<PAGE> 1
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-(6)(e)(2))
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or Section
240.14a-12
HOTCHKIS AND WILEY FUNDS
----------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
HOTCHKIS AND WILEY FUNDS
----------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
[x] Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing
<PAGE> 2
HOTCHKIS AND WILEY FUNDS
800 West 6th Street, Fifth Floor
Los Angeles, California 90017
________________________
Notice of Special Meeting of Shareholders
________________________
To Our Shareholders:
Notice is hereby given that a Special Meeting of the Shareholders of
Hotchkis and Wiley Funds (the "Trust"), including the shareholders of each
series of the Trust: 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
Insurance Companies (collectively, the "Funds"), will be held at 10:00 A.M.,
Los Angeles time, on September 27, 1996, at 800 West 6th Street, Fifth Floor,
Los Angeles, California 90017, for the following purposes:
1. To elect Trustees;
2. (a) To approve a new investment advisory agreement for the EQUITY
INCOME FUND on substantially the same terms as the current
agreement;
(b) To approve a new investment advisory agreement
for the SMALL CAP FUND on substantially the same terms as the
current agreement;
(c) To approve a new investment advisory agreement
for the INTERNATIONAL FUND on substantially the same terms as
the current agreement;
(d) To approve a new investment advisory agreement
for the BALANCED INCOME FUND on substantially the same terms
as the current agreement;
(e) To approve a new investment advisory agreement
for the TOTAL RETURN BOND FUND on substantially the same
terms as the current agreement;
(f) To approve a new investment advisory agreement
for the LOW DURATION FUND on substantially the same terms as
the current agreement;
(g) To approve a new investment advisory agreement
for the SHORT-TERM INVESTMENT FUND on substantially the same
terms as the current agreement;
(h) To approve a new investment advisory agreement
for the EQUITY FUND FOR INSURANCE COMPANIES on substantially
the same terms as the current agreement;
3. To ratify the selection by the Trustees of Price Waterhouse
LLP as independent auditors;
4. To approve amendments to the Declaration of Trust that would
permit the Trustees to authorize classes of shares of the Trust,
among other things; and
5. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
Only shares of beneficial interest of the Trust of record at the close of
business on August 2, 1996 are entitled to any notice of or to vote at this
Meeting or any adjournment thereof.
Gracie Fermelia
Secretary
Dated: August 13, 1996
_________________________________________________________________________
| |
| YOUR VOTE ON THESE ISSUES IS CRITICAL. WHETHER OR NOT YOU |
| EXPECT TO ATTEND THE MEETING, PLEASE REVIEW THE ATTACHED PROPOSALS, |
| COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN THE PROXY IN THE |
| ENCLOSED STAMPED, SELF-ADDRESSED ENVELOPE AS SOON AS POSSIBLE. |
|_______________________________________________________________________|
<PAGE> 3
HOTCHKIS AND WILEY FUNDS
800 West 6th Street, Fifth Floor
Los Angeles, California 90017
________________________
PROXY STATEMENT
________________________
This proxy statement is furnished by the Board of Trustees of the Hotchkis
and Wiley Funds (the "Trust") in connection with its solicitation of proxies
for use at a Special Meeting of Shareholders to be held at 10:00 A.M., Los
Angeles time, on September 27, 1996 at 800 West 6th Street, Fifth Floor, Los
Angeles, California 90017. It is expected that the Notice of Special Meeting,
Proxy Statement and form of Proxy will first be mailed to shareholders on or
about August 13, 1996. The purposes of the Meeting are as follows: (1) to
elect Trustees; (2) to approve a new investment advisory agreement for each
series of the Trust (each a "Fund"); (3) to ratify the selection by the
Trustees of Price Waterhouse LLP as independent auditors and (4) to approve
amendments to the Declaration of Trust that would permit the Trustees to
authorize classes of shares of the Trust, among other things. Shareholders of
each Fund will vote separately on the new investment advisory agreements
(Proposal 2), and in the aggregate on the election of Trustees, the
ratification of the independent auditors and the amendment of the Declaration
of Trust (Proposals 1, 3 and 4). The vote required for approval of each
Proposal is included in the discussion of the Proposal.
