Preliminary Proxy Materials
Filed with the Securities and Exchange Commission on June 20, 2000
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] 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)
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[x] No fee required
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THE HIRTLE CALLAGHAN TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
of
THE INTERNATIONAL EQUITY PORTFOLIO
to be held on July____, 2000
TO THE SHAREHOLDERS:
A Special Meeting of shareholders of The International Equity Portfolio
("International Portfolio") of The Hirtle Callaghan Trust ("Trust") will be held
on July ____, 2000, at the Trust's principal office, located at 100 Four Falls
Corporate Center, Suite 500, West Conshohocken, PA, 19428-2970 at 10:00 a.m.
At the Special Meeting of the International Portfolio, shareholders will be
asked:
(1) To approve the engagement of Capital Guardian Trust Company
("CapGuardian") to provide portfolio management services to the
International Portfolio pursuant to a portfolio management agreement
between the Trust and CapGuardian, which agreement provides for the
calculation of CapGuardian's fee on a performance fee basis under
certain circumstances.
Shareholders of the International Portfolio at the close of business on May 12,
2000, 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
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THE HIRTLE CALLAGHAN TRUST
100 Four Falls Corporate Center, Suite 500,
West Conshohocken, PA ,19428-2970
PROXY STATEMENT
---------------
The enclosed form of Proxy is solicited by the Board of Trustees (the "Board")
of The Hirtle Callaghan Trust ("Trust"), with respect to The International
Equity Portfolio ("International Portfolio"). Proxies so solicited are intended
for use at a special meeting of shareholders of the International Portfolio
("International Portfolio") or any adjournment of that meeting ("Special
Meeting"), to be held on July ____, 2000, at 100 Four Falls Corporate Center,
Suite 500, West Conshohocken, PA ,19428-2970 . The purpose of the Special
Meeting is to consider the approval of certain portfolio management
arrangements, as set forth in the Notice of Meeting accompanying this proxy
statement and more fully described below. It is anticipated that this Proxy
Statement and form of proxy will first be mailed to shareholders on or about
___________.
Persons who were shareholders of record of the International Portfolio on May
12, 2000 ("Record Date") are entitled to vote at the Special Meeting. On the
Record Date, the International Portfolio had outstanding ____________, shares,
each share being entitled to one vote. The presence of the holders of 40% of the
outstanding shares of the International 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 International
Portfolio. Persons and groups known by management to own beneficially 5% or more
of the shares of the International 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 Proposal 1. If the votes required
to approve Proposal 1 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.
Approval of Proposal 1 requires the approval of the holders of a "majority of
the outstanding voting securities" of the International Portfolio. Under the
Investment Company Act of 1940 (hereinafter, "Investment Company Act" or "1940
Act"), this term means the lesser of (i) 67% of the outstanding shares of the
International Portfolio 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 International Portfolio's outstanding voting securities.
Copies of the Trust's most recent Annual and Semi-Annual reports to
Shareholders, dated June 30, 1999 and December 31, 1999, 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 100 Four Falls Corporate Center, Suite 500, West Conshohocken, PA,
19428-2970 or by calling toll-free 1-800-242-9596.
SUMMARY
-------
The 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
" Specialist Manager"). Each of the equity oriented investment portfolios that
comprise the Trust (including the International Portfolio) has retained two
Specialist Managers to make investment decisions on its behalf. Although each of
these Specialist Managers is required to adhere to the investment objective,
policies and restrictions of the portfolio served, each firm is also expected to
do so in the context of its particular investment management style. The Trust's
Board, as part of its overall responsibility to the Trust and with the
assistance of Hirtle Callaghan, monitors the performance of the respective
Specialist Managers to assure that the investment styles used within a single
investment portfolio are complementary.
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The investment objective of the International 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.
Although the Portfolio may invest anywhere in the world, the Portfolio currently
invests primarily in the equity markets included in the Morgan Stanley Capital
International European, Australasia and Far East Index ("MSCI EAFE Index"). This
Index, which is also the Portfolio's performance benchmark, currently includes
most of the nations of western Europe, Japan, the United Kingdom, Australia,
Hong Kong, Singapore, the Scandinavian countries and Ireland.
Two investment advisory organizations serve the International Portfolio. Artisan
Partners Limited Partnership ("Artisan Partners") has served the Portfolio since
July 23, 1999, pursuant to the terms of an agreement that provides for the
payment of a fee to Artisan based on a percentage of the assets allocated to
Artisan Partners by the Trust, but contemplates the payment of a performance
based fee under certain circumstances. FURTHER INFORMATION ABOUT ARTISAN
PARTNERS APPEARS LATER IN THIS PROXY STATEMENT UNDER THE HEADING "MANAGEMENT OF
THE TRUST: INFORMATION ABOUT ARTISAN PARTNERS." The second Specialist Manager
for the International Portfolio is Capital Guardian Trust Company
("CapGuardian"). The engagement of CapGuardian was approved at a Special Meeting
of the Board held on April 14, 2000. At that meeting, 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,
determined to terminate the Trust's investment advisory agreement with Brinson
Partners, Inc. (hereinafter, the "Prior Manager" or "Brinson"), which firm had
served as a Special Manager for the International Portfolio since its inception.
CapGuardian commenced its engagement on April 28, 2000, as permitted under Rule
15a-4 of the Investment Company Act, under the terms of a portfolio management
agreement ("Interim CapGuardianAgreement"). The material terms of the Interim
CapGuardian Agreement, including the compensation provisions, are substantively
identical to the terms of the portfolio management agreement between the Trust
and the Prior Manager. The purpose of this Special Meeting of Shareholders is to
approve the terms of the final portfolio management agreement ("Final
CapGuardian Agreement") between CapGuardian and the Trust. The primary
difference between the terms of the Final CapGuardian Agreement and those of the
Interim CapGuardian Agreement is that the Final CapGuardian Agreement calls for
the payment to CapGuardian of performance based compensation ("Performance Fee
Arrangement"). Under the Performance Fee Arrangement, the portfolio management
fee payable by the International Portfolio may, depending on the investment
performance of that portion of the portfolio's assets allocated to CapGuardian
("CapGuardian Account"), increase the investment advisory fees payable to
CapGuardian by the International Portfolio. FURTHER INFORMATION ABOUT
CAPGUARDIAN APPEARS LATER IN THIS PROXY STATEMENT UNDER THE HEADING "MANAGEMENT
OF THE TRUST: INFORMATION ABOUT CAPGUARDIAN."
If Proposal 1 is approved, the Final CapGuardian Agreement will become effective
on the day following the date on which shareholder approve such agreement and
will remain in effect in accordance with its terms for two years. That 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.
If the Final CapGuardian Agreement is not approved by the Portfolio's
shareholders on or before September ___, 2000, the Final CapGuardian Agreement
will not take effect and the Interim Agreement will terminate automatically. In
this event, the Trust's Board will meet to determine an alternative course of
action.
A more detailed discussion of the Final CapGuardian Agreement, including the
Performance Fee Arrangement contemplated by that agreement, appears below; a
copy of the Final CapGuardian Agreement appears as Exhibit A to this Proxy
Statement.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1.
