Filed with the Securities and Exchange Commission on May 24, 1999
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
The Hirtle Callaghan Trust
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
Fee computed on a table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing is
calculated and state how it was determined):
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $125.00
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party: Registrant
(4) Date Filed: May 10, 1999
<PAGE>
THE HIRTLE CALLAGHAN TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
of
THE VALUE EQUITY PORTFOLIO
to be held on June 15, 1999
TO THE SHAREHOLDERS:
A Special Meeting of shareholders of The Value Equity Portfolio ("Value
Portfolio") of The Hirtle Callaghan Trust ("Trust") will be held on June 15,
1999, at the Trust's principal office, located at 575 East Swedesford Road,
Wayne, PA 19087-1613, at 10:00 a.m.
At the Special Meeting of the Value Portfolio, shareholders will be asked to
approve the engagement of Geewax, Terker & Company ("Geewax") to provide
portfolio management services to the Value Portfolio pursuant to a portfolio
management agreement between the Trust and Geewax ( "Geewax Agreement").
Shareholders of record of the Value Portfolio at the close of business on April
16, 1999 are entitled to notice of the Special Meeting and any adjournments
thereof. If you attend the meeting, you may vote your shares in person. If you
do not expect to attend the meeting, please fill in, date, sign and return the
proxy in the enclosed envelope which requires no postage if mailed in the United
States.
It is important that you return your signed proxy promptly so that a quorum may
be assured.
BY ORDER OF THE BOARD OF TRUSTEES OF THE HIRTLE CALLAGHAN TRUST
<PAGE>
The Value Equity Portfolio
Draft Proxy 5/9/99
(includes all comments to date)
THE HIRTLE CALLAGHAN TRUST
575 East Swedesford Road.
Wayne, PA 19087-1613
PROXY STATEMENT
The enclosed form of Proxy is solicited by the Board of Trustees (the "Board")
of The Hirtle Callaghan Trust (the "Trust") with respect The Value Equity
Portfolio ("Value Portfolio"). Proxies so solicited are intended for use at a
special meeting of shareholders of the Value Portfolio (collectively, the
"Portfolios") or any adjournment of that meeting (the "Special Meeting"), to be
held at 10:00 a.m. on June 15, 1999, at 575 East Swedesford Road, Wayne, PA
19087-1613. The purpose of the Special Meeting is to approve the engagement of
Geewax, Terker & Company ("Geewax") to provide portfolio management services to
the Value Portfolio pursuant to a portfolio management agreement between the
Trust and Geewax ("Geewax Agreement"). It is anticipated that this Proxy
Statement and form of proxy will first be mailed to shareholders on or about May
22, 1999.
Persons who were shareholders of record of the Value Portfolio on the April 16,
1999 ("Record Date") are entitled to vote at the Special Meeting with respect to
Proposal 3, relating to the approval of a new investment advisory agreement with
Geewax, Terker & Co. ("Geewax") relating to the Value Portfolio. On the Record
Date, the Value Portfolio had outstanding 13,796,282.35 shares, each share being
entitled to one vote. The presence of the holders of 40% of the outstanding
shares of the Value Portfolio on the Record Date, represented in person or by
proxy, shall constitute a quorum for the purpose of conducting the business at
the Special Meeting with respect to the Value Portfolio. Persons and groups
known by management to own beneficially 5% or more of the shares of the Value
Portfolio are listed in this Proxy Statement under the heading "Information
about the Trust."
If the accompanying form of Proxy is executed properly and returned, shares
represented by such Proxy will be voted at the Special Meeting in accordance
with the instructions on the form of Proxy. If no instructions are specified,
shares will be voted FOR the approval of the Geewax Agreement. If the votes
required to approve Proposals are not received, the persons named as proxies on
the accompanying form of proxy may propose one or more adjournments of the
Special Meeting to permit further solicitation of proxies. When voting on any
proposed adjournment, the persons named as proxies on the enclosed form of proxy
will vote in favor of the proposed adjournment unless otherwise directed. A
shareholder can revoke the proxy prior to its use by appearing at the Special
Meeting and voting in person, by giving written notice of such revocation to the
Trust or by returning a subsequently dated form of proxy to the Trust.