If the accompanying form of Proxy is executed properly and returned,
shares represented by such Proxy will be voted at the Meeting in accordance
with the instructions on the Proxy. However, if no instructions are specified,
shares will be voted for the election of Trustees and each of the other
Proposals. A Proxy may be revoked at any time prior to the time it is voted by
written notice to the Secretary of the Trust, by submission of a new and
different Proxy or by voting the shares in person or by duly appointed agent at
the Meeting. If sufficient votes to approve one or more of the proposed items
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of those
shares present at the Meeting or represented by proxy. When voting on a
proposed adjournment, the persons named as proxies will vote for the proposed
adjournment all the shares they are entitled to vote with respect to each item,
unless directed to disapprove the item, in which case such shares will be voted
against the proposed adjournment.
If a Proxy that is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (that
is, a Proxy from a broker or nominee indicating
2
<PAGE> 4
that such person has not received instructions from the beneficial owner or
other person entitled to vote shares on a particular matter with respect to
which the broker or nominee does not have discretionary power), the shares
represented thereby will be considered not to be present at the Meeting for
purposes of determining the existence of a quorum for the transaction of
business and will be deemed not cast with respect to such Proposal. A properly
executed and returned Proxy marked with an abstention will be considered present
at the Meeting for the purpose of determining the existence of a quorum for the
transaction of business. However, abstentions and broker "non-votes" do not
constitute a vote "for" or "against" the matter, but have the effect of a
negative vote on matters which require approval by a requisite percentage of the
outstanding shares.
The close of business on August 2, 1996 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at,
the Meeting. On that date, the Trust had 54,112,664.134 shares of beneficial
interest outstanding and entitled to vote, consisting of 9,215,201.173 shares
of the Equity Income Fund, 768,791.114 shares of the Small Cap Fund,
16,692,102.507 shares of the International Fund, 3,787,921.149 shares of the
Balanced Income Fund, 2,990,696.095 shares of the Total Return Bond Fund,
17,376,693.932 shares of the Low Duration Fund, 1,457,422.317 shares of the
Short-Term Investment Fund and 1,823,835.847 shares of the Equity Fund for
Insurance Companies. Each share will be entitled to one vote at the Meeting.
It is expected that the Notice of Special Meeting, Proxy Statement and form of
Proxy will first be mailed to shareholders on or about August 13, 1996.
Persons and groups known by management to own beneficially 5% or more of
any Fund as of June 30, 1996 are listed in Annex A.
The expense of solicitation will be borne by Hotchkis and Wiley,
investment advisor to the Funds. The solicitation of proxies will be largely
by mail but may include, without cost to the Trust, telephonic, telegraphic or
oral communication by regular employees of the Advisor. Brokerage firms, banks
and others may be requested to forward this Notice and Proxy Statement to the
beneficial owners. The Advisor will pay these firms for the out-of-pocket
expenses they incur in doing so.
THE TRUST WILL FURNISH TO SHAREHOLDERS, WITHOUT CHARGE, A COPY OF THE MOST
RECENT ANNUAL REPORT UPON REQUEST, WITHIN THREE BUSINESS DAYS. REQUESTS MAY BE
DIRECTED TO THE TRUST'S INVESTOR INFORMATION DEPARTMENT, TOLL FREE AT (800)
236-4479.
INTRODUCTION
On June 19, 1996, John F. Hotchkis, George Wiley and the other members of
Hotchkis and Wiley, a Delaware Limited Liability Company and the general
partner of Hotchkis and Wiley L.P., a California limited partnership ("Hotchkis
and Wiley" or the "Advisor"), entered into a definitive agreement (the
"Purchase Agreement") to sell all of the partnership interests in Hotchkis and
Wiley
3
<PAGE> 5
to Merrill Lynch & Co., Inc., a Delaware corporation ("Merrill Lynch"). In
connection with the sale, Merrill Lynch has provided incentives for certain key
personnel to remain employed with Hotchkis and Wiley.