PROPOSAL 1: APPROVAL OF THE FINAL CAPGUARDIAN AGREEMENT
-------------------------------------------------------
After conducting an extensive search for an investment advisory organization
whose style would complement the investment approach of Artisan Partners, Hirtle
Callaghan recommended to the Board that CapGuardian be engaged to replace the
Prior Manager. On April 14, 2000, the Board, including a majority of the Board's
Independent Trustees, approved the CapGuardian engagement and the termination of
the Brinson engagement, together with the terms of both the Interim CapGuardian
Agreement and the Final CapGuardian Agreement, including the
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Performance Fee Arrangement. During the course of their deliberations, the
Trustees were advised regarding their responsibilities under Section 15(c) of
the Investment Company Act and the requirements of Section 15(a) of that Act and
were represented by counsel. Specifically, 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 had been approved by
the shareholders of that company. Rule 15a-4 under the Investment Company Act,
however, permits an adviser to provide advisory services to an investment
company prior to such shareholder approval pursuant to the terms of an interim
agreement in the event that a prior advisory contract is terminated by action of
such company's board; in such case, a new contract must be approved by such
shareholders within 150 days of the effective date of the interim agreement, or
such interim agreement will terminate.
The various factors considered by the Board during the course of its
deliberations are set forth below.
TERMINATION OF THE BRINSON ENGAGEMENT AND APPROVAL OF THE CAPGUARDIAN
ENGAGEMENT. The Board's decision to replace the Prior Manager as one of the
Specialist Managers of the International Portfolio was based on several factors.
First, the Board had been made aware of recent changes within the Prior
Manager's organization, both in terms of the investment personnel and in the
structure of that organization. The Board was also informed of Hirtle
Callaghan's view that these changes were affecting the Prior Manager's
investment performance adversely and could also adversely affect the nature and
quality of the Prior Manager's portfolio management process over the longer
term. The Board also considered Hirtle Callaghan's view that, given the changing
nature of the international markets, the International Portfolio would be better
served by an investment management organization whose investment approach favors
fundamental stock selection techniques over the top-down and value-focused
investment approach traditionally favored by the Prior Manager.
In connection with its decision to engage CapGuardian, the Board reviewed with
Hirtle Callaghan, Brinson's traditional focus on the asset classes, countries,
industries and currencies and contrasted this top-down investment approach with
the investment approach and investment selection process followed by
CapGuardian. In particular, the Board considered the nature of CapGuardian's
selection process, which emphasizes stock selections made by individual members
of the CapGuardian investment team rather than country or regional allocation
factors; the qualifications of those members of the CapGuardian investment team
who would be responsible for making day-to-day investment decisions for the
International Portfolio; and the composite performance track record achieved by
CapGuardian under varying market conditions. The Board also considered Hirtle
Callaghan's view that the investment approach of CapGuardian and Artisan
Partners would likely complement one another in the context of the current
market for international securities.
In the context of the International Portfolio, the CapGuardian investment
approach is expected to take as a focus the industries and market sectors
represented in the MSCI EAFE Index. Individual stock selections are made in a
manner that is consistent with this "core" investment focus and based on
fundamental analyses and other investment research undertaken by a team of
individual portfolio managers. Those principles traditionally associated with
"growth" or "value" investing are of only secondary importance in the
CapGuardian investment process. In the context of the International Portfolio,
"growth oriented" investing can be described as a focus on identifying those
companies that seem well positioned for strong, sustainable growth, based on an
analysis of the financial statements and other fundamental factors of individual
issuers, with only a secondary regard for the value of the company relative to
the market in general. An international investor may be said to be using a
"value investing technique" to the extent that the value of a particular company
relative to the MSCI EAFE Index is a factor in the investment selection process.
APPROVAL OF THE INTERIM CAPGUARDIAN AGREEMENT. In its deliberations with respect
to the Interim CapGuardian Agreement, the Board considered the terms of the
Interim CapGuardian Agreement, and the fact that all of its material terms,
including the fee to be paid to CapGuardian, were substantially the same as
those contained in the Brinson Agreement. Both the Interim CapGuardian Agreement
and the Brinson Agreement contemplate an annual advisory fee of .40% of those
assets of the International Portfolio allocated to it, with lower rates
applicable for assets over $200 million. Both the Brinson Agreement and the
Interim CapGuardian Agreement also provide that the portfolio manager will
provide a continuous investment program for that portion of the International
Portfolio's assets as may be allocated to it; select brokers and dealers through
which securities transactions are executed and maintain 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
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the part of the portfolio manager for any loss sustained by the Trust except
losses caused by willful misfeasance, reckless disregard of duty, bad faith or
gross negligence on the part of the portfolio manager; termination by the Trust
or by the portfolio manager upon sixty days' written notice; and termination in
the event of an "assignment" as defined in the Investment Company Act.
As indicated above, the Board considered information relating to the nature and
quality of the services that CapGuardian would be required to provide under the
Interim CapGuardian Agreement, as well as CapGuardian's experience in providing
similar services to other investment companies, and whether approval of the
Interim CapGuardian Agreement would be in the best interests of the Portfolios'
shareholders. The Board also considered information provided by CapGuardian in
response to the Board request, relating to CapGuardian's professional staff,
profitability and other factors.
Approval of the Final CapGuardian Agreement and Performance Fee Arrangement.
----------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES THE BOARD'S DELIBERATIONS WITH RESPECT TO THE FINAL
CAPGUARDIAN AGREEMENT AND THE PERFORMANCE FEE ARRANGEMENT CONTEMPLATED BY THAT
AGREEMENT. A DESCRIPTION OF THE PERFORMANCE FEE ARRANGEMENT APPEARS BELOW UNDER
THE HEADING "THE PERFORMANCE FEE ARRANGEMENT: SUMMARY." A DETAILED DESCRIPTION
OF THE MANNER IN WHICH CAPGUARDIAN'S FEE WOULD BE CALCULATED UNDER THE
PERFORMANCE FEE ARRANGEMENT, TOGETHER HYPOTHETICAL EXAMPLES AND PRO FORMA
EXPENSE INFORMATION IS SET FORTH IN THE PROXY STATEMENT UNDER THE HEADINGS "THE
PERFORMANCE FEE ARRANGEMENT: CALCULATION METHODOLOGY" AND "THE PERFORMANCE FEE
ARRANGEMENT: EXAMPLES AND PRO FORMA EXPENSE INFORMATION."
In addition to the various factors already discussed above, the Board's decision
to approve the terms and conditions of the Final CapGuardian Agreement was based
on a full review of that Agreement and, in particular, the Performance Fee
Arrangement. The Trustees and Hirtle Callaghan believe that the "fulcrum fee"
structure contemplated by the Final CapGuardian Agreement could provide an
effective means to reward good relative performance for the International
Portfolio, while enabling the International Portfolio to realize the benefit of
lower fees when CapGuardian's performance has not reached desired levels. In
particular, the Board considered representations made by Hirtle Callaghan to the
effect that, at the International Portfolio's current asset levels, the fee paid
by the International Portfolio to CapGuardian under the Interim CapGuardian
Agreement was not viewed by CapGuardian as competitive with fees received by
CapGuardian from other investment advisory clients similar to the International
Portfolio. The Board also considered that, as a result of the 40 basis point
performance hurdle, CapGuardian would earn a positive performance adjustment
only to the extent that its activities resulted in sufficient value added to
cover the scheduled Base Fee with respect to the immediately preceding 12 month
period.
