<PAGE> 1
As filed with the Securities and Registration No. 2-96219
Exchange Commission on December 17, 1996. 811-4182
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 23 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 25 [x]
(Check appropriate box or boxes)
------------------------
HOTCHKIS AND WILEY FUNDS
(Exact name of registrant as specified in charter)
800 West 6th Street, Fifth Floor
Los Angeles, California 90017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (213) 362-8900
PAUL H. DYKSTRA, ESQ.
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610-4795
(Name and address of Agent for Service)
Approximate date of proposed public offering: As soon as practicable
after the effective date of the registration statement.
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on January 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
================================================================================
Registrant has previously elected to register an indefinite number of
its shares of beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940.
Registrant filed its Rule 24f-2 Notice for the fiscal year ended
June 30, 1996 on or about August 29, 1996.
<PAGE> 2
HOTCHKIS AND WILEY FUNDS
CROSS-REFERENCE SHEET
(REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
Location in the Prospectus of the Equity
Income Fund, Mid-Cap Fund, Small Cap Fund,
International Fund, Global Equity Fund,
Balanced Income Fund, Low Duration
N-1A Fund, Short-Term Investment Fund Location in the Prospectus of the
Item No. and Total Return Bond Fund Equity Fund for Insurance Companies
-------- ------------------------------------------- -----------------------------------
Part A:
<S> <C> <C> <C>
Item 1. Cover Page Cover Page Cover Page
Item 2. Synopsis Fee Table Fee Table
Item 3. Condensed Financial Financial Highlights Financial Highlights
Information
Item 4. General Description of Cover Page; General Information; Investment Cover Page; General
Registrant Objectives and Policies; Securities and Information; Investment Objective and
Techniques Used by the Funds; Investment Policies; Principal Investment
Risks; Principal Investment Restrictions Restrictions
Item 5. Management of the Fund Organization and Management; General Organization and Management; General
Information Information
Item 5A. Management's Discussion Performance Information Performance Information
of Fund Performance
Item 6. Capital Stock and Other General Information; Dividends and Tax General Information; Dividends and Tax
Securities Status; Organization and Management Status; Organization and Management
Item 7. Purchase of Securities How to Purchase Shares How to Purchase Shares
Being Offered
Item 8. Redemption or How to Redeem Shares How to Redeem Shares
Repurchase
Item 9. Pending Legal Not Applicable Not Applicable
Proceedings
</TABLE>
<TABLE>
<CAPTION>
Part B: Location in the Statement of Additional Information
---------------------------------------------------
<S> <C> <C>
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information about the Trust
Item 13. Investment Objectives and Investment Objective and Policies
Policies
Item 14. Management of the Registrant Management
Item 15. Control Persons and Principal General Information about the Trust
Holders of Securities
Item 16. Investment Advisory and Other Management
Securities
Item 17. Brokerage Allocation and Other Management
Practices
Item 18. Capital Stock and Other General Information about the Trust
Securities
Item 19. Purchase, Redemption and Net Asset Value
Pricing of Securities Being
Offered
Item 20. Tax Status Dividends and Tax Status
Item 21. Underwriters Not Applicable
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
Part C:
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective
Amendment to the Registration Statement.
<PAGE> 3
The Prospectus of the Equity Income Fund, the Mid-Cap Fund, the Small
Cap Fund, the International Fund, the Global Equity Fund, the Balanced Income
Fund, the Total Return Bond Fund, the Low Duration Fund and the Short-Term
Investment Fund, the Prospectus of the Equity Fund for Insurance Companies and
the Statement of Additional Information of the Hotchkis and Wiley Funds
included in Post-Effective Amendment No. 22 to the Registration Statement on
Form N-1A (File Nos. 2-96219 and 811-4182) filed on October 18, 1996 are
incorporated by reference in their entirety. This Post-Effective Amendment to
the Registration Statement is not intended to amend either Prospectus of the
Hotchkis and Wiley Funds, nor the Statement of Additional Information of the
Hotchkis and Wiley Funds referred to in the preceding sentence.
<PAGE> 4
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following audited financial statements are included in the
Statement of Additional Information constituting Part B of this Registration
Statement:
Equity Fund for Insurance Companies Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, years ended June 30, 1996
and 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Equity Income Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, years ended June 30, 1996
and 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Balanced Income Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, years ended June 30, 1996
and 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Small Cap Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, years ended June 30, 1996
and 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
International Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, years ended June 30, 1996
and 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
C-1
<PAGE> 5
Low Duration Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, years ended June 30, 1996
and 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Short-Term Investment Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, years ended June 30, 1996
and 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Total Return Bond Series
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, June 30, 1996
Statement of Changes in Net Assets, year ended June 30, 1996
and December 6, 1994 through June 30, 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
The following financial statements are included in the Prospectuses
constituting Part A of this Registration Statement:
Financial Highlights
(b) Exhibits:
(1)(a) Restated Declaration of Trust*
(b) Certificate of Designation*
(2) By-Laws1
(3) Not applicable
(4) Specimen stock certificate2
(5) (a) Investment Advisory Agreement relating to the
Balanced Income Fund*
(b) Investment Advisory Agreement relating to the
Equity Income Fund*
(c) Investment Advisory Agreement relating to the
International Fund*
(d) Investment Advisory Agreement relating to the
Equity Fund for Insurance Companies*
(e) Investment Advisory Agreement relating to the
Low Duration Fund*
(f) Investment Advisory Agreement relating to the
Total Return Bond Fund*
(g) Investment Advisory Agreement relating to the
Small Cap Fund*
(h) Investment Advisory Agreement relating to the
Short-Term Investment Fund*
(i) Form of Investment Advisory Agreement
relating to the Mid-Cap Fund*
(j) Form of Investment Advisory Agreement
relating to the Global Equity Fund*
(6) Agreement with First Fund Distributors, Inc.5
(7) Not applicable
(8) (a) Custodian Agreement with First Wisconsin Trust
Company4
C-2
<PAGE> 6
(b) Sub-Custodian Agreement between First Wisconsin
Trust Company and Chase Manhattan Bank, N.A.6
(9) (a) Fund Administration Servicing Agreement7
(b) License Agreement with Merrill Lynch & Co., Inc.*
(10) Not applicable
(11) Consents of Price Waterhouse LLP*
(12) Not applicable
(13) Investment letter2
(14) Individual Retirement Account application3
(15) Not applicable
(16) Performance calculation6
(18) Not applicable
(27) Financial Data Schedules7
(27.1) Financial Data Schedule Balanced Income Fund
(27.2) Financial Data Schedule Small Cap Fund
(27.3) Financial Data Schedule Equity Income Fund
(27.4) Financial Data Schedule International Fund
(27.5) Financial Data Schedule Equity Fund For
Insurance Companies
(27.6) Financial Data Schedule Low Duration Fund
(27.7) Financial Data Schedule Short-Term Investment Fund
(27.8) Financial Data Schedule Total Return Bond Fund
1Incorporated herein by reference and previously filed as an exhibit
to the Registration Statement on Form N-1A (File No. 2-96219), filed on
March 5, 1985.
2Incorporated herein by reference and previously filed as an exhibit
to Pre-effective Amendment No. 2 to the Registration Statement on Form N-1A.
3Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 7 to the Registration Statement on Form N-1A,
filed on July 20, 1990.
4Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 8 to the Registration Statement on Form N-1A,
filed on September 18, 1990.
5Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 9 to the Registration Statement on Form N-1A,
filed on May 22, 1991.
6Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 11 to the Registration Statement on Form N-1A,
filed on September 23, 1992.
7Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 21 to the Registration Statement on Form N-1A
filed via EDGAR on October 3, 1996.
8Incorporated herein by reference and previously filed as an exhibit to
Post-effective Amendment No. 22 to the Registration Statement on Form N-1A filed
via EDGAR on October 18, 1996.
- --------------------------
* Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See "General Information About the Trust" in the Statement of
Additional Information.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
At November 30, 1996, there were 158 record holders of shares of
beneficial interest of the Small Cap Series of the Registrant, 365 record
holders of shares of beneficial interest of the Balanced Income Series, 506
record holders of shares of beneficial interest of the Equity Income Series,
7,150 record holders of shares of beneficial interest of the International
Series, 1 record holder of shares of beneficial interest of the Equity Fund
for Insurance Companies Series, 1,261 record holders of shares of beneficial
interest of the Low Duration Series, 113 record holders of shares of beneficial
interest of the Short-Term Investment Series and 65 record holders of shares of
beneficial interest of the Total Return Bond Series.
C-3
<PAGE> 7
ITEM 27. INDEMNIFICATION.
Section 12 of Article SEVENTH of Registrant's Declaration of Trust,
states as follows:
(c)(1) As used in this paragraph the following terms shall
have the meanings set forth below:
(i) the term "indemnitee" shall mean any present
or former Trustee, officer or employee of the Trust, any
present or former Trustee or officer of another trust or
corporation whose securities are or were owned by the Trust or
of which the Trust is or was a creditor and who served or
serves in such capacity at the request of the Trust, any
present or former investment advisor, sub-advisor or principal
underwriter of the Trust and the heirs, executors,
administrators, successors and assigns of any of the
foregoing; however, whenever conduct by an indemnitee is
referred to, the conduct shall be that of the original
indemnitee rather than that of the heir, executor,
administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, to
which an indemnitee is or was a party or is threatened to be
made a party by reason of the fact or facts under which he or
it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office
in question;
(iv) the term "covered expenses" shall mean
expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
an indemnitee in connection with a covered proceeding; and
(v) the term "adjudication of liability" shall
mean, as to any covered proceeding and as to any indemnitee,
an adverse determination as to the indemnitee whether by
judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any
covered expenses in any covered proceeding if there has been an
adjudication of liability against such indemnitee expressly based on a
finding of disabling conduct.
(e) Except as set forth in (d) above, the Trust shall
indemnify an indemnitee for covered expenses in any covered
proceeding, whether or not there is an adjudication of liability as to
such indemnitee, if a determination has been made that the indemnitee
was not liable by reason of disabling conduct by (i) a final decision
of the court or other body before which the covered proceeding was
brought; or (ii) in the absence of such decision, a reasonable
determination, based on a review of the facts, by either (a) the vote
of a majority of a quorum of Trustees who are neither "interested
persons," as defined in the 1940 Act, nor parties to the covered
proceeding or (b) an independent legal counsel in a written opinion;
provided that such Trustees or counsel, in reaching such
determination, may but need not presume the absence of disabling
conduct on the part of the indemnitee by reason of the manner in which
the covered proceeding was terminated.