Copies of the Trust's most recent Annual and Semi-Annual reports to
Shareholders, dated June 30, 1998 and December 31, 1998, respectively, have
previously been delivered to shareholders of the Trust. Shareholders of the
Trust may obtain without charge additional copies of such reports by writing to
the Trust at 575 East Swedesford Road, Wayne, PA 19087-1613 or calling
1-800-242-9596.
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<PAGE>
BACKGROUND AND SUMMARY.
The Trust ("Trust"), is a diversified, open-end management investment company.
The Trust was organized in 1994 by Hirtle Callaghan & Co. Inc. ("Hirtle
Callaghan") to operate in a "multi-manager" or "manager of managers" format.
Under this structure, day-to-day portfolio management services are provided to
each of the Trust's Portfolios by one or more independent investment advisory
firms (each, a "Portfolio Manager"). In cases where more than one Portfolio
Manager has been retained to serve a single Portfolio, each firm may have
different investment style and/or security selection discipline.
The Trust's Board is responsible for the overall supervision and management of
the business and affairs of the Trust, including the selection and general
supervision of the Portfolio Managers that serve the Trust's several Portfolios,
as well as the allocation and reallocation of assets among such managers. In
carrying out its responsibilities, and in particular, in monitoring and
evaluating the services provided by the various Portfolio Managers, the Board is
assisted by Hirtle Callaghan. Pursuant to a separate non-discretionary agreement
with the Trust, Hirtle Callaghan continuously monitors the performance of
various investment management organizations, including the Portfolio Managers.
Please refer to more detailed information about Hirtle Callaghan below.
Between July 29, 1996 and March 8, 1999, Hotchkis & Wiley (hereinafter,
"Hotchkis" or the "Prior Manager") served, pursuant to the terms of a separate
agreement ("Prior Agreement"), as the investment advisory organization retained
by the Trust to provide portfolio management services for the Value Portfolio.
As more fully described below, the Board determined that it would be in the best
interests of the Value Portfolio to replace the Prior Manager with another
investment management organization. Accordingly, at a meeting of the Board held
on March 2, 1999, the Board approved the termination of the Prior Agreement and
the engagement of Geewax under an agreement between Geewax and the Trust
("Geewax Agreement"). Please refer to more detailed discussion below.
The provisions of the Geewax Agreement are substantially the same as those of
the Prior Agreement. In particular, the portfolio management fee under the
Geewax Agreement is the same as the portfolio management fee set forth in the
Prior Agreement. The Geewax Agreement became effective, and the Prior Agreement
terminated, as of the close of business on March 8, 1999. A copy of the Geewax
Agreement appears as Exhibit A to this Proxy Statement.
Under the Investment Company Act, if shareholder approval of the Geewax
Agreement is not obtained within 120 days of the date on which the Geewax
Agreement became effective, the Geewax Agreement will terminate. If the Geewax
Agreement is approved by the shareholders of the Value Portfolio, however, the
Geewax Agreement will remain in force until March 8, 2001. The Geewax Agreement
will continue in effect from year to year thereafter in accordance with its
terms for so long as it is approved annually by the Trust's Board of Trustees.
Approval of the Geewax Agreement requires the approval of a "majority of the
outstanding voting securities" of the Value Portfolio. Under the Investment
Company Act, this term means the lesser of (i) 67% of the outstanding shares
represented at a meeting at which more than 50% of the outstanding shares are
present in person or represented by proxy, or (ii) more than 50% of the Value
Portfolio's
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<PAGE>
outstanding voting securities. If the Geewax Agreement is not approved by the
Value Portfolio's shareholders at the Special Meeting (including any
adjournments thereof), that agreement will terminate.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE "FOR" THIS PROPOSAL.