The Board also considered that (i) the fulcrum fee formula requires that the
investment performance achieved by CapGuardian must exceed the MSCI EAFE Index
by the equivalent of the Base Fee and thus that the "fulcrum point" is
appropriate; (ii) the securities in which the Portfolio is designed to invest
are those that comprise the MSCI EAFE Index and thus that the selection of the
MSCI EAFE Index as the index against which CapGuardian's performance will be
measured under the Performance Fee Arrangement is appropriate; (iii)
CapGuardian's investment performance would be measured with respect to 12 month
periods and on a "rolling basis," thus making it less likely advisory fee
payments will be affected by short-term or "random" fluctuations in the
Portfolio's performance than might be the case if a shorter measuring period
were used in the incentive formula; and (iv) the recoupment feature (described
below) assures the Portfolio is not disadvantaged if CapGuardian performs poorly
during the first twelve months in which the Performance Fee Arrangement is in
effect.
The Board also considered the fact that (i) CapGuardian is not currently
required to register under the Investment Advisers Act and is thus not subject
to the restrictions imposed by that Act on the receipt of incentive based
compensation; (ii) under the express terms of the Final CapGuardian Agreement,
the Performance Fee Arrangement would be suspended in the event that CapGuardian
(or any division within CapGuardian) becomes subject to that Act; and (iii) such
suspension, if it occurs, would be lifted when and if CapGuardian and the Trust
obtain appropriate assurances from the SEC that the receipt by CapGuardian of
performance based compensation calculated in accordance with the Performance Fee
Arrangement is appropriate. If requested, there can be no assurance that such
relief will be granted by the SEC. Under the Final CapGuardian Agreement, if the
Performance Fee Arrangement is suspended, CapGuardian will receive an annual
fee, calculated daily and payable quarterly, of .40% of the assets in the
Account, until such time as such SEC assurances are obtained. Finally, in
considering whether to approve the Final CapGuardian Agreement and the
Performance Fee Arrangement contemplated by it,
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the Board was aware of the fact that the portfolio management agreement between
Artisan Partners and that Trust also provides for the payment of performance
based compensation, but that such fee arrangement is subject to receipt of an
order exempting Artisan Partners from certain provisions of the Investment
Advisers Act and is not yet in effect.
If approved by the shareholders of the International Portfolio, the Final
CapGuardian Agreement will become effective on the first business day of the
month following the date on which such approval is obtained. It will continue in
effect for two years from its effective date. Thereafter, the Final CapGuardian
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 International
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 PERFORMANCE FEE ARRANGEMENT: Summary The Performance Fee Arrangement is
designed to increase CapGuardian's fee with respect to those periods in which
CapGuardian achieves superior investment performance and to reduce its fee when
the performance achieved in the CapGuardian Account falls below the MSCI EAFE
Index, the performance benchmark of the International Portfolio. This type of
fee structure is know as a "fulcrum fee." Under the Final CapGuardian Agreement,
CapGuardian's fee would be adjusted to reflect its performance only after the
Performance Fee Arrangement has been in effect for 12 months following the date
on which the Performance Fee Arrangement becomes effective.
The Performance Fee Arrangement would entitle CapGuardian to receive a base fee
calculated at the annual rate of .40% (or 40 basis points) of the average net
assets of that portion of the CapGuardian Account. CapGuardian's fee would be
increased in the event that the net value added by CapGuardian during the
preceding twelve month period exceeds the total return of the MSCI EAFE Index by
at least .40% (or 40 basis points). This 40 basis point "performance hurdle" is
designed to assure that CapGuardian will earn a performance adjustment only with
respect to the value that its portfolio management adds to the CapGuardian
Account, after taking into account the cost -- before any performance adjustment
is made -- of CapGuardian's portfolio management services. The maximum fee that
would be payable to CapGuardian with respect to any 12 month period is .60% (or
60 basis points). In the event that the performance of the CapGuardian Account
is below the performance of the MSCI EAFE, CapGuardian's .40% (or 40 basis
point) base fee would be decreased for the relevant twelve month period, with
the proviso that the minimum annual fee payable to CapGuardian under the
Performance Fee Arrangement would be 20 basis points. The amount of each
performance adjustment (whether the adjustment would result in an increase or a
decrease in CapGuardian's fee for the period) would be 12.5% of the difference
between the performance of the CapGuardian Account and the MSCI EAFE Index plus
.40%. Shareholders should be aware that the Performance Fee Arrangement could
increase or decrease the the rate at which CapGuardian will be compensated for
its services. Moreover, CapGuardian could earn a positive performance adjustment
in declining markets if the decline in the total return of CapGuardian Account
is less than the decline in the total return of the MSCI EAFE Index.
THE PERFORMANCE FEE: COMPUTATION METHODOLOGY. Under the Performance Fee
Arrangement, CapGuardian's fee would be adjusted to reflect the performance of
the Account only after the Performance Fee Arrangement has been in effect for 12
months ("Initial Period") following the date ("Effective Date") on which the
Performance Fee Arrangement becomes effective.
INITIAL PERIOD. During each of the first three quarters following the date on
which the Performance Fee Arrangement becomes effective, CapGuardian would
receive a Base Fee of .10% of the average net assets of the CapGuardian Account
during the quarter. For the fourth quarter of the Initial Period, CapGuardian
would receive a Base Fee of .10% of the average net assets of the CapGuardian
Account during the quarter plus or minus a Performance Component multiplied by
the average net assets of the CapGuardian Account during the preceding four
quarters ("Initial Period"). The Performance Component will be calculated by (a)
computing the difference between (i) the total return of the CapGuardian Account
without regard to expenses incurred in the operation of the CapGuardian Account
("Gross Total Return") during the Initial Period; and (ii) the return of the
MSCI EAFE Index (net of dividends to U.S. investors) ("Index Return") during the
Initial Period plus .40% (or 40 basis points); and (b) multiplying the resulting
factor by 12.5% (or 12.5 basis points). Expressed in mathematical terms, the fee
payable to CapGuardian after taking into account the described performance
adjustment ("Performance Adjusted Fee") each quarter would be as follows:
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CAPGUARDIAN'S QUARTERLY FEE =
BASE FEE + [(GROSS TOTAL RETURN) - (INDEX RETURN + .40 OF 1%)] X 12.5%
SUBSEQUENT QUARTERLY PERIODS. For each quarter following the fourth quarter
of the Initial Period, CapGuardian would receive a quarterly fee of .10% (10
basis points) plus or minus 12.5% of the Performance Component multiplied by the
average net assets of the CapGuardian Account for the immediately preceding 12
month period, on a "rolling basis." This means that, at each quarterly fee
calculation, the Gross Total Return of the CapGuardian Account, the Index Return
and the average net assets of the CapGuardian Account for the most recent
quarter will be substituted for the corresponding values of the earliest quarter
included in the prior fee calculation.
MAXIMUM PERFORMANCE ADJUSTED FEE. Under the Performance Fee Arrangement,
the maximum Performance Adjusted Fee is limited such that the annual advisory
fee received by CapGuardian will not exceed .60% of the average net assets (or
60 basis points) of the CapGuardian Account. Due to the .40% performance hurdle,
this maximum fee level would be attained only to the extent that the CapGuardian
Account outperforms the MSCI EAFE Index by a factor of at least 200 basis
points. The maximum payment to CapGuardian for any quarter (other than the
fourth quarter of the Initial Period) will be limited to not more than .15% of
the average net assets of the CapGuardian Account (or 15 basis points).
MINIMUM CONTRACTUAL FEE. The minimum Performance Adjusted Fee payable to
CapGuardian under this Performance Fee Arrangement is .20% of the average net
assets of the Cap Guardian Account. This minimum fee would obtain, however, only
in the event that the Cap Guardian Account underperforms the EAFE Index by a
factor of at least 120 basis points. The minimum payment to CapGuardian for any
quarter (other than the fourth quarter of the Initial Period) will be .05% of
the average net assets of the CapGuardian Account (or 5 basis points).