(f) Covered expenses incurred by an indemnitee in
connection with a covered proceeding shall be advanced by the Trust to
an indemnitee prior to the final disposition of a covered proceeding
upon the request of the indemnitee for such advance and the
undertaking by or on behalf of the indemnitee to repay the advance
unless it is ultimately determined that the indemnitee is entitled to
indemnification thereunder, but only if one or more of the following
is the case: (i) the indemnitee shall provide a security for such
undertaking; (ii) the Trust shall be insured against losses arising
out of any lawful advances; or (iii) there shall have been a
determination, based on a review of the readily available facts (as
opposed to a full trial-type inquiry) that there is a reason to
believe that the indemnitee ultimately will be found entitled to
indemnification by either independent legal counsel in a written
opinion or by the vote of a majority of a
C-4
<PAGE> 8
quorum of trustees who are neither "interested persons" as defined in
the 1940 Act nor parties to the covered proceeding.
(g) Nothing herein shall be deemed to affect the right of
the Trust and/or any indemnitee to acquire and pay for any insurance
covering any or all indemnitees to the extent permitted by the 1940
Act or to affect any other indemnification rights to which any
indemnitee may be entitled to the extent permitted by the 1940 Act.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Hotchkis and Wiley, a division of the Capital Management Group of
Merrill Lynch Asset Management, L.P., is the investment advisor of the
Registrant's ten series of shares. For information as to the business,
profession, vocation or employment of a substantial nature of Hotchkis and Wiley
and its managing directors, reference is made to Part B of this Registration
Statement and to the Form ADV filed under the Investment Advisers Act of 1940 by
Hotchkis and Wiley (File No. 801-15345).
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The Registrant's principal underwriter, First Fund
Distributors, Inc., also acts as principal underwriter for the following
investment companies:
Berger/BIAM International Funds
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Masters Select Investment Trust
O'Shaunessy Funds, Inc.
PIC Investment Trust
Professionally Managed Portfolios:
Academy Value Fund
Avondale Total Return Fund
Boston Managed Growth Fund
Harris, Bretall, Sullivan & Smith
Growth Equity Fund
Kayne Anderson Mutual Fund
Leonetti Balanced Fund
Lighthouse Growth Fund
Osterweis Fund
Perkins Micro-Cap Fund
Perkins Opportunity Fund
Pro-Conscience Women's Equity Mutual Fund
Pzena Focused Value Fund
Titan Financial Services Fund
Trent Equity Fund
US Global Growth Fund
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
C-5
<PAGE> 9
(b) The following information is furnished with respect to the
officers and directors of First Fund Distributors, Inc.:
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
---------------- ----------- ----------
Robert H. Wadsworth President & None
4455 E. Camelback Road Treasurer
Suite 261E
Phoenix, Arizona 85018
Steven J. Paggioli Vice President & Assistant Secretary
479 West 22nd Street Secretary
New York, New York 10011
Eric Banhazl Vice President None
20025 East Financial Way
Glendora, California 91741
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of Registrant or
Registrant's investment adviser, 800 West 6th Street, Fifth Floor, Los Angeles,
California 90017, Registrant's custodian and administrator, Firstar Trust
Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202, or Registrant's
sub-custodian, The Chase Manhattan Bank, N.A., Four Chase Metro Tech Center,
Brooklyn, New York 11245.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
The Registrant hereby undertakes to furnish to each person to whom a
Prospectus is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
The Registrant hereby undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from the effective date of Post-Effective Amendment No. 22 to
Registrant's Registration Statement.
C-6
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles and State of California on the 17th day of December, 1996.
HOTCHKIS AND WILEY FUNDS
By: /s/ NANCY D. CELICK
-------------------------------
Nancy D. Celick
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ NANCY D. CELICK Principal Executive Officer December 17, 1996
- ----------------------------------------
Nancy D. Celick
/s/ GRACIE FERMELIA Principal Financial and Accounting December 17, 1996
- ---------------------------------------- Officer
Gracie Fermelia
/s/ ROBERT L. BURCH III Trustee December 17, 1996
- ----------------------------------------
Robert L. Burch III
/s/ JOHN GAVIN Trustee December 17, 1996
- ----------------------------------------
John Gavin
/s/ JOHN F. HOTCHKIS Trustee December 17, 1996
- ----------------------------------------
John F. Hotchkis
/s/ ROBERT B. HUTCHINSON Trustee December 17, 1996
- ----------------------------------------
Robert B. Hutchinson
/s/ MERLE T. WELSHANS Trustee December 17, 1996
- ----------------------------------------
Merle T. Welshans
Trustee
- ----------------------------------------
Joe Grills
Trustee
- ----------------------------------------
Michael L. Quinn
Trustee
- ----------------------------------------
Richard R. West
</TABLE>
<PAGE> 11
HOTCHKIS AND WILEY FUNDS
EXHIBIT INDEX
Exhibit
Number Description Page
- ------- ---------- ----
(1) (a) Restated Declaration of Trust*
(b) Certificate of Designation*
(2) By-Laws1
(3) Not applicable
(4) Specimen stock certificate2
(5) (a) Investment Advisory Agreement relating to the
Balanced Income Fund*
(b) Investment Advisory Agreement relating to the Equity
Income Fund*
(c) Investment Advisory Agreement relating to the
International Fund*
(d) Investment Advisory Agreement relating to the Equity
Fund for Insurance Companies*
(e) Investment Advisory Agreement relating to the Low
Duration Fund*
(f) Investment Advisory Agreement to the Total Return
Bond Fund*
(g) Investment Advisory Agreement relating to the Small
Cap Fund*
(h) Investment Advisory Agreement relating to the
Short-Term Investment Fund*
(i) Form of Investment Advisory Agreement relating to the
Mid-Cap Fund*
(j) Form of Investment Advisory Agreement relating to the
Global Equity Fund*
(6) Agreement with First Fund Distributors, Inc.5
(7) Not applicable
(8) (a) Custodian Agreement with First Wisconsin Trust
Company4
(b) Sub-Custodian Agreement between First Wisconsin Trust
Company and Chase Manhattan Bank, N.A.6
(9) (a) Fund Administration Servicing Agreement7
(b) License Agreement with Merrill Lynch & Co., Inc.*
(10) Not applicable
(11) Consents of Price Waterhouse LLP*
<PAGE> 12
Exhibit
Number Description Page
- ------- ----------- ----
(12) Not applicable
(13) Investment letter2
(14) Individual Retirement Account application3
(15) Not applicable
(16) Performance calculation6
(18) Not applicable
(27) Financial Data Schedules7
(27.1) Financial Data Schedule Balanced Income Fund
(27.2) Financial Data Schedule Small Cap Fund
(27.3) Financial Data Schedule Equity Income Fund
(27.4) Financial Data Schedule International Fund
(27.5) Financial Data Schedule Equity Fund For Insurance Companies
(27.6) Financial Data Schedule Low Duration Fund
(27.7) Financial Data Schedule Short-Term Investment Fund
(27.8) Financial Data Schedule Total Return Bond Fund
1Incorporated herein by reference and previously filed as an exhibit
to the Registration Statement on Form N-1A (File No. 2-96219), filed on
March 5, 1985.
2Incorporated herein by reference and previously filed as an exhibit
to Pre-effective Amendment No. 2 to the Registration Statement on Form N-1A.
3Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 7 to the Registration Statement on Form N-1A,
filed on July 20, 1990.
4Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 8 to the Registration Statement on Form N-1A,
filed on September 18, 1990.
5Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 9 to the Registration Statement on Form N-1A,
filed on May 22, 1991.
6Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 11 to the Registration Statement on Form N-1A,
filed on September 23, 1992.
7Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 21 to the Registration Statement on Form N-1A
filed via EDGAR on October 3, 1996.
8Incorporated herein by reference and previously filed as an exhibit
to Post-effective Amendment No. 22 to the Registration Statement on Form N-1A
filed via EDGAR on October 18, 1996.
- --------------------------
* Filed herewith
2
<PAGE> 1
EXHIBIT 99.B1(a)
HOTCHKIS AND WILEY FUNDS
RESTATED DECLARATION OF TRUST
WHEREAS, Paragraph 11(d) of Article EIGHTH of the DECLARATION OF
TRUST of Hotchkis and Wiley Funds dated August 22, 1984, as amended to date,
provides that the said Declaration of Trust and all amendments thereto may be
restated as a single instrument if executed by a majority of the Trustees;
NOW, THEREFORE, the said Declaration of Trust, as amended to date,
is hereby restated in its entirety to read as follows:
WHEREAS, this Trust has been formed for the investment and
reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the Trust hereunder shall be held and managed under this
Declaration of Trust IN TRUST as herein set forth below.
FIRST: This Trust shall be known as HOTCHKIS AND WILEY FUNDS.
SECOND: Whenever used herein, unless otherwise required by the
context or specifically provided:
1. All terms used in this Declaration of Trust which are defined in the
1940 Act shall have the meanings given to them in the 1940 Act.
2. The "Trust" refers to HOTCHKIS AND WILEY FUNDS.
3. "Shareholder" means a record owner of Shares of the Trust.
4. The "Trustees" refer to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the time
being in office as such trustees.
<PAGE> 2
5. "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
6. The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time, together with the rules, regulations and any relevant
exemptive orders of the Commission from time to time in effect thereunder.
7. "Commission" means the Securities and Exchange Commission.
8. "Board" or "Board of Trustees" means the Board of Trustees of the
Trust.
9. In this Declaration of Trust, the masculine embraces the feminine.
10. "Majority Shareholder Vote", as used with respect to the election of
any Trustee at a meeting of Shareholders, shall mean the vote for the election
of such Trustee of a plurality of all outstanding Shares of the Trust, without
regard to Series or Class, represented in person or by proxy and entitled to
vote thereon, provided, that a quorum is present; and as used with respect to
any other action required or permitted to be taken by Shareholders, shall mean
the affirmative vote for such action of the holders of that number of all
outstanding Shares (or, where a separate vote of Shares of any particular Series
or Class is to be taken, the affirmative vote of that number of the outstanding
Shares of that Series or Class) of the Trust which constitutes: (a) a majority
of all Shares (or of Shares of the particular Series or Class) represented in
person or by proxy and entitled to vote on such action at the meeting of
Shareholders at which such action is to be taken, provided, that a quorum is
present; or (b) if such vote is to be given or such action is to be taken by
written consent of Shareholders, a majority of all Shares (or of Shares of the
particular Series or Class) issued and outstanding and entitled to vote on such
action; or (c) as used with respect to
2
<PAGE> 3
any action requiring the affirmative vote of "a majority of the outstanding
voting securities", as the quoted phrase is defined in the 1940 Act, of the
Trust or of any Series or Class, "Majority Shareholder Vote" means the vote for
such action at a meeting of Shareholders of the smallest majority of all
outstanding Shares of the Trust (or of Shares of the particular Series or Class)
entitled to vote on such action which satisfies such 1940 Act voting
requirement.
