. Total return may be stated for any relevant
period specified. Any statements of total return will be accompanied by
information on that Portfolio's average annual compounded rate of return over
the most recent four calendar quarters and the period from the inception of
that Portfolio's operations. The Trust may also advertise aggregate and
average total return information over different periods of time for the
various Portfolios. The average annual compounded rate of return for a
Portfolio is determined by reference to a hypothetical $1,000 investment that
includes capital appreciation and depreciation for the stated period,
according to the formula P(1+T)/n/ = ERV. For purposes of this formula, the
variables represent the following values:
P = a hypothetical initial purchase of $1,000
T = average annual total return
n = number of years
ERV = redeemable value of hypothetical $1,000 initial purchase at
the end of the period.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates
during the period and gives effect to the maximum applicable sales charge.
From time to time, evaluations of a Trust's performance by independent sources
may also be used in advertisements and in information furnished to present or
prospective investors in the Trusts. Investors should note that the
investment results of each of the Trust's Portfolios will fluctuate over time,
and any presentation of a Portfolio's total return for any period should not
be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
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
Trust as August 29, 1997. 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.
[SUBJECT TO UPDATE BY AMENDMENT]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small
Name and Address of Value Growth Capitalization International Limited Duration
Record Holder Equity Equity Equity Equity Municipal Bond
- -----------------------------------------------------------------------------------------------------------------
Bankers Trust Company 68.19% 78.14% 83.25% 65.50% 94.12%
1 Bankers Trust Plaza
New York, N.Y. 10006
PNC Bank, N.A. 12.41% 7.86% 6.69% 18.04% (1) --
P.O. Box 7780-1888
Philadelphia, PA 19182
Northern Trust Company 11.11% (2) 8.16% (3) 6.94% (4) 5.89% (5) --
P.O. Box 92956
Chicago, IL 60675
- ----------------------------
(1) Shares include 12.24% held FBO 78 PGH Pension
(2) Shares include 10.45% held FBO SFTRS 26-31827
(3) Shares include 7.48% held FBO SFTRS HC
(4) Shares include 6.29% held FBO SFTRS HC
(5) Shares include 5.34% held FBO SFTRS HC
</TABLE>
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
[TO BE SUPPLIED BY AMENDMENT]
<PAGE>
<PAGE>
Ratings Appendix
Ratings for Corporate Debt Securities
<TABLE>
<CAPTION>
Moody's Investors Service, Inc. Standard & Poor's Corporation
<S> <C>
Aaa AAA
Judged to be of the best quality; smallest This is the highest rating assigned by S&P to a
degree of investment risk debt obligation and indicates an extremely strong
capacity to pay principal and interest.
Aa AA
Judged to be of high quality by all Also qualify as high-quality debt obligations.
standards; together with Aaa group, Capacity to pay principal and interest is very
comprise what are generally known as strong
"high grade bonds"
A A
Possess many favorable investment Strong capacity to pay principal and interest,
attributes and are to be considered as although securities in this category are somewhat
upper medium grade obligations more susceptible to the adverse effects of changes
in circumstances and economic conditions.
Baa BBB
Medium grade obligations, i.e. Bonds rated BBB are regarded as having an adequate
they are neither highly protected nor capacity to pay principal and interest. Although
poorly secured. Interest payments they normally exhibit adequate protection
and principal security appear parameters, adverse economic conditions or
adequate for present but certain changing circumstances are more likely to lead to
protective elements may be lacking or a weakened capacity to pay principal and interest
unreliable over time. Lacking in for bonds in this category than for bonds in the A
outstanding investment characteristics and category.
have speculative characteristics as well
Ba BB
Judged to have speculative elements: their Bonds rated BB are regarded, on balance, as
future cannot be considered as well predominantly speculative with respect to the
assured. Often the protection of issuer's capacity to pay interest and repay
interest and principal payments principal in accordance with the terms of the
may every moderate and thereby not well obligation. While such bonds will likely have some
safeguarded during both good and bad quality and protective characteristics, these are
times over the future. Uncertainty outweighed by large uncertainties or major risk
of position characterize bonds exposures to adverse conditions.
in this class
</TABLE>
<PAGE>
<PAGE>
RATINGS FOR MUNICIPAL SECURITIES
The following summarizes the two highest ratings used by Standard & Poor's
Corporation for short term notes:
SP-1 -- Loans bearing this designation evidence a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a (+) designation.
SP-2 -- Loans bearing this designation evidence a satisfactory capacity to
pay principal and interest.
The following summarizes the two highest ratings used by Moody's Investors
Service, Inc. for short term notes:
MIG-1/VIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the
market for refinancing, or both.
MIG-1/VIG-2 -- Obligations bearing these designations are of the high
quality, with margins of protection ample although not so large as in the
preceding group.
The following summarizes the two highest ratings used by Standard & Poor's
Corporation for commercial paper:
Commercial Paper rated A-1 by Standard & Poor's Corporation indicated that
the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is strong, but the relative degree of safety is
not as high as for issues designated A-1.
The following summarizes the two highest ratings used by Moody's Investors
Service, Inc. for commercial paper:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many
of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is
maintained.
<PAGE>
<PAGE>
Part C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) TO BE SUPPLIED BY AMENDMENT
(b) TO BE SUPPLIED BY AMENDMENT
(c) TO BE SUPPLIED BY AMENDMENT
(b) Exhibits:
(1)(a)Certificate of Trust filed on December 15, 1994 with the
Secretary of State of Delaware.
FILED HEREWITH
(1)(b)Amended and Restated Declaration and Agreement of Trust (as
amended November 9, 1995)
(Incorporated herein by reference to Item 1(b)
contained in Post-effective Amendment No. 4, filed
with the Securities and Exchange Commission on
December 16, 1996.)
(2) Bylaws of the Trust (as amended November 9, 1995)
(Incorporated herein by reference to Item 2
contained in Post-effective Amendment No. 4, filed
with the Securities and Exchange Commission on
December 16, 1996.)
(3) /[voting trust agreement]/
Not Applicable.
(4) /[instruments defining right of securityholders]/
Not Applicable.
(5) Investment Advisory Agreements
(a) Consulting Agreement between the Trust and Hirtle, Callaghan
& Co., Inc. FILED HEREWITH
(b) Portfolio Management Contract between the Trust and
Institutional Capital Corporation related to the Value Equity
Portfolio. FILED HEREWITH
(c) Portfolio Management Contracts between the Trust and Hotchkis
and Wiley related to the Value Equity Portfolio. (Incorporated
herein by reference to Item 5(c)(A-B) in Post-effective
Amendment No. 3, filed with the Commission
on October 18, 1996.)
(d) Portfolio Management Contract between the Trust and Goldman
Sachs Asset Management and Jennison Associates Capital
Corporation related to the Growth Equity Portfolio.
FILED HEREWITH
(e) Portfolio Management Contract between the Trust and Clover
Capital Management Inc. and Frontier Capital Management Co.
related to the Small Capitalization Equity Portfolio.
FILED HEREWITH
(f) Portfolio Management Contract between the Trust and Brinson
Partners, Inc. related to the International Equity Portfolio.
FILED HEREWITH
(g) Portfolio Management Contract between the Trust and Morgan
Grenfell Capital Management Inc. related to the Limited
Duration Municipal Bond Portfolio. FILED HEREWITH
(h) Portfolio Management Contract between the Trust and Morgan
Grenfell Capital Management Inc. related to the Fixed Income
Portfolio. FILED HEREWITH
(i) Portfolio Management Contract between the Trust and Morgan
Grenfell Capital Management Inc. related to the Intermediate
Term Portfolio. FILED HEREWITH
<PAGE>
<PAGE>
(6) Distribution Agreement between BISYS Fund Services
(Incorporated herein by reference to Item 1(b)
contained in Post-effective Amendment No. 4, filed
with the Securities and Exchange Commission on
December 16, 1996.)
(7) [bonus, pension and profit-sharing plans]
Not Applicable.
(8) Custodian Agreement between Bankers Trust Company
and the Trust
FILED HEREWITH
(9) Registrant's Agreements with BISYS Fund Services
(i) Amendment to Adminstration Agreement
(ii) Amendment to Transfer Agency Agreement
(iii) Amendment to Fund Accounting Agreement
(Incorporated herein by reference to Item 9(b)
contained in Post-effective Amendment No. 4, filed
with the Securities and Exchange Commission on
December 16, 1996.)
(iv) Omnibus Fee Agreement. FILED HEREWITH
(10) Opinion of Counsel and related consent.
TO BE FILED BY AMENDMENT
(11) Consent of Accountants.
TO BE FILED BY AMENDMENT
(12) Audited Financial Statements
TO BE FILED BY AMENDMENT
(13) [agreements regarding initial capital]
Not Applicable.
<PAGE>
<PAGE>
(14) [model retirement plans]
Not Applicable.
(15) [Rule 12b-1 plan]
Not Applicable.
(16) [computation for Item 22 performance]
Not Applicable.
(17) Financial Data Schedule [See Item 27, below]
(18) [plan pursuant to rule 18f-3]
Not Applicable.
(24) Powers of Attorney
(Incorporated herein by reference to Item 24
contained in Post-effective Amendment No. 4, filed
with the Securities and Exchange Commission on
December 16, 1996.)
(27) Financial Data Schedules (Rule 483 under the Securities
Act of 1933) (Incorporated herein by reference to
filing made by Registrant on September 10, 1997, with the
Securities and Exchange Commission, pursuant to Rule 30(d)
under Investment Company Act of 1940.)
Item 25. Persons Controlled by or Under Common Control with Registrant.
--------------------------------------------------------------
None.
Item 26. Number of Holders of Securities.
--------------------------------
[SUBJECT TO COMPLETION BY AMENDMENT]
Title of Class Number of Record Holders
as of __________
Units of beneficial
interest, par value $.001 The Value Equity Portfolio ____
The Growth Equity Portfolio ____
The Small Capitalization Equity ____
Portfolio
The International Equity Portfolio ____
The Limited Duration Municipal
Bond Portfolio ____
The Fixed Income Portfolio ____
The Intermediate Term Portfolio ____
<PAGE>
Item 27. Indemnification.
----------------
Reference is made to Article VII of the Trust's Amended and Restated
Agreement and Declaration of Trust and to Article VI of the Trust's By-Laws,
which are incorporated herein by reference. Pursuant to Rule 484 under the
Securities Act of 1933 (the "Act"), as amended, the Trust furnishes the
following undertaking:
<PAGE>
Insofar as indemnification for liabilities arising under the Act may be
permitted to trustees, officers and controlling persons of the Trust pursuant to
the foregoing provisions, or otherwise, the Trust has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Trust of expenses incurred or paid by a trustee, officer
or controlling person of the Trust in the successful defense of any action, suit
or proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Trust will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisers.
------------------------------------------------------
Information relating to the business and other connections of each of the
Trust's Investment Managers and each director, officer or partner of such
managers are hereby incorporated by reference from each such manager's Form ADV,
as filed with the Securities and Exchange Commission, as follows:
Investment Manager SEC File No. 801- ADV Item No.
- ------------------------------------------------------------------------------
Brinson Partners, Inc. 34910 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Frontier Capital Management Co. 15724 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Jennison Associates Capital Corp. 5608 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Institutional Capital Corporation 40779 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Goldman Sachs Asset Management _____ Part I (8, 10 & 12)
Part II (6 - 9, 13)
Clover Capital Management Inc. 27041 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Morgan Grenfell Capital Management Inc. 27291 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Hotchkis and Wiley, (a division of
Merrill Lynch Asset Management LP 11583 Part I (8, 10 & 12)
Part II (6 - 9, 13)
Hirtle, Callaghan & Co., Inc. ("HCCI") has entered into a Consulting
Agreement with the Trust. Although HCCI is a registered investment adviser,
HCCI does not have investment discretion with regard to the assets of the Trust.
Information regarding the business and other connections of HCCI's officers and
directors is incorporated by reference to Part I (Items 8, 10 and 12) and Part
II (Items 6 - 9 and 13) of HCCI's Form ADV, File No. 801-32688 which has been
filed with the Securities and Exchange Commission.
<PAGE>
<PAGE>
Item 29. Principal Underwriters.
-----------------------
(a) BISYS Fund Services, Inc. ("BISYS") serves as the principal
underwriter for the Trust. BISYS also serves as a principal underwriter for the
the following investment companies:
The American Performance Funds, AmSouth Mutual funds, The ARCH Fund, Inc.,
The BB&T Mutual Funds Group, The Coventry Group, First Choice Funds,
Fountain Square Funds, HSBC Family of Funds, The HighMark Group,
The Infinity Mutual Fudns, Inc., The Kent Funds, Marketwatch Funds, MMA
Praxis Mutual Funds, M.S.C.&T. Funds, Pacific Capital Funds, Parkstone
Group of Funds, The Parkstone Riverfront Funds, Inc., Pegasus Funds, Qualivest
Funds, The Republic Funds The SBSF Funds, Inc. (dba Key Mutual Funds), The
Sessions Group, Summit Investment Trust, The Time Horizon Funds, and
The Victory Portfolios.
(b) The following table sets forth the indicated information with
respect to each director and officer of BISYS. Unless otherwise noted, the
business address for each such person is 3435 Stelzer Road, Columbus, Ohio
43219:
Name Positions and Offices with Positions with Trust
- ---- Underwriter --------------------
-----------
The BISYS Group, Inc. Sole shareholder None
150 Clove Road Sole Limited Partner
Little Falls, NJ 07424
BISYS Fund Services, Inc.
3435 Stlezer Road
Columbus Ohio 53219 Sole General Partner None
(c) Not Applicable.
Item 30. Location of Accounts and Records.
---------------------------------
(a) Bankers Trust Company, 130 Liberty Street, One Bankers Trust Plaza,
New York, New York 10006 (records relating to its function as custodian.)
(b) BISYS Fund Services, 125 West 55th Street, New York, New York 10119
(records relating to its function as administrator, accounting agent,
transfer and dividend disbursing agent and distributor.)
(c) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219.
<PAGE>
<PAGE>
(d) Records relating to the activities of each of the investment managers
on behalf of the indicated portfolio are maintained as follows:
Investment Manager Location of Accounts and
------------------ Records
------------------------
The International Equity Portfolio
- ----------------------------------
Brinson Partners, Inc. 209 South LaSalle Street
Chicago, IL 60604-1295
The Small Capitalization Equity Portfolio
- ------------------------------------------
Clover Capital Management, Inc. 11 Tobey Village Office Park
Pittsford, NY 14534
Frontier Capital Management 99 Summer Street
Company Boston, MA 02110
The Value Equity Portfolio
- --------------------------
Hotchkis and Wiley 800 West Sixth Street
Los Angeles, California 90017
Institutional Capital 225 West Wacker
Corporation Suite 2400
Chicago, IL 60606
The Growth Equity Portfolio:
- ---------------------------
Jennison Associates Capital Corp. 466 Lexington Ave.
New York, NY 10017
Goldman Sachs Asset Management 85 Broad Street
New York, NY 10004
The Limited Duration Municipal Bond Portfolio:
- ---------------------------------------------
Morgan Grenfell Capital 885 Third Avenue
Management Incorporated New York, NY 10022-4802
and 1435 Walnut Street
(4th Fl.) Philadelphia, PA
19102
Item 31. Management Services.
--------------------
None.
Item 32. Undertakings.
-------------
Not Applicable.
--------------
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 7 to be signed on its behalf by the undersigned,
thereto duly authorized in the City of Wayne, and the Commonwealth of
Pennsylvania on December 30, 1997.
THE HIRTLE CALLAGHAN TRUST
BY: /s/
---------------------------
Donald E. Callaghan
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<S> <C> <C>
/s/ Treasurer and Vice-President December 30, 1997
------------------------- (Principal Financial Officer)
Robert Zion
/s/ Trustee December 30, 1997
-------------------------
Donald E. Callaghan
/s/ * Trustee December 30, 1997
-------------------------
Richard W. Wortham, III
/s/ * Trustee December 30, 1997
-------------------------
Ross H. Goodman
/s/ * Trustee December 30, 1997
-------------------------
Jarrett Burt Kling
/s/ * Trustee December 30, 1997
-------------------------
David M. Spungen
/s/ * Trustee December 30, 1997
-------------------------
Jonathan J. Hirtle
</TABLE>
* signed by Donald E. Callaghan, pursuant
to powers of attorney filed as Exhibits to Post-effective Amendment No 4,
filed with the Commission on December 16, 1996 and incorporated by reference
herein.
Exhibit List
(1) Exhibit List
(2) Certificate of Trust filed on December 15, 1994 with the Secretary of the
State of Deleware.
(3) Consulting Agreement between the Trust and Hirtle, Callaghan
& Co., Inc.
(4) Portfolio Management Contract between the Trust and
Institutional Capital Corporation related to the Value Equity
Portfolio.
(5) Portfolio Management Contract between the Trust and Goldman
Sachs Asset Management related to the Growth Equity Portfolio.
(6) Portfolio Management Contract between the Trust and Jennison Associates
Capital Corporation related to the Growth Equity Portfolio.
(7) Portfolio Management Contract between the Trust and Clover
Capital Management Inc. related to the Small Capitalization Equity
Portfolio.
(8) Portfolio Management Contract between the Trust and Frontier Capital
Management Co. related to the Small Capitalization Equity Portfolio.
(9) Portfolio Management Contract between the Trust and Brinson
Partners, Inc. related to the International Equity Portfolio.
(10) Portfolio Management Contract between the Trust and Morgan
Grenfell Capital Management Inc. related to the Limited
Duration Municipal Bond Portfolio.
(11) Portfolio Management Contract between the Trust and Morgan
Grenfell Capital Management Inc. related to the Fixed Income
Portfolio.
(12) Portfolio Management Contract between the Trust and Morgan
Grenfell Capital Management Inc. related to the Intermediate
Term Portfolio.
(13) Custodian Agreement between Bankers Trust Company and the Trust.
(14) Amendment to Administration Agreement.
(15) Amendment to Transfer Agency Agreement.
(16) Amendment to Fund Accounting Agreement.
(17) Omnibus Fee Agreement.
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY
I, EDWARD J. FREEL, SECRETARY OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE
ATTACHED IS A TRUE AND CORECT COPY OF THE CERTIFIATE OF BUSINESS TRUST
REGISTRATION OF "THE HIRTLE CALLAGHAN TRUST", FILED IN THIS OFFICE ON THE
FIFTEENTH DAY OF DECEMBER, A.D. 1994, AT 10 O'CLOCK A.M.
/s/
________________________________________
Edward J. Freel, Secretary of the State
AUTHENTICATION: 7342070
DATE: 12-16-94
<PAGE>
CONSULTING SERVICES AGREEMENT
AGREEMENT made this 21st day of July, 1995 between HIRTLE CALLAGHAN & CO.,
INC. , a Delaware corporation ("HCCI") 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 intends to retain one or more investment management
organizations to provide portfolio management services to its Portfolios and
HCCI is willing, in accordance with the terms and conditions hereof, to
provide assistance to the Trust in monitoring investment management
organizations in accordance with this Agreement;
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein and intending to be legally bound hereby, it is agreed between the
parties as follows:
1. Duties of HCCI.
(a) HCCI shall assist the Trust in evaluating and monitoring investment
management organizations retained by the Trust ("Portfolio Managers") and/or
investment management organizations proposed to be retained by the Trust
("Manager Candidates"). Such assistance shall be provided to the Trust in
such form as may be agreed upon by the Trust and HCCI from time to time and
may involve the preparation of oral and/or written presentations to the
Trust's Board of Trustees ("Board") or committees established by the Board.
HCCI, upon the request of the Trustees, shall make its officers and/or
employees available to serve as officers, employees or Trustees of the Trust
and provide office space and equipment sufficient for the maintenance of the
Trust's principal office.
<PAGE>
<PAGE>
(b) HCCI shall not have investment discretion with respect to the purchase or
sale of securities by any Portfolio, or any other assets of the Trust or its
Portfolios. Nothing in this Agreement shall be construed to render HCCI an
agent of the Trust or otherwise authorized to act on the Trust's behalf,
except to the extent that the Trust may expressly so request in writing.
Notwithstanding the foregoing, individual officers or employees of HCCI may,
from time to time serve as officers and/or trustees of the Trust and this
Agreement shall not be construed as imposing any limitation on the ability of
any such individual to act in such capacity in accordance with the Trust's
Declaration of Trust and Bylaws.
2. Expenses and Compensation.
HCCI shall pay all of its expenses incurred in the performance of its duties
under this Agreement. For its services under this Agreement, HCCI shall be
entitled to receive a fee at the annual rate of .05% of the average daily net
assets of the Trust, which fee shall be payable monthly. If the expenses
borne by the Trust in any year exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares are
registered or qualified for sale bo the public, HCCI shall reimburse the Trust
for any excess up to the full amount of the fee to which it is entitled under
this Section 2. 3. Limitation of Liability.
(a) HCCI shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Trust in connection with the matters to which
this Agreement relates including, without limitation, losses that may be
sustained in connection with the allocation or reallocation of assets among
various asset categories by the Trust, the retention or termination of any
investment management organization by the Trust or any recommendation or
investment made by any such organization, whether or not any such action was
taken in reliance upon information provided by HCCI as part of the consulting
services that HCCI is obligated to provide hereunder except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of HCCI in
the performance of its duties or from reckless disregard by HCCI of its
obligations and duties under this Agreement.
(b) Notwithstanding the foregoing, HCCI expressly agrees that the Trust may
rely upon information provided, in writing, by HCCI to the Trust (including,
without limitation, information contained in HCCI's then current Form ADV) in
accordance with Section 8 of this 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 (collectively, "SEC Filings"). HCCI 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'
<PAGE>
<PAGE>
fees, incurred as a result of any untrue statement or alleged untrue statement
of a material fact made by HCCI in any such written information and upon which
the Trust relies in preparing any SEC Filing, or any omission or alleged
omission to state in such written information a material fact necessary to
make such statements not misleading ("material omission"). HCCI will not,
however, be required to so indemnify any person
under this Section 3 to the extent that, in making any such statement or
material omission, HCCI relied upon an untrue or alleged untrue statement of
material fact made by, or material omission on the part of, any officer,
Trustee or agent of the Trust (other than an officer, Trustee or agent that is
an employee, officer or director of HCCI) or where such statement or material
omission was made in reliance upon information furnished, in writing, by any
such officer, Trustee or agent, including, without limitation, the Trust's
custodian bank, administrator, distributor, accounting agent or any Portfolio
Manager.
4. Permissible Interest.Subject to and in accordance with the Trust's
Declaration of Trust and Bylaws and corresponding governing documents of HCCI,
Trustees, officers, agents and shareholders of the Trust may have an interest
in HCCI as officers, directors, agents and/or shareholders or otherwise.
HCCI may also 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.
5 Duration, Termination and Amendments.(a) This Agreement shall become
effective as of the date first written above and shall continue in effect for
two years. Thereafter, this Agreement shall continue in effect from year to
year for so long as its continuance is specifically approved at least annually
by (i) a majority of the Board or the vote of the holders of a majority of
the Trust's outstanding voting securities; and (ii) the affirmative vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of those members of the Board ("Independent Trustees") who are not
"interested persons" of the Trust.
(b) This Agreement may be terminated by the Trust or by HCCI 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 Directors or
the holders of a majority of the Trust's outstanding securities, such approval
must be obtained before any such amendment may become effective. This Agreement
shall terminate automatically upon its assignment.
(c) For purposes of this Agreement, the terms "majority of the outstanding
voting securities, "assignment" and "interested person" shall have the
meanings set forth in the Investment Company Act.
<PAGE>
<PAGE>
6. Confidentiality.
The Trust acknowledges and agrees that it may gain access to methodologies and
other information that is proprietary to HCCI ("Proprietary Information") as
a result of the services provided to the Trust by HCCI hereunder. The Trust
agrees that it will use any such Proprietary Information exclusively in
connection with the oversight of the investment activities of Portfolio
Managers and the evaluation of Manager Candidates. The Trust further agrees
that it shall use its best efforts to ensure that any agent or affiliate of
the Trust who may gain access to Proprietary Information shall be made aware
of its proprietary nature and shall likewise treat it as confidential. 7
Use of Name. It is acknowledged and agreed that the names "Hirtle Callaghan,"
"Hirtle Callaghan Chief Investment Officers" (which is a registered trademark
of HCCI), and derivatives of either, as well as any logo that is now or shall
later become associated with either name ("Marks") are valuable property of
HCCI and that the use of the Marks, or any one of them, is subject to the
approval of HCCI. HCCI hereby grants to the Trust a non-exclusive license to
use the Marks provided that, in the event that this Agreement terminates, such
license shall likewise terminate and the Trust shall promptly cease using the
Marks and shall promptly take such action as is necessary to change the name
of the Trust.