RECOUPMENT FEATURE. The Performance Fee Arrangement provides for a
"recoupment feature" with respect to the Initial Period. If the aggregate of the
payments to CapGuardian made with respect to the Initial Period exceed the
Performance Adjusted Fee to which CapGuardian would be entitled with respect to
the Initial Period, advisory fees payable to CapGuardian with respect to each
succeeding quarter will be reduced until the difference between the aggregate
quarterly fees received by CapGuardian with respect to the Initial Period and
such Performance Adjusted Fee is fully recouped by the CapGuardian Account.
CapGuardian could, therefore, not be entitled to receive any advisory fee
payment following the Initial Period, depending on the performance actually
achieved by the Cap Guardian Account during such period.
THE PERFORMANCE FEE ARRANGEMENT: Examples and Pro Forma Expense
Information. As indicated above, the advisory fee payable to CapGuardian at the
end of each of the first three fiscal quarters of the Initial Period would be
the Base Fee for each period; these quarterly payment would not reflect any
performance adjustment. At the end of the fourth fiscal quarter following the
Effective Date, however, CapGuardian would be entitled to receive a Performance
Adjusted Fee based on the performance of the CapGuardian Account during the full
twelve months of the Initial Period. Hypothetical examples of how the
Performance Adjusted Fee would be calculated at the end of the Initial Period
are set forth in the tables below.
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HYPOTHETICAL PERFORMANCE ADJUSTMENT, ASSUMING A POSITIVE PERFORMANCE
ADJUSTMENT. Table 1A below shows the manner in which the value added by
CapGuardian would be determined for purposes of calculating the advisory fee
payable to CapGuardian at the end of the Initial Period, under circumstances
that would result in a net increase in advisory fees payable to CapGuardian:
Base Fee + [(Gross Total Return) - (Index Return + .40 of 1%)] x 12.5%
TABLE 1A
--------
Gross Total Return of CapGuardian Account
for the Initial Period 11.00%
Index Return for the Initial Period 10.00%
plus performance hurdle of 40 basis points .40%
------
10.40%
Value Added by CapGuardian with respect
to the Initial Period .60%
Assuming the facts shown in the hypothetical example above, CapGuardian would
have received a quarterly base fee of .10% of the average net assets of the
CapGuardian Account (10 basis points) for each of the first three quarters of
the Initial Period. For the fourth quarter, CapGuardian would be entitled to
receive a Base Fee of .10% of the average net assets of the CapGuardian Account
(10 basis points) plus 12.5% of value added by CapGuardian during the Initial
Period (12.5% x 60 basis points = .075 % or 7.5 basis points). Thus, the payment
to CapGuardian at the end of the fourth quarter would be the Base Fee of .10% of
the average net assets of the CapGuardian Account plus a performance adjustment
of .075% of such assets, for a total payment of .175% of the average net assets
of the CapGuardian Account (17.5 basis points). The total Performance Adjusted
Fee paid to CapGuardian for the Initial Period would be .475% of the average net
assets of the CapGuardian Account for the Initial Period.
PRO FORMA EXPENSE IMPACT. Table 1B below shows the amount of the advisory fee
that would have been paid to CapGuardian had the CapGuardian Account
outperformed the MSCI EAFE Index to the extent shown in the hypothetical example
set forth in Table 1A during the fiscal year ended June 30, 1999. Also shown is
the fee that would have been payable under the fee arrangement currently in
effect, as well as the pro forma expense ratio of the International Portfolio as
a whole in both cases. Note that such pro forma calculations assume that
one-half of the International Portfolio's assets were subject to the Performance
Fee Arrangement. Note also that the table does not take into account the effect
that the payment of performance-based compensation to Artisan Partners, the
International Portfolio's other Specialist Manager.
TABLE 1B
--------
Average net assets subject to performance arrangement* $128,088,500.
Performance Adjusted Fee to CapGuardian Fee of .40% of average
CapGuardian** net assets
$608,420 $512,354
Resulting Pro forma Expense Resulting Pro forma Expense Ratio
Ratio for the Total Portfolio*** for the Total Portfolio***
.775% .70%
----------------------------
* The net assets of the International Portfolio as of June 30, 1999 were
$256,177,000
** Effective annual rate of .475% of subject assets, calculated as shown in
Table 1A.
*** Figure shown includes all expenses, other than extraordinary expenses and
brokerage commissions.
HYPOTHETICAL PERFORMANCE ADJUSTMENT, ASSUMING A NEGATIVE PERFORMANCE ADJUSTMENT.
The following table shows the manner in which the value added by CapGuardian
would be determined for purposes of calculating the advisory fee payable to
CapGuardian at the end of the Initial Period under circumstances that would
result in a net decrease in
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advisory fees payable to CapGuardian. In this example, the hypothetical Gross
Total Return of the CapGuardian Account is the same as is shown in Table 1A, but
the MSCI EAFE Index Return for the period is higher than in the prior example.
TABLE 2A
--------
Gross Total Return of CapGuardian Account
for the Initial Period 11.00%
Index Return 11.00%
plus performance hurdle of 40 basis points .40%
------
11.40%
Total Return Added by CapGuardian with respect
to the Initial Period -.40%
Assuming the facts shown in the hypothetical above, CapGuardian would have
received a quarterly payment under the Base Fee of .10 % (10 basis points) of
the average net assets of the CapGuardian Account for each of the first three
quarters of the Initial Period. For the fourth quarter, CapGuardian would be
entitled to receive a Performance Adjusted Fee equal to .10 % of the average net
assets of the CapGuardian Account LESS 12.5% of the shortfall in the CapGuardian
Account during the prior 12 month period -- in this case, 12.5% x -40 basis
points = -.05% (or -5 basis points). Thus, factoring in this downward
adjustment, CapGuardian would be entitled to receive .05% (or 5 basis points) at
the end of the fourth quarter. This is so because, under the applicable formula,
the Base Fee installment of .10% of the average nets assets of the CapGuardian
Account would be REDUCED BY 5 basis points. Thus, CapGuardian's Performance
Adjusted Fee for the entire Initial Period would be .35 % of the assets of the
CapGuardian Account (or 35 basis points).
PRO FORMA EXPENSE IMPACT. Table 2B below shows the amount of the advisory fee
that would have been paid to CapGuardian had the CapGuardian Account
underperformed the MSCI EAFE Index to the extent shown in the hypothetical
example set forth in Table 2A during the fiscal year ended June 30, 1999. Also
shown is the fee that would have been payable under the fee arrangement
currently in effect, as well as the pro forma expense ratio of the International
Portfolio as a whole in both cases. Note that such pro forma calculations assume
that one-half of the Portfolio's assets as of June 30, 1999, were subject to the
Performance Fee Arrangement. Note also that the table does not take into account
the effect that the payment of performance-based compensation to Artisan
Partners, the International Portfolio's other Specialist Manager.
TABLE 2B
--------
Average net assets subject to performance arrangement* $128,088,500.
Performance Adjusted Fee to CapGuardian Fee of .40% of average
CapGuardian** net assets
$448,309 $512,354
Resulting Pro forma Expense Ratio
Resulting Pro forma Expense for the Total Portfolio***
Ratio for the Total Portfolio***
.65% .70%
----------------------------
* The net assets of the International Portfolio as of June 30, 1999 were $
256,177,000
** Effective annual rate of .35 % of subject assets, calculated as shown in
Table 2A.