11. "Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
12. "Prospectus", as used with respect to any Fund or Series of Shares
shall mean the prospectus relating to such Fund or Series which constitutes part
of the currently effective Registration Statement of the Trust under the 1933
Act, as such prospectus may be amended or supplemented from time to time.
13. "Single Class Voting", as used with respect to any matter to be
acted upon at a meeting or by written consent of Shareholders, shall mean a
style of voting in which each holder of one or more Shares shall be entitled to
one vote on the matter in question for each Share standing in his name on the
records of the Trust, irrespective of Series or Class, and all outstanding
Shares or all Series or Classes vote as a single class.
14. "Trust Property" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or the
Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
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such time is owned or held by, or for the account of, the Trust or the Trustees,
without regard to the Fund to which such property is allocated.
15. "1933 Act" shall mean the federal Securities Act of 1933 and the
rules and regulations of the Commission thereunder, all as from time to time
amended and in effect.
THIRD: The purpose or purposes for which the Trust is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
1. To hold, invest and reinvest its funds, and in connection therewith
to hold part or all of its funds in cash, and to purchase or otherwise acquire,
hold for investment or otherwise, sell, sell short, assign, negotiate, transfer,
exchange or otherwise dispose of or turn to account or realize upon, securities
(which term "securities" shall for the purposes of this Declaration of Trust,
without limitation of the generality thereof, be deemed to include any stocks,
shares, bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same, or evidencing or representing any
other rights or interests therein, or in any property or assets) created or
issued by any issuer (which term "issuer" shall for the purposes of this
Declaration of Trust, without limitation of the generality thereof be deemed to
include any persons, firms, associations, corporations, syndicates,
combinations, organizations, governments, or subdivisions thereof) or in any
other financial instruments whether or not considered as securities or
commodities; and to exercise, as owner or holder of any securities or other
financial instruments, all rights, powers and privileges in respect thereof; and
to do any and all acts and things for the preservation, protection, improvement
and enhancement in value of any or all such securities.
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2. To borrow money and pledge assets in connection with any of the
objects or purposes of the Trust, and to issue notes or other obligations
evidencing such borrowings, to the extent permitted by the 1940 Act and by the
Trust's fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such amounts and on such terms and
conditions, for such purposes and for such amount or kind of consideration
(including without limitation thereto, securities or other financial
instruments) now or hereafter permitted by the laws of the Commonwealth of
Massachusetts and by this Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the Shareholders
of the Trust) its Shares, in any manner and to the extent now or hereafter
permitted by the laws of Massachusetts and by this Declaration of Trust.
5. To conduct its business in all its branches at one or more offices
in Massachusetts and elsewhere in any part of the world, without restriction or
limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or, to the extent now or
hereafter permitted by the laws of Massachusetts, as a member of, or as the
owner or holder of any stock of, or share of interest in, any issuer, and in
connection therewith to make or enter into such deeds or contracts with any
issuers and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
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7. To do any and all such further acts and things and to exercise any
and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Articles of this Declaration
of Trust, and shall each be regarded as independent and construed as powers as
well as objects and purposes, and the enumeration of specific purposes, objects
and powers shall not be construed to limit or restrict in any manner the meaning
of general terms or the general powers of the Trust now or hereafter conferred
by the laws of the Commonwealth of Massachusetts nor shall the expression of one
thing be deemed to exclude another, though it be of like nature, not expressed;
provided, however, that the Trust shall not carry on any business, or exercise
any powers, in any state, territory, district or country except to the extent
that the same may lawfully be carried on or exercised under the laws thereof.
FOURTH: The beneficial interest in the Trust shall at all times be divided
into an unlimited number of transferable Shares without par value.
1. Establishment and Designation of Funds and Series and Classes of
Shares.
(a) Initial Funds and Series of Shares. The assets held by the Trust
on the date on which the amendment of this Declaration first providing for
separate Classes of Shares within Series became effective (the "Effective Date")
are divided into separate portfolios or funds (each, a "Fund") of the Trust, of
which there are eight (8), known as the Equity Income Fund, the Small Cap Fund,
the International Fund, the Balanced Income Fund, the Total Return Bond Fund,
the Low Duration Fund, the Short-Term Investment Fund and the Equity Fund for
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Insurance Companies (collectively, the "Initial Funds", and each singly, an
"Initial Fund"), the beneficial interests in each of which are at the Effective
Date represented by a separate series of Shares known, respectively, as the
Equity Income Series, the Small Cap Series, the International Series, the
Balanced Income Series, the Total Return Bond Series, the Low Duration Series,
the Short-Term Investment Series and the Equity Fund for Insurance Company
Series (collectively, the "Initial Series", and each singly, an "Initial
Series"). An unlimited number of Shares of each Initial Series may be issued.
The Shares of any Initial Series may at any time be divided into two or more
Classes pursuant to paragraph (c) of this Section 1.
(b) Additional Funds and Series of Shares. The Trustees shall have
the power and authority, at any time or from time to time, and without any
requirement of Shareholder approval, to establish and designate one or more
additional distinct and independent Funds, in addition to the Initial Funds
(each such Fund an "Additional Fund") for the purpose of holding one or more
separate and distinct portfolios of assets, and to authorize a separate Series
of Shares to represent the beneficial interests in each such Additional Fund
(each such additional Series, an "Additional Series"). Such establishment and
designation shall be effective upon the execution by a Majority of the Trustees
(or by an officer of the Trust pursuant to the vote of a Majority of the
Trustees) of an instrument setting forth the establishment and designation of
such Fund and the relative rights and preferences of such Series of Shares, and
the manner in which the same may be amended (a "Certificate of Designation").
The Certificate of Designation establishing an Additional Fund may provide that
the number of Shares of such Fund which may be issued is unlimited, or may limit
the number of Shares, and may provide that its Shares shall be divided into
Classes, or shall consist of a single Class.
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(c) Classes of Shares. Without limitation of any other powers
accorded to them by this Declaration or otherwise, the Trustees shall have
power, at any time or from time to time, and without the necessity for any
Shareholder approval, to authorize two or more separate Classes of Shares of any
Initial Series, or any Additional Series initially authorized without Classes,
as they deem necessary or desirable, by vote of a Majority of the Trustees, and
in such connection to fix and determine the relative rights and burdens of
Shares of the respective Classes of such Series as to sales charges, redemption
charges or other fees and charges to which such Shares shall be subject,
allocations of expenses, rights of redemption, special and related rights as to
dividends and on liquidation, conversion rights, and conditions under which
Shareholders of the several Classes shall have separate voting rights or
(subject to the provisions of paragraph 1 of Article FIFTH) no voting rights.
Any such authorization of Classes shall be effective upon the execution by a
Majority of the Trustees (or by an officer of the Trust pursuant to the vote of
a Majority of the Trustees) of an instrument amending this Declaration of Trust
(in the case of an Initial Series) or the Certificate of Designation
establishing such Series (in the case of an Additional Series) setting forth
such provisions and the manner in which the same may be amended.
2. Changes of Terms of Series and Classes. At any time at which no
Shares of a Series are outstanding, the Trustees may terminate such Series and
the Fund to which it pertains, and at any time at which no Shares of a
particular Class and no Shares of any other Class which are convertible into
Shares of such Class are outstanding, the Trustees may terminate such Class. Any
such termination of a Series or Class shall be effected by the execution by a
Majority of the Trustees, or by an officer of the Trust pursuant to the vote of
a Majority of the Trustees, of an
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instrument so providing (a "Certificate of Termination"). Each Certificate of
Designation or Certificate of Termination, any instrument amending a Certificate
of Designation, and any instrument authorizing the establishment of Classes of
the Shares of a Series shall have the status of an amendment to this Declaration
of Trust, and shall be filed as provided in paragraph 11 of Article EIGHTH
hereof, but such filing shall not be a prerequisite to the effectiveness
thereof.
3. Reclassification of Shares. Without limitation of any other powers
accorded to them by this Declaration or otherwise, the Trustees shall have power
to classify or reclassify any unissued Shares, or any Shares of any Series
previously issued and reacquired by the Trust, into Shares of one or more other
Series that may be established and designated from time to time; and to classify
or reclassify any unissued Shares of any Series, or any Shares of any Series
previously issued and reacquired by the Trust (including in either case Shares
of the Initial Funds) into any number of additional Classes of such Series by
setting or changing in one or more respects provisions applicable to such Class
or Classes relating to sales charges, any rights of redemption and the price,
terms and manner of redemption, special and relative rights as to dividends and
other distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and (subject to the provisions of paragraph 1 of Article
FIFTH) the conditions under which the Shareholders of the several Classes shall
have separate voting rights or no voting rights. Except as otherwise provided as
to a particular Fund herein or in the Certificate of Designation therefor, the
Trustees shall have all the rights and powers, and be subject to all the duties
and obligations, with respect to each such Fund and the assets and affairs
thereof as they have under this Declaration with respect to the Trust and the
Trust Property in general.
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4. Character of Separate Funds and Shares Thereof. Each Fund
established hereunder shall be a separate component of the assets of the Trust,
and the holders of Shares of the Series representing the beneficial interests in
that Fund shall be considered Shareholders of such Fund, and also as
Shareholders of the Trust for purposes of receiving reports and notices and
(except as otherwise provided herein or in the Certificate of Designation for a
particular Fund as to such Fund, or as required by the 1940 Act or other
applicable law) the right to vote, all without distinction by Series.
5. Consideration for Shares. The Trustees may issue Shares of any
Series to such Persons, or for such consideration (which may include property
subject to, or acquired in connection with the assumption of, liabilities) and
on such terms, not inconsistent with the provisions of the 1940 Act, as they may
determine (or for no consideration if pursuant to a Share dividend or split-up),
all without action or approval of the Shareholders. Contributions to the Trust
may be accepted for, and Shares shall be redeemed as, whole Shares and/or one
one-thousandth (1/1000th) of a Share or multiples thereof. All Shares when so
issued on the terms determined by the Trustees shall be fully paid and
non-assessable (but may be subject to mandatory contribution back to the Trust
as provided in sub-section (f) of paragraph 6 of this Article FOURTH). The
Trustees may authorize any distributor, principal underwriter, custodian,
transfer agent or other Person to accept orders for the purchase of Shares that
conform to such authorized terms and to reject any purchase orders for Shares,
whether or not conforming to such authorized terms.