8. Representation, Warranties and Agreements of HCCI.
HCCI represents and warrants that:
(a) It is registered as an investment adviser under the Investment
Advisers Act and that it will maintain such registration in full force and
effect. (b) It understands that, as a result of its services
hereunder, certain of its employees and officers may be deemed "access
persons" of the Trust within the meaning of Rule 17j-1 under the Investment
Company Act and that each such access person is subject to the provisions of
the code of ethics adopted by the Trust in compliance with such rule ("Trust's
Code"). HCCI further represents that it is subject to a written code of
ethics complying with the requirements of Rule 204-2(a)(12) under the
Investment Advisers Act ("HCCI Code") 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 HCCI shall certify to the Trust, at least annually,
that HCCI has complied with the requirements of HCCI's Code during the prior
year; and that either (i) that no violation of such code occurred or (ii) if
such a violation occurred, that appropriate action was taken in response to
such violation. Upon the written request of the Trust, HCCI shall permit the
Trust, or it designated agents, to examine the reports required to be made by
HCCI's officers and employees under HCCI's Code. In addition, HCCI
<PAGE>
<PAGE>
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 HCCI with regard to such trading. HCCI agrees that it will make
every effort to respond to the Trust's reasonable requests in this area.
(c) Upon request of the Trust, HCCI shall promptly supply the Trust
with any information concerning HCCI and its stockholders, employees and
affiliates which 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.
(d) In performing its duties hereunder, HCCI shall comply with applicable
provisions of the Investment Company Act and Investment Advisers Act. In
particular, and without limiting the generality of the foregoing, HCCI
acknowledges and agrees that any records it maintains for the Trust are the
property of the Trust; that HCCI will surrender promptly to the Trust any such
records upon the Trust's request; and that it shall furnish to the Board such
information as may be reasonably necessary for the Board to evaluate the terms
of this Agreement and HCCI performance hereunder..
9. Status of HCCI. The Trust and HCCI acknowledge and agree that the
relationship between HCCI and the Trust is that of an independent contractor
and under no circumstances shall any employee of HCCI be deemed an employee of
the Trust or any other organization that the Trust may, from time to time,
engage to provide services to the Trust, its Portfolios or its shareholders,
notwithstanding the service of any such employee of HCCI as an officer or
Trustee of the Trust in the manner contemplated under this Agreement. The
parties also acknowledge and agree that nothing in this Agreement shall be
construed to restrict the right of HCCI or any affiliate of HCCI to perform
investment management or other services to any person or entity, including
without limitation, other investment companies and persons who may retain HCCI
to provide individualized investment management services and the performance
of such services shall not be deemed to violate or give rise to any duty or
obligations to the Trust.
<PAGE>
<PAGE>
10. Counterparts and Notice.
This Agreement many 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:
The Hirtle Callaghan Trust with copy to: Audrey C.Talley, Esq. 575
E. Swedesford Road Stradley Ronon Steven & Young
Wayne. PA 19087-1937 2600 One Commerce Square
Pennsylvania, PA 19103-7098
If to HCCI:
Mr. Donald E. Callaghan
Hirtle Callaghan & Co., Inc.
575 E. Swedesford Road
Wayne. PA 19087-1937
11. 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. The provisions of Sections 6 and 7 of this
Agreement, relating to confidentiality of certain information and use of
HCCI's Marks by the Trust shall survive the termination of this Agreement.
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.
<PAGE>
<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.
Hirtle, Callaghan & Co. Inc.
By: /s/
The Hirtle Callaghan Trust
By: /s/
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENTAGREEMENT made this
__________day of August, 1995 between Institutional Capital Corporation,a
corporation organized under the laws of Delaware ("Portfolio Manager") and THE
HIRTLECALLAGHAN TRUST, a Delaware business trust ("Trust").
WHEREAS, the Trust is registered as an open-end, diversified, management
series investment companyunder the Investment Company Act of 1940, as amended
("Investment Company Act") which currentlyoffers five series of beneficial
interests ("shares") representing interests in separate investmentportfolios,
and may offer additional portfolios in the future; and WHEREAS, the Trust
desires to retain the Portfolio Manager to provide a continuous program
ofinvestment management for The Value Equity Portfolio of the Trust
("Portfolio") and Portfolio Manageris 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 tobe 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 andPortfolio
Manager agrees to accept such appointment. In carrying out its
responsibilities under thisAgreement, 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 Statementof the Trust, applicable provisions of the Investment
Company Act and the rules and regulationspromulgated 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 portionof the assets of
the Portfolio ("Account") that may, from time to time be allocated to it by
the Trust'sBoard of Trustees, in writing, by an authorized officer of the
Trust. It is understood that the Accountmay consist of all, a portion of or
none of the assets of the Portfolio, and that the Board of Trustees hasthe
right to allocate and reallocate such assets to the Account at any time, and
from time to time, uponsuch notice to the Portfolio Manager as may be
reasonably necessary, in the view of the Trust, to ensureorderly management of
the Account or the Portfolio.
(b) Subject to the general supervision of the Trust's Board of Trustees,
Portfolio Manager shall have soleinvestment discretion with respect to the
Account, including investment research, selection of thesecurities to be
purchased and sold and the portion of the Account, if any, that shall be held
uninvested,and the selection of brokers and dealers through which securities
transactions in the Account shall beexecuted. Specifically, and without
limiting the generality of the foregoing, Portfolio Manager agreesthat it
will:
<PAGE>
<PAGE>
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accountingagent of each purchase and sale, as the case may
be, made on behalf of the Account, specifying thename 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 mayfrom time to time be
reasonably requested by the Trust;
(ii) maintain all applicable books and records with respect to the
securities transactions of theAccount. Specifically, Portfolio Manager agrees
to maintain with respect to the Account those recordsrequired to be maintained
under Rule 31a-1(b)(1), (b)(5) and (b)(6) under the Investment Company Actwith
respect to transactions in the Account including, without limitation, records
which reflect securitiespurchased or sold in the Account, showing for each
such transaction, the name and quantity ofsecurities, the unit and aggregate
purchase or sale price, commission paid, the market on which thetransaction
was effected, the trade date, the settlement date, and the identity of the
effecting broker ordealer. Portfolio Manager will preserve such records in
the manner and for the periods prescribed byRule 31a-2 under the Investment
Company Act. Portfolio Manager acknowledges and agrees that allrecords it
maintains for the Trust are the property of the Trust and Portfolio Manager
will surrenderpromptly to the Trust any such records upon the Trust's
request. The Trust agrees, however, thatPortfolio Manager may retain copies
of those records that are required to be maintained by PortfolioManager under
federal or state regulations to which it may be subject or are reasonably
necessary forpurposes of conducting its business;
(iii) provide, in a timely manner, such information as may be
reasonably requested by the Trustor its designated agents in connection with,
among other things, the daily computation of the Portfolio'snet asset value
and net income, preparation of proxy statements or amendments to the
Trust'sregistration statement and monitoring investments made in the Account
to ensure compliance with thevarious limitations on investments applicable to
the Portfolio and to ensure that the Portfolio willcontinue to qualify for the
special tax treatment accorded to regulated investment companies
underSubchapter M of the Internal Revenue Code of 1986, as amended; and
(iv) render regular reports to the Trust concerning the performance of
Portfolio Manager of itsresponsibilities under this Agreement. In particular,
Portfolio Manager agrees that it will, at thereasonable request of the Board
of Trustees, attend meetings of the Board or its validly constitutedcommittees
and will, in addition, make its officers and employees available to meet with
the officersand employees of the Trust at least quarterly and at other times
upon reasonable notice, to review theinvestments and investment program of the
Account.
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3. Portfolio Transaction and Brokerage. In placing orders for portfolio
securities with brokers anddealers, Portfolio Manager shall use its best
efforts to execute securities transactions on behalf of theAccount in such a
manner that the total cost or proceeds in each transaction is the most
favorable underthe circumstances. Portfolio Manager may, however, in its
discretion, direct orders to brokers thatprovide 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 brokersfor similar transactions, provided that Portfolio
Manager determines in good faith that such commissionis reasonable in terms
either of the particular transaction or of the overall responsibility of the
PortfolioManager to the Account and any other accounts with respect to which
Portfolio Manager exercisesinvestment discretion, and provided further that
the extent and continuation of any such practice issubject to review by the
Trust's Board of Trustees. Portfolio Manager shall not execute any
portfoliotransactions for the Trust with a broker or dealer which is an
"affiliated person" of the Trust or PortfolioManager, including any other
investment advisory organization that may, from time to time act as aportfolio
manager for the Portfolio or any of the Trust's other Portfolios, without
prior written approvalof the Trust. The Trust shall provide a list of such
affiliated brokers and dealers to Portfolio Managerand will promptly advise
Portfolio Manager of any changes in such list.
4. Expenses and Compensation.Portfolio Manager shall pay all of its expenses
incurred in the performance of its duties under thisAgreement and shall not
be required to pay any other expenses of the Trust, including
withoutlimitation, brokerage expenses. For its services under this Agreement,
Portfolio Manager shall beentitled to receive a fee at the annual rate of .30%
of the average daily net asset value of the Account,which fee shall be payable
monthly.
5. Limitation of Liability and Indemnification.(a) Portfolio Manager shall
not be liable for any error of judgment or mistake of law or for any
losssuffered by the Trust in connection with the matters to which this
Agreement relates including, withoutlimitation, losses that may be sustained
in connection with the purchase, holding, redemption or saleof any security
or other investment by the Trust except a loss resulting from willful
misfeasance, badfaith or gross negligence on the part of Portfolio Manager in
the performance of its duties or fromreckless disregard by it of its duties
under this Agreement. (b) Notwithstanding the foregoing, Portfolio Manager
expressly agrees that the Trust may rely uponwritten information provided, in
writing, by Portfolio Manager to the Trust (including, withoutlimitation,
information contained in Portfolio Manager's then current Form ADV) in
accordance withSection 9 of the Agreement or otherwise, in preparing the
Trust's registration statement and amendmentsthereto and certain periodic
reports relating to the Trust and its Portfolios that are required to
befurnished to shareholders of the Trust and/or filed with the Securities and
Exchange Commission ("SECFilings"). Portfolio Manager agrees to indemnify and
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hold harmless the Trust and each of its Trustees,officers and employees from
any claims, liabilities and expenses, including reasonable attorneys'
fees,incurred as a result of any untrue statement or alleged untrue statement
of a material fact made by Portfolio Manager in any such written information
and upon which the Trust relies in preparing anySEC Filing, or any omission or
alleged omission to state in such written information a material factnecessary
to make such statements not misleading ("material omission"). Portfolio
Manager will not,however, be required to so indemnify any person under this
Section 5 to the extent that PortfolioManager relied upon an untrue statement
or material omission made by an officer or Trustee of theTrust or where such
untrue statement or material omission was made in reliance upon
informationfurnished to the Portfolio Manager in writing by such officer or
Trustee, or by the Trust's Custodian,Administrator or Accounting Agent.
6. Permissible Interest.Subject to and in accordance with the Trust's
Declaration of Trust and Bylaws and correspondinggoverning documents of
Portfolio Manager, Trustees , officers, agents and shareholders of the
Trustmay have an interest in the Portfolio Manager as officers, directors,
agents and/or shareholders orotherwise. Portfolio Manager may have similar
interests in the Trust. The effect of any suchinterrelationships shall be
governed by said governing documents and the provisions of the
InvestmentCompany Act.
7. Duration, Termination and Amendments.This Agreement shall become effective
as of the date first written above and shall continue in effect fortwo years.
Thereafter, this Agreement shall continue in effect from year to year for so
long as itscontinuance is specifically approved, at least annually, by (i) a
majority of the Board of Trustees or thevote of the holders of a majority of
the Portfolio's outstanding voting securities; and (ii) the affirmativevote,
cast in person at a meeting called for the purpose of voting on such
continuance, of a majority ofthose members of the Board of Trustees
("Independent Trustees ") who are not "interested persons" ofthe Trust or any
investment adviser to the Trust.This Agreement may be terminated by the Trust
or by Portfolio Manager at any time and withoutpenalty upon sixty days written
notice to the other party, which notice may be waived by the partyentitled to
it. This Agreement may not be amended except by an instrument in writing and
signed bythe party to be bound thereby provided that if the Investment Company
Act requires that suchamendment be approved by the vote of the Board, the
Independent Trustees and/or the holders of theTrust's or the Portfolio's
outstanding shareholders, such approval must be obtained before any
suchamendment may become effective. This Agreement shall terminate upon its
assignment. For purposes of this Agreement, the terms "majority of the
outstanding voting securities, "assignment" and "interested person" shall have
the meanings set forth in the Investment Company Act.
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8. Confidentiality; Use of Name.Portfolio Manager acknowledges and agrees
that during the course of its responsibilities hereunder, itmay have access to
certain information that is proprietary to the Trust or to one or more of the
Trust'sagents or service providers. Portfolio Manager agrees that Portfolio
Manager, its officers and itsemployees shall treat all such proprietary
information as confidential and will not use or discloseinformation contained
in, or derived from such material for any purpose other than in connection
withthe carrying out of Portfolio Manager's responsibilities hereunder. In
addition, Portfolio Manager shalluse its best efforts to ensure that any agent
or affiliate of Portfolio Manager who may gain access tosuch proprietary
materials shall be made aware of the proprietary nature of such materials and
shalllikewise treat such materials as confidential. It is acknowledged and
agreed that the names "Hirtle Callaghan," "Hirtle Callaghan Chief
InvestmentOfficers" (which is a registered trademark of Hirtle, Callaghan &
Co., Inc. ("HCCI")), and derivativeof 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 itsagents is subject to the license granted to the Trust by HCCI.
Portfolio Manager agrees that it will notuse any Mark without the prior
written consent of the Trust. Portfolio Manager consents to use of itsname,
performance data, biographical data and other pertinent data by the Trust for
use in marketingand sales literature, provided that any such marketing and
sales literature shall not be used by the Trustwithout the prior written
consent of Portfolio Manager, which consent shall not be
unreasonablywithheld. 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 ("InvestmentAdvisers Act"), it will maintain such registration in
full force and effect and will promptly report to theTrust the commencement
of any formal proceeding that could render the Portfolio Manager ineligibleto
serve as an investment adviser to a registered investment company under
Section 9 of the InvestmentCompany Act.
(b) It understands that, as a result of its services hereunder, certain of its
employees and officers maybe deemed "access persons" of the Trust within the
meaning of Rule 17j-1 under the InvestmentCompany Act and that each such
access person is subject to the provisions of the code of ethics
("Trust'sCode") adopted by the Trust in compliance with such rule. Portfolio
Manager further represents thatit is subject to a written code of ethics
("Portfolio Manager's Code") complying with the requirementsof Rule
204-2(a)(12) under the Investment Advisers Act and will provide the Trust with
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a copy of suchcode of ethics. During the period that this Agreement is in
effect, an officer or director of PortfolioManager shall certify to the Trust,
on a quarterly basis, that Portfolio Manager has complied with the
requirements of the Portfolio Manager's Code during the prior year; and that
either (i) that no violationof such code occurred or (ii) if such a violation
occurred, that appropriate action was taken in responseto such violation.
Upon the written request of the Trust, Portfolio Manager shall permit the
Trust, orit designated agents, to examine the reports required to be made by
Portfolio Manager under rule 17j-1(c)(1) under the Investment Company Act. In
addition, Portfolio Manager acknowledges that the Trustmay, in response to
regulations or recommendations issued by the Securities and Exchange
Commissionor other regulatory agencies, from time to time, request additional
information regarding the personalsecurities trading of its directors,
partners, officers and employees and the policies of Portfolio Managerwith
regard to such trading. Portfolio Manager agrees that it make every effort to
respond to the Trust'sreasonable requests in this area.
(c) Upon request of the Trust, Portfolio Manager shall promptly supply the
Trust with any informationconcerning Portfolio Manager and its stockholders,
employees and affiliates that the Trust mayreasonably 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 orFederal agencies or to be provided to shareholders of the
Trust.
10. Status of Portfolio Manager. The Trust and Portfolio Manager acknowledge
and agree that the relationship between PortfolioManager and the Trust is that
of an independent contractor and under no circumstances shall anyemployee of
Portfolio Manager be deemed an employee of the Trust or any other organization
that theTrust may, from time to time, engage to provide services to the Trust,
its Portfolios or its shareholders. The parties also acknowledge and agree
that nothing in this Agreement shall be construed to restrict theright of
Portfolio Manager or its affiliates to perform investment management or other
services to anyperson or entity, including without limitation, other
investment companies and persons who may retainPortfolio Manager to provide
investment management services and the performance of such servicesshall not
be deemed to violate or give rise to any duty or obligations to the Trust.
11. Counterparts and Notice. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be anoriginal. 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:
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If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087
If to Portfolio Manager:
Robert H. Lyon
Institutional Capital Corporation
225 South Wacker Drive
Chicago, Illinois 60606
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only andin 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 orotherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall bebinding upon and shall inure to the
benefit of the parties hereto and their respective successors and shallbe
governed by the law of the state of Delaware provided that nothing herein
shall be construed asinconsistent with the Investment Company Act or the
Investment Advisers Act.
Portfolio Manager is hereby expressly put on notice of the limitations of
shareholder and Trusteeliability set forth in the Declaration of Trust of the
Trust and agrees that obligations assumed by theTrust pursuant to this
Agreement shall be limited in all cases to the assets of The Value
EquityPortfolio. Portfolio Manager further agrees that it will not seek
satisfaction of any such obligationsfrom the shareholders or any individual
shareholder of the Trust, or from the Trustees of the Trust orany individual
Trustee of the Trust.
13. Acknowledgement. The Trust acknowledges that it has received a copy of
PortfolioManagerscurrent Form ADV, as filed with the Securities and Exchange
Commission. IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by theirofficers thereunto duly authorized as of the day and
year first written above.
By: /s/
Institutional Capital Corporation
By: /s/
The Hirtle Callaghan Trust
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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.
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(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
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
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(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
EDGARPlus(TM) FORM-TYPE: PROXY FILING-DATE: December 13, 1997
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.
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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
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.
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(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
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.
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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.
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(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) 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.
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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.
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<PAGE>
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 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:
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<PAGE>
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.
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/
-----------------------------
The Hirtle Callaghan Trust
By: /s/
-----------------------------
A
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this __________day of August between Clover Capital
Management, Inc., a corporation organized under the laws of New York
("Portfolio Manager") 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; and WHEREAS, the Trust desires to retain the Portfolio Manager to
provide a continuous program of investment management for The Small
Capitalization Equity Portfolio of the Trust ("Portfolio") and Portfolio
Manager is willing, in accordance with the terms and conditions hereof, to
provide such services to the Trust; NOW THEREFORE, in consideration of the
promises and covenants set forth herein and intending to be legally bound
hereby, it is agreed between the parties as follows:
1. Appointment of Portfolio Manager. The Trust hereby retains Portfolio
Manager to provide the investment services set forth herein and Portfolio
Manager agrees to accept such appointment. In carrying out its
responsibilities under this Agreement, the Portfolio Manager shall at all
times act in accordance with the investment objectives, policies and
restrictions applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the Investment
Company Act and the rules and regulations promulgated under that Act and
other applicable federal securities laws. 2. Duties of Portfolio
Manager. (a) Portfolio Manager shall provide a continuous program of
investment management for that portion of the assets of the Portfolio
("Account") that may, from time to time be allocated to it by the Trust's
Board of Trustees, in writing, by an authorized officer of the Trust. It is
understood that the Account may consist of all, a portion of or none of the
assets of the Portfolio, and that the Board of Trustees has the right to
allocate and reallocate such assets to the Account at any time, and from time
to time, upon such notice to the Portfolio Manager as may be reasonably
necessary, in the view of the Trust, to ensure orderly management of the
Account or the Portfolio. (b) Subject to the general supervision of the
Trust's Board of Trustees, Portfolio Manager shall have sole investment
discretion with respect to the Account, including investment research,
selection of the securities to be purchased and sold and the portion of the
Account, if any, that shall be held uninvested, and the selection of brokers
and dealers through which securities transactions in the Account shall be
executed. Specifically, and without limiting the generality of the
foregoing, Portfolio Manager agrees that it will:
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as the case may
be, made on behalf of the Account, specifying the name and quantity of the
security purchased or sold, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was effected, the trade
date, the settlement date, the identity of the effecting broker or dealer
and/or such other information, and in such manner, as may from time to time
be reasonably requested by the Trust;
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<PAGE>
(ii) maintain all applicable books and
records with respect to the securities transactions of the Account.
Specifically, Portfolio Manager agrees to maintain with respect to the
Account those records required to be maintained under Rule 31a-1(b)(1), (b)(5)
and (b)(6) under the Investment Company Act with respect to transactions in
the Account including, without limitation, records which reflect securities
purchased or sold in the Account, showing for each such transaction, the name
and quantity of securities, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was effected, the trade
date, the settlement date, and the identity of the effecting broker or
dealer. Portfolio Manager will preserve such records in the manner and for
the periods prescribed by Rule 31a-2 under the Investment Company Act.
Portfolio Manager acknowledges and agrees that all records it maintains for
the Trust are the property of the Trust and Portfolio Manager will surrender
promptly to the Trust any such records upon the Trust's request;
(iii) provide, in a timely manner, such information as
may be reasonably requested
by the Trust or its designated agents in connection with, among other things,
the daily computation of the Portfolio's net asset value and net income,
preparation of proxy statements or amendments to the Trust's registration
statement and monitoring investments made in the Account to ensure
compliance with the various limitations on investments applicable to the
Portfolio and to ensure that the Portfolio will continue to qualify for the
special tax treatment accorded to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended; and
(iv) render regular reports to the Trust concerning
the performance of Portfolio
Manager of its responsibilities under this Agreement. In particular,
Portfolio Manager agrees that it will, at the reasonable request of the Board
of Trustees, attend meetings of the Board or its validly constituted
committees and will, in addition, make its officers and employees available
to meet with the officers and employees of the Trust at least quarterly and at
other times upon reasonable notice, to review the investments and investment
program of the Account.
3. Portfolio Transaction and Brokerage. In placing
orders for portfolio securities with brokers and dealers, Portfolio Manager
shall use its best efforts to execute securities transactions on behalf of
the Account in such a manner that the total cost or proceeds in each
transaction is the most favorable under the circumstances. Portfolio Manager
may, however, in its discretion, direct orders to brokers that provide to
Portfolio Manager research, analysis, advice and similar services, and
Portfolio Manager may cause the Account to pay to those brokers a higher
commission than may be charged by other brokers for similar transactions,
provided that Portfolio Manager determines in good faith that such commission
<PAGE>
<PAGE>
is reasonable in terms either of the particular transaction or of the overall
responsibility of the Portfolio Manager to the Account and any other accounts
with respect to which Portfolio Manager exercises investment discretion, and
provided further that the extent and continuation of any such practice is
subject to review by the Trust's Board of Trustees. Portfolio Manager shall
not execute any portfolio transactions for the Trust with a broker or dealer
which is an "affiliated person" of the Trust or Portfolio Manager, including
any other investment advisory organization that may, from time to time act as
a portfolio manager for the Portfolio or any of the Trust's other Portfolios,
without prior written approval of the Trust. The Trust shall provide a list
of such affiliated brokers and dealers to Portfolio Manager and will promptly
advise Portfolio Manager of any changes in such list.
4. Expenses and Compensation. Portfolio Manager
shall pay all of its expenses incurred in the
performance of its duties under this Agreement and shall not be required to
pay any other expenses of the Trust. For its services under this Agreement,
Portfolio Manager shall be entitled to receive a fee at the annual rate of .45%
of the average daily net asset value of the Account, which fee shall be
payable monthly.
5. Limitation of Liability and Indemnification. (a) Portfolio Manager
shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates including, without limitation, losses that may be
sustained in connection with the purchase, holding, redemption or sale of
any security or other investment by the Trust except a loss resulting from
willful misfeasance, bad faith or negligence on the part of Portfolio Manager
in the performance of its duties or from reckless disregard by it of its
duties under this Agreement. (b) Notwithstanding the foregoing, Portfolio
Manager expressly agrees that the Trust may rely upon written information
provided, in writing, by Portfolio Manager to the Trust (including, without
limitation, information contained in Portfolio Manager's then current Form
ADV) in accordance with Section 9 of the Agreement or otherwise, in preparing
the Trust's registration statement and amendments thereto and certain
periodic reports relating to the Trust and its Portfolios that are required
to be furnished to shareholders of the Trust and/or filed with the Securities
and Exchange Commission ("SEC Filings"). 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 as a result of any untrue statement or alleged
untrue statement of a material fact made by Portfolio Manager in any such
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<PAGE>
written information and upon which the Trust relies in preparing any SEC
Filing, or any omission or alleged omission to state in such written
information a material fact necessary to make such statements not misleading
("material omission"). Portfolio Manager will not, however, be required to so
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,
Administrator or Accounting Agent.