*** Figure shown includes all expenses, other than extraordinary expenses and
brokerage commissions.
COMPARATIVE ANNUAL OPERATING EXPENSES. The table and example shown below are
designed to assist investors in understanding the various costs and expenses of
investment in shares of the International Portfolio in the event that the
Performance Fee Arrangement is implemented. The table and accompanying example
are designed to correspond with the tables that appear on page 2 of the
prospectus for The Hirtle Callaghan Trust. Neither should be
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considered a representation of past or future expenses of performance Actual
expenses may vary from year to year and may be higher or lower than those shown
in the illustrations below.
TABLE OF ANNUAL OPERATING EXPENSES. 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, 1999. Figures shown reflect expenses
under the Portfolio's existing advisory arrangements and expenses that would be
incurred if the Performance Fee Arrangement had been in effect during that
period, and assuming that the International Portfolio outperformed the MSCI EAFE
Index by a factor of 1.0% (or 100 basis points) as show in Table 1B. Figures
shown reflect expenses incurred during the fiscal year ended June 30, 1999
Under Proposed CapGuardian Under Performance Fee
Agreement Arrangement
(w/o performance fee) (w/performance fee)
--------------------- -------------------
Management Fees .45% .525%
Other Expenses .25% .25%
Total Annual Portfolio
Operating Expenses .70% .775%
EXAMPLE: The following illustrates the expenses on a $10,000 investment, under
the fees and expenses shown in the table above, assuming (1) 5% annual return
and (2) redemption at the end of each time period:
Under Proposed CapGuardian Under Performance Fee
Agreement Arrangement
(w/o performance fee) (w/performance fee)
--------------------- -------------------
1 year $ 72 $ 79
3 years $224 $ 248
5 years $390 $ 431
10 years $871 $ 960
The preceding example assumes that all dividends and distributions are
reinvested and that the percentage totals shown in the "Annual Operating
Expenses" table above remain the same in the years shown.
MANAGEMENT OF THE TRUST
-----------------------
INFORMATION ABOUT HIRTLE CALLAGHAN. Pursuant to a written agreement ("Hirtle
Callaghan Agreement") Hirtle Callaghan continuously monitors the performance of
various investment management organizations, including the several portfolio
managers retained by the Trust. The Hirtle Callaghan 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 Hirtle Callaghan 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, 1999, Hirtle Callaghan
received advisory fees from the International Portfolio in the amount of
$912,160.
Hirtle Callaghan's principal offices are located at 100 Four Falls Corporate
Center, Suite 500, West Conshohocken, PA, 19428-2970 . Hirtle Callaghan was
organized in 1988. An investment adviser registered under the Investment
Advisers Act, Hirtle Callaghan had, as of March 31, 2000, approximately $3.8
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
Hirtle Callaghan 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 February
29, 2000.
INFORMATION ABOUT CAPGUARDIAN. CapGuardian commenced serving as a Specialist
Manager for the International Equity Portfolio on April 28, 2000. CapGuardian,
the principal offices of which are located at 333 South Hope Street, Los
Angeles, CA 90071, is a trust company and is organized as a corporation under
California law. It is an
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indirect, wholly-owned subsidiary of The Capital Group Companies, Inc. ("Capital
Group") and Capital Group maintains offices throughout the world. As of December
31, 1999, CapGuardian and its affiliated companies managed total assets of in
excess of $123 billion, including approximately $4.4 billion in assets of
registered investment companies. CapGuardian is responsible for providing
portfolio management services to each of the investment company portfolios
listed in the table below.
<TABLE>
<CAPTION>
Name of Fund Investment Objective Assets as of CapGuardian Advisory Fee
------------ -------------------- ------------ ------------------------
[to be supplied] 3/31/00
---------------- -------
<S> <C> <C> <C>
The Diversified Investors $676,189,574 First $ 25 million 0.750%
Funds Group Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
Fremont International $ 83,764,868 First $ 25 million 0.750%
Growth Fund Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
Republic International $393,971,119 First $ 25 million 0.700%
Growth Equity Fund Next $25 million 0.550%
Next $200 million 0.425%
Over $250 million 0.375%
SEI Institutional $791,597,139 First $ 25 million 0.750%
International Trust -IEP Next $25 million 0.600%
Next $200 million 0.425%
SEI Institutional $285,774,477 Over $250 million 0.375%
International Trust -IEF
American General $ 12,316,573 First $ 25 million 0.750%
International Value Fund - Next $25 million 0.600%
AG3 Next $200 million 0.425%
Over $250 million 0.375%
American General $ 14,997,700 First $ 25 million 0.750%
International Value Fund - Next $25 million 0.600%
AG2 Next $200 million 0.425%
Over $250 million 0.375%
New Covenant Growth Fund $ 98,078,034 First $ 25 million 0.750%
Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
ICMA Retirement Trust - $112,287,019 First $ 25 million 0.750%
International Equity Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
WM Trust International $213,952,281 First $ 25 million 0.750%
Growth Fund Next $25 million 0.600%
Next $200 million 0.425%
WM Variable Trust $ 75,100,918 Over $250 million 0.375%
International Growth Fund
Equitable - Non-U.S. Equity $ 91,347,739 First $ 150 million 0.650%
Next $150 million 0.550%
Next $200 million 0.450%
Over $250 million 0.400%
ING-Managed Global Fund 203,279,953 First $ 150 million 0.650%
Next $150 million 0.550%
Next $ 200 million 0.450%
Over $250 million 0.400%
Pacific Select Non-U.S. 53,785,551 First $ 150 million 0.650%
Next $150 million 0.550%
Next $ 200 million 0.450%
Over $250 million 0.400%
</TABLE>
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Under the Interim CapGuardian Agreement, CapGuardian is compensated for its
services at the annual rate of .40% of the average net assets of the Account's
average net assets of $200 million or less; .35% of average net assets of assets
over $200 million up to $300 million; and .30% on assets over $300 million,
payable quarterly. Under the Final CapGuardian Agreement, CapGuardian will be
compensated for its services to the International Portfolio based on the
performance that CapGuardian is able to achieve in the CapGuardian Account.
Detailed information about the performance fee arrangement, including the manner
in which the fee is computed, appears above.
Day-to-day portfolio management for that portion of the Portfolio allocated to
CapGuardian is the responsibility of the following individuals:
o David I. Fisher, Chairman of the Board of CapGuardian and s an officer
and/or director of several affiliated companies. Mr. Fisher joined the
Capital Group in 1969. Mr. Fisher is a graduate of the University of
California at Berkeley, holds an MBA from the University of Missouri
Graduate School of Business Administration. Mr. Fisher is a member of the
Los Angeles Society of Financial Analysts and a founding member of the
International Society of Security Analysts.
o Hartmut Giesecke is Chairman of the Board of Capital Group's Japanese
investment management subsidiary and serves as an officer and/or director
of several companies in the Capital Group. Mr. Giesecke has been with the
Capital Group since 1972, focusing on international and emerging markets.
Mr. Giesecke was a Research Fellow with the Geneva Graduate Institute of
International Studies and German Research Association and holds a Master of
Economics degree from Freiburg University, Germany, and an MBA from
Columbia University.
o Richard N. Havas is a Senior Vice President and a portfolio manager with
research responsibilities for CapGuardian in its Montreal offices, and
serves as an officer and/or director of several companies in the Capital
Group. Mr. Havas joined the Capital Group in 1986 as a financial analyst.