DETAILED DISCUSSION OF THE GEEWAX ENGAGEMENT. The investment objective of the
Value Portfolio is to provide total return consisting of capital appreciation
and current income by investing primarily in equity securities. Since the
commencement of its operations in September, 1995, the Value Portfolio has been
served by two separate investment management organizations (each a "portfolio
manager"): Hotchkis & Wiley (hereinafter, "Hotchkis" or the "Prior Manager"),
which served between July 29, 1996 and March 8, 1999, and Institutional Capital
Corporation ("ICAP"), which has served as a portfolio manager of the Value
Portfolio since its inception.
Although each portfolio manager engaged on behalf of the Value Portfolio must
adhere to the Value Portfolio's investment objective, policies and restrictions,
each carries out its responsibilities in the context of its own management
style. As part of its overall responsibility to supervise these managers and
with the assistance of Hirtle Callaghan, the Board attempts to ensure that the
respective portfolio management styles are complementary. Hirtle Callaghan
monitors the overall investment performance of each of the Trust's several
portfolios, including the Value Portfolio and performance of those investment
advisory organizations retained by the Trust to provide portfolio management
services to the portfolios.
In connection with the Board's annual review of the investment advisory
agreement between Hotchkis and the Trust relating to the Value Portfolio
("Hotchkis Agreement"), Hirtle Callaghan reported to the Board that the
investment results achieved by that portion of the Value Portfolio ("Hotchkis
Portfolio") allocated to the Hotchkis & Wiley had lagged the Standard & Poor's
Index ("S&P Index"). In light of this track record, Hirtle Callaghan further
reported that it had reexamined the pairing of Hotchkis and ICAP, both of which
generally adhere to an investment style that emphasizes a fundamental analysis
and "bottom up" stock selection, and had determined to recommend to the Board
that Hotchkis be replaced with a more quantitative, "top down" portfolio
management firm. In contrast to the funadmental "bottom up" investment
philosophy, which focuses on identifying investment through analysis of
financial statements, management and other fundamental factors, a "top down"
investment style focuses on quantitative factors -- market capitalization,
financial quality, cash flow, earnings and revenues and the like -- in selecting
investments.
Hirtle Callaghan recommended that the Board consider engaging Geewax, Terker &
Co. ("Geewax") to replace Hotchkis. The Geewax investment approach uses that
firm's its proprietary valuation system to analyze the financial quality and
other quantitative factors. The recommendation was based, in part, upon the fact
that Geewax had, in Hirtle Callaghan's view, successfully implemented a similar
"top down" investment program in the Trust's Small
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<PAGE>
Capitalization Equity Portfolio. In addition, Hirtle Callaghan's recommendation
was based on its belief that the addition of a quantitative investment style
could serve to improve the performance of the Value Portfolio during periods
when the fundamental value of companies in certain sectors of the market may not
be reflected in stock prices. At that meeting of the Board held on March 2,
1999, the Board, including a majority of those Trustees ("Independent Trustees")
who are not "interested persons" of the Trust within the meaning of the
Investment Company Act, approved the Geewax engagement as well as a portfolio
management agreement between the Trust and Geewax relating to the Value
Portfolio.
PRO FORMA EXPENSE IMPACT AND COMPARATIVE ANNUAL OPERATING EXPENSES. Table 1 sets
for the fees and expenses that would have been incurred by the Value Equity
Portfolio had the Geewax Agreement been in effect during the fiscal year ended
June 30 1998. Table 2, and the example following it, are designed to assist
investors in understanding the various costs and expenses of investment in
shares of the Value Portfolio under the terms of the Geewax Agreement. Neither
should be considered a representation of past or future expenses of performance
and actual expenses may vary from year to year and may be higher or lower than
those shown.