6. Permissible Interest. Subject to and in
accordance with the Trust's Declaration of Trust and Bylaws and corresponding
governing documents of Portfolio Manager, Trustees , officers, agents and
shareholders of the Trust may have an interest in the Portfolio Manager as
officers, directors, agents and/or shareholders or otherwise. Portfolio
Manager may have similar interests in the Trust. The effect of any such
interrelationships shall be governed by said governing documents and the
provisions of the Investment Company Act.
7. Duration, Termination and Amendments. This Agreement
shall become effective as of the date first
written above and shall continue in effect for two years. Thereafter, this
Agreement shall continue in effect from year to year for so long as its
continuance is specifically approved, at least annually, by (i) a majority of
the Board of Trustees or the vote of the holders of a majority of the
Portfolio's outstanding voting securities; and (ii) the affirmative vote,
cast in person at a meeting called for the purpose of voting on such
continuance, of a majority of those members of the Board of Trustees
("Independent Trustees ") who are not "interested persons" of the Trust or any
investment adviser to the Trust. This Agreement may be terminated by the
Trust or by Portfolio Manager at any time and without penalty upon sixty days
written notice to the other party, which notice may be waived by the party
entitled to it. This Agreement may not be amended except by an instrument in
writing and signed by the party to be bound thereby provided that if the
Investment Company Act requires that such amendment be approved by the vote
of the Board, the Independent Trustees and/or the holders of the Trust's or
the Portfolio's outstanding shareholders, such approval must be obtained
before any such amendment may become effective. This Agreement shall
terminate upon its assignment. For purposes of this Agreement, the terms
"majority of the outstanding voting securities, "assignment" and "interested
person" shall have the meanings set forth in the Investment Company Act.
<PAGE>
<PAGE>
8. Confidentiality; Use of Name. Portfolio Manager acknowledges and agrees
that during the course of its responsibilities hereunder, it may have access
to certain information that is proprietary to the Trust or to one or more of
the Trust's agents or service providers. Portfolio Manager agrees that
Portfolio Manager, its officers and its employees shall treat all such
proprietary information as confidential and will not, without the express
written permission of the Trust, use or disclose information contained in, or
derived from such material for any purpose other than in connection with the
carrying out of Portfolio Manager's responsibilities hereunder. In addition,
Portfolio Manager shall use its best efforts to ensure that any agent or
affiliate of Portfolio Manager who may gain access to such proprietary
materials shall be made aware of the proprietary nature of such materials and
shall likewise treat such materials as confidential. This provision shall
not apply, however, to information that is publicly available. 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 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 HCCI. Portfolio Manager agrees
that it will not use any Mark without the prior written consent of the
Trust. Portfolio Manager consents to use of its name, performance data,
biographical data and other pertinent data by the Trust for use in marketing
and sales literature, provided that any such marketing and sales literature
shall not be used by the Trust without the prior written consent of Portfolio
Manager, which consent shall not be unreasonably withheld. The provisions of
this Section 8 shall survive termination of this Agreement.
9.Representation, Warranties and Agreements of Portfolio Manager. Portfolio
Manager represents and warrants that: (a) It is registered as an investment
adviser under the Investment Advisers Act of 1940 ("Investment Advisers
Act"), it will maintain such registration in full force and effect and will
promptly report to the Trust the commencement of any formal proceeding that
could render the Portfolio Manager ineligible to serve as an investment
adviser to a registered investment company under Section 9 of the Investment
Company Act. (b) It understands that, as a result of its services hereunder,
certain of its employees and officers may be deemed "access persons" of the
Trust within the meaning of Rule 17j-1 under the Investment Company Act and
that each such access person is subject to the provisions of the code of
ethics ("Trust's Code") adopted by the Trust in compliance with such rule.
Portfolio Manager further represents that it is subject to a written code of
ethics ("Portfolio Manager's Code") complying with the requirements of Rule
204-2(a)(12) under the Investment Advisers Act and will provide the Trust
with a copy of such code of ethics. During the period that this Agreement is
in effect, an officer or director of Portfolio Manager shall certify to the
Trust, on a quarterly basis, that Portfolio Manager has complied with the
requirements of the Portfolio Manager's Code during the prior year; and that
either (i) that no violation of such code occurred or (ii) if such a
violation occurred, that appropriate action was taken in response to such
violation. 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
<PAGE>
<PAGE>
Company Act. In addition, Portfolio Manager acknowledges that the Trust may,
in response to regulations or recommendations issued by the Securities and
Exchange Commission or other regulatory agencies, from time to time, request
additional information regarding the personal securities trading of its
directors, partners, officers and employees and the policies of Portfolio
Manager with regard to such trading. Portfolio Manager agrees that it make
every effort to respond to the Trust's reasonable requests in this area.
(c) Upon request of the Trust, Portfolio Manager shall promptly supply the
Trust with any information concerning Portfolio Manager and its stockholders,
employees and affiliates that the Trust may reasonably require in connection
with the preparation of its registration statements, proxy materials, reports
and other documents required, under applicable state or Federal laws, to be
filed with state or Federal agencies or to be provided to shareholders of the
Trust.
10. Status of Portfolio Manager. The Trust and Portfolio Manager acknowledge
and agree that the relationship between Portfolio Manager and the Trust is
that of an independent contractor and under no circumstances shall any
employee of Portfolio Manager be deemed an employee of the Trust or any other
organization that the Trust may, from time to time, engage to provide services
to the Trust, its Portfolios or its shareholders. The parties also
acknowledge and agree that nothing in this Agreement shall be construed to
restrict the right of Portfolio Manager or its affiliates to perform
investment management or other services to any person or entity, including
without limitation, other investment companies and persons who may retain
Portfolio Manager to provide investment management services and the
performance of such services shall not be deemed to violate or give rise to
any duty or obligations to the Trust. 11. Counterparts and Notice. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original. Any notice required to be given under this
Agreement shall be deemed given when received, in writing addressed and
delivered, by certified mail, by hand or via overnight delivery service as
follows:
If to the Trust: Mr. Donald E. Callaghan, PresidentThe Hirtle Callaghan
Trust 575 East Swedesford Road Wayne, PA 19087 If to Portfolio Manager:
Michael E. Jones Clover Capital Management, Inc. 11 Tobey Village Office
ParkPittsford, New York 14534 12. Miscellaneous. The captions in this
Agreement are included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by the law of the state of
Delaware provided that nothing herein shall be construed as inconsistent with
the Investment Company Act or the Investment Advisers Act. Portfolio
Manager is hereby expressly put on notice of the limitations of shareholder
and Trustee liability set forth in the Declaration of Trust of the Trust and
agrees that obligations assumed by the Trust pursuant to this Agreement shall
be limited in all cases to the assets of The Small Capitalization 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.
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<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.
Clover Capital Management, Inc.
By: /s/
The Hirtle Callaghan Trust
By: /s/
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this __________day of August, 1995, between Frontier
Capital Management Company, a corporation organized under the laws of
Massachusetts ("Portfolio Manager") 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; and WHEREAS, the Trust desires to retain the
Portfolio Manager to provide a continuous program of investment management
for The Small Capitalization Equity Portfolio of the Trust ("Portfolio") and
Portfolio Manager is willing, in accordance with the terms and conditions
hereof, to provide such services to the Trust; NOW THEREFORE, in
consideration of the promises and covenants set forth herein and intending to
be legally bound hereby, it is agreed between the parties as follows:
1. Appointment of Portfolio Manager. The Trust hereby retains Portfolio
Manager to provide the investment services set forth herein and Portfolio
Manager agrees to accept such appointment. In carrying out its
responsibilities under this Agreement, the Portfolio Manager shall at all
times act in accordance with the investment objectives, policies and
restrictions applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the Investment
Company Act and the rules and regulations promulgated under that Act and
other applicable federal securities laws.
2. Duties of Portfolio Manager. (a) Portfolio Manager shall provide a
continuous program of investment management for that portion of the assets
of the Portfolio ("Account") that may, from time to time be allocated to it
by the Trust's Board of Trustees, in writing, by an authorized officer of the
Trust. It is understood that the Account may consist of all, a portion of or
none of the assets of the Portfolio, and that the Board of Trustees has the
right to allocate and reallocate such assets to the Account at any time, and
from time to time, upon such notice to the Portfolio Manager as may be
reasonably necessary, in the view of the Trust, to ensure orderly management
of the Account or the Portfolio. (b) Subject to the general supervision of
the Trust's Board of Trustees, Portfolio Manager shall have sole investment
discretion with respect to the Account, including investment research,
selection of the securities to be purchased and sold and the portion of the
Account, if any, that shall be held uninvested, and the selection of brokers
and dealers through which securities transactions in the Account shall be
executed. Specifically, and without limiting the generality of the
foregoing, Portfolio Manager agrees that it will:
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<PAGE>
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as the case may
be, made on behalf of the Account, specifying the name and quantity of the
security purchased or sold, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was effected, the trade
date, the settlement date, the identity of the effecting broker or dealer
and/or such other information, and in such manner, as may from time to time
be reasonably requested by the Trust; (ii) maintain all applicable books and
records with respect to the securities transactions of the Account.
Specifically, Portfolio Manager agrees to maintain with respect to the
Account those records required to be maintained under Rule 31a-1(b)(1), (b)(5)
and (b)(6) under the Investment Company Act with respect to transactions in
the Account including, without limitation, records which reflect securities
purchased or sold in the Account, showing for each such transaction, the name
and quantity of securities, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was effected, the trade
date, the settlement date, and the identity of the effecting broker or
dealer. Portfolio Manager will preserve such records in the manner and for
the periods prescribed by Rule 31a-2 under the Investment Company Act.
Portfolio Manager acknowledges and agrees that all records it maintains for
the Trust are the property of the Trust and Portfolio Manager will surrender
promptly to the Trust any such records upon the Trust's request; (iii)
provide, in a timely manner, such information as may be reasonably requested
by the Trust or its designated agents in connection with, among other things,
the daily computation of the Portfolio's net asset value and net income,
preparation of proxy statements or amendments to the Trust's registration
statement and monitoring investments made in the Account to ensure
compliance with the various limitations on investments applicable to the
Portfolio and to ensure that the Portfolio will continue to qualify for the
special tax treatment accorded to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended; and (iv)
render regular reports to the Trust concerning the performance of Portfolio
Manager of its responsibilities under this Agreement. In particular,
Portfolio Manager agrees that it will, at the reasonable request of the Board
of Trustees, attend meetings of the Board or its validly constituted
committees and will, in addition, make its officers and employees available
to meet with the officers and employees of the Trust at least quarterly and at
other times upon reasonable notice, to review the investments and investment
program of the Account.
3. Portfolio Transaction and Brokerage. In placing orders for portfolio
securities with brokers and dealers, Portfolio Manager shall use its best
efforts to execute securities transactions on behalf of the Account in such a
manner that the total cost or proceeds in each transaction is the most
favorable under the circumstances. Portfolio Manager may, however, in its
discretion, direct orders to brokers that provide to Portfolio Manager
research, analysis, advice and similar services, and Portfolio Manager may
cause the Account to pay to those brokers a higher commission than may be
charged by other brokers for similar transactions, provided that Portfolio
Manager determines in good faith that such commission is reasonable in terms
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<PAGE>
either of the particular transaction or of the overall responsibility of the
Portfolio Manager to the Account and any other accounts with respect to which
Portfolio Manager exercises investment discretion, and provided further that
the extent and continuation of any such practice is subject to review by the
Trust's Board of Trustees. Portfolio Manager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an "affiliated
person" of the Trust or Portfolio Manager, including any other investment
advisory organization that may, from time to time act as a portfolio manager
for the Portfolio or any of the Trust's other Portfolios, without prior
written approval of the Trust. The Trust shall provide a list of such
affiliated brokers and dealers to Portfolio Manager and will promptly advise
Portfolio Manager of any changes in such list.
4. Expenses and Compensation. Portfolio Manager shall pay all of its
expenses incurred in the performance of its duties under this Agreement and
shall not be required to pay any other expenses of the Trust. For its
services under this Agreement, Portfolio Manager shall be entitled to receive
a fee at the annual rate of .45% of the average daily net asset value of the
Account, which fee shall be payable monthly.
5. Limitation of Liability and Indemnification. (a) Portfolio Manager shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which this Agreement
relates including, without limitation, losses that may be sustained in
connection with the purchase, holding, redemption or sale of any security or
other investment by the Trust except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Portfolio Manager
in the performance of its duties or from reckless disregard by it of its
duties under this Agreement. (b) Notwithstanding the foregoing, Portfolio
Manager expressly agrees that the Trust may rely upon written information
provided, in writing, by Portfolio Manager to the Trust (including, without
limitation, information contained in Portfolio Manager's then current Form
ADV) in accordance with Section 9 of the Agreement or otherwise, in preparing
the Trust's registration statement and amendments thereto and certain
periodic reports relating to the Trust and its Portfolios that are required
to be furnished to shareholders of the Trust and/or filed with the Securities
and Exchange Commission ("SEC Filings"). 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 as a result of any untrue statement or alleged
untrue statement of a material fact made by Portfolio Manager in any such
written information and upon which theTrust relies in preparing any SEC
Filing, or any omission or alleged omission to state in such written
information a material fact necessary to make such statements not misleading
("material omission"). Portfolio Manager will not, however, be required to so
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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,
Administrator or Accounting Agent.
6. Permissible Interest. Subject to and in accordance with the Trust's
Declaration of Trust and Bylaws and corresponding governing documents of
Portfolio Manager, Trustees , officers, agents and shareholders of the Trust
may have an interest in the Portfolio Manager as officers, directors, agents
and/or shareholders or otherwise. Portfolio Manager may have similar
interests in the Trust. The effect of any such interrelationships shall be
governed by said governing documents and the provisions of the Investment
Company Act.
7. Duration, Termination and Amendments. This Agreement shall become
effective as of the date first written above and shall continue in effect for
two years. Thereafter, this Agreement shall continue in effect from year to
year for so long as its continuance is specifically approved, at least
annually, by (i) a majority of the Board of Trustees or the vote of the
holders of a majority of the Portfolio's outstanding voting securities; and
(ii) the affirmative vote, cast in person at a meeting called for the purpose
of voting on such continuance, of a majority of those members of the Board of
Trustees ("Independent Trustees") who are not "interested persons" of the
Trust or any investment adviser to the Trust. This Agreement may be
terminated by the Trust or by Portfolio Manager at any time and without
penalty upon sixty days written notice to the other party, which notice may
be waived by the party entitled to it. This Agreement may not be amended
except by an instrument in writing and signed by the party to be bound
thereby provided that if the Investment Company Act requires that such
amendment be approved by the vote of the Board, the Independent Trustees
and/or the holders of the Trust's or the Portfolio's outstanding shareholders,
such approval must be obtained before any such amendment may become
effective. This Agreement shall terminate upon its assignment. For
purposes of this Agreement, the terms "majority of the outstanding voting
securities, "assignment" and "interested person" shall have the meanings set
forth in the Investment Company Act.
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8. Confidentiality; Use of Name. Portfolio Manager acknowledges and agrees
that during the course of its responsibilities hereunder, it may have access
to certain information that is proprietary to the Trust or to one or more of
the Trust's agents or service providers. Portfolio Manager agrees that
Portfolio Manager, its officers and its employees shall treat all such
proprietary information as confidential and will not use or disclose
information contained in, or derived from such material for any purpose other
than in connection with the carrying out of Portfolio Manager's
responsibilities hereunder. In addition, Portfolio Manager shall use its
best efforts to ensure that any agent or affiliate of Portfolio Manager who
may gain access to such proprietary materials shall be made aware of the
proprietary nature of such materials and shall likewise treat such materials
as confidential.It is acknowledged and agreed that the names "Hirtle
Callaghan," "Hirtle Callaghan Chief Investment Officers" (which is a
registered trademark of Hirtle, Callagha & Co., Inc. ("HCCI")) and
derivatives of either, as well as any logo that is now or shall later become
associated with either name ("Marks") are valuable property of Hirtle,
Callaghan and Co. Inc. ("HCCI") and that the use of the Marks, or any one of
them, by the Trust or its agents is subject to the license granted to the
Trust by HCCI. Portfolio Manager agrees that it will not use any Mark without
the prior written consent of the Trust. Portfolio Manager consents to use of
its name, performance data, biographical data and other pertinent data by the
Trust for use in marketing and sales literature, provided that any such
marketing and sales literature shall not be used by the Trust without the
prior written consent of Portfolio Manager, which consent shall not be
unreasonably withheld. The provisions of this Section 8 shall survive
termination of this Agreement.
9. Representation, Warranties and Agreements of Portfolio Manager.
Portfolio Manager represents and warrants that: (a) It is registered as an
investment adviser under the Investment Advisers Act of 1940 ("Investment
Advisers Act"), it will maintain such registration in full force and effect
and will promptly report to the Trust the commencement of any formal
proceeding that could render the Portfolio Manager ineligible to serve as an
investment adviser to a registered investment company under Section 9 of the
Investment Company Act. (b) It understands that, as a result of its services
hereunder, certain of its employees and officers may be deemed "access
persons" of the Trust within the meaning of Rule 17j-1 under the Investment
Company Act and that each such access person is subject to the provisions of
the code of ethics ("Trust's Code") adopted by the Trust in compliance with
such rule. Portfolio Manager further represents that it is subject to a
written code of ethics ("Portfolio Manager's Code") complying with the
requirements of Rule 204-2(a)(12) under the Investment Advisers Act and will
provide the Trust with a copy of such code of ethics. During the period that
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this Agreement is in effect, an officer or director of Portfolio Manager
shall certify to the Trust, on a quarterly basis, that Portfolio Manager has
complied with the requirements of the Portfolio Manager's Code during the
prior year; and that either (i) that no violation of such code occurred or
(ii) if such a violation occurred, that appropriate action was taken in
response to such violation. 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. In addition, Portfolio Manager acknowledges that
the Trust may, in response to regulations or recommendations issued by the
Securities and Exchange Commission or other regulatory agencies, from time to
time, request additional information regarding the personal securities
trading of its directors, partners, officers and employees and the policies of
Portfolio Manager with regard to such trading. Portfolio Manager agrees that
it make every effort to respond to the Trust's reasonable requests in this
area. (c) Upon request of the Trust, Portfolio Manager shall promptly
supply the Trust with any information concerning Portfolio Manager and its
stockholders, employees and affiliates that the Trust may reasonably require
in connection with the preparation of its registration statements, proxy
materials, reports and other documents required, under applicable state or
Federal laws, to be filed with state or Federal agencies or to be provided to
shareholders of the Trust.
10. Status of Portfolio Manager. The Trust and Portfolio Manager acknowledge
and agree that the relationship between Portfolio Manager and the Trust is
that of an independent contractor and under no circumstances shall any
employee of Portfolio Manager be deemed an employee of the Trust or any other
organization that the Trust may, from time to time, engage to provide services
to the Trust, its Portfolios or its shareholders. The parties also
acknowledge and agree that nothing in this Agreement shall be construed to
restrict the right of Portfolio Manager or its affiliates to perform
investment management or other services to any person or entity, including
without limitation, other investment companies and persons who may retain
Portfolio Manager to provide investment management services and the
performance of such services shall not be deemed to violate or give rise to
any duty or obligations to the Trust.11. Counterparts and Notice. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original. Any notice required to be given under this
Agreement shall be deemed given when received, in writing addressed and
delivered, by certified mail, by hand or via overnight delivery service as
follows:
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:
Michael A. Cavarretta
Frontier Capital Management Company
99 Summer Street
Boston, Massachusetts 02110
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12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
shall be governed by the law of the state of Delaware provided that nothing
herein shall be construed as inconsistent with the Investment Company Act or
the Investment Advisers Act. Portfolio Manager is hereby expressly put on
notice of the limitations of shareholder and Trustee liability set forth in
the Declaration of Trust of the Trust and agrees that obligations assumed by
the Trust pursuant to this Agreement shall be limited in all cases to the
assets of The Small Capitalization 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.
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.
Frontier Capital Management Company
By: /s/
The Hirtle Callaghan Trust
By: /s/
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENTAGREEMENT made this __________day of August,
1995 between Brinson Partners, Inc. a corporation organized underthe laws of
Delaware ("Portfolio Manager") 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 theInvestment Company Act of 1940, as amended
("Investment Company Act") which currently offers five series of
beneficialinterests ("shares") representing interests in separate investment
portfolios, and may offer additional portfolios in the future; and
WHEREAS, the Trust desires to retain the Portfolio Manager to provide a
continuous program of investment managementfor The International Equity
Portfolio of the Trust ("Portfolio") and Portfolio Manager is willing, in
accordance with theterms 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 boundhereby, 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
Manageragrees to accept such appointment. In carrying out its
responsibilities under this Agreement, the Portfolio Manager shallat all
times act in accordance with the investment objectives, policies and
restrictions applicable to the Portfolio as set forthin the then current
Registration Statement of the Trust, applicable provisions of the Investment
Company Act and the rulesand regulations promulgated under that Act and other
applicable federal securities laws.
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2. Duties of Portfolio Manager. (a) Portfolio Manager shall provide a
continuous program of investment management for that portion of the assets of
thePortfolio ("Account") that may, from time to time be allocated to it by the
Trust's Board of Trustees, in writing, by anauthorized officer of the Trust.
It is understood that the Account may consist of all, a portion of or none of
the assets ofthe Portfolio, and that the Board of Trustees has the right to
allocate and reallocate such assets to the Account at any time,and from time
to time, upon such notice to the Portfolio Manager as may be reasonably
necessary, in the view of the Trust,to ensure orderly management of the
Account or the Portfolio. (b) Subject to the general supervision of the
Trust's Board of Trustees, Portfolio Manager shall have sole
investmentdiscretion with respect to the Account, including investment
research, selection of the securities to be purchased and soldand the portion
of the Account, if any, that shall be held uninvested, and the selection of
brokers and dealers through whichsecurities transactions in the Account shall
be executed. Specifically, and without limiting the generality of the
foregoing,Portfolio Manager agrees that it will:
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of eachpurchase and sale, as the case may
be, made on behalf of the Account, specifying the name and quantity of the
securitypurchased or sold, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction waseffected, 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
maintainedunder Rule 31a-1(b)(1), (b)(5) and (b)(6) under the Investment
Company Act with respect to transactions in the Accountincluding, without
limitation, records which reflect securities purchased or sold in the Account,
showing for each suchtransaction, the name and quantity of securities, the
unit and aggregate purchase or sale price, commission paid, the marketon 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
theInvestment Company Act. Portfolio Manager acknowledges and agrees that all
records it maintains for the Trust are theproperty of the Trust and Portfolio
Manager will surrender promptly to the Trust any such records upon the Trust's
request. The Trust agrees, however, that Portfolio Manager may retain copies
of those records that are required to be maintainedby Portfolio Manager under
federal or state regulations to which it may be subject or are reasonably
necessary for purposesof conducting its business;
(iii) provide, in a timely manner, such information as may be
reasonably requested by the Trust or its designatedagents 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 inthe 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
underSubchapter M of the Internal Revenue Code of 1986, as amended; and
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(iv) render regular reports to the Trust concerning the
performance of Portfolio Manager of its responsibilitiesunder this
Agreement. In particular, Portfolio Manager agrees that it will, at the
reasonable request of the Board ofTrustees, attend meetings of the Board or
its validly constituted committees and will, in addition, make its officers
andemployees available to meet with the officers and employees of the Trust at
least quarterly and at other times uponreasonable notice, to review the
investments and investment program of the Account.
3. Portfolio Transaction and Brokerage. In placing orders for portfolio
securities with brokers and dealers, PortfolioManager shall use its best
efforts to execute securities transactions on behalf of the Account in such a
manner that the totalcost or proceeds in each transaction is the most
favorable under the circumstances. Portfolio Manager may, however, inits
discretion, direct orders to brokers that provide to Portfolio Manager
research, analysis, advice and similar services, andPortfolio Manager may
cause the Account to pay to those brokers a higher commission than may be
charged by otherbrokers for similar transactions, provided that Portfolio
Manager determines in good faith that such commission isreasonable in terms
either of the particular transaction or of the overall responsibility of the
Portfolio Manager to theAccount and any other accounts with respect to which
Portfolio Manager exercises investment discretion, and providedfurther that
the extent and continuation of any such practice is subject to review by the
Trust's Board of Trustees. PortfolioManager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an "affiliated
person"of the Trust or Portfolio Manager, including any other investment
advisory organization that may, from time to time actas a portfolio manager
for the Portfolio or any of the Trust's other Portfolios, without prior
written approval of the Trust. The Trust shall provide a list of such
affiliated brokers and dealers to Portfolio Manager and will promptly advise
PortfolioManager of any changes in such list.