He holds a BA from the University of Toronto and an MBA from INSEAD in
Fontainebleau, France.
o Nancy J. Kyle is a portfolio manager ins CapGuardian's New York office. Ms.
Kyle is a Senior Vice President, Director and member of the Executive
Committee of CapGuardian, and serves as an officer and/or director of
several companies in the Capital Group. Before joining CapGuardian in 1991,
Ms. Kyle was a Managing Director at J.P. Morgan Investment Management Inc.,
where she was head the international equities business in the U.S. Ms. Kyle
earned a BA in political science from Connecticut College and did graduate
work in international political science in the London School of Economics.
o Robert Ronus is a portfolio manager in CapGuardian's West Los Angeles
office. Mr. Ronus is president and a director of Cap Guardian and serves as
an officer and/or director of several companies in the Capital Group. Mr.
Ronus, a portfolio manager responsible for both global and non-U.S.
portfolios, joined the Capital Group in 1972. He holds a BA and an MA from
Oxford University.
o Lionel M. Sauvage is a portfolio manager in CapGuardian's West Los Angeles
office. Mr. Sauvage is senior vice president and portfolio manager of
CapGuardian and a vice president of Capital International Research, Inc.
Mr. Sauvage joined the Capital Group in 1987 as an investment analyst and
has covered European food, beverage and airline industries, as well a U.S.
aerospace companies. He holds an MBA from INSEAD in Fontainebleau, France
and electronic engineering degree from ENSEM in Nancy, France.
o Nilly Sikorsky is a portfolio manager based in Cap Guardian's Geneva
office. Ms. Sikorsky serves as President and Managing Director of Capital
International, S.A. and Chairman of Capital International Perspective S.A.
and as an officer and/or director of several companies in the Capital
Group. Ms. Sikorsky, who joined the Capital Group of Companies in 1962 as a
statistician, was managing editor of the Morgan Stanley Capital
International Perspective for 20 years. Ms. Sikorsky is a graduate in
sociology of the University of Geneva and also attended the University of
Geneva Graduate School of International Studies. She is a member of the
Swiss Association of Financial Analysts.
o Rudolf M. Staehelin a portfolio manager in Cap Guardian's Geneva office.
Mr. Staehelin is a Senior Vice President and Director of Capital
International Research, Inc. and Director and Senior Vice President of
Capital International S.A. He joined the Capital Group Companies in 1961 as
a financial analyst with international research responsibilities in banking
and pharmaceuticals. Mr. Staehelin holds an MBA from Stanford University
Graduate School of Business, as well as a doctorate and master's degree in
law from the UniversitatBasel in Switzerland. Mr. Staehelin is a member of
the Swiss Association of Financial Analysts, the German Society for
Securities Analysts, the International Society of Financial Analysts and
the New York Society of Security Analysts.
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CapGuardian is responsible for the management of the international assets of
numerous institutional and other accounts. The following table sets forth
certain information regarding portfolios in registered investment companies for
which CapGuardian provides investment advisory services. The investment
objective of each of these fund is:
<TABLE>
<CAPTION>
Name of Fund Investment Objective Assets as of CapGuardian Advisory Fee
------------ -------------------- ------------ ------------------------
3/31/00
-------
<S> <C> <C>
The Diversified Investors $676,189,574 First $ 25 million 0.750%
Funds Group Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
Fremont International $ 83,764,868 First $ 25 million 0.750%
Growth Fund Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
Republic International $393,971,119 First $ 25 million 0.700%
Growth Equity Fund Next $25 million 0.550%
Next $200 million 0.425%
Over $250 million 0.375%
SEI Institutional $791,597,139 First $ 25 million 0.750%
International Trust -IEP Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
SEI Institutional 285,774,477 First $ 25 million 0.750%
International Trust -IEF Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
American General 12,316,573 First $ 25 million 0.750%
International Value Fund - Next $25 million 0.600%
AG3 Next $200 million 0.425%
Over $250 million 0.375%
American General 14,997,700 First $ 25 million 0.750%
International Value Fund - Next $25 million 0.600%
AG2 Next $200 million 0.425%
Over $250 million 0.375%
New Covenant Growth Fund 98,078,034 First $ 25 million 0.750%
Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
ICMA Retirement Trust - 112,287,019 First $ 25 million 0.750%
International Equity Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
WM Trust International 213,952,281 First $ 25 million 0.750%
Growth Fund Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
WM Variable Trust 75,100,918 First $ 25 million 0.750%
International Growth Fund Next $25 million 0.600%
Next $200 million 0.425%
Over $250 million 0.375%
Equitable - Non-U.S. Equity 91,347,739 First $ 150 million 0.650%
Next $150 million 0.550%
Next $ 200 million 0.450%
Over $250 million 0.400%
ING-Managed Global Fund 203,279,953 First $ 150 million 0.650%
Next $150 million 0.550%
Next $ 200 million 0.450%
Over $250 million 0.400%
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Pacific Select Non-U.S. 53,785,551 First $ 150 million 0.650%
Next $150 million 0.550 %
Next $ 200 million 0.450%
Over $250 million 0.400 %
</TABLE>
INFORMATION ABOUT ARTISAN PARTNERS. Artisan Partners is located at 1000 N. Water
Street, Suite 1770, Milwaukee, Wisconsin 53202. Artisan Partners also maintains
offices at 100 Pine Street, Suite 2950, San Francisco, California and Five
Concourse Parkway, Suite 2120, Atlanta, Georgia. As of December 31, 1999,
Artisan Partners managed total assets in excess of $ 6.5 billion. The principal
executive officer of Artisan Partners is Andrew A. Ziegler, whose principal
occupation is the management of Artisan Partners and Artisan Partners' sole
general partner, Artisan Partners Investment Corporation. Mr. Ziegler and
Carlene Murphy Ziegler control Artisan Partners Investment Corporation, which is
organized as a Wisconsin corporation.
A team of investment professionals, lead by Mark L. Yockey, who is a partner of
the firm, is responsible for making day-to-day investment decisions for that
portion of the International Portfolio allocated to Artisan Partners. Mr. Yockey
has been with Artisan Partners since 1995 and currently serves as a vice
president of Artisan Funds, Inc., an open-end, series management investment
company registered under the Investment Company Act. Before joining Artisan
Partners, Mr. Yockey was portfolio manager of United International Growth Fund
and Vice President of Waddell & Reed, Inc., an investment adviser and mutual
fund organization located in Missouri. Mr. Yockey holds BA and MBA degrees from
Michigan State University and is a Chartered Financial Analyst.
For its services to the Portfolio, Artisan Partners receives an annual fee of
.40% of the average daily net asset value of that portion of the Portfolio's
assets managed by it. The Trust has conditionally approved an amendment
("Artisan Fulcrum Fee Amendment") to the portfolio management agreement relating
to Artisan Partners' services to the Portfolio. Under the Artisan Fulcrum Fee
Amendment, Artisan Partners would be compensated based, in part, on the
investment results achieved by it. Implementation of the Artisan Fulcrum 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 Artisan Fulcrum
Fee Amendment is implemented, it could, under certain circumstances, increase or
decrease the fee paid to Artisan Partners, when compared to the current fixed
fee arrangement and could result in the payment of incentive compensation during
periods of declining markets. The Portfolio Management Agreement between the
Trust and Artisan Partners, as well as the Artisan Fulcrum Fee Amendment
referred to above was last approved by the Board (including the Independent
Trustees) at a meeting of the Board held on June 9, 1999, and by the
shareholders of the International Portfolio on July 23, 1999. During the period
ended December 31, 1999, Artisan Partners received from the International
Portfolio investment advisory fees of $_______.