6. General Provisions for All Funds Subject to the power of the
Trustees to classify or reclassify any unissued Shares of a Series in accordance
with paragraph 4 of this Article
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FOURTH, the Shares of the Initial Funds, and (unless
the Trustees otherwise determine with respect to an Additional Fund at the time
of establishing and designating the same) of any Additional Funds that may from
time to time be established and designated by the Trustees, shall have the
following relative rights and preferences:
(a) Assets Belonging to Funds. Any portion of the Trust Property
allocated to a particular Fund, and all consideration received by the Trust for
the issue or sale of Shares of such Fund, together with all assets in which such
consideration is invested or reinvested, all interest, dividends, income,
earnings, profits and gains therefrom, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds, in whatever
form the same may be, shall be held by the Trustees in trust for the benefit of
the holders of Shares of that Fund and shall irrevocably belong to that Fund for
all purposes, and shall be so recorded upon the books of account of the Trust,
and the Shareholders of such Fund shall not have, and shall be conclusively
deemed to have waived, any claims to the assets of any Fund of which they are
not Shareholders. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items allocated
to that Fund as provided in the following sentence, are herein referred to
collectively as "Fund Assets" of such Fund, and as assets "belonging to" that
Fund. If the Trust shall have or realize any assets, interest, dividends,
income, earnings, profits, gains or proceeds which are not readily identifiable
as belonging to any particular Fund (collectively, "General Items"), the
Trustees shall allocate such General Items to and among any one or more of the
Funds of the Trust in such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items so allocated to a
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particular Fund shall belong to and be part of the Fund Assets of that Fund.
Each such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Funds for all purposes.
(b) Liabilities of Funds. The assets belonging to each Fund shall be
charged with the liabilities incurred by or arising in respect of that Fund and
all expenses, costs, charges and reserves attributable to that Fund, and at any
time at which the Trust shall have more than one Fund, any general liabilities,
expenses, costs, charges or reserves which are not readily identifiable as
pertaining to any particular Fund shall be allocated and charged by the Trustees
to and among any one or more of the Funds of the Trust in such manner and on
such basis as the Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges and reserves so allocated and so charged
to a particular Fund are herein referred to as "liabilities of" that Fund. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the Shareholders of all Funds for all
purposes. The creditors of a particular Fund may look only to the assets of that
Fund to satisfy such creditors' claims, and the creditors of a particular Class
of a Fund may look only to the share of that Class in the Fund Assets of such
Fund to satisfy their claims.
(c) Dividends. Dividends and distributions on Shares of any Series
shall, subject to any applicable provisions of the 1940 Act or other applicable
law or regulation, be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to the
Shareholders of that Series, from such of the income, accrued or realized, and
capital gains, realized or unrealized, and out of the assets belonging to the
Fund to
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which such Series pertains, as the Trustees may determine, after providing for
actual and accrued liabilities of that Fund. All dividends and distributions on
Shares of any Series without separate Classes shall be distributed pro rata to
the holders of Shares of that Series in proportion to the number of such Shares
held by such holders at the date and time of record established for the payment
of such dividends or distributions. Dividends and distributions on the Shares of
a Fund having separate Classes of Shares shall be in such amount as may be
declared from time to time by the Trustees, and such dividends and distributions
may vary as between such Classes to reflect differing allocations among such
Classes of the liabilities, expenses, costs, charges and reserves of such Fund,
and any resultant differences between the net asset value of such several
Classes, to such extent and for such purposes as the Trustees may deem
appropriate, but dividends and distributions on the Shares of a particular Class
shall be distributed pro rata to the Shareholders of that Class in proportion to
the number of such Shares held by such holders at the date and time of record
established for the payment of such dividends and distributions. Notwithstanding
the last two preceding sentences, the Trustees may determine, in connection with
any dividend or distribution program or procedure, that no dividend or
distribution shall be payable on newly-issued Shares as to which the
Shareholder's purchase order and/or payment have not been received by the time
or times established by the Trustees under such program or procedure, or that
dividends or distributions shall be payable on Shares which have been tendered
by the holder thereof for redemption or repurchase, but the redemption or
repurchase proceeds of which have not yet been paid to such Shareholder.
Dividends and distributions on the Shares of a Series may be made in cash or
Shares of any Class of that Series, or a combination thereof, as determined by
the Trustees, or pursuant to any program that the Trustees may have in effect at
the time for the
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election by each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution paid in
Shares will be paid at the net asset value thereof as determined in accordance
with paragraph 13 of Article SEVENTH.
(d) Liquidation; Dissolution; Termination. In the event of the
liquidation or dissolution of the Trust, the Shareholders of each Fund with
outstanding Shares shall be entitled to receive, and in the event of the
liquidation, dissolution or termination of any single Fund having outstanding
Shares, the Shareholders of such Fund shall be entitled to receive, when and as
declared by the Trustees, the excess of the Fund Assets of such Fund over the
liabilities of such Fund. The assets so distributable to the Shareholders of any
Fund without Classes shall be distributed among such Shareholders in proportion
to the number of Shares of that Fund held by them and recorded on the books of
the Trust. The assets so distributable to the Shareholders of any Fund with
Classes shall be allocated among such Classes in proportion to the respective
share of such Class in the Fund Assets of such Fund, and shall be distributed to
the Shareholders of each such Class in proportion to the number of Shares of
that Class held by them and recorded on the books of the Trust.
(e) Redemption by Shareholder. Each holder of Shares of any Series
or Class shall have the right at such times as may be permitted by the Trustees,
but no less frequently than once each week, to require the Trust to redeem all
or any part of such Shares at a redemption price equal to the net asset value of
such Shares next determined in accordance with paragraph 13 of Article SEVENTH;
provided, that the Trustees may from time to time, in their discretion,
determine and impose a fee for such redemption, and the proceeds of the
redemption of Shares (including a fractional Share) of any Series or Class shall
be reduced by the amount of any
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applicable contingent deferred sales charge payable on such redemption pursuant
to the terms of the initial issuance of the Shares of such Series or Class (to
the extent consistent with the 1940 Act). The redemption price of Shares
redeemed under this sub-section (e) shall be paid in cash; provided, however,
that if the Trustees determine, which determination shall be conclusive, that
conditions exist with respect to any Series or Class of Shares which make
payment wholly in cash unwise or undesirable, the Trust may make payment wholly
or partly in securities or other assets belonging to such, at the value of such
securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the redemption
price and may suspend the right of the holders of Shares of any Series or Class
to require the Trust to redeem such Shares during any period or at any time when
and to the extent permissible under the 1940 Act.
(f) Shareholder Disclosure; Redemption at the Option of the Trust.
The holders of Shares of each Series and Class shall upon demand disclose to the
Trustees in writing such information with respect to their direct and indirect
ownership of Shares of such Series or Class as the Trustees deem necessary to
comply with the provisions of the Internal Revenue Code, or to comply with the
requirements of any other authority. Each Share of any Series or Class shall be
subject to redemption at the option of the Trust at the redemption price which
would be applicable if such Share were being redeemed by the Shareholder
pursuant to sub-section (e) of this paragraph 6 on the effective date of such
redemption: (i) at any time, if the Trustees determine in their sole discretion
that failure to so redeem may have materially adverse consequences to the
holders of the Shares of the Trust, generally, or of any Fund thereof, or (ii)
upon such other conditions with respect to maintenance of Shareholder accounts
with a
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minimum amount of at least five hundred dollars ($500) as may from time to time
be determined by the Trustees in accordance with the 1940 Act. The Trustees
shall have authority to fix the effective date of such redemption, which shall
be not earlier than the date on which the Trust gives notice thereof to the
shareholders whose Shares are to be redeemed. Upon such redemption the holders
of the Shares so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
(g) Equality. All Shares of each Series without Classes shall
represent an equal proportionate interest in the Fund Assets of the Fund to
which such Series pertains (subject to the liabilities of that Fund), and each
Share of any such Series shall be equal to each other Share thereof. All Shares
of each Class of any Series having separate Classes shall represent an equal
proportionate interest in the share of such Class in the Fund Assets of the Fund
to which such Series pertains, subject to a like share of the liabilities of
such Fund, adjusted for any liabilities specifically allocable to that Class,
and each Share of any such Class shall be equal to each other Share thereof; but
the interests represented by the Shares of the different Classes of a Series
having separate Classes shall reflect any distinctions among the several Classes
of such Series existing under this paragraph 6 or under sub-section (c) of
paragraph 1, of this Article FOURTH, or under the Certificate of Designation
providing for such Series. The Trustees may from time to time divide or combine
the Shares of any Series, or any Class of any Series, into a greater or lesser
number of Shares of that Series or Class without thereby changing the
proportionate beneficial interest in the Fund Assets of the Fund to which such
Series or Class pertains, or in any way affecting the rights of the holders of
Shares of any other Series or Class.
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(h) Rights of Fractional Shares. Any fractional Share of any Series
or Class of Shares shall carry proportionately all the rights and obligations of
a whole Share of that Series or Class, including rights and obligations with
respect to voting, receipt of dividends and distributions, redemption of Shares,
and liquidation of the Trust or of the Fund to which such Series or Class
pertains.
(i) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide (i) that
holders of Shares of any Series or Class shall have the right to convert said
Shares into Shares of any other investment company registered as such under the
1940 Act and designated for that purpose (an "Eligible Investment Company") in
the Trust's Prospectus for the Shares being converted, (ii) that holders of any
Class of a Series shall have the right to convert such Shares into Shares of one
or more other Classes of such Series, and (iii) that Shares of any Class of a
Series shall be automatically converted into Shares of another Class of such
Series, in each case in accordance with such requirements and procedures as the
Trustees may establish.
7. Ownership of Shares; Transfers. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer agent or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series and Class that has been authorized. All Shares of the Trust shall be
transferable, but transfers of Shares of a particular Series or Class will be
recorded on the Share transfer records of the Trust applicable to that Series or
Class only at such times as Shareholders shall have the right to require the
Trust to redeem Shares of that Series or Class and at such other times as may be
permitted by the Trustees. Certificates evidencing the ownership of Shares need
not be issued except as the Trustees may otherwise
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determine from time to time, and the Trustees shall have power to call
outstanding Share certificates and to replace them with book entries. The
Trustees may make such rules as they consider appropriate for the issuance of
Share certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer agent or similar agent, as the case may be, shall be conclusive as to
who are the Shareholders and as to the number of Shares of each Series and/or
Class held from time to time by each such Shareholder.