4. Expenses and Compensation.Portfolio Manager shall pay all of its
expenses incurred in the performance of its duties under this Agreement and
shallnot be required to pay any other expenses of the Trust. For its services
under this Agreement, Portfolio Manager shall beentitled to receive a fee at
the annual rate of .40% of the average daily net asset value of the Account,
which fee shall bepayable monthly.
5. Limitation of Liability and Indemnification.(a) Portfolio Manager shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trustin connection with the matters to which this Agreement
relates including, without limitation, losses that may be sustainedin
connection with the purchase, holding, redemption or sale of any security or
other investment by the Trust except a lossresulting from willful misfeasance,
bad faith or gross negligence on the part of Portfolio Manager in the
performance ofits duties or from reckless disregard by it of its duties under
this Agreement.
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(b) Notwithstanding the foregoing, Portfolio Manager expressly agrees that the
Trust may rely upon written informationprovided, in writing, by Portfolio
Manager to the Trust (including, without limitation, information contained in
PortfolioManager's then current Form ADV) in accordance with Section 9 of the
Agreement or otherwise, in preparing the Trust'sregistration statement and
amendments thereto and certain periodic reports relating to the Trust and its
Portfolios that arerequired to be furnished to shareholders of the Trust
and/or filed with the Securities and Exchange Commission ("SECFilings").
Portfolio Manager agrees to indemnify and hold harmless the Trust and each of
its Trustees, officers andemployees from any claims, liabilities and expenses,
including reasonable attorneys' fees, incurred as a result of any
untruestatement or alleged untrue statement of a material fact made by
Portfolio Manager in any such written information and
upon which the Trust relies in preparing any SEC Filing, or any omission
or alleged omission to state in such writteninformation a material fact
necessary to make such statements not misleading ("material omission").
Portfolio Managerwill not, however, be required to so indemnify any person
under this Section 5 to the extent that Portfolio Manager reliedupon an untrue
statement or material omission made by an officer or Trustee of the Trust or
where such untrue statementor material omission was made in reliance upon
information furnished to the Portfolio Manager in writing by such officeror
Trustee, or by the Trust's Custodian, Administrator or Accounting Agent.
6. Permissible Interest.Subject to and in accordance with the Trust's
Declaration of Trust and Bylaws and corresponding governing documentsof
Portfolio Manager, Trustees , officers, agents and shareholders of the Trust
may have an interest in the PortfolioManager as officers, directors, agents
and/or shareholders or otherwise. Portfolio Manager may have similar interests
inthe Trust. The effect of any such interrelationships shall be governed by
said governing documents and the provisions ofthe Investment Company Act.
7. Duration, Termination and Amendments.This Agreement shall become effective
as of the date first written above and shall continue in effect for two years.
Thereafter, this Agreement shall continue in effect from year to year for so
long as its continuance is specifically approved,at least annually, by (i) a
majority of the Board of Trustees or the vote of the holders of a majority of
the Portfolio'soutstanding voting securities; and (ii) the affirmative vote,
cast in person at a meeting called for the purpose of voting onsuch
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 dayswritten notice to the other party,
which notice may be waived by the party entitled to it. This Agreement may
not beamended except by an instrument in writing and signed by the party to be
bound thereby provided that if the InvestmentCompany Act requires that such
amendment be approved by the vote of the Board, the Independent Trustees
and/or theholders of the Trust's or the Portfolio's outstanding shareholders,
such approval must be obtained before any suchamendment may become effective.
This Agreement shall terminate upon its assignment.
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For purposes of this Agreement, the terms "majority of the outstanding voting
securities, "assignment" and "interestedperson" shall have the meanings set
forth in the Investment Company Act. 8. Confidentiality; Use of Name.(a)
Portfolio Manager acknowledges and agrees that during the course of its
responsibilities hereunder, it may have accessto certain information that is
proprietary to the Trust or to one or more of the Trust's agents or service
providers. PortfolioManager agrees that Portfolio Manager, its officers and
its employees shall treat all such proprietary information asconfidential and
will not use or disclose information contained in, or derived from such
material for any purpose other thanin connection with the carrying out of
Portfolio Manager's responsibilities hereunder. In addition, Portfolio
Manager shall use its best efforts to ensure that any agent or affiliate of
Portfolio Manager who may gain access to such proprietarymaterials shall be
made aware of the proprietary nature of such materials and shall likewise
treat such materials as confidential.
(b) It is acknowledged and agreed that the names "Hirtle Callaghan,"
"Hirtle Callaghan Chief Investment Officers" (whichis a registered trademark
of Hirtle, Callaghan & Co., Inc. ("HCCI")), and derivatives of either, as well
as any logo that isnow or shall later become associated with either name
("Marks") are valuable property of HCCI and that the use of theMarks, or any
one of them, by the Trust or its agents is subject to the license granted to
the Trust HCCI. Portfolio Manageragrees that it will not use any Mark without
the prior written consent of the Trust. Portfolio Manager consents to use
ofits name, performance data, biographical data and other pertinent data by
the Trust for use in marketing and sales literature,provided that any such
marketing and sales literature shall not be used by the Trust without the
prior written consent ofPortfolio Manager, which consent shall not be
unreasonably withheld. The provisions of this Section 8 shall
survivetermination 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 willmaintain such registration in
full force and effect and will promptly report to the Trust the commencement
of any formalproceeding that could render the Portfolio Manager ineligible to
serve as an investment adviser to a registered investmentcompany 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 "accesspersons" of the Trust within the
meaning of Rule 17j-1 under the Investment Company Act and that each such
accessperson 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") complyingwith the requirements of Rule 204-2(a)(12) under the
Investment Advisers Act and will provide the Trust with a copy of
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such code of ethics. During the period that this Agreement is in
effect, an officer or director of Portfolio Manager shallcertify to the Trust,
at least quarterly, that Portfolio Manager has complied with the requirements
of the Portfolio Manager'sCode during the prior year; and that either (i) that
no violation of such code has 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 Managershall permit the
Trust, or it designated agents, to examine the reports required to be made by
Portfolio Manager under rule17j-1(c)(1) under the Investment Company Act. In
addition, Portfolio Manager acknowledges that the Trust may, inresponse to
regulations or recommendations issued by the Securities and Exchange
Commission or other regulatoryagencies, 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 Manageragrees that it make
every effort to respond to the Trust's reasonable requests in this area.
(c) Upon request of the Trust, Portfolio Manager shall promptly supply the
Trust with any information concerning PortfolioManager and its stockholders,
employees and affiliates that the Trust may reasonably require in connection
with thepreparation of its registration statements, proxy materials, reports
and other documents required, under applicable state orFederal laws, to be
filed with state or Federal agencies or to be provided to shareholders of the
Trust.
10. Status of Portfolio Manager. The Trust and Portfolio Manager acknowledge
and agree that the relationship between Portfolio Manager and the Trustis that
of an independent contractor and under no circumstances shall any employee of
Portfolio Manager be deemed anemployee of the Trust or any other organization
that the Trust may, from time to time, engage to provide services to the
Trust, its Portfolios or its shareholders. The parties also acknowledge
and agree that nothing in this Agreement shall beconstrued to restrict the
right of Portfolio Manager or its affiliates to perform investment management
or other services toany person or entity, including without limitation, other
investment companies and persons who may retain PortfolioManager to provide
investment management services and the performance of such services shall not
be deemed to violateor give rise to any duty or obligations to the Trust.
11. Counterparts and Notice. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original. Any
noticerequired to be given under this Agreement shall be deemed given when
received, in writing addressed and delivered, bycertified mail, by hand or via
overnight delivery service as follows:
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If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087
If to Portfolio Manager:
Michael Jacobs, Esq.
Brinson Partners, Inc.
209 South LaSalle Street
Chicago, Illinois 60604-1295
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way defineor 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
beaffected thereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and theirrespective successors and shall be
governed by the law of the state of Delaware provided that nothing herein
shall beconstrued 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 theDeclaration of Trust of the
Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall belimited in all cases to the assets of The International
Equity Portfolio. Portfolio Manager further agrees that it will not
seeksatisfaction of any such obligations from the shareholders or any
individual shareholder of the Trust, or from the Trusteesof the Trust or any
individual Trustee of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto dulyauthorized as of the day and year
first written above.
Brinson Partners, Inc.
By: /s/
The Hirtle Callaghan Trust
By: /s/
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this __________day of September 1995, between Morgan
Grenfell Capital Management, Incorporated, a corporation organized under the
laws of Delaware ("Portfolio Manager") 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; and
WHEREAS, the Trust desires to retain the Portfolio Manager to provide a
continuous program of investment management for The Limited Duration Municipal
Bond Portfolio of the Trust ("Portfolio") and Portfolio Manager is willing,
in accordance with the terms and conditions hereof, to provide such services
to the Trust;
NOW THEREFORE, in consideration of the promises and covenants set forth
herein and intending to be legally bound hereby, it is agreed between the
parties as follows:
1. Appointment of Portfolio Manager. The Trust hereby retains Portfolio
Manager to provide the investment services set forth herein and Portfolio
Manager agrees to accept such appointment. In carrying out its
responsibilities under this Agreement, the Portfolio Manager shall at all
times act in accordance with the investment objectives, policies and
restrictions applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the Investment
Company Act and the rules and regulations promulgated under that Act and
other applicable federal securities laws.
2. Duties of Portfolio Manager. (a) Portfolio Manager shall provide a
continuous program of investment management for that portion of the assets
of the Portfolio ("Account") that may, from time to time be allocated to it
by the Trust's Board of Trustees, in writing, by an authorized officer of the
Trust. It is understood that the Account may consist of all, a portion of or
none of the assets of the Portfolio, and that the Board of Trustees has the
right to allocate and reallocate such assets to the Account at any time, and
from time to time, upon such notice to the Portfolio Manager as may be
reasonably necessary, in the view of the Trust, to ensure orderly management
of the Account or the Portfolio. (b) Subject to the general supervision of
the Trust's Board of Trustees, Portfolio Manager shall have sole investment
discretion with respect to the Account, including investment research,
selection of the securities to be purchased and sold and the portion of the
Account, if any, that shall be held uninvested, and the selection of brokers
and dealers through which securities transactions in the Account shall be
executed. Specifically, and without limiting the generality of the
foregoing, Portfolio Manager agrees that it will: (i) promptly advise the
Portfolio's designated custodian bank and administrator or accounting agent
of each purchase and sale, as the case may be, made on behalf of the Account,
specifying the name and quantity of the security purchased or sold, the unit
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and aggregate purchase or sale price, commission paid, the market on which
the transaction was effected, the trade date, the settlement date, the
identity of the effecting broker or dealer and/or such other information, and
in such manner, as may from time to time be reasonably requested by the
Trust; (ii) maintain all applicable books and records with respect to the
securities transactions of the Account. Specifically, Portfolio Manager
agrees to maintain with respect to the Account those records required to be
maintained under Rule 31a-1(b)(1), (b)(5) and (b)(6) under the Investment
Company Act with respect to transactions in the Account including, without
limitation, records which reflect securities purchased or sold in the
Account, showing for each such transaction, the name and quantity of
securities, the unit and aggregate purchase or sale price, commission paid,
the market on which the transaction was effected, the trade date, the
settlement date, and the identity of the effecting broker or dealer.
Portfolio Manager will preserve such records in the manner and for the
periods prescribed by Rule 31a-2 under the Investment Company Act. Portfolio
Manager acknowledges and agrees that all records it maintains for the Trust
are the property of the Trust and Portfolio Manager will surrender promptly to
the Trust any such records upon the Trust's request; (iii) provide, in a
timely manner, such information as may be reasonably requested by the Trust
or its designated agents in connection with, among other things, the daily
computation of the Portfolio's net asset value and net income, preparation of
proxy statements or amendments to the Trust's registration statement and
monitoring investments made in the Account to ensure compliance with the
various limitations on investments applicable to the Portfolio and to ensure
that the Portfolio will continue to qualify for the special tax treatment
accorded to regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended; and (iv) render regular
reports to the Trust concerning the performance ofPortfolio Manager of its
responsibilities under this Agreement. In particular, Portfolio Manager
agrees that it will, at the reasonable request of the Board of Trustees,
attend meetings of the Board or its validly constituted committees and will,
in addition, make its officers and employees available to meet with the
officers and employees of the Trust at least quarterly and at other times
upon reasonable notice, to review the investments and investment program of
the Account.
3. Portfolio Transaction and Brokerage. In placing orders for portfolio
securities with brokers and dealers, Portfolio Manager shall use its best
efforts to execute securities transactions on behalf of the Account in such a
manner that the total cost or proceeds in each transaction is the most
favorable under the circumstances. Portfolio Manager may, however, in its
discretion, direct orders to brokers that provide to Portfolio Manager
research, analysis, advice and similar services, and Portfolio Manager may
cause the Account to pay to those brokers a higher commission than may be
charged by other brokers for similar transactions, provided that Portfolio
Manager determines in good faith that such commission is reasonable in terms
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either of the particular transaction or of the overall responsibility of the
Portfolio Manager to the Account and any other accounts with respect to which
Portfolio Manager exercises investment discretion, and provided further that
the extent and continuation of any such practice is subject to review by the
Trust's Board of Trustees. Portfolio Manager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an "affiliated
person" of the Trust or Portfolio Manager, including any other investment
advisory organization that may, from time to time act as a portfolio manager
for the Portfolio or any of the Trust's other Portfolios, without prior
written approval of the Trust. The Trust shall provide a list of such
affiliated brokers and dealers to Portfolio Manager and will promptly advise
Portfolio Manager of any changes in such list.
4. Expenses and Compensation. Portfolio Manager shall pay all of its
expenses incurred in the performance of its duties under this Agreement and
shall not be required to pay any other expenses of the Trust. For its
services under this Agreement, Portfolio Manager shall be entitled to receive
a fee at the annual rate of .20% of the average daily net asset value of the
Account, which fee shall be payable monthly.
5. Limitation of Liability and Indemnification. (a) Portfolio Manager shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which this Agreement
relates including, without limitation, losses that may be sustained in
connection with the purchase, holding, redemption or sale of any security or
other investment by the Trust except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Portfolio Manager
in the performance of its duties or from reckless disregard by it of its
duties under this Agreement. (b) Notwithstanding the foregoing,
Portfolio Manager expressly agrees that the Trust may rely upon information
provided, in writing, by Portfolio Manager to the Trust (including, without
limitation, information contained in Portfolio Manager's then current Form
ADV) in accordance with Section 9 of the Agreement or otherwise, in preparing
the Trust's registration statement and amendments thereto and certain
periodic reports relating to the Trust and its Portfolios that are required
to be furnished to shareholders of the Trust and/or filed with the
Securities and Exchange Commission ("SEC Filings"), provided that a copy of
any such filing is provided to Portfolio Manager (i) at least 10 business
days prior to the date on which it will become effective, in the case of a
registration statement; (ii) at least 10 business days prior to the date
upon which it is filed with the SEC in the case of the Trust's semi-annual
report on Form N-SAR or any shareholder report or proxy statement. (c)
Portfolio Manager agrees to indemnify and hold harmless the Trust and each of
its Trustees, officers and employees from any claims, liabilities and
expenses, including reasonable attorneys' fees, (collectively, "Losses") to
the extent that Losses are incurred as a result of statements contained in an
SEC Filing ("Disputed Statements") that are misleading either because they
are (i) untrue statements of material fact; or (ii) omitted to state any
material fact necessary in order to make the statements made, in the light of
the circumstances under which they are made, not misleading. For purposes of
the indemnification obligation set forth in this Section 5(c), a Disputed
Statement will be deemed misleading if so declared by a decision of a court
or administrative law judge or in an order of settlement issued by any court
or administrative body. Portfolio Manager further agrees to indemnify and
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hold harmless the Trust and each of its Trustees, from any Losses to the
extent that such Losses are incurred as a result of Disputed Statements that
are alleged (i) to be untrue statements of material fact; or (ii) to have
omitted to state any material fact necessary in order to make the statements
made, in the light of the circumstances under which they are made, provided
that the indemnification obligation set forth in this Section 5(d) is
expressly limited to Losses arising from Disputed Statements that accurately
reflect information provided to the Trust in writing by the Portfolio Manager
and that cannot be independently verified by the Trust. Further, the
indemnification set forth in this Section 5(d) will not require
reimbursement of fees or expenses other than those incurred by the Trust's
regular counsel in connection with such counsel's representation of the Trust
or its Trustees. (e) The indemnification obligations set forth in Sections
5(c) and (d) shall not apply unless (i) Disputed Statements accurately
reflect information provided to the Trust in writing by the Portfolio
Manager; (ii) Disputed Statements were included in an SEC Filing in reliance
upon written information provided to the Trust by the Portfolio Manager;
(iii) the Portfolio Manager was afforded the opportunity to review Disputed
Statements in connection with the 10 business day review requirement set
forth in Section 5(b) above; and (iv) upon receipt by the Trust of any notice
of the commencement of any action or the assertion of any claim to which the
indemnification obligations set forth in Section 5(c) and (d) may apply, the
Trust notifies the Portfolio Manager, within 30 days and in writing, of such
receipt and provides to Portfolio Manager the opportunity to participate in
the defense and/or settlement of any such action or claim. Further,
Portfolio Manager will not be required to indemnify any person under this
Section 5 to the extent that Portfolio Manager relied upon statements or
information furnished to the Portfolio Manager, in writing, by any officer,
employee or Trustee of the Trust, or by the Trust's Custodian, Administrator
or Accounting Agent or any other agent of the Trust, in preparing written
information provided to the Trust and upon which the Trust relied in
preparing any Disputed Statement.
6. Permissible Interest. Subject to and in accordance with the Trust's
Declaration of Trust and By-laws and corresponding governing documents of
Portfolio Manager, Trustees , officers, agents and shareholders of the Trust
may have an interest in the Portfolio Manager as officers, directors, agents
and/or shareholders or otherwise. Portfolio Manager may have similar
interests in the Trust. The effect of any such interrelationships shall be
governed by said governing documents and the provisions of the Investment
Company Act.
7. Duration, Termination and Amendments. This Agreement shall become
effective as of the date first written above and shall continue in effect for
two years. Thereafter, this Agreement shall continue in effect from year to
year for so long as its continuance is specifically approved, at least
annually, by (i) a majority of the Board of Trustees or the vote of the
holders of a majority of the Portfolio's outstanding voting securities; and
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(ii) the affirmative vote, cast in person at a meeting called for the purpose
of voting on such continuance, of a majority of those members of the Board of
Trustees ("Independent Trustees ") who are not "interested persons" of the
Trust or any investment adviser to the Trust. This Agreement may be
terminated by the Trust or by Portfolio Manager at any time and without
penalty upon sixty days written notice to the other party, which notice may
be waived by the party entitled to it. This Agreement may not be amended
except by an instrument in writing and signed by the party to be bound
thereby provided that if the Investment Company Act requires that such
amendment be approved by the vote of the Board, the Independent Trustees
and/or the holders of the Trust's or the Portfolio's outstanding shareholders,
such approval must be obtained before any such amendment may become
effective. This Agreement shall terminate upon its assignment. For
purposes of this Agreement, the terms "majority of the outstanding voting
securities, "assignment" and "interested person" shall have the meanings
set forth in the Investment Company Act.
8. Confidentiality; Use of Name. Portfolio Manager and the Trust acknowledge
and agree that during the term of this Agreement the parties may have access
to certain information that is proprietary to the Trust or Portfolio Manager,
respectively (or to their affiliates and/or service providers). The parties
agree that their respective officers and 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 their responsibilities under this
Agreement and the management of the Trust's assets, provided, however, that
this shall not apply in the case of (i) information that is publicly
available; and (ii) disclosures required by law or requested by any
regulatory authority that may have jurisdiction over Portfolio Manager or the
Trust, as the case may be, in which case such party shall request such
confidential treatment of such information as may be reasonably available.
In addition, each party shall use its best efforts to ensure that its agents
or affiliates who may gain access to such proprietary information shall be
made aware of the proprietary nature and shall likewise treat such materials
as confidential. It is acknowledged and agreed that the names "Hirtle
Callaghan," "Hirtle Callaghan Chief Investment Officers" (which is a
registered trademark of Hirtle Callaghan & Co., Inc. ("HCCI")), and
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 without the prior written consent of the
Trust. Portfolio Manager consents to use of its name, performance data,
biographical data and other pertinent data by the Trust for use in marketing
and sales literature, provided that any such marketing and sales literature
shall not be used by the Trust without the prior written consent of Portfolio
Manager, which consent shall not be unreasonably withheld. The provisions
of this Section 8 shall survive termination of this Agreement.
9. Representation, Warranties and Agreements of Portfolio Manager. Portfolio
Manager represents and warrants that: (a) It is registered as an investment
adviser under the Investment Advisers Act of 1940 ("Investment Advisers
Act"), it will maintain such registration in full force and effect and will
promptly report to the Trust the commencement of any formal proceeding that
could render the Portfolio Manager ineligible to serve as an investment
adviser to a registered investment company under Section 9 of the Investment
Company Act. (b) It understands that, as a result of its services hereunder,
certain of its employees and officers may be deemed "access persons" of the
Trust within the meaning of Rule 17j-1 under the Investment Company Act and
that each such access person is subject to the provisions of the code of
ethics ("Trust's Code") adopted by the Trust in compliance with such rule.
Portfolio Manager further represents that it is subject to a written code of
ethics ("Portfolio Manager's Code") complying with the requirements of Rule
204-2(a)(12) under the Investment Advisers Act and will provide the Trust
with a copy of such code of ethics. During the period that this Agreement is
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in effect, an officer or director of Portfolio Manager shall certify to the
Trust, on a quarterly basis, that Portfolio Manager has complied with the
requirements of the Portfolio Manager's Code during the prior year; and that
either (i) that no violation of such code occurred or (ii) if such a
violation occurred, that appropriate action was taken in response to such
violation. In addition, Portfolio Manager acknowledges that the Trust may,
in response to regulations or recommendations issued by the Securities and
Exchange Commission or other regulatory agencies, from time to time, request
additional information regarding the personal securities trading of its
directors, partners, officers and employees and the policies of Portfolio
Manager with regard to such trading. Portfolio Manager agrees that it make
every effort to respond to the Trust's reasonable requests in this area. (c)
Upon request of the Trust, Portfolio Manager shall promptly supply the Trust
with any information concerning Portfolio Manager and its stockholders,
employees and affiliates that the Trust may reasonably require in connection
with the preparation of its registration statements, proxy materials, reports
and other documents required, under applicable state or Federal laws, to be
filed with state or Federal agencies or to be provided to shareholders of the
Trust.
10. Status of Portfolio Manager. The Trust and Portfolio Manager
acknowledge and agree that the relationship between Portfolio Manager and
the Trust is that of an independent contractor and under no circumstances
shall any
employee of Portfolio Manager be deemed an employee of the Trust or any
other organization that the Trust may, from time to time, engage to provide
services to the Trust, its Portfolios or its shareholders. The parties also
acknowledge and agree that nothing in this Agreement shall be construed to
restrict the right of Portfolio Manager or its affiliates to perform
investment management or other services to any person or entity, including
without limitation, other investment companies and persons who may retain
Portfolio Manager to provide investment management services and the
performance of such services shall not be deemed to violate or give rise to
any duty or obligations to the Trust.
11. Counterparts and Notice. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original. Any
notice required to be given under this Agreement shall be deemed given when
received, in writing addressed and delivered, by certified mail, by hand or
via overnight delivery service as follows:
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If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087
If to Portfolio Manager:
Jim Minnick
Morgan Grenfell Capital Management Incorporated
855 Third Avenue
New York, New York 10022
with a copy to:
David Baldt
Morgan Grenfell Capital Management Incorporated
1435 Walnut -- 4th Floor
Philadelphia, PA 19102
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and shall be governed by the law of the state of Delaware provided that
nothing herein shall be construed as inconsistent with the Investment Company
Act or the Investment Advisers Act.
Portfolio Manager is hereby expressly put on notice of the limitations of
shareholder and Trustee liability set forth in the Declaration of Trust of the
Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the assets of The Limited Duration
Municipal Bond 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.
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.