In connection with the transaction (hereafter, the "Acquisition"), John
F. Hotchkis will enter into an employment agreement with Merrill Lynch Capital
Management Group to serve as Chairman of the Hotchkis and Wiley unit of Merrill
Lynch, while Mr. Wiley, who is retiring, will enter into a services agreement
with Merrill Lynch Capital Management Group to serve as a special advisor to
Merrill Lynch Capital Management Group. Michael L. Quinn, the head of
Merrill Lynch Capital Management Group, will serve as the Advisor's Chief
Executive Officer. It is expected that all other managing directors, all
principals except for Laird Landmann and Tad Rivelle, who have resigned, and
substantially all key employees of the Advisor will sign long-term employment
agreements with Merrill Lynch Capital Management Group. With the exceptions of
Messrs. Wiley, Landmann and Rivelle, it is expected that all of the current
portfolio managers will continue to be responsible for the day-to-day
investment management of their client assignments. Messrs. Landmann and Rivelle
had been co-managers of the portfolios of the Total Return Bond Fund, the Low
Duration Fund and the Short-Term Investment Fund and Mr. Landmann had been
portfolio manager of the fixed-income portion of the Balanced Income Fund. In
August 1996, Dr. Roger DeBard, a managing director of the Advisor and
portfolio manager of the equity portion of the Balanced Income Fund, assumed
overall responsibility for the management of these portfolios. Upon Mr. Wiley's
retirement, Gail Bardin will continue to have responsibility for the management
of the portfolio of the Equity Income Fund, as to which she and Mr. Wiley are
currently co-managers.
The Acquisition, which is subject to various approvals and consents,
including the approval by the Funds' shareholders of the New Agreements
described in Proposal 2, is expected to close by the end of the fourth quarter
of 1996. After the closing, Hotchkis and Wiley will remain in Los Angeles. The
Advisor will become part of Merrill Lynch Asset Management and will operate as a
separate business unit called Hotchkis and Wiley, a division of Merrill Lynch
Capital Management Group. No changes in investment philosophy or processes are
anticipated.
The following information regarding Merrill Lynch has been provided by
Merrill Lynch.
Merrill Lynch, a Delaware corporation, is a holding company formed in 1973
that, through its subsidiaries and affiliates, provides investment, financing,
insurance and related services on a global basis. Such services include
securities brokering, trading and underwriting; investment banking and other
corporate finance advisory activities, including loan syndication; asset
management and other investment advisory services; trading of foreign exchange
instruments, futures, commodities and derivatives; securities clearance
services; banking, trust and lending services; and insurance sales and
underwriting services. These services are provided to a large group of clients
and customers, including individual investors, corporations, governments and
governmental agencies and financial institutions.
4
<PAGE> 6
Merrill Lynch conducts its business from its World Headquarters facility
in New York City, New York, additional principal locations in New Jersey,
London, Tokyo, Hong Kong, various regional facilities located in the United
States and in other countries, and numerous retail sales and other offices
throughout the world. At December 29, 1995, Merrill Lynch employed
approximately 46,000 people.
Merrill Lynch conducts its worldwide business through a number of highly
integrated subsidiaries and affiliates which frequently participate in the
facilitation and consummation of a single transaction.
Merrill Lynch's asset management activities are conducted through, or
managed by, Merrill Lynch Asset Management, LP, Fund Asset Management, LP, and
their affiliates (together, "MLAM"). MLAM constitutes the investment
management unit of Merrill Lynch, and is one of the largest mutual fund managers
in the world.
At the end of 1995, MLAM managed 217 portfolios representing a wide
variety of investment objectives ranging from money market funds to long-term
taxable and tax-exempt fixed income funds, along a broad spectrum of quality
ratings and maturities, as well as a wide variety of equity funds which in the
aggregate invest in more than 48 markets globally.