ADMINISTRATION, DISTRIBUTION AND RELATED SERVICES. BISYS Fund Services, Inc. and
certain of its affiliated companies ("BISYS") currently provide administration,
transfer agency, distribution and accounting services to the Trust pursuant to
the terms of separate agreements between BISYS and the Trust. For the
administration, transfer agency and fund accounting services it provides to the
Trust, BISYS receives an omnibus fee, which fee is computed daily, 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, 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 .095% of the aggregate average net assets of the Limited Duration Municipal
Bond, Fixed Income and Intermediate Term Municipal Bond Portfolios. BISYS is
located at 3434 Stelzer Road, Columbus, Ohio 43219-3035.
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
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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
International Portfolio as of the Record Date. Hirtle Callaghan may be deemed to
have, or share, investment and/or voting power with respect to more than 50% of
the shares of the Trust's portfolios, with respect to which shares Hirtle
Callaghan disclaims beneficial ownership.
NAME AND ADDRESS OF RECORD HOLDERS INTERNATIONAL PORTFOLIO
Bankers Trust Company ______%
1 Bankers Trust Plaza (__________SHARES)
New York, N.Y. 10006
PNC Bank, N.A. -- ______%
P.O. Box 7780-1888 (__________ SHARES)
Philadelphia, PA 19182
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 ____day of _____ 2000 between Capital Guardian Trust Company
("Portfolio Manager"), a California corporation 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 International 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
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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 to assist the Trust or its
designated agent in (a) the daily computation of the Portfolio's net asset value
and net income; (b) the preparation of proxy statements or amendments to the
Trust's registration statement; and (c) the 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 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 other
expenses of the Trust. For its services under this Agreement, Portfolio Manager
shall be entitled to receive a fee in accordance with Schedule A hereto.
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
any such Associated Person in the performance of its duties or from reckless
disregard by any such Portfolio Manager or Associated Person of its duties under
this Agreement. In no event shall the Portfolio Manager or its Associated
Persons have any liability arising from the conduct of any other portfolio
manager with respect to the portion of the Portfolio's assets not allocated to
the Portfolio Manager.
(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 and officers from any claims, liabilities and expenses (including
reasonable attorneys' fees), incurred: (i) as a result of any untrue statement,
or alleged untrue statement, of a material fact made by Portfolio Manager in
such written information; and/or (ii) as a result of the omission, or the
alleged omission, in such written information of any material fact necessary in
order to make the statements made, in the light of the circumstances under which
they are made, not misleading ("Material Omission"), provided that the Trust has
relied upon such statement or Material Omission in preparing any SEC Filing.
Portfolio Manager shall not be required to indemnify any person under this
Section 5 to the extent that Portfolio Manager relied upon an untrue statement
or Material Omission made by an officer or Trustee of the Trust or where such
untrue statement or Material Omission was made in reliance upon information
furnished to the Portfolio Manager in writing by such officer or Trustee, or by
the Trust's custodian bank, administrator or accounting agent.
(c) The Trust agrees to indemnify and hold harmless the Portfolio Manager and
its Associated Persons from any claims, liabilities and expenses, including
reasonable attorneys' fees, incurred as a result of any untrue statement of a
material fact which relates to information in any SEC filing, or any omission to
state in such written information a material fact necessary to make such
statements not misleading ("material omission"), contained in any information in
such SEC filings not supplied orally, by electronic transmission or in writing
to Trust or its administrator, transfer agent, custodian, distributor or to
Hirtle Callaghan & Co., Inc., the Trust's investment manager, by the Portfolio
Manager.
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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.
-------------------------------------
(a) This Agreement shall become effective as of the date on which it shall be
approved by the shareholders of the Portfolio in the manner contemplated by
Section 15(a) of the 1940 Act and shall continue in effect until for a period of
two years from that date. This Agreement shall continue in effect from year to
year thereafter 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.
(b) 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.
----------------------------
(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. 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 of Hirtle,
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 HCCI.
Portfolio Manager agrees that it will not use any Mark without the prior written
consent of the Trust.
(c) It is acknowledged and agreed that the name "Capital Guardian Trust
Company," the names of the Portfolio Manager's affiliates within The Capital
Croup Companies, Inc., and any derivative or logo or trade or service mark
(including but not limited to the American Funds Group of mutual funds), are the
valuable property of the Portfolio Manager. The Trust shall have the right to
use such names(s), derivatives, logos, trade or service marks only with the
prior written approval of the Portfolio Manager, which approval shall not be
unreasonably withheld or delayed so long as this Agreement is in effect. Upon
termination of this Agreement, the Trust shall forthwith cease to use such
name(s), derivatives,
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logos, trade or service marks. The Trust agrees that it will review with the
Portfolio Manager any advertisement, sales literature, or notice prior to its
use that makes reference to the Portfolio Manager so that the Portfolio Manager
may review the context in which it is referred to, it being agreed that the
Portfolio Manager shall have no responsibility to ensure the adequacy of the
form or content of such materials for the purposes of the 1940 Act or other
applicable laws and regulations. If the Trust makes any unauthorized use of the
Portfolio Manager's name(s) derivatives, logos, trade or service marks, the
parties acknowledge that the Portfolio Manage4 shall suffer irreparable harm for
which monetary damages are inadequate and thus, the Portfolio Manager shall be
entitled to injunctive relief.
(d) 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 a "bank" as defined under the Investment Advisers Act of 1940
("Investment Advisers Act"), and thereby exempt from registration under the
Investment Advisers Act and that it 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 or any actions that Portfolio
Manager has determined to take in connection with changes in its status as an
entity that is exempt from registration under the Investment Advisers Act.
(b) It will take such actions as may be necessary, and shall provide such
information that is reasonably requested by the Trust in connection with the
Trust's obligations under Rule 17j-1 under the 1940 Act. In particular,
Portfolio Manager represents that it is subject to a written code of ethics
("Portfolio Manager's Code") complying with the requirements of Rule 17j-1 under
the 1940 Act. 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 such rule and 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.
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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
100 Four Falls Corporate Center
West Conshohocken, PA 19428-7425
If to Portfolio Manager:
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, CA 90025
Attention: Treasurer
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 International
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.
ATTEST: Capital Guardian Trust Company
By:
-------------------------------- ----------------------------
The Hirtle Callaghan Trust
ATTEST:
By:
-------------------------------- ----------------------------
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Schedule A
COMPENSATION
Performance Based Compensation. The parties acknowledge and agree that the Trust
has retained the Portfolio Manager to provide a continuous program of investment
management for a portion of the assets of The International Equity Portfolio of
the Trust ("Cap Guardian Account") pursuant to the Agreement and that the Trust
desires to compensate the Portfolio Manager for its services based, in part, on
the performance achieved by the Portfolio Manager for the Account, in accordance
with the fee arrangement set forth below.
INITIAL PERIOD. Portfolio Manager shall be entitled to receive a fee of would be
adjusted to reflect the performance of the Account only after the Performance
Fee Arrangement has been in effect for 12 months ("Initial Period") following
the date ("Effective Date") of this Agreement. For purposes of this Agreement,
the Initial Period shall begin on the first business day of the month following
such Effective Date.