Morgan Grenfell Capital Management, Incorporated
By: /s/
The Hirtle Callaghan Trust
By: /s/
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PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this __________day of __________, 199__, between Morgan
Grenfell Capital Management, Incorporated, a corporation organized under the
laws of Delaware ("Portfolio Manager") 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 seven series of beneficial
interests ("shares") representing interests in separate investment portfolios,
and may offer additional portfolios in the future; and
WHEREAS, the Trust desires to retain the Portfolio Manager to provide a
continuous program of investment management for The Fixed Income Portfolio of
the Trust ("Portfolio") and Portfolio Manager is willing, in accordance with
the terms and conditions hereof, to provide such services to the Trust;
NOW THEREFORE, in consideration of the promises and covenants set forth herein
and intending to be legally bound hereby, it is agreed between the parties as
follows:
1. Appointment of Portfolio Manager.
The Trust hereby retains Portfolio Manager to provide the investment services
set forth herein and Portfolio Manager agrees to accept such appointment. In
carrying out its responsibilities under this Agreement, the Portfolio Manager
shall at all times act in accordance with the investment objectives, policies
and restrictions applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the Investment
Company Act and the rules and regulations promulgated under that Act and other
applicable federal securities laws.
2. Duties of Portfolio Manager.
(a) Portfolio Manager shall provide a continuous program of investment
management for that portion of the assets of the Portfolio ("Account") that
may, from time to time be allocated to it by the Trust's Board of Trustees, in
writing, by an authorized officer of the Trust. It is understood that the
Account may consist of all, a portion of or none of the assets of the
Portfolio, and that the Board of Trustees has the right to allocate and
reallocate such assets to the Account at any time, and from time to time, upon
such notice to the Portfolio Manager as may be reasonably necessary, in the
view of the Trust, to ensure orderly management of the Account or the
Portfolio.
(b) Subject to the general supervision of the Trust's Board of Trustees,
Portfolio Manager shall have sole investment discretion with respect to the
Account, including investment research, selection of the securities to be
purchased and sold and the portion of the Account, if any, that shall be held
uninvested, and the selection of brokers and dealers through which securities
transactions in the Account shall be executed. Specifically, and without
limiting the generality of the foregoing, Portfolio Manager agrees that it
will:
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(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as the case may
be, made on behalf of the Account, specifying the name and quantity of the
security purchased or sold, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was effected, the trade
date, the settlement date, the identity of the effecting broker or dealer
and/or such other information, and in such manner, as may from time to time be
reasonably requested by the Trust;
(ii) maintain all applicable books and records with respect to the
securities transactions of the Account. Specifically, Portfolio Manager
agrees to maintain with respect to the Account those records required to be
maintained under Rule 31a-1(b)(1), (b)(5) and (b)(6) under the Investment
Company Act with respect to transactions in the Account including, without
limitation, records which reflect securities purchased or sold in the Account,
showing for each such transaction, the name and quantity of securities, the
unit and aggregate purchase or sale price, commission paid, the market on
which the transaction was effected, the trade date, the settlement date, and
the identity of the effecting broker or dealer. Portfolio Manager will
preserve such records in the manner and for the periods prescribed by Rule
31a-2 under the Investment Company Act. Portfolio Manager acknowledges and
agrees that all records it maintains for the Trust are the property of the
Trust and Portfolio Manager will surrender promptly to the Trust any such
records upon the Trust's request;
(iii) provide, in a timely manner, such information as may be reasonably
requested by the Trust or its designated agents in connection with, among
other things, the daily computation of the Portfolio's net asset value and net
income, preparation of proxy statements or amendments to the Trust's
registration statement and monitoring investments made in the Account to
ensure compliance with the various limitations on investments applicable to
the Portfolio and to ensure that the Portfolio will continue to qualify for
the special tax treatment accorded to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended; and
(iv) render regular reports to the Trust concerning the performance of
Portfolio Manager of its responsibilities under this Agreement. In
particular, Portfolio Manager agrees that it will, at the reasonable request
of the Board of Trustees, attend meetings of the Board or its validly
constituted committees and will, in addition, make its officers and employees
available to meet with the officers and employees of the Trust at least
quarterly and at other times upon reasonable notice, to review the investments
and investment program of the Account.
3. Portfolio Transaction and Brokerage. In placing orders for portfolio
securities with brokers and dealers, Portfolio Manager shall use its best
efforts to execute securities transactions on behalf of the Account in such a
manner that the total cost or proceeds in each transaction is the most
favorable under the circumstances. Portfolio Manager may, however, in its
discretion, direct orders to brokers that provide to Portfolio Manager
research, analysis, advice and similar services, and Portfolio Manager may
cause the Account to pay to those brokers a higher commission than may be
charged by other brokers for similar transactions, provided that Portfolio
Manager determines in good faith that such commission is reasonable in terms
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either of the particular transaction or of the overall responsibility of the
Portfolio Manager to the Account and any other accounts with respect to which
Portfolio Manager exercises investment discretion, and provided further that
the extent and continuation of any such practice is subject to review by the
Trust's Board of Trustees. Portfolio Manager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an "affiliated
person" of the Trust or Portfolio Manager, including any other investment
advisory organization that may, from time to time act as a portfolio manager
for the Portfolio or any of the Trust's other Portfolios, without prior written
approval of the Trust. The Trust shall provide a list of such affiliated
brokers and dealers to Portfolio Manager and will promptly advise Portfolio
Manager of any changes in such list.
4. Expenses and Compensation.
Portfolio Manager shall pay all of its expenses incurred in the performance of
its duties under this Agreement and shall not be required to pay any other
expenses of the Trust. For its services under this Agreement, Portfolio
Manager shall be entitled to receive a fee at the annual rate of .25% of the
average daily net asset value of the Account, which fee shall be payable
monthly.
5. Limitation of Liability and Indemnification.
(a) Portfolio Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates including, without limitation, losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security or other investment by the Trust except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Portfolio Manager in
the performance of its duties or from reckless disregard by it of its duties
under this Agreement.
(b) Notwithstanding the foregoing, Portfolio Manager expressly agrees that the
Trust may rely upon information provided, in writing, by Portfolio Manager to
the Trust (including, without limitation, information contained in Portfolio
Manager's then current Form ADV) in accordance with Section 9 of the Agreement
or otherwise, in preparing the Trust's registration statement and amendments
thereto and certain periodic reports relating to the Trust and its Portfolios
that are required to be furnished to shareholders of the Trust and/or filed
with the Securities and Exchange Commission ("SEC Filings"), provided that a
copy of any such filing is provided to Portfolio Manager (i) at least 10
business days prior to the date on which it will become effective, in the case
of a registration statement; (ii) at least 10 business days prior to the date
upon which it is filed with the SEC in the case of the Trust's semi-annual
report on Form N-SAR or any shareholder report or proxy statement.
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(c) Portfolio Manager agrees to indemnify and hold harmless the Trust and each
of its Trustees, officers and employees from any claims, liabilities and
expenses, including reasonable attorneys' fees, (collectively, "Losses") to
the extent that Losses are incurred as a result of statements contained in an
SEC Filing ("Disputed Statements") that are misleading either because they are
(i) untrue statements of material fact; or (ii) omitted to state any material
fact necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading. For purposes of the
indemnification obligation set forth in this Section 5(c), a Disputed
Statement will be deemed misleading if so declared by a decision of a court or
administrative law judge or in an order of settlement issued by any court or
administrative body.
(d) Portfolio Manager further agrees to indemnify and hold harmless the Trust
and each of its Trustees, from any Losses to the extent that such Losses are
incurred as a result of Disputed Statements that are alleged (i) to be untrue
statements of material fact; or (ii) to have omitted to state any material
fact necessary in order to make the statements made, in the light of the
circumstances under which they are made, provided that the indemnification
obligation set forth in this Section 5(d) is expressly limited to Losses
arising from Disputed Statements that accurately reflect information provided
to the Trust in writing by the Portfolio Manager and that cannot be
independently verified by the Trust. Further, the indemnification set forth
in this Section 5(d) will not require reimbursement of fees or expenses other
than those incurred by the Trust's regular counsel in connection with such
counsel's representation of the Trust or its Trustees.
(e) The indemnification obligations set forth in Sections 5(c) and (d) shall
not apply unless (i) Disputed Statements accurately reflect information
provided to the Trust in writing by the Portfolio Manager; (ii) Disputed
Statements were included in an SEC Filing in reliance upon written information
provided to the Trust by the Portfolio Manager; (iii) the Portfolio Manager
was afforded the opportunity to review Disputed Statements in connection with
the 10 business day review requirement set forth in Section 5(b) above; and
(iv) upon receipt by the Trust of any notice of the commencement of any action
or the assertion of any claim to which the indemnification obligations set
forth in Section 5(c) and (d) may apply, the Trust notifies the Portfolio
Manager, within 30 days and in writing, of such receipt and provides to
Portfolio Manager the opportunity to participate in the defense and/or
settlement of any such action or claim. Further, Portfolio Manager will not
be required to indemnify any person under this Section 5 to the extent that
Portfolio Manager relied upon statements or information furnished to the
Portfolio Manager, in writing, by any officer, employee or Trustee of the
Trust, or by the Trust's Custodian, Administrator or Accounting Agent or any
other agent of the Trust, in preparing written information provided to the
Trust and upon which the Trust relied in preparing any Disputed Statement.
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6. Permissible Interest.
Subject to and in accordance with the Trust's Declaration of Trust and By-laws
and corresponding governing documents of Portfolio Manager, Trustees ,
officers, agents and shareholders of the Trust may have an interest in the
Portfolio Manager as officers, directors, agents and/or shareholders or
otherwise. Portfolio Manager may have similar interests in the Trust. The
effect of any such interrelationships shall be governed by said governing
documents and the provisions of the Investment Company Act.
7. Duration, Termination and Amendments.
This Agreement shall become effective as of the date first written above and
shall continue in effect for two years. Thereafter, this Agreement shall
continue in effect from year to year for so long as its continuance is
specifically approved, at least annually, by (i) a majority of the Board of
Trustees or the vote of the holders of a majority of the Portfolio's
outstanding voting securities; and (ii) the affirmative vote, cast in person
at a meeting called for the purpose of voting on such continuance, of a
majority of those members of the Board of Trustees ("Independent Trustees ")
who are not "interested persons" of the Trust or any investment adviser to the
Trust.
This Agreement may be terminated by the Trust or by Portfolio Manager at any
time and without penalty upon sixty days written notice to the other party,
which notice may be waived by the party entitled to it. This Agreement may
not be amended except by an instrument in writing and signed by the party to
be bound thereby provided that if the Investment Company Act requires that
such amendment be approved by the vote of the Board, the Independent Trustees
and/or the holders of the Trust's or the Portfolio's outstanding shareholders,
such approval must be obtained before any such amendment may become
effective. This Agreement shall terminate upon its assignment.
For purposes of this Agreement, the terms "majority of the outstanding voting
securities, "assignment" and "interested person" shall have the meanings set
forth in the Investment Company Act.
8. Confidentiality; Use of Name.
Portfolio Manager and the Trust acknowledge and agree that during the term of
this Agreement the parties may have access to certain information that is
proprietary to the Trust or Portfolio Manager, respectively (or to their
affiliates and/or service providers). The parties agree that their respective
officers and 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 their responsibilities under this Agreement and the management of the
Trust's assets, provided, however, that this shall not apply in the case of
(i) information that is publicly available; and (ii) disclosures required by
law or requested by any regulatory authority that may have jurisdiction over
Portfolio Manager or the Trust, as the case may be, in which case such party
shall request such confidential treatment of such information as may be
reasonably available. In addition, each party shall use its best efforts to
ensure that its agents or affiliates who may gain access to such proprietary
information shall be made aware of the proprietary nature and shall likewise
treat such materials as confidential.
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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
without the prior written consent of the Trust. Portfolio Manager consents to
use of its name, performance data, biographical data and other pertinent data
by the Trust for use in marketing and sales literature, provided that any such
marketing and sales literature shall not be used by the Trust without the
prior written consent of Portfolio Manager, which consent shall not be
unreasonably withheld. The provisions of this Section 8 shall survive
termination of this Agreement.
9. Representation, Warranties and Agreements of Portfolio Manager.
Portfolio Manager represents and warrants that:
(a) It is registered as an investment adviser under the Investment Advisers
Act of 1940 ("Investment Advisers Act"), it will maintain such registration in
full force and effect and will promptly report to the Trust the commencement
of any formal proceeding that could render the Portfolio Manager ineligible to
serve as an investment adviser to a registered investment company under
Section 9 of the Investment Company Act.
(b) It understands that, as a result of its services hereunder, certain of its
employees and officers may be deemed "access persons" of the Trust within the
meaning of Rule 17j-1 under the Investment Company Act and that each such
access person is subject to the provisions of the code of ethics ("Trust's
Code") adopted by the Trust in compliance with such rule. Portfolio Manager
further represents that it is subject to a written code of ethics ("Portfolio
Manager's Code") complying with the requirements of Rule 204-2(a)(12) under
the Investment Advisers Act and will provide the Trust with a copy of such
code of ethics. During the period that this Agreement is in effect, an
officer or director of Portfolio Manager shall certify to the Trust, on a
quarterly basis, that Portfolio Manager has complied with the requirements of
the Portfolio Manager's Code during the prior year; and that either (i) that
no violation of such code occurred or (ii) if such a violation occurred, that
appropriate action was taken in response to such violation. In addition,
Portfolio Manager acknowledges that the Trust may, in response to regulations
or recommendations issued by the Securities and Exchange Commission or other
regulatory agencies, from time to time, request additional information
regarding the personal securities trading of its directors, partners, officers
and employees and the policies of Portfolio Manager with regard to such
trading. Portfolio Manager agrees that it make every effort to respond to the
Trust's reasonable requests in this area.
(c) Upon request of the Trust, Portfolio Manager shall promptly supply the
Trust with any information concerning Portfolio Manager and its stockholders,
employees and affiliates that the Trust may reasonably require in connection
with the preparation of its registration statements, proxy materials, reports
and other documents required, under applicable state or Federal laws, to be
filed with state or Federal agencies or to be provided to shareholders of the
Trust.
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10. Status of Portfolio Manager.
The Trust and Portfolio Manager acknowledge and agree that the relationship
between Portfolio Manager and the Trust is that of an independent contractor
and under no circumstances shall any employee of Portfolio Manager be deemed
an employee of the Trust or any other organization that the Trust may, from
time to time, engage to provide services to the Trust, its Portfolios or its
shareholders. The parties also acknowledge and agree that nothing in this
Agreement shall be construed to restrict the right of Portfolio Manager or its
affiliates to perform investment management or other services to any person or
entity, including without limitation, other investment companies and persons
who may retain Portfolio Manager to provide investment management services and
the performance of such services shall not be deemed to violate or give rise
to any duty or obligations to the Trust.
11. Counterparts and Notice.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original. Any notice required to be given under this
Agreement shall be deemed given when received, in writing addressed and
delivered, by certified mail, by hand or via overnight delivery service as
follows:
If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087
If to Portfolio Manager:
Jim Minnick
Morgan Grenfell Capital Management Incorporated
855 Third Avenue
New York, New York 10022
with a copy to:
David Baldt
Morgan Grenfell Capital Management Incorporated
1435 Walnut -- 4th Floor
Philadelphia, PA 19102
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the state of Delaware provided that nothing herein
shall be construed as inconsistent with the Investment Company Act or the
Investment Advisers Act.
Portfolio Manager is hereby expressly put on notice of the limitations of
shareholder and Trustee liability set forth in the Declaration of Trust of the
Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the assets of The Limited Duration
Municipal Bond 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.
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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.
Morgan Grenfell Capital Management, Incorporated
By: /s/
The Hirtle Callaghan Trust
(on behalf of The Fixed Income Portfolio)
By: /s/
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this __________day of __________, 199__, between Morgan
Grenfell Capital Management, Incorporated, a corporation organized under the
laws of Delaware ("Portfolio Manager") 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 seven series of beneficial
interests ("shares") representing interests in separate investment portfolios,
and may offer additional portfolios in the future; and
WHEREAS, the Trust desires to retain the Portfolio Manager to provide a
continuous program of investment management for The Intermediate Municipal
Bond Portfolio of the Trust ("Portfolio") and Portfolio Manager is willing, in
accordance with the terms and conditions hereof, to provide such services to
the Trust;
NOW THEREFORE, in consideration of the promises and covenants set forth herein
and intending to be legally bound hereby, it is agreed between the parties as
follows:
1. Appointment of Portfolio Manager.
The Trust hereby retains Portfolio Manager to provide the investment services
set forth herein and Portfolio Manager agrees to accept such appointment. In
carrying out its responsibilities under this Agreement, the Portfolio Manager
shall at all times act in accordance with the investment objectives, policies
and restrictions applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the Investment
Company Act and the rules and regulations promulgated under that Act and other
applicable federal securities laws.
2. Duties of Portfolio Manager.
(a) Portfolio Manager shall provide a continuous program of investment
management for that portion of the assets of the Portfolio ("Account") that
may, from time to time be allocated to it by the Trust's Board of Trustees, in
writing, by an authorized officer of the Trust. It is understood that the
Account may consist of all, a portion of or none of the assets of the
Portfolio, and that the Board of Trustees has the right to allocate and
reallocate such assets to the Account at any time, and from time to time, upon
such notice to the Portfolio Manager as may be reasonably necessary, in the
view of the Trust, to ensure orderly management of the Account or the
Portfolio.
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(b) Subject to the general supervision of the Trust's Board of Trustees,
Portfolio Manager shall have sole investment discretion with respect to the
Account, including investment research, selection of the securities to be
purchased and sold and the portion of the Account, if any, that shall be held
uninvested, and the selection of brokers and dealers through which securities
transactions in the Account shall be executed. Specifically, and without
limiting the generality of the foregoing, Portfolio Manager agrees that it
will:
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as the case may
be, made on behalf of the Account, specifying the name and quantity of the
security purchased or sold, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was effected, the trade
date, the settlement date, the identity of the effecting broker or dealer
and/or such other information, and in such manner, as may from time to time be
reasonably requested by the Trust;
(ii) maintain all applicable books and records with respect to the
securities transactions of the Account. Specifically, Portfolio Manager
agrees to maintain with respect to the Account those records required to be
maintained under Rule 31a-1(b)(1), (b)(5) and (b)(6) under the Investment
Company Act with respect to transactions in the Account including, without
limitation, records which reflect securities purchased or sold in the Account,
showing for each such transaction, the name and quantity of securities, the
unit and aggregate purchase or sale price, commission paid, the market on
which the transaction was effected, the trade date, the settlement date, and
the identity of the effecting broker or dealer. Portfolio Manager will
preserve such records in the manner and for the periods prescribed by Rule
31a-2 under the Investment Company Act. Portfolio Manager acknowledges and
agrees that all records it maintains for the Trust are the property of the
Trust and Portfolio Manager will surrender promptly to the Trust any such
records upon the Trust's request;
(iii) provide, in a timely manner, such information as may be reasonably
requested by the Trust or its designated agents in connection with, among
other things, the daily computation of the Portfolio's net asset value and net
income, preparation of proxy statements or amendments to the Trust's
registration statement and monitoring investments made in the Account to
ensure compliance with the various limitations on investments applicable to
the Portfolio and to ensure that the Portfolio will continue to qualify for
the special tax treatment accorded to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended; and
(iv) render regular reports to the Trust concerning the performance of
Portfolio Manager of its responsibilities under this Agreement. In
particular, Portfolio Manager agrees that it will, at the reasonable request
of the Board of Trustees, attend meetings of the Board or its validly
constituted committees and will, in addition, make its officers and employees
available to meet with the officers and employees of the Trust at least
quarterly and at other times upon reasonable notice, to review the investments
and investment program of the Account.
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3. Portfolio Transaction and Brokerage. In placing orders for portfolio
securities with brokers and dealers, Portfolio Manager shall use its best
efforts to execute securities transactions on behalf of the Account in such a
manner that the total cost or proceeds in each transaction is the most
favorable under the circumstances. Portfolio Manager may, however, in its
discretion, direct orders to brokers that provide to Portfolio Manager
research, analysis, advice and similar services, and Portfolio Manager may
cause the Account to pay to those brokers a higher commission than may be
charged by other brokers for similar transactions, provided that Portfolio
Manager determines in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of the
Portfolio Manager to the Account and any other accounts with respect to which
Portfolio Manager exercises investment discretion, and provided further that
the extent and continuation of any such practice is subject to review by the
Trust's Board of Trustees. Portfolio Manager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an "affiliated
person" of the Trust or Portfolio Manager, including any other investment
advisory organization that may, from time to time act as a portfolio manager
for the Portfolio or any of the Trust's other Portfolios, without prior written
approval of the Trust. The Trust shall provide a list of such affiliated
brokers and dealers to Portfolio Manager and will promptly advise Portfolio
Manager of any changes in such list.
4. Expenses and Compensation.
Portfolio Manager shall pay all of its expenses incurred in the performance of
its duties under this Agreement and shall not be required to pay any other
expenses of the Trust. For its services under this Agreement, Portfolio
Manager shall be entitled to receive a fee at the annual rate of .25% of the
average daily net asset value of the Account, which fee shall be payable
monthly.
5. Limitation of Liability and Indemnification.
(a) Portfolio Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates including, without limitation, losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security or other investment by the Trust except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Portfolio Manager in
the performance of its duties or from reckless disregard by it of its duties
under this Agreement.
(b) Notwithstanding the foregoing, Portfolio Manager expressly agrees that the
Trust may rely upon information provided, in writing, by Portfolio Manager to
the Trust (including, without limitation, information contained in Portfolio
Manager's then current Form ADV) in accordance with Section 9 of the Agreement
or otherwise, in preparing the Trust's registration statement and amendments
thereto and certain periodic reports relating to the Trust and its Portfolios
that are required to be furnished to shareholders of the Trust and/or filed
with the Securities and Exchange Commission ("SEC Filings"), provided that a
copy of any such filing is provided to Portfolio Manager (i) at least 10
business days prior to the date on which it will become effective, in the case
of a registration statement; (ii) at least 10 business days prior to the date
upon which it is filed with the SEC in the case of the Trust's semi-annual
report on Form N-SAR or any shareholder report or proxy statement.
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<PAGE>
(c) Portfolio Manager agrees to indemnify and hold harmless the Trust and each
of its Trustees, officers and employees from any claims, liabilities and
expenses, including reasonable attorneys' fees, (collectively, "Losses") to
the extent that Losses are incurred as a result of statements contained in an
SEC Filing ("Disputed Statements") that are misleading either because they are
(i) untrue statements of material fact; or (ii) omitted to state any material
fact necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading. For purposes of the
indemnification obligation set forth in this Section 5(c), a Disputed
Statement will be deemed misleading if so declared by a decision of a court or
administrative law judge or in an order of settlement issued by any court or
administrative body.
(d) Portfolio Manager further agrees to indemnify and hold harmless the Trust
and each of its Trustees, from any Losses to the extent that such Losses are
incurred as a result of Disputed Statements that are alleged (i) to be untrue
statements of material fact; or (ii) to have omitted to state any material
fact necessary in order to make the statements made, in the light of the
circumstances under which they are made, provided that the indemnification
obligation set forth in this Section 5(d) is expressly limited to Losses
arising from Disputed Statements that accurately reflect information provided
to the Trust in writing by the Portfolio Manager and that cannot be
independently verified by the Trust. Further, the indemnification set forth
in this Section 5(d) will not require reimbursement of fees or expenses other
than those incurred by the Trust's regular counsel in connection with such
counsel's representation of the Trust or its Trustees.
(e) The indemnification obligations set forth in Sections 5(c) and (d) shall
not apply unless (i) Disputed Statements accurately reflect information
provided to the Trust in writing by the Portfolio Manager; (ii) Disputed
Statements were included in an SEC Filing in reliance upon written information
provided to the Trust by the Portfolio Manager; (iii) the Portfolio Manager
was afforded the opportunity to review Disputed Statements in connection with
the 10 business day review requirement set forth in Section 5(b) above; and
(iv) upon receipt by the Trust of any notice of the commencement of any action
or the assertion of any claim to which the indemnification obligations set
forth in Section 5(c) and (d) may apply, the Trust notifies the Portfolio
Manager, within 30 days and in writing, of such receipt and provides to
Portfolio Manager the opportunity to participate in the defense and/or
settlement of any such action or claim. Further, Portfolio Manager will not
be required to indemnify any person under this Section 5 to the extent that
Portfolio Manager relied upon statements or information furnished to the
Portfolio Manager, in writing, by any officer, employee or Trustee of the
Trust, or by the Trust's Custodian, Administrator or Accounting Agent or any
other agent of the Trust, in preparing written information provided to the
Trust and upon which the Trust relied in preparing any Disputed Statement.