TABLE 1*
- --------
- --------------------------------------------------------------------------------
ITEM FEES/EXPENSES DURING THE PRO FORMA FEES AND EXPENSES FOR
FISCAL YEAR ENDED JUNE 30, 1998 FISCAL YEAR ENDED JUNE 30, 1998
------------------------------- -------------------------------
- --------------------------------------------------------------------------------
Advisory Fee** $466,737 $466737
- --------------------------------------------------------------------------------
Expense Ratio** .52% .52%
- --------------------------------------------------------------------------------
*Assets of the Value Portfolio as of June 30, 1998 were $176,587,000. As of
that date, the assets of the Value Portfolio were allocated evenly between
ICAP and the Prior Manager. As more fully described in the Trust's
prospectus, however, the Board has the authority to allocate and reallocate
the assets of the Value Portfolio among its the Portfolio Managers that
serve the Value Portfolio.
** Effective February 2, 1998, the fee payable to ICAP was increased from
.30% to .35% of the average daily net assets allocated to ICAP. These
figures have been restated to reflect the impact of such increase. The fee
payable under the Prior Agreement and the fee payable under the Geewax
Agreement are identical: .30% of the average daily net assets of the
relevant portion of the Value Portfolio.
The following table provides data concerning the Portfolio's management fees and
expenses as a percentage of average net assets for the fiscal year ended June
30, 1998. Figures shown reflect expenses under the Prior Agreement and expenses
that would have been incurred if the Geewax Agreement had been in effect during
that period. Figures shown reflect expenses incurred during the fiscal year
ended June 30, 1998
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<PAGE>
TABLE 2
- -------
- --------------------------------------------------------------------------------
UNDER PRIOR AGREEMENT UNDER GEEWAX AGREEMENT
--------------------- ----------------------
- --------------------------------------------------------------------------------
Management Fees* .38% .38%
- --------------------------------------------------------------------------------
Other Expenses** .16% .16%
- --------------------------------------------------------------------------------
Total Portfolio Operating Expenses .54% .54%
- --------------------------------------------------------------------------------
* Effective February 2, 1998, the fee payable to ICAP was increased from
.30% to .35% of the average daily net assets allocated to ICAP. These
figures have been restated to reflect the impact of such increase.
** The caption "Other Expenses" does not include extraordinary expenses as
determined by the use of generally accepted accounting principles.
EXAMPLE: The following illustrates the expenses on a $10,000 investment, under
the fees and expenses shown for the Geewax Agreement in the table above,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
- --------------------------------------------------------------------------------
Under Geewax Agreement $55 $173 $302 $677
- --------------------------------------------------------------------------------
Under Prior Agreement $55 $173 $302 $677
- --------------------------------------------------------------------------------
The preceding example assumes that all dividends and distributions are
reinvested and that the percentage totals shown in Table 2: "Total 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.
FACTORS CONSIDERED BY THE BOARD OF TRUSTEES. During the course of its
deliberations, the Board considered the recommendations and investment analysis
of Hirtle Callaghan, as well as material provided to the Board by Geewax. In
particular, the Board discussed the notion that ICAP's stock selection
discipline would be complemented by the more quantitative Geewax style. The
Board also discussed information provided to it relating to the management style
and past performance record of Geewax, information relating to the nature and
quality of the services to be provided by Geewax and the background and
experience of those individuals who would be responsible for making day-to-day
investment decisions with respect to assets of the Value Portfolio, andthe
experience of the firm as a whole in rendering investment advisory services to
other registered investment companies. In particular, the Board considered the
fact that Geewax has, since April 1, 1998, served as a portfolio manager for The
Small Capitalization Equity Portfolio of the Trust and considered the Trust's
overall experience with Geewax in connection with that relationship. The
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<PAGE>
Board also considered the fact that the terms and conditions set forth in the
Geewax Agreement, including those relating to the level of compensation payable,
are substantially the same as those contained in the Prior Agreement.