MLAM's other major business activity is separate account management.
Assets under management were $26.2 billion at the end of 1995 (which amount
includes approximately $3.9 billion of general account assets managed on behalf
of insurance companies that are affiliates of MLAM) as compared with
approximately $24.3 billion in 1994 (which amount includes approximately $4.4
billion of general account assets managed on behalf of insurance companies that
are affiliates of MLAM).
At the end of 1995, total assets under management by MLAM approximated
$196 billion, as compared with $164 billion at year-end 1994.
INVESTMENT COMPANY ACT CONSIDERATIONS
Pursuant to Section 15 of the Investment Company Act of 1940, as amended
(the "1940 Act"), and each Fund's current investment advisory agreement (each a
"Current Agreement"), each advisory agreement terminates automatically upon its
assignment, which is deemed to include any change of control of the Advisor.
Therefore, in order for the Advisor to continue to provide investment advisory
services to the Funds after the closing of the Acquisition, the shareholders of
each Fund must approve a new advisory agreement (the "New Agreements"), as
Section 15(a) of the 1940 Act prohibits any person from serving as an
investment advisor to a registered investment company except pursuant to a
written contract that has been approved by the shareholders of the
5
<PAGE> 7
registered investment company. THE NEW AGREEMENTS ARE SUBSTANTIALLY
SIMILAR TO EACH FUND'S CURRENT AGREEMENT WITH THE EXCEPTIONS OF THE TERM
THEREOF, THE DESCRIPTION OF THE ENTITY TO ACT AS ADVISOR AND CERTAIN OTHER
PROVISIONS DESCRIBED BELOW.
The Purchase Agreement also contemplates that the Trust, the Advisor,
Merrill Lynch and its affiliates will conform with the provisions of Section
15(f) of the 1940 Act, which provides, in pertinent part, that the Advisor may
receive any amount or benefit in connection with a sale of securities of, or a
sale of any other interest in, the Advisor, which results in an assignment of
an investment advisory contract if (1) for a period of three years after
that event, at least 75% of the members of the board of directors of the
investment company which it advises are not "interested persons" (as defined in
the 1940 Act) of the new or old investment advisor; and (2) there is no "unfair
burden" imposed on the investment company as a result of the Acquisition.
Three of the seven current Trustees (Messrs. Hotchkis and Wiley and Ms.
Celick) are "interested persons" of the Advisor and, following execution of the
Purchase Agreement, may be deemed "interested persons" of Merrill Lynch. The
Trustees therefore have taken steps to conform to Section 15(f). Two of the
"interested" Trustees (Ms. Celick and Mr. Wiley) are not standing for
re-election as Trustees of the Trust. In addition, two individuals who are not
"interested persons" of either Merrill Lynch or the Advisor have been nominated
as Trustees, as has Michael Quinn, head of Merrill Lynch Capital Management
Group. The Board of Trustees would thus be comprised of eight members, two of
whom would be interested persons of the Advisor or Merrill Lynch, and six of
whom would not be interested persons of either Merrill Lynch or the Advisor.
6
<PAGE> 8
In the Purchase Agreement, Merrill Lynch has covenanted to the Advisor
that it will not engage in any act which would impose an unfair burden on the
Funds as a result of the Acquisition. Furthermore, based on information
provided by Merrill Lynch and the Advisor and discussed at a meeting of the
Trustees held on July 23, 1996, the Trustees do not believe that any part of
the Acquisition, either express or implied, will constitute an "unfair burden"
on the Funds within the meaning of Section 15(f).