<PAGE>
<PAGE>
6. Permissible Interest.
Subject to and in accordance with the Trust's Declaration of Trust and By-laws
and corresponding governing documents of Portfolio Manager, Trustees ,
officers, agents and shareholders of the Trust may have an interest in the
Portfolio Manager as officers, directors, agents and/or shareholders or
otherwise. Portfolio Manager may have similar interests in the Trust. The
effect of any such interrelationships shall be governed by said governing
documents and the provisions of the Investment Company Act.
7. Duration, Termination and Amendments.
This Agreement shall become effective as of the date first written above and
shall continue in effect for two years. Thereafter, this Agreement shall
continue in effect from year to year for so long as its continuance is
specifically approved, at least annually, by (i) a majority of the Board of
Trustees or the vote of the holders of a majority of the Portfolio's
outstanding voting securities; and (ii) the affirmative vote, cast in person
at a meeting called for the purpose of voting on such continuance, of a
majority of those members of the Board of Trustees ("Independent Trustees ")
who are not "interested persons" of the Trust or any investment adviser to the
Trust.
This Agreement may be terminated by the Trust or by Portfolio Manager at any
time and without penalty upon sixty days written notice to the other party,
which notice may be waived by the party entitled to it. This Agreement may
not be amended except by an instrument in writing and signed by the party to
be bound thereby provided that if the Investment Company Act requires that
such amendment be approved by the vote of the Board, the Independent Trustees
and/or the holders of the Trust's or the Portfolio's outstanding shareholders,
such approval must be obtained before any such amendment may become
effective. This Agreement shall terminate upon its assignment.
For purposes of this Agreement, the terms "majority of the outstanding voting
securities, "assignment" and "interested person" shall have the meanings set
forth in the Investment Company Act.
8. Confidentiality; Use of Name.
Portfolio Manager and the Trust acknowledge and agree that during the term of
this Agreement the parties may have access to certain information that is
proprietary to the Trust or Portfolio Manager, respectively (or to their
affiliates and/or service providers). The parties agree that their respective
officers and 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 their responsibilities under this Agreement and the management of the
Trust's assets, provided, however, that this shall not apply in the case of
(i) information that is publicly available; and (ii) disclosures required by
law or requested by any regulatory authority that may have jurisdiction over
Portfolio Manager or the Trust, as the case may be, in which case such party
shall request such confidential treatment of such information as may be
reasonably available. In addition, each party shall use its best efforts to
ensure that its agents or affiliates who may gain access to such proprietary
information shall be made aware of the proprietary nature and shall likewise
treat such materials as confidential.
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<PAGE>
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
without the prior written consent of the Trust. Portfolio Manager consents to
use of its name, performance data, biographical data and other pertinent data
by the Trust for use in marketing and sales literature, provided that any such
marketing and sales literature shall not be used by the Trust without the
prior written consent of Portfolio Manager, which consent shall not be
unreasonably withheld. The provisions of this Section 8 shall survive
termination of this Agreement.
9. Representation, Warranties and Agreements of Portfolio Manager.
Portfolio Manager represents and warrants that:
(a) It is registered as an investment adviser under the Investment Advisers
Act of 1940 ("Investment Advisers Act"), it will maintain such registration in
full force and effect and will promptly report to the Trust the commencement
of any formal proceeding that could render the Portfolio Manager ineligible to
serve as an investment adviser to a registered investment company under
Section 9 of the Investment Company Act.
(b) It understands that, as a result of its services hereunder, certain of its
employees and officers may be deemed "access persons" of the Trust within the
meaning of Rule 17j-1 under the Investment Company Act and that each such
access person is subject to the provisions of the code of ethics ("Trust's
Code") adopted by the Trust in compliance with such rule. Portfolio Manager
further represents that it is subject to a written code of ethics ("Portfolio
Manager's Code") complying with the requirements of Rule 204-2(a)(12) under
the Investment Advisers Act and will provide the Trust with a copy of such
code of ethics. During the period that this Agreement is in effect, an
officer or director of Portfolio Manager shall certify to the Trust, on a
quarterly basis, that Portfolio Manager has complied with the requirements of
the Portfolio Manager's Code during the prior year; and that either (i) that
no violation of such code occurred or (ii) if such a violation occurred, that
appropriate action was taken in response to such violation. In addition,
Portfolio Manager acknowledges that the Trust may, in response to regulations
or recommendations issued by the Securities and Exchange Commission or other
regulatory agencies, from time to time, request additional information
regarding the personal securities trading of its directors, partners, officers
and employees and the policies of Portfolio Manager with regard to such
trading. Portfolio Manager agrees that it make every effort to respond to the
Trust's reasonable requests in this area.
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<PAGE>
(c) Upon request of the Trust, Portfolio Manager shall promptly supply the
Trust with any information concerning Portfolio Manager and its stockholders,
employees and affiliates that the Trust may reasonably require in connection
with the preparation of its registration statements, proxy materials, reports
and other documents required, under applicable state or Federal laws, to be
filed with state or Federal agencies or to be provided to shareholders of the
Trust.
10. Status of Portfolio Manager.
The Trust and Portfolio Manager acknowledge and agree that the relationship
between Portfolio Manager and the Trust is that of an independent contractor
and under no circumstances shall any employee of Portfolio Manager be deemed
an employee of the Trust or any other organization that the Trust may, from
time to time, engage to provide services to the Trust, its Portfolios or its
shareholders. The parties also acknowledge and agree that nothing in this
Agreement shall be construed to restrict the right of Portfolio Manager or its
affiliates to perform investment management or other services to any person or
entity, including without limitation, other investment companies and persons
who may retain Portfolio Manager to provide investment management services and
the performance of such services shall not be deemed to violate or give rise
to any duty or obligations to the Trust.
11. Counterparts and Notice.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original. Any notice required to be given under this
Agreement shall be deemed given when received, in writing addressed and
delivered, by certified mail, by hand or via overnight delivery service as
follows:
If to the Trust:
Mr. Donald E. Callaghan, President
The Hirtle Callaghan Trust
575 East Swedesford Road
Wayne, PA 19087
If to Portfolio Manager:
Jim Minnick
Morgan Grenfell Capital Management Incorporated
855 Third Avenue
New York, New York 10022
with a copy to:
David Baldt
Morgan Grenfell Capital Management Incorporated
1435 Walnut -- 4th Floor
Philadelphia, PA 19102
<PAGE>
<PAGE>
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the state of Delaware provided that nothing herein
shall be construed as inconsistent with the Investment Company Act or the
Investment Advisers Act.
Portfolio Manager is hereby expressly put on notice of the limitations of
shareholder and Trustee liability set forth in the Declaration of Trust of the
Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the assets of The Limited Duration
Municipal Bond 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.
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.
Morgan Grenfell Capital Management, Incorporated
By: /s/
The Hirtle Callaghan Trust
(on behalf of The Intermediate Term Municipal Bond Portfolio)
By: /s/
<PAGE>
CUSTODIAN AGREEMENT between BANKERS TRUST COMPANY and THE HIRTLE CALLAGHAN
TRUST
TABLE OF CONTENTS
Page
1. Employment of Custodian 1
2. Maintenance of Securities and Cash at Custodian and Subcustodian Locations
2
3. Custody Account 2
4. Subcustodians and Securities Systems 4
(a) Domestic Custody 4
(b) Foreign Custody 4
(c) General 5
5. Use of Subcustodian 5
6. Use of Securities System 6
7. Records, Ownership of Property, Statements, Opinions of
Independent Certified Public Accountants 7
8. Holding of Securities, Nominees, etc. 8
9. Proxies, etc. 8
10. Segregated Account9
11. Settlement Procedures 9
12. Instructions 10
13. Standard of Care 11
14. Investment Limitations and Legal or Contractual Restrictions
or Regulations 13
15. Fees and Expenses13
16. Tax Reclaims 14
17. Amendment, Modifications, etc. 14
18. Termination 14
(a) Termination of Entire Agreement 14
(b) Termination as to One or More Portfolios 15
19. Notices 15
20. Representations and Warranties 16
21. Governing Law and Successors and Assigns 16
22. Publicity17
23. Representative Capacity and Binding Obligation 17
24. Submission to Jurisdiction 17
25. Counterparts17
26. Confidentiality 17
27. Severability18
28. Headings 18
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
<PAGE>
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT dated as of July 20, 1995 between BANKERS TRUST COMPANY
(the"Custodian") and The Hirtle Callaghan Trust, a Delaware business trust(the
"Trust").
WHEREAS, the Trust may be organized with one or more series of shares,each of
which shall represent an interest in a separate portfolio of Property as
defined in Section 1) (all such existing and additional series now or hereafter
listed on Exhibit A being hereafter referredto individually as a "Portfolio"
and collectively, as the"Portfolios"); and
WHEREAS, the Trust desires to appoint the Custodian as custodian on behalf of
the Portfolios under the terms and conditions set forth inthis Agreement, and
the Custodian has agreed to so act as custodian;
NOW, THEREFORE, in consideration of the mutual covenants andagreements herein
contained, the parties hereto agree as follows:
1. Employment of Custodian. (a) The Trust hereby employs theCustodian as
custodian of all assets of each Portfolio which aredelivered to and accepted
by the Custodian or any Subcustodian (asthat term is defined in Section 4)
(the "Property") pursuant to theterms and conditions set forth herein, and the
Custodian accepts suchemployment. Without limitation, such Property may
include stocks andother equity interests of every type, evidences of
indebtedness, otherinstruments representing same or rights or obligations to
receive,purchase, deliver or sell same and other non-cash investment
propertyof a Portfolio which is acceptable for deposit ("Securities") and
cashfrom any source and in any currency ("Cash"). The Custodian shall notbe
responsible for any property of a Portfolio held or received by theTrust or
others and not delivered to the Custodian or anySubcustodian.
(b) Custodian agrees that each Portfolio shall be regarded for allpurposes
hereunder as a separate party to this Agreement apart anddistinguished from
any other Portfolio and that with respect to everytransaction covered by this
Agreement every reference to the Trust shallbe deemed to relate solely to the
Portfolio or Portfolios. Under nocircumstances shall the rights, obligations
or remedies with respect to aparticular Portfolio constitute a right,
obligation or remedy applicableto any other Portfolio. The use of this
Agreement to set forth theseparate agreements between the Custodian and each
Portfolio in connectionwith the employment of the Custodian as set forth
hereunder is understoodby the Custodian to be for clerical convenience only
and shall not constitute any basis for joining several Portfolios for any
reason.
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<PAGE>
2. Maintenance of Securities and Cash at Custodian and
Subcustodian Locations. The Trust, on behalf of a Portfolio, by Instructions
(asthat term is defined in Section 12), shall direct the Custodian to
(a)settle Securities transactions and maintain cash in the country orother
jurisdiction in which the principal trading market for suchSecurities is
located, either where such Securities are to bepresented for payment or where
such Securities are acquired, and (b)maintain cash and cash equivalents in
such countries in amountsreasonably necessary to effect the Portfolio's
transactions in suchSecurities, provided that the limitation in (b) above
shall not applyto cash and cash equivalents maintained in the United
States.Instructions to settle Securities transactions in any country shall
bedeemed to authorize the holding of such Securities and Cash in thatcountry.
3. Custody Account. The Custodian agrees to establish and maintain one or
more custody accounts on its books for each Portfolio (all accountsrelating to
a single Portfolio hereinafter referred to as, an "Account")for any and all
Property from time to time received and accepted by theCustodian or any
Subcustodian (as defined in Section 4) on behalf of a Portfolio. The Custodian
shall allocate such Property to the Accounts inaccordance with such
Instructions (as defined in Section 12); providedthat the Custodian shall have
the right, in its sole discretion, to refuse to accept any Property that is not
in proper form for deposit for anyreason or with respect to which Instructions
have not been received.Subject to Section 1(b) above, the Trust, on behalf of
each Portfolio,acknowledges its responsibility as a principal for all of its
obligationsto the Custodian arising under or in connection with this
Agreement,warrants its authority to deposit in the appropriate Account any
Property received therefor by the Custodian or a Subcustodian and to give,
andauthorize others to give, instructions relative thereto. The Custodian may
deliver securities of the same class in place of those deposited in the
Account.
The Custodian shall hold, keep safe and protect as custodian for
eachPortfolio, all Property in such Accounts. All transactions,including, but
not limited to, foreign exchange transactions,involving the Property shall be
executed or settled solely inaccordance with Instructions, except that, until
the Custodianreceives Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income andpayments,
whether paid in cash or in kind, on the Property, as thesame become payable
and thereafter promptly credit the same to theappropriate Account;
(b) present for payment all Securities held in an Account which arecalled,
redeemed or retired or otherwise become payable and allcoupons and other
income items which call for payment uponpresentation to the extent that the
Custodian or Subcustodian isactually aware of such opportunities and hold the
cash received insuch Account pursuant to this Agreement;
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(c) (i) exchange Securities where the exchange is purely
ministerial(including, without limitation, the exchange of temporary
securities forthose in definitive form and the exchange of warrants, or other
documentsof entitlement to securities, for the Securities themselves) and (ii)
whennotification of a tender or exchange offer (other than
ministerialexchanges described in (i) above) is received for an Account,
endeavor toreceive Instructions, provided that if such Instructions are not
receivedin time for the Custodian to take timely action, no action shall be
takenwith respect thereto;
(d) whenever notification of a rights entitlement or a fractionalinterest
resulting from a rights issue, stock dividend or stock splitis received for an
Account and such rights entitlement or fractionalinterest bears an expiration
date, if after endeavoring to obtainInstructions such Instructions are not
received in time for theCustodian to take timely action or if actual notice of
such actionswas received too late to seek Instructions, sell in the discretion
ofthe Custodian (which sale is hereby authorized) such rightsentitlement or
fractional interest and credit the Account with the netproceeds of such sale;
(e) execute, whenever the Custodian deems it appropriate, suchownership and
other certificates as may be required to obtain thepayment of income from the
Property in such Account;
(f) in connection with Property held outside the United States, pay foreach
Account any and all taxes and levies in the nature of taxes imposedon
interest, dividends or other similar income on the Property in suchAccount by
any governmental authority. In the event there is insufficientCash available
in such Account to pay such taxes and levies, the Custodianshall notify the
Trust of the amount of the shortfall and the Trust, atits option, may deposit
additional Cash in such Account or take steps tomake sufficient Cash available
to the Custodian for such payment. TheTrust agrees, when and if requested by
the Custodian and required inconnection with the payment of any such taxes and
levies, to cooperatewith the Custodian in furnishing information, executing
documents orotherwise; and
(g) appoint brokers and agents for any of the ministerial
transactionsinvolving the Securities described in (a) - (f) above, including,
withoutlimitation, affiliates of the Custodian or any Subcustodian.
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4. Subcustodians and Securities Systems.
(a) Domestic Custody. The Custodian is authorized to hold theProperty in
custody accounts which have been established by theCustodian with (i) one or
more of the Custodian's U.S. branches oranother U.S. bank or trust company or
branch thereof located in theU.S., provided that each such bank, branch bank,
or trust company isitself qualified under the Investment Company Act of 1940,
as amended("1940 Act"), to act as custodian (individually, a "U.S.Subcustodian")
, or (ii) a U.S. securities depository or clearingagency or system in which
the Custodian or a U.S. Subcustodianparticipates (individually, a "U.S.
Securities System"). In each casein which a U.S. Subcustodian or U.S.
Securities System is employed,each such U.S. Subcustodian or U.S. Securities
System shall have beenapproved by Instructions.
(b) Foreign Custody. The Custodian is further authorized to holdProperty in
custody accounts which have been established by theCustodian with (i) one or
more of the Custodian's non-U.S. branches ormajority-owned non-U.S.
subsidiaries, a non-U.S. branch ormajority-owned subsidiary of a U.S. bank or
a non-U.S. bank or trustcompany, acting as custodian (individually, a
"non-U.S. Subcustodian";U.S. Subcustodians and non-U.S. Subcustodians,
collectively,"Subcustodians"), or a non-U.S. depository or clearing agency
orsystem in which the Custodian or any Subcustodian participates(individually,
a "non-U.S. Securities System"; U.S. Securities Systemand non-U.S. Securities
System, collectively, "Securities System").
In each case in which a non-U.S. Subcustodian or non-U.S. SecuritiesSystem is
employed (a) such non-U.S. Subcustodian or non-U.S.Securities System either is
(i) a "qualified U.S. bank" as defined byRule 17f-5 under the 1940 Act ("Rule
17f-5"); (ii) an "eligibleforeign custodian" within the meaning of Rule 17f-5
or (iii) thesubject of an order granted by the U.S. Securities and
ExchangeCommission ("SEC") exempting such non-U.S. Subcustodian or
non-U.S.Securities System or the subcustody arrangements thereto from all
orpart of the provisions of Rule 17f-5. In addition, Property shall notbe
held in any non-U.S. Subcustodian unless the agreement between theCustodian
and such non-U.S. Subcustodian has been approved byInstructions, nor shall
Property be held in any non-U.S. SecuritiesSystem unless the use of such
non-U.S. Securities System is approvedby Instructions.
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Upon request of the Trust, the Custodian shall deliver to theTrust annually
(i) a certificate stating: (x) the identity ofeach non-U.S. Subcustodian and
non-U.S. Securities System thenacting on behalf of the Custodian and the name
and address of thegovernmental agency or other regulatory authority that
supervisesor regulates such non-U.S Subcustodian and non-U.S.
SecuritiesSystem, and (y) the countries in which each non-U.S. Subcustodianor
non-U.S. Securities System is located; and (ii) such otherinformation relating
to such non-U.S. Subcustodians and non-U.S.Securities Systems as may
reasonably be requested by the Trust toensure compliance with Rule 17f-5. So
long as Rule 17f-5 requiresthe Trust's Board of Trustees to directly approve
its foreigncustody arrangements, the Custodian shall furnish annually to
theTrust information concerning such non-U.S. Subcustodians andnon-U.S.
Securities Systems similar in kind and scope as thatfurnished to the Trust in
connection with the initial approval ofthis Agreement. Custodian agrees to
promptly notify the Trust if,in the normal course of its custodial activities,
the Custodianhas reason to believe that any non-U.S. Subcustodian or
non-U.S.Securities System has ceased to be a qualified U.S. bank or aneligible
foreign custodian each within the meaning of Rule 17f-5or has ceased to be
exempt from some or all of the requirements ofSection 17f-5 pursuant to an
order of the SEC.
(c) General. The Custodian shall have no liability or responsibility
fordetermining whether the approval of any Subcustodian or Securities
Systemhas been proper under the 1940 Act or any rule or regulation
thereunder.
Upon receipt of Instructions, the Custodian agrees to cease theemployment of
any Subcustodian or Securities System with respectto a Portfolio, and if
desirable and practicable, appoint areplacement subcustodian or securities
system in accordance withthe provisions of this Section. In addition, the
Custodian may,at any time in its discretion, upon written notification to
theTrust, terminate the employment of any Subcustodian or SecuritiesSystem.
5. Use of Subcustodian. With respect to Property maintained by theCustodian
in the custody of a Subcustodian employed pursuant toSection 4:
(a) The Custodian will identify on its books as belonging to theTrust, on
behalf of a Portfolio, any Property held by suchSubcustodian.
(b) Any Property in the Account held by a Subcustodian will be subjectonly to
the instructions of the Custodian or its agents.
(c) Property deposited with a Subcustodian will be maintained in anaccount
holding only assets for customers of the Custodian.
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(d) Any agreement the Custodian shall enter into with a non-U.S.Subcustodian
with respect to the holding of Property shall require that(i) the Account will
be adequately indemnified or its losses adequatelyinsured; (ii) the Securities
will not be subject to any right, charge,security interest, lien or claim of
any kind in favor of such Subcustodianor its creditors except a claim for
payment in accordance with suchagreement for their safe custody or
administration and expenses relatedthereto, (iii) beneficial ownership of such
Securities will be freelytransferable without the payment of money or value
other than for safecustody or administration and expenses related thereto,
(iv) adequaterecords will be maintained identifying the Property held pursuant
to suchAgreement as belonging to the Custodian, on behalf of its customers
and(v) to the extent permitted by applicable law, officers of or
auditorsemployed by, or other representatives of or designated by, the
Custodian,including the independent public accountants of or designated by,
theTrust will be given access to the books and records of such
Subcustodianrelating to its actions under its agreement pertaining to any
Propertyheld by it thereunder or confirmation of or pertinent
informationcontained in such books and records be furnished to such
personsdesignated by the Custodian.
6. Use of Securities System. With respect to Property in theAccount(s) which
are maintained by the Custodian or any Subcustodianin the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by itsagreement
with the Custodian to, identify on its books such Propertyas being held for
the account of the Custodian or Subcustodian for itscustomers.
(b) Any Property held in a Securities System for the account of theCustodian
or a Subcustodian will be subject only to the instructionsof the Custodian or
such Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be maintained in
anaccount holding only assets for customers of the Custodian orSubcustodian,
as the case may be, unless precluded by applicable law,rule, or regulation.
(d) The Custodian shall provide the Trust with any report obtained bythe
Custodian on the Securities System's accounting system, internalaccounting
control and procedures for safeguarding securitiesdeposited in the Securities
System.
7. Records, Ownership of Property, Statements, Opinions ofIndependent
Certified Public Accountants.
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(a) The ownership of the Property whether Securities, Cash and/orother
property, and whether held by the Custodian or a Subcustodian orin a
Securities System as authorized herein, shall be clearly recordedon the
Custodian's books as belonging to the appropriate Account andnot for the
Custodian's own interest. The Custodian shall keepaccurate and detailed
accounts of all investments, receipts,disbursements and other transactions for
each Account. All accounts,books and records of the Custodian relating
thereto shall be open toinspection and audit at all reasonable times during
normal businesshours by any person designated by the Trust. All such accounts
shallbe maintained and preserved in the form reasonably requested by
theTrust. The Custodian will supply to the Trust from time to time,
asmutually agreed upon, a statement in respect to any Property in anAccount
held by the Custodian or by a Subcustodian. In the absence ofthe filing in
writing with the Custodian by the Trust of exceptions orobjections to any such
statement within sixty (60) days of the mailingthereof, the Trust, on behalf
of the applicable Portfolio, shall bedeemed to have approved such statement
and in such case or uponwritten approval of the Trust of any such statement,
such statementshall be presumed to be for all purposes correct with respect to
allinformation set forth therein.
(b) The Custodian shall take all reasonable action as the Trust mayrequest to
obtain from year to year favorable opinions from the Trust'sindependent
certified public accountants with respect to the Custodian'sactivities
hereunder in connection with the preparation of the Trust'sForm N-1A and the
Trust's Form N-SAR or other periodic reports to the SECand with respect to any
other requirements of the SEC.
(c) At the request of the Trust, the Custodian shall deliver to theTrust a
written report prepared by the Custodian's independentcertified public
accountants with respect to the services provided bythe Custodian under this
Agreement, including, without limitation, theCustodian's accounting system,
internal accounting control andprocedures for safeguarding Cash and
Securities, including Cash andSecurities deposited and/or maintained in a
Securities System or witha Subcustodian. Such report shall be of sufficient
scope and insufficient detail as may reasonably be required by the Trust and
asmay reasonably be obtained by the Custodian.
(d) The Trust, on behalf of the Portfolios, may elect to participatein any of
the electronic on-line service and communications systemsoffered by the
Custodian which can provide the Trust, on a dailybasis, with the ability to
view on-line or to print on hard copyvarious reports of Account activity and
of Securities and/or Cashbeing held in any Account. To the extent that such
service shallinclude market values of Securities in an Account, the Trust,
onbehalf of the Portfolios, hereby acknowledges that the Custodian nowobtains
and may in the future obtain information on such values fromoutside sources
that the Custodian considers to be reliable and theTrust, on behalf of the
Portfolios, agrees that the Custodian (i) doesnot verify nor represent or
warrant either the reliability of suchservice nor the accuracy or completeness
of any such informationfurnished or obtained by or through such service and
(ii) shall bewithout liability in selecting and utilizing such service
orfurnishing any information derived therefrom.
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8. Holding of Securities, Nominees, etc. Securities in an Account whichare
held by the Custodian or any Subcustodian may be held by such entityin the
name of the Trust, on behalf of a Portfolio, in the Custodian's
orSubcustodian's name, in the name of the Custodian's or
Subcustodian'snominee, or in bearer form. Securities that are held by a
Subcustodian orwhich are eligible for deposit in a Securities System as
provided abovemay be maintained with the Subcustodian or the Securities System
in anaccount for the Custodian's or Subcustodian's customers, unless
prohibitedby law, rule, or regulation. The Custodian or Subcustodian, as the
casemay be, may combine certificates representing Securities held in anAccount
with certificates of the same issue held by it as fiduciary or asa custodian.