During the course of their deliberation, the Board was advised regarding its
responsibilities under Section 15(c) of the Investment Company Act and the
requirements of Section 15(a) of that Act and was represented by counsel. In
particular, it was noted that Section 15 of the Investment Company Act normally
would prohibit any person from serving as an investment adviser to a registered
investment company unless the written contract has been approved by the
shareholders of that company. Counsel also discussed with the Board the
exception to this requirement contained in rule 15a-4 under the Investment
Company Act. Under that provision, an adviser may provide advisory services to
an investment company pursuant to a written contract approved by the investment
company's board of directors (including those directors who are not "interested
persons" of the company or the adviser) in the event that a prior advisory
contract is terminated by action of such company's board. However, such contract
must be approved within 120 days of its effective date by the shareholders of
the affected company.
COMPARISON OF THE GEEWAX AGREEMENT AND PRIOR AGREEMENTS. As noted above, the
terms and conditions set forth in the Geewax Agreement are, in all material
respects, the same as those contained in the Prior Agreement except for the
description of the portfolio manager and the effective and termination dates.
Both agreements require the portfolio manager, subject to the overall
supervision of the Board, to provide a continuous investment program for the
assets of the Value Portfolio, or that portion of such assets as may be, from
time to time, allocated to it. Under both agreements, the named portfolio
manager is responsible, among other things, for the provision of investment
research, management of all investments and the selection of brokers and dealers
through which securities transactions are executed, as well as the maintenance
of certain records required under relevant provisions of the Investment Company
Act. The agreements each also provide that the portfolio manager will not be
liable to the Trust for any error of judgment or mistake of law on the part of
the portfolio manager for any loss sustained by the Trust in connection with the
purchase or sale of any instrument on behalf of the Value Portfolio, except
losses that may be sustained as a result of willful misfeasance, reckless
disregard of its duties, bad faith or gross negligence on the part of the
portfolio manager. Each of the agreements also provides for its termination, at
any time and without penalty, either by the Trust or by the portfolio manager,
in each case upon sixty days' written notice, and its termination in the event
of an "assignment" as defined in the Investment Company Act. Both agreements
also state that the relevant portfolio manager will indemnify the Trust with
respect to any information provided to the Trust by such manager in writing and
included in document filed with the SEC, so long as 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.
The Geewax Agreement became effective on March 8, 1999, in accord with rule
15a-4 of the Investment Company Act. It will continue in effect for two years
from its effective date, unless sooner terminated, provided that the Geewax
Agreement is approved by the shareholders of the Value Portfolio within 120 days
of such effective date. Thereafter, the Geewax Agreement shall continue in
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<PAGE>
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 Value Portfolio's outstanding voting securities;
and (ii) the affirmative vote, cast in person at a meeting called for the
purpose of voting on such continuance, of a majority of the Trust's Independent
Trustees.
The Hotchkis Agreement was last approved by the Board (including the Independent
Trustees) at a meeting of the Board held on May 6, 1998, and by the shareholders
of the Value Portfolio held on October 26, 1996. During the six month period
ended December 31, 1998, Hotchkis received from the Value Portfolio investment
advisory fees of $ 97,589 in accordance with the Prior Agreement. For the fiscal
year ended June 30, 1998, $174,556 in accordance with the Prior Agreement.
INFORMATION ABOUT GEEWAX. Geewax is a Pennsylvania general partnership whose
general partners are John J. Geewax and Bruce Terker. The firm's principal
offices are located 99 Starr Street, Phoenixville, Pennsylvania 19460. As of
December 31, 1998, Geewax, managed total assets of approximately $5.1 billion.
Geewax from time to time receives research and analytical services, as a
by-product of it trading activities on behalf of its clients. Geewax provides
investment advisory services for other registered investment companies,
including the Trust's Small Capitalization Equity Portfolio. However, the
investment objectives and policies of these funds are not similar to those of
the Value Portfolio.