8. No Pre-emptive Rights. No Shareholder, by virtue of holding Shares
of any Series or Class, shall have any pre-emptive or other right to subscribe
to any additional Shares of that Series or Class, or to any Shares of any other
Series or Class, or any other securities issued by the Trust.
9. Status of Shares. Every Shareholder, by virtue of having become a
Shareholder, shall be deemed to have expressly assented and agreed to the terms
hereof and to have become a party hereto. Shares shall be deemed to be personal
property, giving only the rights provided herein. Ownership of Shares shall not
entitle the Shareholder to any title in or to the whole or any part of the Trust
Property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners. The death of a Shareholder during the continuance of the Trust shall
not operate to terminate the Trust or any Fund, nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent under this Declaration.
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10. Rights of Shareholders, and Obligations of Trustees. Notwithstanding
anything elsewhere contained in this Declaration of Trust or in the By-laws, so
long as the By-laws do not provide for regular annual meetings of Shareholders
of the Trust, the Shareholders of the Trust shall have such rights, and the
Trust, the Board of Trustees, and the Trustees shall have such obligations as
would exist if the Trust were a common law trust covered by Section 16(c) of the
1940 Act. Whenever the Trust is divided into separate Funds represented by
separate Series of Shares, each such Fund shall be considered as if it were a
separate common law trust covered by said Section 16(c). However, the Trust may
at any time or from time to time apply to the Commission for one or more
exemptions from all or part of said Section 16(c) and, if an exemptive order or
orders are issued by the Commission, such order or orders shall be deemed part
of said Section 16(c) for purposes of this paragraph 10.
FIFTH: Shareholders:
1. Voting Powers. The Shareholders shall have power to vote only for
the following matters:
(a) for the election or removal of Trustees as provided in the
By-laws;
(b) with respect to the approval or termination in accordance with
the 1940 Act of any investment advisory contract, management contract or
other contract as to which Shareholder approval is required by the 1940
Act;
(c) with respect to any amendment of this Declaration to the extent
and as provided in paragraph 11 of Article EIGHTH hereof;
(d) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or
claim should or should not
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be brought or maintained derivatively or as a class action on behalf of
the Trust or any Fund, or the Shareholders of any of them (provided,
however, that a Shareholder of a particular Fund shall not in any event be
entitled to maintain a derivative or class action on behalf of any other
Fund or the Shareholders thereof);
(e) with respect to any merger or consolidation of, or any sale
(other than a sale solely for cash) of all or substantially all the assets
of, the Trust or any Fund;
(f) as to whether the Trust or any Fund should be incorporated; and
(g) with respect to such additional matters relating to the Trust as
may be required by the 1940 Act, this Declaration of Trust, the By-Laws or
any registration of the Trust with the Commission (or any successor
agency) or any State, or as the Trustees may consider necessary or
desirable.
If and to the extent that the Trustees shall determine that such action is
required by law or by this Declaration, they shall cause each matter required or
permitted to be voted upon at a meeting or by written consent of Shareholders to
be submitted to a separate vote of the outstanding Shares of each Fund entitled
to vote thereon; provided, that (i) when required by the 1940 Act or
Massachusetts or other law, actions of Shareholders shall be taken by Single
Class Voting of all outstanding Shares of each Series and Class whose holders
are entitled to vote thereon, and (ii) when (A) the Trustees determine that any
matter to be submitted to a vote of Shareholders affects only the rights or
interests of Shareholders of one or more but not all Series, or of one or more
but not all Classes of a single Series, or (B) where a vote of the holders of
Shares of any Series or Class, or of more than one Series or Class, voting as
separate Series or Classes, is required by the 1940 Act or Massachusetts law as
to any proposal, then only the Shareholders of
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each Series or Class so affected shall be entitled to vote thereon. Without
limiting the generality of the foregoing, and except as required by the 1940 Act
or other law, the Shareholders of each Class of a Series having more than one
Class shall have exclusive voting rights with respect to the provisions of any
distribution plan adopted by the Trustees pursuant to Rule 12b-1 under the 1940
Act (a "Plan") applicable to such Class.
2. Number of Votes and Manner of Voting; Proxies. On each matter
submitted to a vote of the Shareholders, each holder of Shares of any Series or
Class of which the Shareholders are entitled to vote thereon shall be entitled
to a number of votes equal to the number of Shares and fractions of Shares of
such Series or Class standing in such Shareholder's name on the books of the
Trust on the record date for such meeting. There shall be no cumulative voting
in the election of Trustees. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided, that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken. A
proxy with respect to Shares held in the name of two (2) or more Persons shall
be valid if executed by any one of them unless at or prior to exercise of the
proxy the Trust receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. If the holder of any
such Share is a minor or a person of unsound mind, and subject to guardianship
or to the legal control of any other person as regards the charge or management
of such Share, he may vote by his guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
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3. Meetings of Shareholders. Meetings of Shareholders may be called by
the Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided, or upon
any other matter deemed by the Trustees to be necessary or desirable. The
Trustees shall promptly call a meeting of Shareholders for the purpose of voting
upon removal of any Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than ten percent (10%) of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of thirty (30) days after written application by
Shareholders holding at least ten percent (10%) of the Shares then outstanding
requesting that a meeting be called for any other purpose requiring action by
the Shareholders as provided herein or in the By-Laws, then Shareholders holding
at least ten percent (10%) of the Shares then outstanding may call and give
notice of such meeting, and thereupon the meeting shall be held in the manner
provided for herein in case of call thereof by the Trustees.
4. Notice of Meetings. Written notice of any meeting of Shareholders,
stating the time, place and purposes of the meeting, shall be given or caused to
be given by the Trustees by mailing such notice at least ten (10) and not more
than ninety (90) days before such meeting, postage prepaid, to each Shareholder
at his address as it appears on the records of the Trust. Only the business
stated in the notice of the meeting shall be considered at such meeting. Any
adjourned meeting may be held as adjourned without further notice.
5. Quorum and Required Vote. The holders of one-third (1/3) of the
Shares entitled to vote on a matter shall be a quorum for the transaction of
business with respect to such matter at a Shareholders' meeting, except as may
be otherwise required by the 1940 Act, the laws of The
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<PAGE> 23
Commonwealth of Massachusetts or other applicable law, or by this Declaration or
the By-laws of the Trust, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a reasonable
time after the date set for the original meeting without the necessity of
further notice. A Majority Shareholder Vote at a meeting of which a quorum is
present shall decide any question, except when a different vote is required or
permitted by any provision of the 1940 Act, the laws of The Commonwealth of
Massachusetts or other applicable law, or by this Declaration or the By-Laws, or
when the Trustees shall in their discretion require a larger vote or the vote of
a majority or larger fraction of the Shares of one or more particular Series or
Classes. If the Shares of any Fund divided into Classes shall include a Class
having exclusive voting rights with respect to certain matters, the aforesaid
quorum and voting requirements with respect to action to be taken by the
Shareholders of such Class on such matters shall be applicable only to the
Shares of such Class.
6. Record Dates. For the purpose of determining the Shareholders who
are entitled to notice of and to vote at any meeting or any adjournment thereof,
or who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding thirty (30) days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than ninety (90) days prior to the date of any meeting of Shareholders, the
payment of any dividend or distribution or other action as the date and time of
record for the determination of Shareholders entitled to notice of and to vote
at such meeting or any adjournment thereof or to be treated as Shareholders of
record for such purposes, even though he has since that date and time disposed
23
<PAGE> 24
of his Shares, and no Shareholder becoming such after that date and time shall
be so entitled to vote at such meeting or any adjournment thereof or to be
treated as a Shareholder of record for purposes of such dividend, distribution
or other action.
7. Action by Written Consent. Subject to the provisions of the 1940 Act
and other applicable law, any action taken by Shareholders may be taken without
a meeting if a majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof or of the Shares of any particular Series or Class as
shall be required by the 1940 Act or by any express provision of this
Declaration or the By-Laws or as shall be permitted by the Trustees) consent to
the action in writing and if the writings in which such consent is given are
filed with the records of the meetings of Shareholders, to the same extent and
for the same period as proxies given in connection with a Shareholders' meeting.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
8. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted stockholders of a
Massachusetts business corporation under the Massachusetts Business Corporation
Law.
9. Additional Provisions. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters not inconsistent with
the provisions hereof.
SIXTH: The persons who shall act as initial Trustees are the persons
initially executing this Declaration of Trust or any counterpart thereof.
However, the By-Laws of the Trust may fix the number of Trustees at a
number greater than that of the number of initial Trustees and may authorize the
Trustees to increase or decrease the number of Trustees, to fill the vacancies
created by any such increase in the number of
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Trustees, to set and alter the terms of office of the Trustees and to lengthen
or lessen their own terms or make their terms of indefinite duration, all
subject to the 1940 Act. Unless otherwise provided by the By-Laws of the Trust,
the Trustees need not be Shareholders.
SEVENTH: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Trust and of the Trustees
and Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the
Trustees and shall have accepted this trust, the Trust estate shall vest in the
new Trustee or Trustees, together with the continuing Trustees without any
further act or conveyance, and he shall be deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee hereunder by
the Trustees or any successor Trustees. All of the assets of the Trust shall at
all times be considered as vested in the Trustees. Except as provided in this
Declaration of Trust, no Shareholder shall have, as such holder of beneficial
interest in the Trust, any authority, power or right whatsoever to transact
business for or on behalf of the Trust, or on behalf of the Trustees, in
connection with the property or assets of the Trust, or in any part thereof,
except the rights to receive the income and distributable amounts arising
therefrom as set forth herein.
4. The Trustees in all instances shall act as principals, and are and
shall be free from the control of the Shareholders. The Trustees shall have full
power and authority to do any and
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all acts and to make and execute any and all contracts and instruments that they
may consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall not in any way be bound or limited by present or
future laws or customs in regard to Trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purposes of this
Trust. Subject to any applicable limitation in this Declaration of Trust or in
the By-Laws of the Trust, the Trustees shall have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;
(b) to elect and remove such officers and appoint and terminate such
officers as they consider appropriate with or without cause;
(c) to employ a bank or trust company as custodian of any assets of
the Trust subject to any conditions set forth in this Declaration of Trust or in
the By-Laws;
(d) to retain a transfer agent and Shareholder servicing agent, or
both;
(e) to provide for the distribution of Shares either through a
principal underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in the By-Laws of
the Trust;
(g) to delegate such authority as they consider desirable to any
officers of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property held in Trust hereunder;
and to execute and deliver powers
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of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities held in trust hereunder;
(j) to hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either in
its own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or concern, and to pay calls or subscriptions
with respect to any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(m) to make, in the manner provided in the By-Laws, distributions of
income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted by the
1940 Act and the Trust's fundamental policy thereunder as to borrowing; and
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons; if the other party or parties to any such
contract are authorized to enter into securities transactions
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on behalf of the Trust, such transactions shall be deemed to have been
authorized by all of the Trustees.