In the event that any Securities in the name of theCustodian or its nominee or
held by a Subcustodian and registered in thename of such Subcustodian or its
nominee are called for partial redemptionby the issuer of such Security, the
Custodian may, subject to the rules orregulations pertaining to allocation of
any securities depository in whichsuch Securities have been deposited, allot,
or cause to be allotted, thecalled portion of the respective beneficial
holders of such class ofsecurity in any manner the Custodian deems to be fair
and equitable.
9. Proxies, etc. With respect to any proxies, notices, reports orother
communications relative to any of the Securities in any Account,the Custodian
shall perform only such services relative thereto as are(i) set forth in
Section 3 of this Agreement, (ii) described inExhibit B attached hereto (as
such service therein described may be in
effect from time to time) (the "Proxy Service") and (iii) as mayotherwise be
agreed upon between the Custodian and the Trust, onbehalf of the Portfolios.
The liability and responsibility of theCustodian in connection with the Proxy
Service referred to in (ii) ofthe immediately preceding sentence and in
connection with anyadditional services which the Custodian and the Trust, on
behalf ofthe Portfolios, may agree upon as provided in (iii) of the
immediatelypreceding sentence shall be as set forth in the description of
theProxy Service and as may be agreed upon by the Custodian and theTrust, on
behalf of the Portfolios, in connection with the furnishingof any such
additional service and shall not be affected by any otherterm of this
Agreement. Neither the Custodian nor its nominees oragents shall vote upon or
in respect of any of the Securities in anAccount, execute any form of proxy to
vote thereon, or give anyconsent or take any action (except as provided in
Section 3) withrespect thereto except upon the receipt of Instructions
relativethereto.
10. Segregated Account. Upon receipt of Instructions, the Custodianshall
establish and maintain a segregated account or accounts for andon behalf of a
Portfolio, into which account or accounts may betransferred Cash and/or
Securities, including Securities maintained inan account by the Custodian in a
Securities System (i) in accordancewith the provisions of any agreement among
the Trust, on behalf of aPortfolio, the Custodian and a broker-dealer
registered under theSecurities Exchange Act of 1934 and a member of the
NationalAssociation of Securities Dealers, Inc. (or any futures
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commissionmerchant registered under the Commodity Exchange Act), relating
tocompliance with the rules of The Options Clearing Corporation and ofany
registered national securities exchange (or the Commodity FuturesTrading
commission or any registered contract market), or of anysimilar organization
or organizations, regarding escrow or otherarrangements in connection with
transactions by the Trust, (ii) forthe purposes of segregating Cash or
Government Securities inconnection with options purchased, sold or written by
the Trust, on behalf of a Portfolio or commodity futures contracts or options
thereonpurchased or sold by the Trust, (iii) for the purposes of compliance by
aPortfolio with Investment Company Act Release No. 10666, or any
subsequentrelease or releases of the SEC relating to the maintenance of
segregatedaccounts by registered investment companies, and (iv) for other
propercorporate purposes.
11. Settlement Procedures. Securities will be transferred, exchangedor
delivered by the Custodian or a Subcustodian upon receipt by theCustodian of
Instructions which include all information required bythe Custodian.
Settlement and payment for Securities received for anAccount and delivery of
Securities out of such Account may be effectedin accordance with the customary
or established securities trading orsecurities processing practices and
procedures in the jurisdiction ormarket in which the transaction occurs,
including, without limitation,delivering Securities to the purchaser thereof
or to a dealer therefor(or an agent for such purchaser or dealer) against a
receipt with theexpectation of receiving later payment for such Securities
from suchpurchaser or dealer, as such practices and procedures may be
modifiedor supplemented in accordance with the standard operating proceduresof
the Custodian in effect from time to time for that jurisdiction ormarket. The
Custodian shall not be liable for any loss which resultsfrom effecting
transactions in accordance with the customary orestablished securities trading
or securities processing practices andprocedures in the applicable
jurisdiction or market.
Notwithstanding that the Custodian may settle purchases and salesagainst, or
credit income to, an Account, on a contractual basis, asoutlined in the
Investment Manager User Guide provided to the Trust bythe Custodian, the
Custodian may, at its sole option, reverse suchcredits or debits to the
appropriate Account in the event that thetransaction does not settle, or the
income is not received in a timelymanner, and the Trust agrees to hold the
Custodian harmless from anylosses which may result therefrom.
Except as otherwise may be agreed upon by the parties hereto, theCustodian
shall not be required to comply with Instructions to settle thepurchase of any
assets for an Account unless there is sufficient clearedand available funds in
such Account at the time or to settle thetransactions, provided further that
if the transaction is for the sale ofany Securities in such Account, unless
such Securities are in deliverableform. Notwithstanding the foregoing, if the
purchase price of suchSecurities exceeds the amount of Cash in an Account at
the time ofsettlement of such purchase, the Custodian may, in its sole
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discretion,but in no way shall have any obligation to, permit an overdraft in
suchAccount in the amount of the difference solely for the purpose
offacilitating the settlement of such purchase of Securities for
promptdelivery for such Account. The Trust, on behalf of each Portfolio,
agreesto immediately repay the amount of any such overdraft in the
ordinarycourse of business and further agrees to indemnify and hold the
Custodianharmless from and against any and all losses, costs, including,
withoutlimitation the cost of funds, and expenses incurred in connection
withsuch overdraft. The Trust agrees that it will not use the Account
tofacilitate the purchase or sale of securities without sufficient funds inthe
Account (which funds shall not include the proceeds of the sale of
thepurchased securities).
12. Instructions. The Trust shall deliver to the Custodian a list ofpersons
authorized to give particular classes of Instructions,together with their
signatures and their office addresses. The term"Instructions" means
instructions in respect of any of the Custodian'sduties hereunder which have
been received by the Custodian (i) inwriting (including, without limitation,
facsimile transmission) or bytested telex, in each case from persons
reasonably believed by theCustodian to be authorized to give such
instructions, or (ii)transmitted electronically through an electronic on-line
service andcommunications system offered by the Custodian or other
electronicinstruction system acceptable to the Custodian, or (iii) by
atelephonic or oral communication in each case from persons reasonablybelieved
by the Custodian to be authorized to give such instructions;or (iv) upon
receipt of such other form of instructions as the Trustmay from time to time
authorize in writing and which the Custodian hasagreed in writing to accept.
Instructions in the form of oralcommunications shall be confirmed by the Trust
by tested telex orwriting in the manner set forth in clause (i) above, but the
lack of
such confirmation shall in no way affect any action taken by the Custodianin
reliance upon such oral instructions prior to the Custodian's receiptof such
confirmation. Instructions may relate to specific transactions orto types or
classes of transactions, and may be in the form of standinginstructions.
Instructions shall specifically identify the Account to which theInstructions
relate. Instructions shall be delivered to the Custodianat the address and in
the manner set forth in the User Guide providedto the Trust, as amended from
time to time.
The Custodian shall have the right to assume in the absence of noticeto the
contrary from the Trust that any person whose name is on filewith the
Custodian pursuant to this Section 12 has been authorized bythe Trust to give
the Instructions in question and that suchauthorization has not been revoked.
The Custodian may act upon andconclusively rely on, without any liability to
the Trust or any otherperson or entity for any losses resulting therefrom, any
Instructionsreasonably believed by it to be furnished by the proper person
orpersons as provided above.
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13. Standard of Care. The Custodian shall be responsible for theperformance
of only such duties as are set forth herein or containedin Instructions given
to the Custodian which are not the contrary tothe provisions of this
Agreement. The Custodian will use reasonablecare with respect to the
safekeeping of Property in each Account and,except as otherwise expressly
provided herein, in carrying out itsobligations under this Agreement. So long
as and to the extent thatit has exercised reasonable care, the Custodian shall
not beresponsible for the title, validity or genuineness of any Property
orother property or evidence of title thereto received by it ordelivered by it
pursuant to this Agreement and shall be held harmlessin acting upon, and may
conclusively rely on, without liability forany loss resulting therefrom, any
notice, request, consent,certificate or other instrument reasonably believed
by it to begenuine and to be signed or furnished by the proper party or
parties,including, without limitation, Instructions, and shall be indemnified
by the applicable Portfolio of the Trust for any losses, damages, costsand
expenses (including, without limitation, the fees and expenses ofcounsel)
incurred by the Custodian and arising out of action taken oromitted with
reasonable care by the Custodian hereunder or under anyInstructions. The
Custodian shall be liable to the applicable Portfolioof the Trust for any act
or omission to act of any Subcustodian to thesame extent as if the Custodian
committed such act itself. With respectto a Securities System, the Custodian
shall only be responsible or liablefor losses arising from employment of such
Securities System caused by theCustodian's own failure to exercise reasonable
care. In the event of anyloss to a Portfolio of the Trust by reason of the
failure of the Custodianor a Subcustodian to utilize reasonable care, the
Custodian shall beliable to the applicable Portfolio to the extent of the
Portfolio's actualdamages at the time such loss was discovered without
reference to anyspecial conditions or circumstances. In no event shall the
Custodian beliable for any consequential or special damages. The Custodian
shall beentitled to rely, and may act, on advice of counsel (who may be
counselfor the Trust) on all matters and shall be without liability for
anyaction reasonably taken or omitted pursuant to such advice.
In the event the Trust, on behalf of the Portfolios, subscribes to
anelectronic on-line service and communications system offered by
theCustodian, the Trust shall be fully responsible for the security ofthe
Trust's connecting terminal, access thereto and the proper andauthorized use
thereof and the initiation and application ofcontinuing effective safeguards
with respect thereto and the Trust, onbehalf of each Portfolio, agrees to
defend and indemnify the Custodianand hold the Custodian harmless from and
against any and all losses,damages, costs and expenses (including the fees and
expenses ofcounsel) incurred by the Custodian as a result of any improper
orunauthorized use of such terminal by the Trust or by any others.
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All collections of funds or other property paid or distributed in respectof
Securities in an Account, including funds involved in third-partyforeign
exchange transactions, shall be made at the risk of the applicablePortfolio of
the Trust.
Subject to the exercise of reasonable care, the Custodian shall haveno
liability for any loss occasioned by delay in the actual receipt ofnotice by
the Custodian or by a Subcustodian of any payment,redemption or other
transaction regarding Securities in each Accountin respect of which the
Custodian has agreed to take action asprovided in Section 3 hereof. The
Custodian shall not be liable forany loss resulting from, or caused by, or
resulting from acts ofgovernmental authorities (whether de jure or de facto),
including,without limitation, nationalization, expropriation, and the
impositionof currency restrictions; devaluations of or fluctuations in the
valueof currencies; changes in laws and regulations applicable to thebanking
or securities industry; market conditions that prevent theorderly execution of
securities transactions or affect the value ofProperty; acts of war,
terrorism, insurrection or revolution; strikesor work stoppages; the inability
of a local clearing and settlementsystem to settle transactions for reasons
beyond the control of theCustodian; hurricane, cyclone, earthquake, volcanic
eruption, nuclearfusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damageor expense
suffered by the Trust or any Portfolio, insofar as suchloss, damage or expense
arises from the performance of the Custodian'sduties hereunder by reason of
the Custodian's reliance upon recordsthat were maintained for the Trust or any
Portfolio by entities otherthan the Custodian prior to the Custodian's
employment under thisAgreement.
Except as otherwise provided in this Agreement, the Custodian agreesto
indemnify and hold harmless each Portfolio against and from anyloss, damage
and expense suffered or incurred by such Portfolio andarising from (i) the bad
faith, reckless disregard of duties, willfulmisfeasance, or gross negligence
of the Custodian or any Subcustodian;and (ii) any breach of this Agreement by
the Custodian.
The provisions of this Section 13 shall survive termination of thisAgreement.
14. Investment Limitations and Legal or Contractual Restrictions
orRegulations. Provided that the Custodian acts in accordance
withInstructions, the Custodian shall not be liable to the Trust or
anyPortfolio and the Trust, on behalf of each Portfolio, agrees toindemnify
the Custodian and its nominees, for any loss, damage orexpense suffered or
incurred by the Custodian or its nominees arisingout of any violation of any
investment restriction or otherrestriction or limitation applicable to the
Trust or any Portfoliopursuant to any contract or any law or regulation. The
provisions ofthis Section 14 shall survive termination of this Agreement.
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15. Fees and Expenses. The Trust, on behalf of each Portfolio, agreesto pay
to the Custodian such compensation for its services pursuant tothis Agreement,
including if elected by the Trust fees for anelectronic on-line service and
communications system offered by theCustodian, as may be mutually agreed upon
in writing from time to timeand the Custodian's reasonable out-of-pocket or
incidental expenses inconnection with the performance of this Agreement,
including (butwithout limitation) legal fees as described herein and/or
deemednecessary in the judgment of the Custodian to keep safe or protect
theProperty in the Account. The initial fee schedule is attached heretoas
Exhibit C.
The Trust, on behalf of each Portfolio, hereby agrees to hold theCustodian
harmless from any liability or loss resulting from any taxesor other
governmental charges, and any expense related thereto, whichmay be imposed, or
assessed with respect to any Property in an Accountand also agrees to hold the
Custodian, its Subcustodians, and theirrespective nominees harmless from any
liability as a record holder ofProperty in such Account. The Custodian is
authorized to charge theapplicable Account for such items and the Custodian
shall have a lienon the Property in the applicable Account for any amount
payable tothe Custodian under this Section 15, Section 1, and the last
paragraphof Section 11. The provisions of this Section shall survive
thetermination of this Agreement.
16. Tax Reclaims. With respect to withholding taxes deducted and whichmay be
deducted from any income received from any Property in an Account,the
Custodian shall perform such services with respect thereto as aredescribed in
Exhibit D attached hereto and shall in connection therewithbe subject to the
standard of care set forth in such Exhibit D. Suchstandard of care shall not
be affected by any other term of thisAgreement.
17. Amendment, Modifications, etc. No provision of this Agreement maybe
amended, modified or waived except in a writing signed by theparties hereto.
No waiver of any provision hereto shall be deemed acontinuing waiver unless it
is so designated. No failure or delay onthe part of either party in
exercising any power or right under thisAgreement operates as a waiver, nor
does any single or partialexercise of any power or right preclude any other or
further exercisethereof or the exercise of any other power or right.
18. Termination.
(a) Termination of Entire Agreement. This Agreement may beterminated by the
Trust or the Custodian by ninety (90) days' writtennotice to the other;
provided that notice by the Trust shall specifythe names of the persons to
whom the Custodian shall deliver theSecurities in each Account and to whom the
Cash in such Account shallbe paid. If notice of termination is given by the
Custodian, theTrust shall, within ninety (90) days following the giving of
suchnotice, deliver to the Custodian a written notice specifying the namesof
the persons to whom the Custodian shall deliver the Property ineach Account.
The Custodian will deliver such Property to the personsso specified, after
deducting therefrom any amounts which theCustodian determines to be owed to it
under Sections 1, the lastparagraph of Section 11, and 15. In addition, upon
written notice tothe Trust, the Custodian may in its discretion withhold from
deliverysuch Property as may be necessary to settle transactions pending atthe
time of such delivery. If within ninety (90) days following thegiving of a
notice of termination by the Custodian, the Custodian doesnot receive from the
Trust a written notice specifying the names of
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the persons to whom the Custodian shall deliver the Property in eachAccount,
the Custodian, at its election, may deliver such Property and paysuch Cash to
a bank or trust company doing business in the State of NewYork to be held and
disposed of pursuant to the provisions of thisAgreement, or may continue to
hold such Property until a written notice asaforesaid is delivered to the
Custodian, provided that the Custodian'sobligations shall be limited to
safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may beterminated
by the Trust or the Custodian as to one or more Portfolios(but less than all
of the Portfolios) by delivery of an amendedExhibit A deleting such
Portfolios, in which case termination as tosuch deleted Portfolios shall take
effect ninety (90) days after thedate of the delivery of applicable Property,
or such earlier time asmutually agreed. The execution and delivery of an
amended Exhibit Awhich deletes one or more Portfolios shall constitute a
termination ofthis Agreement only with respect to such deleted Portfolios(s),
shallbe governed by the preceding provisions of Section 18 as to
theidentification of a successor custodian and the delivery of Propertyof the
Portfolios(s) so deleted to such successor custodian, and shallnot affect the
obligations of the Custodian and the Trust hereunderwith respect to the other
Portfolios set forth in Exhibit A, asamended from time to time.
19. Notices. Except as otherwise provided in this Agreement, allrequests,
demands or other communications between the parties ornotices in connection
herewith (a) shall be in writing, hand deliveredor sent by telex, telegram,
cable, facsimile or other means ofelectronic communication agreed upon by the
parties hereto addressed,if to the Trust, to:
The Hirtle Callaghan Trustc/o Hirtle Callaghan & Co., Inc.575 E. Swedesford
RoadWayne, PA. 19087
with a copy to:
The Hirtle Callaghan Trust
c/o Furman Selz Incorporated
237 Park Avenue
New York, N.Y. 10017
if to the Custodian, to:
Attn: Sandra T. Gross
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, N.Y. 10006
or in either case to such other address as shall have been furnished tothe
receiving party pursuant to the provisions hereof and (b) shall bedeemed
effective when received, or, in the case of a telex, when sent tothe proper
number and acknowledged by a proper answerback.
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20. Representations and Warranties.
(a) The Trust, on behalf of each Portfolio, hereby represents andwarrants to
the Custodian that:
(i) the employment of the Custodian and the allocation of fees,expenses and
other charges to any Account as herein provided, isnot prohibited by law or
any governing documents or contracts towhich the Trust is subject;
(ii) the terms of this Agreement do not violate any obligation bywhich the
Trust is bound, whether arising by contract, operationof law or otherwise;
(iii) this Agreement has been duly authorized by appropriateaction and when
executed and delivered will be binding upon theTrust and each Portfolio in
accordance with its terms; and
(iv) the Trust will deliver to the Custodian such evidence ofsuch
authorization as the Custodian may reasonably require,whether by way of a
certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Trust that:
(i) the terms of this Agreement do not violate any obligation bywhich the
Custodian is bound, whether arising by contract,operation of law or otherwise;
(ii) this Agreement has been duly authorized by appropriateaction and when
executed and delivered will be binding upon theCustodian in accordance with
its terms;
(iii) the Custodian will deliver to the Trust such evidence ofsuch
authorization as the Trust may reasonably require, whether byway of a
certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section 26(a) ofthe 1940 Act
and warrants that it will remain so qualified or uponceasing to be so
qualified shall promptly notify the Trust inwriting.
21. Governing Law and Successors and Assigns. This Agreement shall begoverned
by the law of the State of New York and shall not beassignable by either
party, but shall bind the successors in interestof the Trust and the
Custodian.
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22. Publicity. Trust, on behalf of each Portfolio, shall furnish toCustodian
at its office referred to in Section 19 above, prior to anydistribution
thereof, copies of any material prepared by any personother than the Custodian
for distribution to any persons who are notparties hereto that refer in any
way to the Custodian. Trust shallnot distribute or permit the distribution of
such materials ifCustodian reasonably objects in writing within ten (10)
business daysof receipt thereof (or such other time as may be mutually
agreed)after receipt thereof. Notwithstanding the foregoing,
priornotification shall not be required with respect to references to
theCustodian in the Trust's prospectus(es) or to account statementsrelating to
individual custody accounts maintained by Custodian, whichstatements are
forwarded by Hirtle Callaghan & Co. to its advisoryclients provided that the
form of any such reference was presented toCustodian in accordance with this
section and is used in subsequentprospectuses and/or account statements in a
substantially identicalform as that presented. The provisions of this Section
22 shallsurvive the termination of this Agreement.
23. Representative Capacity and Binding Obligation. Notice is herebygiven
that this Agreement is not executed on behalf of the Trustees ofthe Trust as
individuals, and the obligations of this Agreement arenot binding upon any of
the Trustees, officers or shareholders of theTrust individually but are
binding only upon the assets and propertyof the Portfolios.
The Custodian agrees that no shareholder, trustee or officer of theTrust may
be held personally liable or responsible for any obligationsof the Trust
arising out of this Agreement.
24. Submission to Jurisdiction. Any suit, action or proceedingarising out of
this Agreement may be instituted in any State orFederal court sitting in the
City of New York, State of New York,United States of America, and the Trust
irrevocably submits to thenon-exclusive jurisdiction of any such court in any
such suit, actionor proceeding and waives, to the fullest extent permitted by
law, anyobjection which it may now or hereafter have to the laying of venue
ofany such suit, action or proceeding brought in such a court and anyclaim
that such suit, action or proceeding was brought in aninconvenient forum.
25. Counterparts. This Agreement may be executed in any number
ofcounterparts, each of which shall be deemed an original. ThisAgreement
shall become effective when one or more counterparts havebeen signed and
delivered by each of the parties hereto.
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26. Confidentiality. The parties hereto agree that each shall
treatconfidentially the terms and conditions of this Agreement and
allinformation provided by each party to the other regarding its businessand
operations. All confidential information provided by a partyhereto shall be
used by any other party hereto solely for the purposeof rendering services
pursuant to this Agreement and, except as may berequired in carrying out this
Agreement, shall not be disclosed to anythird party without the prior consent
of such providing party, whichconsent shall not be withheld unreasonably. The
foregoing shall notbe applicable to any information that is publicly available
whenprovided or thereafter becomes publicly available other than through
abreach of this Agreement, or that is required or requested to bedisclosed by
any bank or other regulatory examiner of the Custodian,Trust, or any
Subcustodian, any auditor of the parties hereto, byjudicial or administrative
process or otherwise by applicable law orregulation.
27. Severability. If any provision of this Agreement is determinedto be
invalid or unenforceable, such determination shall not affectthe validity or
enforceability of any other provision of thisAgreement.
28. Headings. The headings of the paragraphs hereof are included
forconvenience of reference only and do not form a part of thisAgreement.
THE HIRTLE CALLAGHAN TRUST
By: _/s/_________________________Title: _______________________
BANKERS TRUST COMPANY
By: ___/s/_______________________Title: _______________________
EXHIBIT A
To Custodian Agreement dated as of July 20, 1995 between Bankers TrustCompany
and The Hirtle Callaghan Trust.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first WHEREASclause
of the above-referred to Custodian Agreement. Terms usedherein as defined
terms unless otherwise defined shall have themeanings ascribed to them in the
above-referred to CustodianAgreement.
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The Value Equity PortfolioThe Growth Equity Portfolio The Small Capitalization
PortfolioThe Internationalization Equity Portfolio The Limited Duration
Municipal Bond Portfolio
Dated as of: July 20, 1995 THE HIRTLE CALLAGHAN TRUST
By: _____/s/_____________________Title: _______________________
BANKERS TRUST COMPANY
By: ______/s/____________________Title: _______________________
EXHIBIT B
To Custodian Agreement dated as of July 20, 1995 between Bankers TrustCompany
and The Hirtle Callaghan Trust.
PROXY SERVICE
The following is a description of the Proxy Service referred to inSection 9 of
the above referred to Custodian Agreement. Terms usedherein as defined terms
unless otherwise defined shall have themeanings ascribed to them therein
unless otherwise defined below.
The Custodian provides a service, described below, for thetransmission of
corporate communications in connection withshareholder meetings relating to
Securities held in Argentina,Australia, Austria, Canada, Denmark, Finland,
France, Germany, Greece,Hong Kong, Indonesia, Ireland, Italy, Japan, Korea,
Malaysia, Mexico,Netherlands, New Zealand, Pakistan, Poland, Singapore, South
Africa,Spain, Sri Lanka, Sweden, United Kingdom, United States, andVenezuela.
For the United States and Canada, the term "corporatecommunications" means the
proxy statements or meeting agenda, proxycards, annual reports and any other
meeting materials received by theCustodian. For countries other than the
United States and Canada, the
term "corporate communications" means the meeting agenda only and doesnot
include any meeting circulars, proxy statements or any othercorporate
communications furnished by the issuer in connection withsuch meeting.
Non-meeting related corporate communications are notincluded in the
transmission service to be provided by the Custodianexcept upon request as
provided below.
The Custodian's process for transmitting and translating meetingagendas will
be as follows:
1) If the meeting agenda is not provided by the issuer in the
Englishlanguage, and if the language of such agenda is in the officiallanguage
of the country in which the related security is held, theCustodian will as
soon as practicable after receipt of the originalmeeting agenda by a
Subcustodian provide an English translationprepared by that Subcustodian.
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2) If an English translation of the meeting agenda is furnished, thelocal
language agenda will not be furnished unless requested.