MANAGEMENT OF THE TRUST
INFORMATION ABOUT HIRTLE CALLAGHAN. Pursuant to a written agreement ("HCCI
Consulting Agreement") Hirtle Callaghan continuously monitors the performance of
various investment management organizations, including the several portfolio
managers retained by the Trust. The HCCI Consulting Agreement provides that
Hirtle Callaghan will make its officers available to serve as officers and/or
Trustees of the Trust, and maintain office space sufficient for the Trust's
principal office. For its services under the HCCI Consulting Agreement, Hirtle
Callaghan is entitled to receive an annual fee of .05% of each Portfolio's
average net assets. For the fiscal year ended June 30, 1998, Hirtle Callaghan
received advisory fees from the Value Portfolio in the amount of $7,193. Hirtle
Callaghan's principal offices are located at 575 East Swedesford Road, Wayne,
Pennsylvania 19087. Hirtle Callaghan was organized in 1988. A registered
investment adviser under the Investment Advisers Act, Hirtle Callaghan had, as
of April 30, 1999, had approximately $ 2.7 billion in assets under management.
Hirtle Callaghan is controlled by Jonathan Hirtle and Donald E. Callaghan, each
of whom also serves on the Trust's Board. Mr. Callaghan also serves as President
of the Trust. Robert J. Zion, a principal of Hirtle Callaghan, serves as
Treasurer and Vice President of the Trust. The HCCI Consulting Agreement was
approved by the Trust's initial shareholder on July 21, 1995, and was last
approved by the Trust's Board (including a majority of the Trust's Independent
Trustees) at a meeting of the Board held on March 2, 1999.
ADMINISTRATION, DISTRIBUTION AND RELATED SERVICES. BISYS Fund Services, Inc. and
certain of its affiliated companies ("BISYS") currently provide administration,
transfer agency, distribution and accounting services to the Trust pursuant to
the terms of separate agreements between BISYS and the Trust. For the
administration, transfer agency and fund accounting services it provides to the
Trust,
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<PAGE>
BISYS receives an omnibus fee, which fee is computed daily, paid monthly and
inclusive of all out-of-pocket expense, at an annual rate of .115% of the
aggregate average net assets of the Value Equity, International Equity, Small
Capitalization Equity Portfolios Growth Equity and of any additional portfolios
that invest primarily in equity securities that may be created by the Trust in
the future and .095% of the aggregate average net assets of the Limited Duration
Municipal Bond, Fixed Income and Intermediate Term Municipal Bond Portfolios.
INFORMATION ABOUT ICAP. As noted above, ICAP has served as a portfolio manager
for the Value Portfolio since its inception. As of February, 1999, ICAP had
approximately $ 12.5 billion under management. Day-to-day investment decisions
for that portion of the Value Portfolio allocated to ICAP are made by an
investment committee and no individual has primary responsibility for making
recommendations to that committee. ICAP's principal executive officer is Robert
H. Lyon and ICAP's directors are Gary S. Maurer, Jerrold K. Senser, Donald D.
Niemann and Barbara C. Schanmier. The address of each such officer and director
and the principal offices of ICAP are located at 225 West Wacker Drive Chicago,
Illinois 60606.
The ICAP Agreement was last approved by the Board (including the Independent
Trustees) at a meeting of the Board held on March 2, 1999, and by the
shareholders of the Value Portfolio at a special meeting held on January 12,
1998. Under the ICAP Agreement, ICAP receives a fee from the Value Portfolio at
an annual rate of .35% of the average net assets of the Value Portfolio
allocated to it. During the six month period ended December 31, 1998, ICAP
received from the Value Portfolio investment advisory fees of $175,490. During
the fiscal year ended June 30, 1998, ICAP received from the Value Portfolio
investment advisory fees of $292,181.
ICAP provides investment advisory services to seven investment company
portfolios. Of these, five are managed by ICAP in a manner that is sufficiently
similar to the manner in which the ICAP Account is managed to warrant a fee
comparison. The following table sets forth certain information about these
portfolios.