For each of the first three quarters of the Initial Period, Portfolio Manager
shall receive 12.5% of its Base Fee (i.e. 10% of the average net assets of the
Cap Guardian Account or 10 basis points). For the fourth quarter of the Initial
Period, Portfolio Manager shall receive a fee equal to .10% of the average net
assets of the Cap Guardian Account plus or minus a Performance Component
multiplied by the average net assets of the Cap Guardian Account for the Initial
Period. The Performance Component shall be calculated by (a) computing the
difference between (i) the total return of the Cap Guardian Account without
regard to expenses incurred in the operation of the Cap Guardian Account ("Gross
Total Return") during the Initial Period, and (ii) the return of the EAFE Index
("Index Return") during the Initial Period plus 40 basis points; and (b)
multiplying the resulting factor by 12.5%.
SUBSEQUENT QUARTERLY PERIODS. For each quarter following the fourth quarter of
the Initial Period, Portfolio Manager will receive a quarterly fee of 10 basis
points plus or minus 12.5% of the Performance Component (calculated in the same
manner as set forth with respect to the Initial Period and set forth above)
multiplied by the average net assets of the Cap Guardian Account for the
immediately preceding 12 month period, on a "rolling basis." This means that, at
each quarterly fee calculation, the Gross Total Return of the Cap Guardian
Account, the Index Return and the average net assets of the Cap Guardian Account
for the most recent quarter will be substituted for the corresponding values of
the earliest quarter included in the prior fee calculation.
MAXIMUM PERFORMANCE ADJUSTED FEE. Notwithstanding the formula set forth above,
the maximum fee to which Portfolio Manager shall be entitled with respect to any
12 month period shall be .60% of the average net assets of the Cap Guardian
Account (or 60 basis points). The maximum fee to which Portfolio Manager shall
be entitled with respect to any quarter (other than the fourth quarter of the
Initial Period) shall be .15% of the average net assets of the Cap Guardian
Account (or 15 basis points). Due to the performance hurdle noted above, this
maximum fee level would be attained only to the extent that the Cap Guardian
Account outperforms the Index by a factor of at least 200 basis points.
MINIMUM CONTRACTUAL FEE. The minimum fee payable to Portfolio Manager for any
twelve month period shall be 20% of the average net assets of the CapGuardian
Account or 20 basis points. This minimum fee would obtain, however, only in the
event that the Cap Guardian Account underperforms the EAFE Index by a factor of
at least 120 basis points.
RECOUPMENT FEATURE. The Performance Fee Arrangement provides for a
"recoupment feature" with respect to the Initial Period. If the aggregate of the
payments to Portfolio Manager made with respect to the first four quarters
following the Effective Date exceed the Performance Adjusted Fee to which
Portfolio Manager would be entitled with respect to the Initial Period, advisory
fees payable to Portfolio Manager with respect to each succeeding quarter will
be reduced until the difference between the aggregate quarterly fees received by
Portfolio Manager with respect to the Initial Period and such Performance
Adjusted Fee is fully recouped by the Cap Guardian Account. In accordance with
the Minimum Contractual Fee provision noted above, however, no quarterly payment
to CapGuardian will be less than .05% (or 5 basis points). Portfolio Manager
could, therefore, not be entitled to receive any advisory fee payment following
the Initial Period, depending on the performance actually achieved by the Cap
Guardian Account during such period.
23
<PAGE>
SUSPENSION OF PERFORMANCE BASED COMPENSATION. The parties acknowledge and
agreement that the performance adjustments contemplated above will be suspended
after such date, if any, on which Portfolio Manager (or the separately
identified division of Portfolio Manager's that provides the services
contemplated under this Agreement) is required to be registered under the
Investment Advisers Act of 1940 and is subject to Section 205 thereof, unless
and until Portfolio Manager (or such division) obtains an order ("Exemptive
Order") or other relief appropriate relief from the Securities and Exchange
Commission permitting Portfolio Manager to receive performance fee adjustments
calculated in the manner contemplated by this fulcrum fee arrangement. In the
event that performance adjustments are suspended, Portfolio Manager will receive
an annual fee, calculated daily and payable quarterly, of .40% of the assets in
the Account, until such time as the Exemptive Order or other relief is obtained.
Expenses; Effectiveness. Portfolio Manager shall pay all expenses incurred by it
in the performance of its duties under the Agreement and shall not be required
to pay any other expenses of the Trust, including but not limited to brokerage
and transactions costs incurred by the Trust. In the event of termination of
this Agreement, all compensation due to the Portfolio Manager through the date
of termination will be calculated on a pro-rated basis through the date of
termination and paid within fifteen business days of the date of termination.
CAPITAL GUARDIAN TRUST COMPANY THE HIRTLE CALLAGHAN TRUST
ON BEHALF OF THE INTERNATIONAL
EQUITY PORTFOLIO
BY: BY:
------------------------------- ---------------------------
DATE: DATE:
----------------------------- -------------------------
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PROXY
The International Equity Portfolio
of The Hirtle Callaghan Trust
Special Meeting of Shareholders
July ____, 2000
This Proxy is Solicited on Behalf of the Board of Trustees
----------------------------------------------------------
The undersigned appoints, Donald E. Callaghan and Robert J. Zion, and each of
them, attorneys and proxies, with full power of substitution in each, to vote
and act on behalf of the undersigned at the special meeting of shareholders of
The Hirtle Callaghan Trust (the "Trust") representing interests in the Trust's
International Equity Portfolio at the offices of Hirtle, Callaghan & Co., Inc.,
100 Four Falls Corporate Center, West Conshohocken, PA 19428-2970 on July ____,
2000, at 10 a.m. and at all adjournments, according to the number of shares of
Common Stock which the undersigned could vote if present, upon such subjects as
may properly come before the meeting, all as set forth in the notice of the
meeting and the proxy statement furnished therewith. Unless otherwise marked
below, this proxy is given WITH authority to vote FOR the proposals noted below.
The undersigned further confers upon such attorneys and proxies discretionary
authority to vote for and in the name of the undersigned and with all of the
powers the undersigned would possess if personally present, all the Portfolio
shares of the undersigned in the Trust at said meeting. The Board of Trustees
recommends that you vote "FOR" the proposal below.
(1) To approve the engagement of Capital Guardian Trust Company ("CapGuardian")
to provide portfolio management services to the International Portfolio
pursuant to a portfolio management agreement between the Trust and
CapGuardian, which agreement provides for the payment to CapGuardian of
performance based compensation under certain circumstances.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
IMPORTANT: WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS ATTORNEY OR AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
PLEASE SIGN, DATE, AND RETURN IN THE ADDRESSED ENVELOPE - NO POSTAGE REQUIRED.
PLEASE MAIL PROMPTLY TO SAVE THE TRUST FURTHER SOLICITATION EXPENSE. THE RECEIPT
OF THE NOTICE OF MEETING AND PROXY STATEMENT IS ACKNOWLEDGED BY EXECUTION OF
THIS PROXY.
Dated: ________________, 2000
----------------------------------------
------------------------------------- The International Equity Portfolio
Signature and Title
-------------------------------------
Signature, if held jointly
------------------ shares
--------------------------------------------------------------------------------
Sign, Date and Return the Proxy
Promptly Using the Enclosed
Envelope to: BISYS FUND SERVICES, ATTN: PAIGE C. HODGIN,
3435 STELZER ROAD, COLUMBUS, OHIO 43219