5. No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred by the Trustees or upon
their order.
6. (a) The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription to any Shares or otherwise. Every
note, bond, contract or other undertaking issued by or on behalf of the Trust or
the Trustees relating to the Trust shall include a recitation limiting the
obligation represented thereby to the Trust and its assets (but the omission of
such a recitation shall not operate to bind any Shareholder).
(b) Except as otherwise provided in this Declaration of Trust or the
By-Laws, whenever this Declaration of Trust calls for or permits any action to
be taken by the Trustees hereunder, such action shall mean that taken by the
Board of Trustees by vote of the majority of a quorum of Trustees as set forth
from time to time in the By-Laws of the Trust or as required pursuant to the
provisions of the 1940 Act and the rules and regulations promulgated thereunder.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein contained
such as may be necessary or convenient in the conduct of any business or
enterprise of the Trust, to do and perform anything necessary, suitable, or
proper for the accomplishment of any of the purposes, or the attainment of any
one or more of the objects, herein enumerated, or which shall at any time appear
conducive
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to or expedient for the protection or benefit of the Trust, and to do
and perform all other acts or things necessary or incidental to the purposes
herein before set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power to determine conclusively
whether any moneys, securities, or other properties of the Trust property are,
for the purposes of this Trust, to be considered as capital or income and in
what manner any expenses or disbursements are to be borne as between capital and
income whether or not in the absence of this provision such moneys, securities,
or other properties would be regarded as capital or income and whether or not in
the absence of this provision such expenses or disbursements would ordinarily be
charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and
prescribe the tenure of office of the several classes, but no class shall be
elected for a period shorter than that from the time of the election following
the division into classes until the next meeting of Shareholders.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable regulations of
the Trustees, not contrary to Massachusetts law, as to whether and to what
extent, and at what times and places, and under what conditions and regulations,
such right shall be exercised.
9. Any Trustee, or any officer elected or appointed by the Trustees or
by any committee of the Trustees or by the Shareholders or otherwise, may be
removed at any time, with or without cause, in such lawful manner as may be
provided in the By-Laws of the Trust.
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10. If the By-Laws so provide, the Trustees shall have power to hold
their meetings, to have an office or offices and, subject to the provisions of
the laws of Massachusetts, to keep the books of the Trust outside of said
Commonwealth at such places as may from time to time be designated by them.
11. Securities held by the Trust shall be voted in person or by proxy by
the President or a Vice-President, or such officer or officers of the Trust as
the Trustees shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Trustees, except as otherwise ordered by vote of the
holders of a majority of the Shares outstanding and entitled to vote in respect
thereto.
12. (a) Subject to the provision of the 1940 Act, any Trustee, officer
or employee, individually, or any partnership of which any Trustee, officer or
employee may be a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, director, trustee, employee or
stockholder, may be a party to, or may be pecuniarily or otherwise interested
in, any contract or transaction of the Trust, and in the absence of fraud no
contract or other transaction shall be thereby affected or invalidated; provided
that in case a Trustee, or a partnership, corporation or association of which a
Trustee is a member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known to the
Trustees or a majority thereof; and any Trustee who is so interested, or who is
also a director, officer, trustee, employee or stockholder of such other
corporation or association or a member of such partnership which is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Trustees which shall authorize any such contract or transaction,
and may vote thereat to authorize any such contract or transaction, with like
force and effect as if he were
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not such director, officer, trustee, employee or stockholder of such other trust
or corporation or association or a member of a partnership so interested.
(b) Specifically, but without limitation of the foregoing, the Trust
may enter into a management or investment advisory contract or underwriting
contract and other contracts with, and may otherwise do business with any
manager or investment adviser and/or any sub-adviser for the Trust and/or
principal underwriter of the Shares of the Trust or any subsidiary or affiliate
of any such manager or investment adviser and/or sub-adviser and/or principal
underwriter and may permit any such firm or corporation to enter into any
contracts or other arrangements with any other firm or corporation relating to
the Trust notwithstanding that the Board of the Trust may be composed in part of
partners, directors, officers or employees of any such firm or corporations, and
officers of the Trust may have been or may be or become partners, directors,
officers or employees of any such firm or corporation, and in the absence of
fraud the Trust and any such firm or corporation may deal freely with each
other, and no such contract or transaction between the Trust and any such firm
or corporation shall be invalidated or in any way affected thereby, nor shall
any Trustee or officer of the Trust be liable to the Trust or to any Shareholder
or creditor thereof or to any other person for any loss incurred by it or him
solely because of the existence of any such contract or transaction; provided
that nothing herein shall protect any Trustee or officer of the Trust against
any liability to the Trust or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
(c) As used in this paragraph the following terms shall have the
meanings set forth below:
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(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present or former Trustee
or officer of another trust or corporation whose securities are or were
owned by the Trust or of which the Trust is or was a creditor and who
served or serves in such capacity at the request of the Trust, any present
or former investment advisor, sub-advisor or principal underwriter of the
Trust and the heirs, executors, administrators, successors and assigns of
any of the foregoing; however, whenever conduct by an indemnitee is
referred to, the conduct shall be that of the original indemnitee rather
than that of the heir, executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which an indemnitee is or was a party
or is threatened to be made a party by reason of the fact or facts under
which he or it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses
(including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by an indemnitee in connection
with a covered proceeding; and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitee, an adverse determination as
to the indemnitee
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whether by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of disabling
conduct.
(e) Except as set forth in (d) above, the Trust shall indemnify any
indemnitee for covered expenses in any covered proceeding, whether or not there
is an adjudication of liability as to such indemnitee, if a determination has
been made that the indemnitee was not liable by reason of disabling conduct by
(i) a final decision of the court or other body before which the covered
proceeding was brought; or (ii) in the absence of such decision, a reasonable
determination, based on a review of the facts, by either (a) the vote of a
majority of a quorum of Trustees who are neither "interested persons", as
defined in the 1940 Act, nor parties to the covered proceeding or (b) an
independent legal counsel in a written opinion; provided that such Trustees or
counsel, in reaching such determination, may but need not presume the absence of
disabling conduct on the part of the indemnitee by reason of the manner in which
the covered proceeding was terminated.
(f) Covered expenses incurred by an indemnitee in connection with a
covered proceeding shall be advanced by the Trust to an indemnitee prior to the
final disposition of a covered proceeding upon the request of the indemnitee for
such advance and the undertaking by or on behalf of the indemnitee to repay the
advance unless it is ultimately determined that the indemnitee is entitled to
indemnification thereunder, but only if one or more of the following is the
case: (i) the indemnitee shall provide a security for such undertaking; (ii) the
Trust shall be
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insured against losses arising out of any lawful advances; or (iii) there shall
have been a determination, based on a review of the readily available facts (as
opposed to a full trial-type inquiry) that there is a reason to believe that the
indemnitee ultimately will be found entitled to indemnification by either
independent legal counsel in a written opinion or by the vote of a majority of a
quorum of trustees who are neither "interested persons" as defined in the 1940
Act nor parties to the covered proceeding.
(g) Nothing herein shall be deemed to affect the right of the Trust
and/or any indemnitee to acquire and pay for any insurance covering any or all
indemnitees to the extent permitted by the 1940 Act or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by the 1940 Act.
13. Determination of Net Asset Value, Net Income and Distributions.
(a) The net asset value of each outstanding Share of each Fund
shall be determined at such time or times on such days as the Trustees may
determine, in accordance with the 1940 Act. The method of determination of net
asset value of Shares of each Series and Class shall be determined by the
Trustees and shall be as set forth in the Prospectus relating to the respective
Series or Class, with any expenses being borne solely by a particular Class of a
Series being reflected in the net asset value of the Shares of such Class. The
power and duty to make the daily calculations may be delegated by the Trustees
to the adviser, administrator, manager, custodian, transfer agent or such other
person as the Trustees may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act.
(b) In determining the net asset value of the Shares of a Series or
Class at any time, the following rules shall apply:
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(i) Shares to be issued shall be deemed to be outstanding as
of the time of the determination of the net asset value per Share
applicable to such issuance and the net price thereof shall be deemed to
be an asset belonging to the Fund to which such Shares pertains, or to the
share of the Class in the assets of the Series to which such Shares
pertain, as the case may be;
(ii) Shares to be redeemed by the Trust shall be deemed to be
outstanding until the time of the determination of the net asset value
applicable to such redemption, and thereupon and until paid the redemption
price thereof shall be deemed to be a liability of the Fund to which such
Shares pertain, or a liability forming part of the share of the Class to
which such Shares pertain in the liabilities of the Fund to which such
Class pertains, as the case may be; and
(iii) Shares redeemed by a Fund pursuant to sub-section (f) of
paragraph 6 of Article FOURTH shall be deemed to be outstanding until
whichever is the later of (A) the effective date of such redemption, as
determined for purposes of such sub-section (f), and (B) the time as of
which the redemption price is determined, and thereupon and until paid,
the redemption price thereof shall be deemed to be a liability of such
Fund.
(c) In addition to the foregoing, the Trustees are empowered, in
their absolute discretion, to establish other bases or times, or both, for
determining the net asset value of each Share of the Trust in accordance with
the 1940 Act and to authorize the voluntary purchase by the Trust, either
directly or through an agent, of Shares of the Trust upon such terms and
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conditions and for such consideration as the Trustees shall deem advisable in
accordance with any such provision, rule or regulation.
(d) Payment of the net asset value of Shares of a Fund properly
surrendered to the Trust for redemption shall be made by such Fund within seven
(7) days after tender of such Shares to the Trust for such purpose, plus any
period of time during which the right of the holders of the Shares of such Fund
to require such Fund to redeem such Shares has been suspended. Any such payment
may be made in portfolio securities of such Fund and/or in cash, as the Trustees
shall deem advisable, and no Shareholder shall have a right, other than as
determined by the Trustees, to have his Shares redeemed in kind.