<TABLE>
<CAPTION>
FUND ASSETS AT DECEMBER ADVISORY FEE*
31, 1998
(MILLIONS)
<S> <C> <C>
Nuveen Growth and Income Stock Fund $828.40 .35% on the first $500 million
of average net assets; .30% on
Nuveen Balanced Stock and Bond Fund $ 68.90 next $500 million of such
assets; and .25% on assets over
Nuveen Balanced Municipal and Stock Fund $ 88.20 $1 billion**
ICAP Discretionary Equity Portfolio $204.90 These funds are structured with
an all inclusive fee of .80% of
ICAP Equity Portfolio $715.60 average net assets payable to
ICAP, from which fee ICAP pays
all other fund expenses.
Effective advisory fee to ICAP
for the four year period ended
December 31, 1996 averaged
.46% of average net assets.***
</TABLE>
8
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* Figures shown do not take into fee waivers, if any, in effect for the
companies listed.
** ICAP provides advisory services only with respect to the equity portion of
the investment portfolio of the listed company. Accordingly, fee schedule shown
applies only to the equity portion of listed Nuveen funds. ***Fee shown reflects
ICAP's voluntary waiver of all or a portion of the fee payable to ICAP.
OTHER MATTERS. As a Delaware business trust, the Trust is not required, and
currently does not intend, to hold annual meetings of shareholders except as
required by the Investment Company Act or other applicable law. The Investment
Company Act requires initial shareholder approval of each of the investment
advisory agreements, election of Trustees and, if the Trust holds an annual
meeting, ratification of the Board's selection of the Trust's independent public
accountants. Under certain circumstances, the law provides shareholders with the
right to call for a meeting of shareholders to consider the removal of one or
more Trustees. To the extent required by law, the Trust will assist in
shareholder communication in such matters.
The table below shows the name and address of record of each person known to the
Trust to hold, as of record or beneficially, 5% or more of shares of the Value
Portfolio as of the date indicated. 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.
NAME AND ADDRESS OF RECORD HOLDERS VALUE PORTFOLIO
Bankers Trust Company 60.77%
1 Bankers Trust Plaza (7,927,013.402 SHARES)
New York, N.Y. 10006
PNC Bank, N.A. -- 9.50%
P.O. Box 7780-1888 (1,310,677.441 SHARES)
Philadelphia, PA 19182
Bank One, NA 7.75%
PO Box 160 (1,069,583.367 SHARES)
Westerville, OH 43086
Wilmington Trust Co. 5.62%
P.O. Box 8882 (776,003.052 SHARES)
Wilmington, DE
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A properly executed and returned form of Proxy marked with an abstention will be
considered present at the Special Meeting for the purpose of determining the
existence of a quorum. If any form of proxy received by the Trust that withholds
authority to vote represents a "broker non-vote," shares represented by such
form of proxy will not be counted for purposes of determining whether or not a
quorum is present at the Special Meeting and will not be deemed "votes cast"
with respect to any matter with respect to which authority to vote is withheld.
As used in this Proxy Statement, "broker non-vote" means a form of proxy,
executed by a broker or other nominee, indicating that the nominee has not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominee does
not have discretionary power. Abstentions and broker non-votes will thus not
constitute a vote "for" or "against" any matter, but will have the same effect
as a negative vote with respect to matters which require the approval of a
requisite percentage of the outstanding shares of the relevant Portfolio.
By Order of the Board of Trustees
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EXHIBIT A
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 8th day of March 1999, between Geewax, Terker & Co., a
Pennsylvania partnership ("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 Value Equity Portfolio of
the Trust ("Portfolio") and Portfolio Manager is willing, in accordance with the
terms and conditions hereof, to provide such services to the Trust;
NOW THEREFORE, in consideration of the promises and covenants set forth herein
and intending to be legally bound hereby, it is agreed between the parties as
follows:
1. Appointment of Portfolio Manager.
---------------------------------
(a) 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.
