SUPPLEMENT TO PROSPECTUS
DATED SEPTEMBER 25, 2000 FOR
THE HIRTLE CALLAGHAN TRUST
THE DATE OF THIS SUPPLEMENT IS NOVEMBER 7, 2000
THE SMALL CAPITALIZATION EQUITY PORTFOLIO
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INVESTMENT ADVISORY ARRANGEMENTS. Subject to the approval of the shareholders of
the Portfolio, the Trust's Board of Trustees approved the engagement of Sterling
Johnston Capital Management, Inc. ("Sterling Johnston") to serve as the third
Specialist Manager for The Small Capitalization Equity Portfolio. The Board also
approved an investment advisory agreement between Sterling Johnston and the
Trust ("Proposed Sterling Johnston Agreement"), pursuant to which Sterling
Johnston would be entitled to receive a fee calculated at an annual rate of .40%
of those assets of the Portfolio allocated to Sterling Johnston from time to
time by the Board. In connection with its consideration of the proposed Sterling
Johnston engagement, the Board has also considered and approved an amendment
("Performance Fee Amendment") to the Sterling Johnston Agreement that would
permit Sterling Johnston to be compensated on a performance fee basis. The
Performance Fee Amendment is also subject to the approval of the Portfolio's
shareholders. If the Performance Fee Amendment is implemented, it could, under
certain circumstances, increase or decrease the fee paid to Sterling Johnston,
when compared to the asset-based fee arrangement included in the Proposed
Sterling Johnston Agreement. Shareholders will be asked to approve the Proposed
Sterling Johnston Agreement and the Performance Fee Amendment at a Special
Meeting of the Shareholders of the Portfolio to be held on or about December 1,
2000
INFORMATION ABOUT STERLING JOHNSTON. Sterling Johnston adheres to a "bottom-up"
and "growth-oriented" investment philosophy that emphasizes fundamental research
in its effort to identify companies with above-average potential for growth in
revenue and earnings relative to other companies in their industries or market
sectors. Factors considered in this process include demonstrated accelerating
earnings, strong and improving financials (e.g. balance sheet, cash flow) and
strength of the company's stock price relative to other companies in its
industry. Sterling Johnston, which is expected to be more aggressive in seeking
opportunities for growth than either of the Portfolio's current Specialist
Managers, attempts to identify specific circumstances or "catalysts" (e.g., a
corporate restructuring or the introduction of a new product, consolidations
within its industry, or new technologies or product markets) that will benefit a
particular issuer. Securities may be considered for sale when Sterling Johnston
anticipates decelerating earnings, weak financials or a decline in the strength
of the company's stock price, or when it determines that a previously identified
catalyst no longer appears to be a positive factor for the company. Sterling
Johnston's principal offices are located at One Sansome Street, San Francisco,
California, 94104. As of September 30, 2000, Sterling Johnston managed assets of
$235 million; Sterling Johnston does not currently provide investment advisory
services to any mutual fund.
Day-to-day investment decisions for that portion of Portfolio allocated to
Sterling Johnston will be the responsibility of Scott Sterling Johnston,
Sterling Johnston's Chief Executive Officer and Chief Investment Officer. Mr.
Johnston obtained a BA from University of California in 1967, and an MBA in
business from the University of Southern California in 1969. Mr. Johnston began
his career as a consultant with Arthur Andersen & Co., and later joined Smith
Barney as an institutional salesman. Mr. Johnston then became Managing Director
and Chief Investment Officer (CIO) of the Trust Investment Department at San
Diego Trust and Savings Bank from 1976 to 1981, and subsequently served as
Managing Director and CIO of Pacific Century Group, Inc., an investment advisory
subsidiary of Security Pacific Bank from 1981 to 1985. He founded Sterling
Financial Group, Inc., an SEC registered investment adviser, in 1985, as Chief
Executive Officer and CIO. For a brief period, (1993 to 1996) he was a founder
and CIO of Apodaca-Johnston Capital Management, Inc. He left to reactivate
Sterling Financial Group, Inc. and changed the name to Sterling Johnston Capital
Management, Inc. in 1996. Sterling Johnston is an independent investment
advisory firm; Mr. Johnston holds a controlling interest in the firm.
INFORMATION ABOUT THE PROPOSED PERFORMANCE FEE AMENDMENT. If the Performance Fee
Amendment is approved and implemented, Sterling Johnston will be entitled to
receive a compensation for its services based in part on the performance
achieved by the Sterling Johnston Account in accordance with a "fulcrum fee"
arrangement. The arrangement will reward Sterling Johnston for performance that
exceeds the total return of the Russell 2000 Small Cap Growth Stock Index
("Index Return") by a factor of at least .40% (40 basis points) and to reduce
Sterling Johnston's compensation with respect to periods during which lesser
performance is achieved. Before the proposed performance fee arrangement can be
implemented, the proposed Performance Fee Amendment must be approved by the
THE HIRTLE CALLAGHAN TRUST
SUPPLEMENT TO PROSPECTUS
DATED SEPTEMBER 25, 2000
SUPPLEMENT DATE: OCTOBER 31, 2000
<PAGE>
shareholders of the Small Cap Portfolio. In addition, certain exemptive relief
relating to the proposed performance fee must be obtained by Sterling Johnston
from the SEC before the Performance Fee Amendment can become effective.
THE FIXED INCOME II PORTFOLIO. The investment objective of The Fixed Income II
Portfolio is to achieve above-average return over a market cycle of three to
five years. It is anticipated that the performance benchmark for this Portfolio
will be the Lehman Brothers Aggregate Bond Index. Although there is no minimum
or maximum maturity for any individual security, the Specialist Manager actively
manages the interest rate risk of the Portfolio within a range relative to this
benchmark and the effective dollar weighted average portfolio maturity of the
Portfolio will generally be over 5 years. The Portfolio may invest more than 50%
of its assets in mortgage-backed securities. Investments in these securities are
subject to the risk that, if interest rates decline, borrowers may pay off their
mortgages sooner than expected. If this occurs, the Portfolio would have to
reinvest at lower interest rates. Prepayment rates can also shorten or extend
the average life of the Portfolio's mortgage securities.
THE HIGH-YIELD PORTFOLIO. The investment objective of The High Yield Portfolio
is to achieve above-average return over a market cycle of three to five years.
It is anticipated that the performance benchmark for this Portfolio will be the
Credit Swiss/First Boston High Yield Index. Although there is no minimum or
maximum maturity for any individual security, the Specialist Manager actively
manages the interest rate risk of the Portfolio within a range relative to this
benchmark and the effective dollar weighted average portfolio maturity of the
Portfolio will generally be over 5 years.
THE HIRTLE CALLAGHAN TRUST
SUPPLEMENT TO PROSPECTUS
DATED SEPTEMBER 25, 2000
SUPPLEMENT DATE: OCTOBER 31, 2000