EIGHTH:
1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the Trust estate to be held
harmless from and indemnified against all loss and expense arising from such
liability. This Trust shall, upon request by the Shareholder, assume the defense
of any claim made against any Shareholder for any act or obligation of the Trust
and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership
is created hereby. No Trustee hereunder shall have any power to bind personally
either the Trust's officers or any Shareholder. All persons extending credit to,
contracting with or having any claim against the Trust or the Trustees shall
look only to the assets of the Trust for payment under such credit,
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contract or claim; and neither the Shareholders nor the Trustees, nor any of
their agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect a Trustee against
any liability to which such Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
3. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the provisions
of paragraph 2 of this Article EIGHTH, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and operations of this
Declaration of Trust, and subject to the provisions of paragraph 2 of this
Article EIGHTH, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
required.
4. This Trust, and each Fund of the Trust, shall continue without
limitation of time, but subject to the provisions of sub-section (a), through
(e) of this paragraph 4:
(a) The Trustees, with the favorable vote of the holders of more
than 50% of the outstanding Shares entitled to vote may sell and convey the
assets of the Trust (which sale may be subject to the retention of assets for
the payment of liabilities and expenses) to another issuer for a consideration
which may be or include securities of such issuer. Upon making provision for the
payment of liabilities, by assumption by such issuer or otherwise, the Trustees
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shall distribute the remaining proceeds ratably among the holders of the Shares
of the Trust then outstanding.
(b) The Trustees, with the favorable vote of the holders of more
than 50% of the outstanding Shares entitled to vote, may at any time sell and
convert into money all the assets of the Trust. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust, the Trustees shall distribute the remaining assets of
the Trust ratably among the holders of the outstanding Shares.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-sections (a) and (b), the Trust shall
terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties shall be cancelled and discharged.
(d) Subject to a Majority Shareholder Vote of each Series affected
by the matter or, if applicable, to a Majority Shareholder Vote of the Trust,
the Trustees may sell or otherwise transfer and convey all or substantially all
the assets of any Fund of the Trust to another Fund of the Trust, or sell or
otherwise transfer and convey all or substantially all the assets of the Trust
or any Fund thereof to, or merge or consolidate the Trust or any Fund of the
Trust (pursuant to the laws of any jurisdiction providing for or authorizing the
merger or consolidation of an entity such as the Trust or such Fund with or into
an entity organized under the laws of such jurisdiction) into or with, another
trust, partnership, association or corporation organized under the laws of any
state or other jurisdiction and which is or thereupon becomes an open-end
management investment company, as defined in the 1940 Act, for adequate
consideration, which may include the assumption of all or substantially all
outstanding
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obligations, taxes and other liabilities, accrued or contingent of the Trust or
the Fund affected, as the case may be, and which may include shares of
beneficial interest or stock of or other equity interests in such other Fund of
the Trust or such trust, partnership, association or corporation.
(e) The Trustees may at any time, in their discretion, sell and
convert into money all or substantially all the assets of any Fund and terminate
such Fund (a "Terminating Fund"), without the need for any Shareholder vote. In
any such case, after paying, or making provision for, all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Terminating Fund, the Trustees shall distribute the proceeds of such sale, and
any other assets of the Terminating Fund remaining after such payment or
provision among the Shareholders of such Fund in accordance with sub-section (d)
of paragraph 6 of Article FOURTH, and shall terminate such Fund in accordance
with paragraph 2 of Article FOURTH. Upon termination of any Fund, the Trustees
shall thereupon be discharged from all further liabilities and duties with
respect to such Fund, and the rights and interests of all Shareholders of such
Fund shall thereupon cease.
5. The original or a copy of this instrument and of each declaration of
trust supplemental hereto shall be kept at the office of the Trust where it may
be inspected by any Shareholder. A copy of this instrument and of each
Supplemental Declaration of Trust shall be filed with the Massachusetts
Secretary of State, as well as any other governmental office where such filing
may from time to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
Supplemental Declarations of Trust have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be
39
<PAGE> 40
a copy of this instrument or of any such Supplemental Declaration of Trust. In
this instrument or in any such Supplemental Declaration of Trust, references to
this instrument, and all expressions like "herein", "hereof" and "hereunder"
shall be deemed to refer to this instrument as amended or affected by any such
Supplemental Declaration of Trust. This instrument may be executed in any number
of counterparts, each of which shall be deemed an original.
6. The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
7. In the event that any person advances the organizational expenses of
the Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
in accordance with criteria fixed by the Board of Trustees, to be amortized over
a period or periods to be fixed by the Board.
8. Whenever any action is taken under this Declaration of Trust under
any authorization to take action which is permitted by the 1940 Act, such action
shall be deemed to have been properly taken if such action is in accordance with
the construction of the 1940 Act then in effect as expressed in "no action"
letters of the staff of the Commission or any release, rule, regulation or other
under the 1940 Act or any decision of a court of competent jurisdiction,
notwithstanding that any of the foregoing shall later be found to be invalid or
otherwise reversed or modified by any of the foregoing.
40
<PAGE> 41
9. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its By-Laws may be taken by the description thereof in
the then effective prospectus or Statement of Additional Information relating to
the Shares under the Securities Act of 1933 or in any proxy statement of the
Trust rather than by formal resolution of the Board.
10. Whenever under this Declaration of Trust, the Board of Trustees is
permitted or required to place a value on assets of the Trust, such action may
be delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
11. Amendment Procedure.
(a) This Declaration may be amended by a Majority Shareholder Vote,
at a meeting of Shareholders, or by written consent without a meeting. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to change the name of a Trust, a Fund or any Series or Class of
Shares, to authorize additional Funds, and additional Series and Classes of
Shares, to make any changes which do not adversely affect the rights of any
Shareholders of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or if they
deem it necessary to conform this Declaration to the requirements of applicable
federal, state or similar regulatory authority, or of the regulated investment
company provisions of the United States Internal Revenue Code, as from time to
time in effect, or to eliminate or reduce any federal, state or local taxes
which may be payable by a Fund or its Shareholders.
(b) No amendment may be made under this paragraph 11 which would
change any rights with respect to any Shares of any Series or Class by reducing
the amount payable
41
<PAGE> 42
thereon upon liquidation of the Trust or a Fund, or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of the holders of two-thirds (2/3) of the Shares of each Series and
Class so affected outstanding and entitled to vote. Nothing contained in this
Declaration shall permit any amendment which impairs the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or a Fund, or to permit assessments upon Shareholders.
(c) A certificate in recordable form, signed by a Majority of the
Trustees, or by a Trustee or officer of the Trust pursuant to the vote of a
Majority of the Trustees, setting forth an amendment and reciting that it was
duly adopted by the Shareholders or by the Trustees as aforesaid, or a copy of
the Declaration, as amended, in recordable form, and executed by a Majority of
the Trustees, shall be conclusive evidence of such amendment when lodged among
the records of the Trust, unless some later effective date is specified in such
instrument.
(d) A restated Declaration, integrating into a single instrument all
of the provisions of this Declaration which are then in effect and operative,
may be executed from time to time by a Majority of the Trustees and shall, upon
filing with the Secretary of The Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein, and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
42
<PAGE> 43
IN WITNESS WHEREOF, the undersigned have executed this instrument this
22nd day of August, 1996.
/s/ Robert L. Burch III
--------------------------------------
Robert L. Burch III
/s/ John A. G. Gavin
--------------------------------------
John A. G. Gavin
/s/ Joe Grills
--------------------------------------
Joe Grills
/s/ John F. Hotchkis
--------------------------------------
John F. Hotchkis
/s/ Robert B. Hutchinson
--------------------------------------
Robert B. Hutchinson
/s/ Michael L. Quinn
--------------------------------------
Michael L. Quinn
/s/ Merle T. Welshans
--------------------------------------
Merle T. Welshans
/s/ Richard R. West
--------------------------------------
Richard R. West
Trustees' address:
800 W. Sixth Street
Los Angeles, CA 90017
R/A:
Prentice-Hall Corporation System
1013 Centre Street
Wilmington, DE 19805
43
<PAGE> 44
CERTIFICATE
The undersigned, as Secretary of Hotchkis and Wiley Funds (the "Trust"),
does hereby certify that the amended and restated Declaration of Trust attached
hereto was duly adopted by the Trust's Trustees on October 22, 1996, pursuant to
Section 11 of Article EIGHTH of the Declaration of Trust.
/s/ Gracie V. Fermelia
--------------------------------------
Gracie V. Fermelia, Secretary
Acknowledged:
/s/ Vonny Reagan
- ---------------------------------------
_________________, Assistant Secretary
44
<PAGE> 1
EXHIBIT 99.B1(b)
Certificate of Designation
--------------------------
HOTCHKIS AND WILEY FUNDS
The undersigned, being the Secretary of Hotchkis and Wiley Funds
(hereinafter referred to as the "Trust"), a trust with transferable shares of
the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Article FOURTH, paragraph 1(b) of the Declaration of Trust dated August 22,
1984, as amended to date (hereinafter referred to as the "Declaration of
Trust"), and by the affirmative vote of a majority of the Trustees at a meeting
duly called and held on October 11, 1996, the shares of beneficial interest of
the Trust are divided into ten separate series, each series to have the
following special and relative rights:
(1) The series shall be designated as follows:
Equity Income Series Low Duration Series
Small Cap Series Short-Term Investment Series
International Series Equity Fund for Insurance
Companies Series
Balanced Income Series Mid-Cap Series
Total Return Bond Series Global Equity Series
(2) Each series shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statement under the Securities Act of
1933. Each share of beneficial interest of each series ("share") shall be
redeemable, shall be entitled to one vote or fraction thereof in respect of a
fractional share on matters on which shares of that series shall be entitled to
vote and shall represent a pro rata beneficial interest in the assets allocated
to that series, and shall be entitled to receive its pro rata share of net
assets of that series upon liquidation of that series, all as provided in the
Declaration of Trust.
(3) The shares of beneficial interest of each series of the Trust
shall consist of a single class; provided, however, that the Trustees reserve
the right to hereafter create one or more
<PAGE> 2
classes of shares of any series of the Trust. An unlimited number of shares of
each series may be issued.
(4) Shareholders of each series shall vote as a separate class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to any series as provided in, Rule 18f-2,
as from time to time in effect, under the 1940 Act, or any successor rule and
by the Declaration of Trust.
(5) The assets and liabilities of the Trust shall be allocated among
the above-referenced series as set forth in paragraph 6 of Article FOURTH of the
Declaration of Trust, except that the liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging to any
particular series shall be allocated among the series (a) on the basis of their
relative average daily net assets, (b) as incurred on a specific identification
basis or (c) evenly among the series, depending on the nature of the
expenditure.