(b) The Trust further agrees that it will provide to Portfolio Manager a copy of
the agreement between the Trust=s custodian bank and the Trust and will take
such actions as may be necessary to assure that such custodian bank will accept
instruction from the Portfolio Manager with respect to 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.
2. Duties of Portfolio Manager.
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(a) Portfolio Manager shall provide a continuous program of investment
management for the Account. 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;
(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;
<PAGE>
(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.
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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.
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Portfolio Manager shall pay all of its expenses incurred in the performance of
its duties under this Agreement and shall not be required to pay any other
expenses of the Trust. For its services under this Agreement, Portfolio Manager
shall be entitled to receive a fee at the annual rate of .30% of the average
daily net asset value of the Account, which fee shall be payable monthly.
5. Limitation of Liability and Indemnification.
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(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.
<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, ALosses@) to the
extent that Losses are incurred as a result of statements contained in an SEC
Filing (ADisputed Statements@) that are misleading either because they are (i)
untrue statements of material fact; or (ii) omitted to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading. For purposes of the
indemnification obligation set forth in this Section 5(c), a Disputed Statement
will be deemed misleading if so declared by a decision of a court or
administrative law judge or in an order of settlement issued by any court or
administrative body.
(d) Portfolio Manager further agrees to indemnify and hold harmless the Trust
and each of its Trustees, from any Losses to the extent that such Losses are
incurred as a result of Disputed Statements that are alleged (i) to be untrue
statements of material fact; or (ii) to have omitted to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they are made, provided that the indemnification
obligation set forth in this Section 5(d) is expressly limited to Losses arising
from Disputed Statements that accurately reflect information provided to the
Trust in writing by the Portfolio Manager and that cannot be independently
verified by the Trust. Further, the indemnification set forth in this Section
5(d) will not require reimbursement of fees or expenses other than those
incurred by the Trust's regular counsel in connection with such counsel's
representation of the Trust or its Trustees.
(e) The indemnification obligations set forth in Sections 5(c) and (d) shall not
apply unless (i) Disputed Statements accurately reflect information provided to
the Trust in writing by the Portfolio Manager; (ii) Disputed Statements were
included in an SEC Filing in reliance upon written information provided to the
Trust by the Portfolio Manager; (iii) the Portfolio Manager was afforded the
opportunity to review Disputed Statements in connection with the 10 business day
review requirement set forth in Section 5(b) above; and (iv) upon receipt by the
Trust of any notice of the commencement of any action or the assertion of any
claim to which the indemnification obligations set forth in Section 5(c) and (d)
may apply, the Trust notifies the Portfolio Manager, within 30 days and in
writing, of such receipt and provides to Portfolio Manager the opportunity to
participate in the defense and/or settlement of any such action or claim.
Further, Portfolio Manager will not be required to indemnify any person under
this Section 5 to the extent that Portfolio Manager relied upon statements or
information furnished to the Portfolio Manager, in writing, by any officer,
employee or Trustee of the Trust, or by the Trust's Custodian, Administrator or
Accounting Agent or any other agent of the Trust, in preparing written
information provided to the Trust and upon which the Trust relied in preparing
any Disputed Statement.
6. Permissible Interest.
---------------------
Subject to and in accordance with the Trust's Declaration of Trust and 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 on which that certain
agreement between Hotchkis & Wiley 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.
<PAGE>
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.
-----------------------------
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.
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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.
(d) The Portfolio Manager shall promptly notify the Trust, in writing, of any
material change in the senior management or the identity of the Portfolio
Manager=s partners and of any change in the identity of those individuals within
the Portfolio Manager=s organization who are responsible for making investment
decisions on behalf of the Account. Portfolio Manager shall also promptly notify
the Trust of any material change in the nature of Portfolio Manager=s principal
business activities.
<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.
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:
John Geewax
Geewax Terker & Co.
99 Starr Street
Phoenixville, PA 19460
12. Miscellaneous.
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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.
Geewax, Terker & Co.
The Hirtle Callaghan Trust
(on behalf of The Value Equity Portfolio)