Translations will be free translations and neither the Custodian norany
Subcustodian will be liable or held responsible for the accuracythereof or any
direct or indirect consequences arising therefrom,including without limitation
arising out of any action taken oromitted to be taken based thereon.
If requested, the Custodian will, on a reasonable efforts basis,endeavor to
obtain any additional corporate communication such asannual or interim
reports, proxy statements, meeting circulars, orlocal language agendas, and
provide them in the form obtained.
Timing in the voting process is important and, in that regard, uponreceipt by
the Custodian of notice from a Subcustodian, the Custodianwill provide a
notice to the Trust indicating the deadline for receiptof its instructions to
enable the voting process to take placeeffectively and efficiently. As voting
procedures will vary frommarket to market, attention to any required
procedures will be veryimportant. Upon timely receipt of voting instructions,
the Custodianwill promptly forward such instructions to the
applicableSubcustodian. If voting instructions are not timely received,
theCustodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the
firstparagraph, the Custodian will not furnish the material described aboveor
seek voting instructions. However, if requested to exercise votingrights at a
specific meeting, the Custodian will endeavor to do so ona reasonable efforts
basis without any assurance that such rights willbe so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses
inexercising voting rights related to any Securities pursuant toappropriate
instructions or direction (e.g., by way of illustrationonly and not by way of
limitation, physical presence is required at ameeting and/or travel expenses
are incurred), such expenses will bereimbursed out of the Account containing
such Securities unless otherarrangements have been made for such
reimbursement.
It is the intent of the Custodian to expand the Proxy Service toinclude
jurisdictions which are not currently included as set forth inthe second
paragraph hereof. The Custodian will notify the Trust asto the inclusion of
additional countries or deletion of existingcountries after their inclusion or
deletion and this Exhibit B will bedeemed to be automatically amended to
include or delete such countriesas the case may be.
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Dated as of: July 20, 1995
THE HIRTLE CALLAGHAN TRUST
By: ____/s/______________________Title: _______________________
BANKERS TRUST COMPANY
By: ____/s/______________________Title: _______________________
EXHIBIT C
To Custodian Agreement dated as of ______________, 1995 between Bankers Trust
Company and The Hirtle Callaghan Trust.
CUSTODY FEE SCHEDULE
This Exhibit C shall be amended upon delivery by the Custodian of a newExhibit
C to the Trust and acceptance thereof by the Trust and shall beeffective as of
the date of acceptance by the Trust or a date agreed uponbetween the Custodian
and the Trust.
EXHIBIT D
To Custodian Agreement dated as of July 20, 1995 between Bankers TrustCompany
and The Hirtle Callaghan Trust.
TAX RECLAIMS
Pursuant to Section 16 of the above referred to Custodian Agreement,the
Custodian shall perform the following services with respect towithholding
taxes imposed or which may be imposed on income fromProperty in any Account.
Terms used herein as defined terms shallunless otherwise defined have the
meanings ascribed to them in theabove referred to Custodian Agreement.
When withholding tax has been deducted with respect to income from anyProperty
in an Account, the Custodian will actively pursue on areasonable efforts basis
the reclaim process and will provide fullydetailed advices/vouchers to support
reclaims submitted to the localauthorities by the Custodian or its designee.
In all cases ofwithholding, the Custodian will provide full details to the
Trust. Ifexemption from withholding at the source can be obtained in
thefuture, the Custodian will notify the Trust and advise whatdocumentation,
if any, is required to obtain the exemption. Uponreceipt of such
documentation from the Trust, the Custodian will filefor exemption on the
Trust's behalf and notify the Trust when it hasbeen obtained.
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In connection with providing the foregoing service, the Custodianshall be
entitled to apply categorical treatment of the Trustaccording to the Trust's
nationality, the particulars of itsorganization and other relevant details
that shall be supplied by theTrust. It shall be the duty of the Trust to
inform the Custodian ofany change in the organization, domicile or other
relevant factconcerning tax treatment of the Trust and further to inform
theCustodian if the Trust is or becomes the beneficiary of any specialruling
or treatment not applicable to the general nationality andcategory or entity
of which the Trust is a part under general laws andtreaty provisions. The
Custodian may rely on any such informationprovided by the Trust.
In connection with providing the foregoing service, the Custodian mayalso rely
on professional tax services published by a majorinternational accounting firm
and/or advice received from aSubcustodian in the jurisdictions in question.
In addition, theCustodian may seek the advice of counsel or other professional
taxadvisers in such jurisdictions. The Custodian is entitled to rely,and may
act, on information set forth in such services and on advicereceived from a
Subcustodian, counsel or other professional taxadvisers and shall be without
liability to the Trust for any actionreasonably taken or omitted pursuant to
information contained in suchservices or such advice.
Dated as of: July 20, 1995 THE HIRTLE CALLAGHAN TRUST
______________________________
By: ___/s/_______________________
Title: _______________________
BANKERS TRUST COMPANY
By: ___/s/_______________________
Title: _______________________
<PAGE>
AMENDMENT TO
ADMINISTRATION AGREEMENT
This Amendment is made as of October 1, 1997, between The Hirtle
Callaghan Trust (the "Trust") and BISYS Fund Services Limited Partnership
d/b/a BISYS Fund Services (the "Administrator"). The parties hereby amend the
Administration Agreement (the "Agreement") between the Trust and the
Administrator, dated as of October 1, 1996, as set forth below.
WHEREAS, the parties hereto wish to modify ARTICLE 4 of the Agreement and
such portion of Schedule A to the Agreement entitled "Fees" by revising the
fees that are payable to the Administrator; and
WHEREAS, the parties hereto wish to modify the portion of Schedule A to
the Agreement entitled "Term" by extending the initial term set forth therein.
NOW THEREFORE, in consideration of the foregoing and the mutual premises
and covenants herein set forth, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the same
meaning as in the Agreement.
2.ARTICLE 4, Paragraph (A) of the Agreement shall be amended by adding
the following sentence after the first sentence of such paragraph:
Effective as of October 1, 1997, for the services rendered, the
facilities furnished and the expenses assumed by the Administrator pursuant to
this Agreement, the Trust shall pay to the Administrator compensation that is
more particularly described in the Omnibus Fee Agreement among the
Administrator, BISYS Fund Services, Inc. and the Trust dated October 1, 1997.
3.Schedule A to the Agreement shall be amended by adding the following
sentence at the end of the section entitled "Fees":
Effective as of October 1, 1997, the fee schedule set forth above
shall be superseded by the fee schedule that is more particularly described in
the Omnibus Fee Agreement among the Administrator, BISYS Fund Services, Inc.
and the Trust dated October 1, 1997.
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4. Schedule A to the Agreement shall be amended by replacing the first
sentence of
the first paragraph of the section entitled "Term" with the
following:
The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both parties and
ending on December 31, 1998.
5. This Amendment may be executed in one or more counterparts, each
of which will be deemed an original, but all of which together shall
constitute one and the same instrument.
6. Except as specifically set forth herein, all other provisions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
THE HIRTLE CALLAGHAN TRUST
By: ___/s/_______________________________
Title:________________________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: _______/s/___________________________
Title:________________________________
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this _____day of July, 1995 between JENNISON ASSOCIATES CAPITAL
CORP., a New York corporation ("Portfolio Manager") 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 Portfolio Manager as may, in the view of the Trust, be
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 through which securities
transactions in the Account shall be executed. Specifically, and without
limiting the generality of the foregoing, Portfolio Manager agrees that it
will:
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(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as the case
may be, made on behalf of the Account, specifying the name and quantity of
the security purchased or sold, the unit and aggregate purchase or sale
price, commission paid, the market on which the transaction was effected,
the trade date, the settlement date, the identity of the effecting broker
or dealer and/or such other information, and in such manner, as may from
time to time be reasonably requested by the Trust;
(ii) maintain all applicable books and records with respect to the
securities transactions of the Account. Specifically, Portfolio Manager
agrees to maintain with respect to the Account those records required to
be maintained under Rule 31a-1(b)(1), (b)(5) and (b)(6) under the
Investment Company Act with respect to transactions in the Account
including, without limitation, records which reflect securities purchased
or sold in the Account, showing for each such transaction, the name and
quantity of securities, the unit and aggregate purchase or sale price,
commission paid, the market on which the transaction was effected, the
trade date, the settlement date, and the identity of the effecting broker
or dealer. Portfolio Manager will preserve such records in the manner and
for the periods prescribed by Rule 31a-2 under the Investment Company
Act. Portfolio Manager acknowledges and agrees that all records it
maintains for the Trust are the property of the Trust and Portfolio
Manager will surrender promptly to the Trust any such records upon the
Trust's request. The Trust agrees, however, that Portfolio Manager may
retain copies of those records that are required to be maintained by
Portfolio Manager under federal or state regulations to which it may be
subject or are reasonably necessary for purposes of conducting its
business;
(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
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(iv) render regular reports to the Trust concerning the performance of
Portfolio Manager of its responsibilities under this Agreement. In
particular, Portfolio Manager agrees that it will, upon reasonable notice
and at the reasonable request of the Board of Trustees, attend meetings of
the Board or its validly constituted committees and make its officers and
employees available to meet with the officers and employees of the Trust
at least quarterly to review the investments and investment program of the
Account.
3. Portfolio Transaction and Brokerage. In placing orders for portfolio
securities with brokers and dealers, Portfolio Manager shall use its best
efforts to execute securities transactions on behalf of the Account in such a
manner that the total cost or proceeds in each transaction is the most
favorable under the circumstances. Portfolio Manager may, however, in its
discretion, direct orders to brokers that provide to Portfolio Manager
research, analysis, advice and similar services, and Portfolio Manager may
cause the Account to pay to those brokers a higher commission than may be
charged by other brokers for similar transactions, provided that Portfolio
Manager determines in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of the
Portfolio Manager to the Account and any other accounts with respect to which
Portfolio Manager exercises investment discretion, and provided further that
the extent and continuation of any such practice is subject to review by the
Trust's Board of Trustees. Portfolio Manager shall not execute any portfolio
transactions for the Trust with a broker or dealer which is an "affiliated
person" of the Trust or Portfolio Manager, including any other investment
advisory organization that may, from time to time act as a portfolio manager
for the Portfolio or any of the Trust's other Portfolios, without prior
written approval of the Trust. The Trust shall provide a list of such
affiliated brokers and dealers to Portfolio Manager and will promptly advise
Portfolio Manager of any changes in such list.
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4. Expenses and Compensation.
Portfolio Manager shall pay all of its expenses incurred in the performance of
its duties under this Agreement and shall not be required to pay any expenses
of the Trust. For its services under this Agreement, Portfolio Manager shall
be entitled to receive a fee at the annual rate of .30% of the average daily
net assets of the Account, which fee shall be payable monthly.
5. Limitation of Liability and Indemnification.
(a) Portfolio Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates including, without limitation, losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security or other investment by the Trust except a loss resulting directly
from willful misfeasance, bad faith or gross negligence on the part of
Portfolio Manager in the performance of its duties or from reckless disregard
by it of its duties under this Agreement.
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(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) in accordance with Section 9 of the Agreement
or otherwise in preparing the Trust's registration statement and amendments
thereto and certain periodic reports relating to the Trust and its Portfolios
that are required to be furnished to shareholders of the Trust and/or filed
with the Securities and Exchange Commission ("SEC Filings"). 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 as a result of any untrue
statement or alleged untrue statement of a material fact made by Portfolio
Manager in any such written information <PAGE>
and upon which the Trust relies in preparing any SEC Filing, or any omission
or alleged omission to state in such written information a material fact
necessary to make such statements not misleading ("material omission").
Portfolio Manager will not, however, be required to so 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.
6. Permissible Interest.
Subject to and in accordance with the Trust's Declaration of Trust and Bylaws
and corresponding governing documents of Portfolio Manager, directors,
officers, agents and shareholders of the Trust may have an interest in the
Portfolio Manager as officers, directors, agents and/or shareholders or
otherwise. Portfolio Manager may have similar interests in the Trust. The
effect of any such interrelationships shall be governed by said governing
documents and the provisions of the Investment Company Act.
7. Duration, Termination and Amendments.
This Agreement shall become effective as of the date first written above and
shall continue in effect for two years. Thereafter, this Agreement shall
continue in effect from year to year for so long as its continuance is
specifically approved, at least annually, by (i) a majority of the Board of
Trustees or the vote of the holders of a majority of the Portfolio's
outstanding voting securities; and (ii) the affirmative vote, cast in person
at a meeting called for the purpose of voting on such continuance, of a
majority of those members of the Board of Trustees ("IndependentTrustees") who
are not "interested persons" of the Trust or any investment adviser to the
Trust.
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<PAGE>
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
Directors, and/or the holders of the Trust's or the Portfolio's outstanding
shareholders, such approval must be obtained before any such amendment may
become effective. This Agreement shall terminate upon its assignment.
For purposes of this Agreement, the terms "majority of the outstanding voting
securities, "assignment" and "interested person" shall have the meanings set
forth in the Investment Company Act.
8. Confidentiality; Use of Name.
(a) Portfolio Manager acknowledges and agrees that during the course of its
responsibilities hereunder, it may have access to certain information that is
proprietary to the Trust or to one or more of the Trust's agents or service
providers. Portfolio Manager agrees that Portfolio Manager, its officers and
its employees shall treat all such proprietary information as confidential and
will not use or disclose information contained in, or derived from such
material for any purpose other than in connection with the carrying out of
Portfolio Manager's responsibilities hereunder, provided, however, that this
shall not apply in the case of (i) information that is publicly available;
(ii) information that Portfolio Manager obtains from other sources without
knowing of any obligation of confidentiality that such sources have to the
Trust, and (iii) disclosures required by law or requested by any regulatory
authority that may have jurisdiction over Portfolio Manager, in which case
Portfolio Manager shall request such confidential treatment of such
information as may be reasonably available. 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.
(b) It is acknowledged and agreed that the names "Hirtle Callaghan," "Hirtle
Callaghan Chief Investment Officers" (which is a registered trademark
ofHirtle, Callaghan & Co., Inc. ("HCCI")), and derivatives of either, as well
as any logo that is now or shall later become associated with either name
("Marks") are valuable property of HCCI and that the use of the Marks, or any
one of them, by the Trust or its agents is subject to the license granted to
the Trust by HCCI. Portfolio Manager agrees that it will not use any Mark
without the prior written consent of the Trust or HCCI.
(c) Portfolio Manager consents to use of its name, performance data,
biographical data and other pertinent data by the Trust for use in marketing
and sales literature, provided that any such marketing and sales literature
(other than the Trust's prospectus included in its then current registration
statement) shall not be used by the Trust without the prior written consent of
Portfolio Manager. The Trust agrees to treat Portfolio Manager's advice and
information rendered to the Portfolio confidential and for use only by the
Trust, subject to the exception stated in clauses Section 8(a)(i), (ii) and
(iii), above. The provisions of this Section 8 shall survive termination of
this Agreement.
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<PAGE>
9. Representations, 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 would be reasonably likely to 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 has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the Investment Company Act and has provided the Trust with a
copy of the 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 (i) Portfolio Manager has complied with the
requirements of Rule 17j-1 during the prior year and (ii) that there has been
no violation of such code of ethics or, if such a violation has 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. In addition,
Portfolio Manager acknowledges that the Trust may, in response to regulations
or recommendations issued by the Securities and Exchange Commission or other
regulatory agencies, from time to time, request additional information
regarding the personal securities trading of its directors, partners, officers
and employees and the policies of Portfolio Manager with regard to such
trading. Portfolio Manager agrees that it make every reasonable effort to
respond to the Trust's requests in this area.
(c) Upon request of the Trust, Portfolio Manager shall promptly supply the
Trust with any information concerning Portfolio Manager and its stockholders,
employees and affiliates that the Trust may reasonably require in connection
with the preparation of its registration statements, proxy materials, reports
and other documents required, under applicable state or Federal laws, to be
filed with state or Federal agencies or to be provided to shareholders of the
Trust.
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<PAGE>
10. Status of Portfolio Manager.
The Trust and Portfolio Manager acknowledge and agree that the relationship
between Portfolio Manager and the Trust is that of an independent contractor
and under no circumstances shall any employee of Portfolio Manager be deemed
an employee of the Trust or any other organization that the Trust may, from
time to time, engage to provide services to the Trust, its Portfolios or its
shareholders. The parties also acknowledge and agree that nothing in this
Agreement shall be construed to restrict the right of Portfolio Manager or its
affiliates to perform investment management or other services to any person or
entity, including without limitation, other investment companies and persons
who may retain Portfolio Manager to provide investment management services and
the performance of such services shall not be deemed to violate or give rise
to any duty or obligations to the Trust. It is understood that Portfolio
Manager shall not have any obligation to purchase for or sell for the
Portfolio any security that Portfolio Manager or its affiliates or employees
may purchase or sell for its or their own account or for the account of any
other client.
11. Counterparts and Notice.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original. Any notice required to be given under this
Agreement shall be deemed given when received, in writing addressed and
delivered, by certified mail, by hand or via overnight delivery service as
follows:
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:
Mr. Robert B. Corman
Senior Vice President
Jennison Associates Capital Corp.
466 Lexington Avenue
New York, New York 10017
<PAGE>
<PAGE>
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the state of Delaware provided that nothing herein
shall be construed as inconsistent with the Investment Company Act or the
Investment Advisers Act.
Portfolio Manager is hereby expressly put on notice of the limitations of
shareholder and Trustee liability set forth in the Declaration of Trust of the
Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the assets of The Growth Equity
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.
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.
Jennison Associates Capital Corp.
By: /s/
The Hirtle Callaghan Trust
By: /s/
<PAGE>
AMENDMENT TO
TRANSFER AGENCY AGREEMENT
This Amendment is made as of October 1, 1997, between The Hirtle
Callaghan Trust (the "Trust") and BISYS Fund Services, Inc. ("BISYS"). The
parties hereby amend the Transfer Agency Agreement (the "Agreement") between
the Trust and BISYS, dated as of October 1, 1996, as set forth below.
WHEREAS, the parties hereto wish to modify Section 2 of the Agreement
and Schedule B to the Agreement by revising the fees that are payable to
BISYS; and
WHEREAS, the parties hereto wish to modify Section 5 of the Agreement by
extending the initial term set forth therein.
NOW THEREFORE, in consideration of the foregoing and the mutual premises
and covenants herein set forth, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the same
meaning as in the Agreement.
2.Section 2 of the Agreement shall be amended by adding the following
sentence at the end of such paragraph:
Effective as of October 1, 1997, for the services rendered, the
facilities furnished and the expenses assumed by BISYS pursuant to this
Agreement, the Trust shall pay to BISYS compensation that is more
particularly described in the Omnibus Fee Agreement among BISYS Fund Services
Limited Partnership, BISYS Fund Services, Inc. and the Trust, dated October 1,
1997.
3.Schedule B to the Agreement shall be amended by adding the following
sentence at the end of the fee schedule contained therein:
Effective as of October 1, 1997, the fee schedule set forth above
shall be superseded by the fee schedule that is more particularly described in
the Omnibus Fee Agreement among BISYS Fund Services Limited Partnership, BISYS
Fund Services, Inc. and the Trust, dated October 1, 1997.
4. Section 5 of the Agreement shall be amended by replacing the first
sentence of the first paragraph of the section entitled "Term" with the
following:
The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both parties and
ending on December 31, 1998.
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<PAGE>
5. This Amendment may be executed in one or more counterparts, each
of which will be deemed an original, but all of which together shall
constitute one and the same instrument.
6. Except as specifically set forth herein, all other provisions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
THE HIRTLE CALLAGHAN TRUST
By: _____/s/_____________________________
Title:________________________________
BISYS FUND SERVICES, INC.
By: _______/s/___________________________
Title:________________________________
<PAGE>
AMENDMENT TO
FUND ACCOUNTING AGREEMENT
This Amendment is made as of October 1, 1997, between The Hirtle
Callaghan Trust (the "Trust") and BISYS Fund Services, Inc. ("Fund
Accountant"). The parties hereby amend the Fund Accounting Agreement (the
"Agreement") between the Trust and Fund Accountant, dated as of October 1,
1996, as set forth below.
WHEREAS, the parties hereto wish to modify Section 3 of the Agreement
and Schedule A to the Agreement by revising the fees that are payable to Fund
Accountant; and
WHEREAS, the parties hereto wish to modify Section 6 of the Agreement by
extending the initial term set forth therein.
NOW THEREFORE, in consideration of the foregoing and the mutual premises
and covenants herein set forth, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the same
meaning as in the Agreement.
2.Section 3 of the Agreement shall be amended by adding the following
sentence at the end of such paragraph:
Effective as of October 1, 1997, for the services rendered, the
facilities furnished and the expenses assumed by Fund Accountant pursuant to
this Agreement, the Trust shall pay to Fund Accountant compensation that is
more particularly described in the Omnibus Fee Agreement among BISYS Fund
Services Limited Partnership, BISYS Fund Services, Inc. and the Trust, dated
October 1, 1997.
3.Schedule A to the Agreement, as amended effective January 1, 1997,
shall be amended by adding the following sentence at the end of the fee
schedule contained therein:
Effective as of October 1, 1997, the fee schedule set forth above
shall be superseded by the fee schedule that is more particularly described in
the Omnibus Fee Agreement among BISYS Fund Services Limited Partnership, BISYS
Fund Services, Inc. and the Trust, dated October 1, 1997.
4. Section 6 of the Agreement shall be amended by replacing the first
sentence of
the first paragraph of the section entitled "Term" with the
following:
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<PAGE>
The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both parties and
ending on December 31, 1998.
5. This Amendment may be executed in one or more counterparts, each
of which will be deemed an original, but all of which together shall
constitute one and the same instrument.
6. Except as specifically set forth herein, all other provisions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
THE HIRTLE CALLAGHAN TRUST
By: ___/s/_______________________________
Title:________________________________
BISYS FUND SERVICES, INC.
By: _____/s/_____________________________
Title:________________________________
<PAGE> OMNIBUS FEE AGREEMENT
THIS AGREEMENT is made as of this 1st day of October, 1997, by and
among THE HIRTLE CALLAGHAN TRUST (the "Company"), a Delaware business
trust, BISYS FUND SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND SERVICES
("BISYS LP"), an Ohio limited partnership, and BISYS FUND SERVICES, INC.
("BISYS"), a Delaware corporation.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act") consisting of several series of shares of beneficial interest
("Shares");
WHEREAS, the Company and BISYS LP have entered into an Administration
Agreement, dated October 1, 1996, as amended on October 1, 1997, concerning
the provision of management and administrative services for the investment
portfolios of the Company (individually referred to herein as a "Fund" and
collectively as the "Funds");
WHEREAS, the Company and BISYS have entered into a Fund Accounting
Agreement and a Transfer Agency Agreement, each of which is dated October
1, 1996, as amended on October 1, 1997, concerning the provision of fund
accounting and transfer agency services, respectively, for the Funds; and
WHEREAS, the parties desire to set forth the compensation payable by
the Company under the foregoing agreements in a separate written document.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. The Administration Agreement, Fund Accounting Agreement, and
Transfer Agency Agreement referred to herein shall be referred to
collectively as the "Service Agreements."
2. The Company shall pay to BISYS LP all of the compensation set
forth herein on the dates set forth herein.
3. The amount of the compensation due and payable to BISYS LP
shall be the aggregate fee amount due and payable for Administration, Fund
Accounting and Transfer Agency services set forth in Schedule A hereto
during the term of the Service Agreements.
<PAGE>
<PAGE>
4. This Agreement shall be governed by, and its provisions shall
be construed in accordance with, the laws of the State of Ohio. IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be fully executed
as of the day and year first written above.
THE HIRTLE CALLAGHAN TRUST
By: /s/
BISYS FUND SERVICES LIMITED PARTNERSHIP
By: /s/
BISYS FUND SERVICES, INC., General
Partner
BISYS FUND SERVICES, INC.
By: /s/
SCHEDULE A
FEE SCHEDULE FOR ADMINISTRATION, FUND ACCOUNTING AND TRANSFER AGENCY
SERVICES
The Company will pay to BISYS LP on the first business day of each
month in arrears, or at such time(s) as BISYS LP shall request and the
parties hereto shall agree, a fee computed daily at the annual rate set
forth below:
Ten one-hundredths of one percent (.10%) of the Company's average daily net
assets attributable to equity Funds.
Eight one-hundreths of one percent (.08%) of the Company's average
daily net assets atrributable to fixed income Funds.
The fee payable by the Company hereunder shall be allocated to each
Fund based upon its pro rata share of the total fee payable hereunder.
Such fee as is attributable to each Fund shall be a separate (and not joint
or joint and several) obligation of each such Fund. The fees set forth
above shall be in addition to the payment of out-of-pocket expenses, as
provided for in the Service Agreements.