(6) The Trustees (including any successor Trustees) shall have the
right at any time and from time to time to reallocate assets and expenses or to
change the designation of any series now or hereafter created, or to otherwise
change the special and relative rights of any such series provided that such
change shall not adversely affect the rights of holders of shares of a series.
IN WITNESS WHEREOF, the undersigned has set her hand and seal this 11th
day of October, 1996.
/s/ Gracie V. Fermelia
----------------------------------
Gracie V. Fermelia, Secretary
-2-
<PAGE> 3
ACKNOWLEDGMENT
--------------
STATE OF CALIFORNIA )
) SS October 11, 1996
COUNTY OF LOS ANGELES )
Then personally appeared before me the above named Gracie V. Fermelia,
Secretary, and acknowledged the foregoing instrument to be her free act and
deed.
/s/ Carmen E. Ortiz
------------------------------
Notary Public
-3-
<PAGE> 1
EXHIBIT 99.B5.(a)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Balanced Income Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch Asset Management, L.P. (the
"Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .75%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
----------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- -------------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill
Lynch Asset Management, L.P.
By /s/ NANCY D. CELICK
----------------------------------
ATTEST:
/S/ VONNY REAGAN
- -------------------------------------
5
<PAGE> 1
EXHIBIT 99.B5.(b)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Equity Income Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch Asset Management, L.P. (the
"Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .75%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
--------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- -------------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill
Lynch Asset Management, L.P.
By /s/ NANCY D. CELICK
--------------------------------
ATTEST:
/s/ VONNY REAGAN
- -------------------------------------
5
<PAGE> 1
EXHIBIT 99.B5.(c)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
International Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch Asset Management, L.P. (the
"Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .75%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
---------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- -------------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
By /s/ NANCY D. CELICK
---------------------------------
ATTEST:
/s/ VONNY REAGAN
- -------------------------------------
5
<PAGE> 1
EXHIBIT 99.B5.(d)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Equity Fund for Insurance Companies Series (the "Fund"), and HOTCHKIS AND WILEY,
a division of the Capital Management Group of Merrill Lynch Asset Management,
L.P. (the "Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund are hereby
expressly assumed by the Advisor, including, but not limited to (i) interest and
taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv) compensation
and expenses of the Trust's Trustees other than those affiliated with the
Advisor; (v) legal and audit expenses; (vi) fees and expenses of the Trust's
custodian, shareholder servicing or transfer agent and accounting services
agent; (vii) expenses incident to the issuance of the Fund's shares, including
issuance on the payment of, or reinvestment of, dividends; (viii) fees and
expenses incident to the registration under Federal or state securities laws of
the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .60 of 1% of the first $10,000,000 of such
average net assets and .50 of 1% of such net assets in excess
of $10 million; provided, however, that no fee will be paid on
any portion of such net assets that are invested in another
investment company for which the Advisor serves as the
investment advisor.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
4
<PAGE> 5
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
--------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- ---------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
--------------------------------
ATTEST:
/s/ VONNY REAGAN
- ---------------------------------
5
<PAGE> 1
EXHIBIT 99.B5(e)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Low Duration Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch Asset Management, L.P. (the
"Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .46%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
-------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- -------------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
By /s/ NANCY D. CELICK
-------------------------------
ATTEST:
/s/ VONNY REAGAN
- -------------------------------------
5
<PAGE> 1
EXHIBIT 99.B5.(f)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Total Return Bond Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch Asset Management, L.P. (the
"Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .55%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
--------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- --------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
By /s/ NANCY D. CELICK
--------------------------------
ATTEST:
/s/ VONNY REAGAN
- --------------------------------
5
<PAGE> 1
EXHIBIT 99.B5.(g)
hotchkis and WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Small Cap Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the Capital
Management Group of Merrill Lynch Asset Management, L.P. (the "Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .75%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
---------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- ----------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
By /s/ NANCY D. CELICK
---------------------------------
ATTEST:
/s/ VONNY REAGAN
- ----------------------------------
5
<PAGE> 1
EXHIBIT 99.B5.(h)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Short-Term Investment Series (the "Fund"), and HOTCHKIS AND WILEY, a division of
the Capital Management Group of Merrill Lynch Asset Management, L.P. (the
"Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of eight series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .40 of 1% of net assets under $100,000,000, .35
of 1% of net assets from $100,000,000 through $249,999,999,
.30 of 1% of net assets from $250,000,000 through $499,999,999
and .25 of 1% of net assets in excess of $500,000,000.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
4
<PAGE> 5
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ NANCY D. CELICK
---------------------------------
ATTEST:
/s/ GRACIE FERMELIA
- ---------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
By /s/ NANCY D. CELICK
---------------------------------
ATTEST:
/s/ VONNY REAGAN
- ---------------------------------
5
<PAGE> 1
EXHIBIT 99.B5.(i)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of January, 1997, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Mid-Cap Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the Capital
Management Group of Merrill Lynch Asset Management, L.P. (the "Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of ten series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
3
<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .75%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until January 1, 1999, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By
---------------------------------
ATTEST:
- --------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
By
---------------------------------
ATTEST:
- --------------------------------
<PAGE> 1
EXHIBIT 99.B5.(j)
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of January, 1997, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Global Equity Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch Asset Management, L.P. (the
"Advisor").
WITNESSETH:
WHEREAS, the trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of ten series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment advisor under the
Investment Advisors Act of 1940 and engages in the business of providing
investment advisory services; and
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Trust, the Advisor shall:
(i) Decide what securities or other assets shall be
purchased or sold by the Trust with respect to the Fund
and when; and
(ii) Arrange for the purchase and the sale of securities
or other assets held in the portfolio of the Fund by
placing purchase and sale orders for the Trust with
respect to the Fund.
<PAGE> 2
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act
and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from
time to time; (4) any policies and determinations of the Board
of Trustees of the Trust; and (5) the fundamental policies of
the Trust relating to the Fund, as reflected in the Trust's
Registration Statement under the 1940 Act, or as amended by
the shareholders of the Fund.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the
Advisor shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security whether or
not such purchase, sale or retention shall have been based on
its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected
in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the
Trust or its security holders by reason of willful
misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor
from acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and
shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling or trading any
securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Advisor for
inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
2
<PAGE> 3
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
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<PAGE> 4
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees
to accept as full compensation for all services rendered by
the Advisor hereunder, an annual management fee, payable
monthly and computed on the value of the average net assets of
the Fund as of the close of business each business day, at the
annual rate of .75%.
(b) In the event the expenses of the Fund (including the fees
of the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and any distribution
fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made
to the Trust as to the Fund so that at no time will there be
any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until January 1, 1999, and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the
vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote
of the Trustees.
(b) This Agreement may be terminated by the Advisor at any
time without penalty upon giving the Trust sixty (60) days'
notice written notice (which notice may be waived by the
Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written
notice (which notice may be waived by the Advisor), provided
that such termination by the Trust shall be directed or
approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents
4
<PAGE> 5
that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By
---------------------------------
ATTEST:
- ----------------------------------
HOTCHKIS AND WILEY, a division of the
Capital Management Group of Merrill Lynch
Asset Management, L.P.
By
---------------------------------
ATTEST:
- ----------------------------------
5
<PAGE> 1
EXHIBIT 99.B9(b)
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the 12th day of November, 1996, by and between
MERRILL LYNCH & CO., INC., a Delaware corporation ("ML & Co."), and HOTCHKIS AND
WILEY FUNDS, a Massachusetts business trust (the "Fund").
WITNESSETH:
WHEREAS, on the date hereof, ML & Co. Has purchased the partnership
interests in Hotchkis and Wiley, a California limited partnership, and Hotchkis
and Wiley has begun operating as a business unit within ML & Co.'s Capital
Management Group ("CMG");
WHEREAS, on the date hereof, the Hotchkis and Wiley division of ML & Co.'s
CMG has become investment adviser to the Fund; and
WHEREAS, ML & Co. has requested that the Fund agree to cease the use of
"Hotchkis and Wiley" in its name if the Hotchkis and Wiley division of ML &
Co.'s CMG no longer serves as investment adviser to the Fund;
NOW, THEREFORE, in consideration of the premises and of the covenants
hereinafter contained, ML & Co. and the Fund hereby agree as follows:
1. ML & Co. Hereby grants the Fund a non-exclusive license to use the
words "Hotchkis and Wiley" in its name.
2. The non-exclusive license hereinabove referred to has been given and is
given by ML & Co. on the condition that it may withdraw the non-exclusive
license to the use of the words "Hotchkis and Wiley" in the name of the Fund if
the Hotchkis and Wiley division of ML & Co.'s CMG no longer serves as investment
adviser to the Fund; and, as soon as
<PAGE> 2
practicable after receipt by the Fund of written notice of the withdrawal of
such non-exclusive license, and in no event later than ninety days thereafter,
the Fund will change its name so that such name will not thereafter include the
words "Hotchkis and Wiley" or any variation thereof.
3. The Fund will not grant to any other company the right to use a name
similar to that of the Fund without the written consent of ML & Co.
4. Regardless of whether the Fund should hereafter change its name and
eliminate the words "Hotchkis and Wiley" or any variation thereof from such
name, the Fund hereby grants to ML & Co. the right to cause the incorporation of
other corporations or the organization of voluntary associations which may have
names similar to that of the Fund or to that to which the Fund may change its
name and to own all or any portion of the shares of such other corporations or
associations, subject to any requisite approval of a majority of the Fund's
shareholders and the Securities and Exchange Commission and subject to the
payment of a reasonable amount to be determined at the time of use, and the Fund
agrees to give and execute any such formal consents or agreements as may be
necessary in connection therewith.
5. This Agreement may be amended at any time by a writing signed by the
parties hereto.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH & CO., INC.
By: /s/ MICHAEL L. QUINN
-------------------------------
Senior Vice President
HOTCHKIS AND WILEY FUNDS
By: /s/ NANCY D. CELICK
-------------------------------
President
3
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 23 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
August 16, 1996, relating to the financial statements and financial highlights
of the Equity Income Fund, the Small Cap Fund, the International Fund, the
Balanced Income Fund, the Total Return Bond Fund, the Low Duration Fund and the
Short-Term Investment Fund (seven of the ten separately managed portfolios of
Hotchkis and Wiley Funds), which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "General Information About the
Trust" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 13, 1996
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 23 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
August 16, 1996, relating to the financial statements and financial highlights
of the Equity Fund for Insurance Companies (one of the ten separately managed
portfolios of Hotchkis and Wiley Funds), which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the reference to us under the heading "General Information
About the Trust" in such Statement of Additional Information and to the
reference to us under the heading "Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 13, 1996