The New Agreements, if approved by the Funds' shareholders, will commence
on the closing date of the Acquisition or, if later, on the date on which each
Agreement receives the requisite approval of shareholders. Thereafter, the New
Agreements will remain in effect for an initial two-year term and will continue
in effect for successive periods if and so long as such continuance is
specifically approved annually by (a) the Trustees or (b) the vote of the
holders of a majority of each Fund's outstanding voting securities, provided
that in either event, the continuance also is approved by a majority of those
Trustees who are not parties to the contract or interested persons of any such
party (the "Independent Trustees") by vote cast in person at a meeting called
for the purpose of voting on such approval. Each New Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
7
<PAGE> 9
If the Acquisition does not occur, the New Agreements presented for
approval in Proposal 2 will not take effect, and investment advisory services
will continue to be provided to the Funds under the Current Agreements.
PROPOSAL 1. ELECTION OF BOARD OF TRUSTEES
It is intended that the persons named in the accompanying form of Proxy
will vote for the election of the nominees listed below, five of whom are
currently Trustees. Each Trustee so elected will serve as a Trustee until the
next meeting of shareholders, if any, called for the purpose of electing
Trustees and until the election and qualification of a successor or until such
Trustee sooner dies, resigns or is removed. The Trustees have recently adopted
a retirement policy under which a Trustee (other than a current Trustee) will
serve until any of the foregoing conditions occur, or until the year in which
he reaches the age of 72. The current Trustees are not subject to the
retirement policy for the three years following the Acquisition. With the
exception of John Gavin, all of the current Trustees who have been nominated to
continue to serve as Trustees have previously been elected by shareholders,
i.e., Robert L. Burch III, John F. Hotchkis, Robert B. Hutchinson and Merle T.
Welshans. Three nominees are not currently serving as Trustees of the Trust.
They have been proposed in connection with the Acquisition described above
under "Introduction," to replace Ms. Celick and Mr. Wiley, who will not stand
for re-election. The composition of the Board of Trustees, if each nominee is
elected, will satisfy the requirements of Section 15(f) of the 1940 Act, as
discussed in greater detail under "Investment Company Act Considerations"
above.
Since the Trust does not hold annual shareholder meetings, Trustees will
hold office for an indefinite period. Each nominee has consented to be named
in this Proxy Statement and to serve as a Trustee if elected. In case any
nominee shall be unable to act as a Trustee by virtue of an unexpected
occurrence, the proxies will be voted for such other person(s) as shall be
recommended by the Trustees.
The following table shows the nominees who are standing for election and
their principal occupations which, unless specific dates are shown, exceed five
years in duration, although the titles may not have been the same throughout.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NOMINEE'S NAME, ADDRESS POSITION WITH PRINCIPAL OCCUPATIONS DURING PERIOD DURING WHICH
AND AGE TRUST PAST FIVE YEARS NOMINEE HAS BEEN A
TRUSTEE OF TRUST
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert L. Burch III (62) Trustee Managing Partner, A.W. Jones Trustee since 1987.
885 Third Avenue Co. (investments); Chairman and
New York, NY 10022 President, Jonathan Mfg. Corp.
(slide manufacturing).
</TABLE>
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<PAGE> 10
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John A.G. Gavin (65) Trustee Chairman, GAMMA Services Corp. Trustee since 1995.
2100 Century Park West (Venture Capital) (since 1968);
Los Angeles, CA 90067 Principal, Gavin,
Dailey & Partners (consulting)
(since 1993); U.S.
Ambassador to Mexico (1981-1986);
Director, Atlantic Ritchfield
Co., Dresser Industries, Inc.,
Pinkertons, International Wire
Corp. and Kap Resources.
- ---------------------------------------------------------------------------------------------------------
Joe Grills (60) Nominee for Trustee Member of the Committee of None.
183 Soundview Lane Investment of Employee Benefit
New Canaan, CT 06840 Assets of the Financial
Executives Institute ("CIEBA")
since 1986; member of CIEBA's
Executive Committee since 1988
and its Chairman from 1991 to
1992; Assistant Treasurer of
International Business Machines
Incorporated ("IBM") and Chief
Investment Officer of the IBM
Retirement Funds from 1986 until
1993; Member of the Investment
Advisory Committee of the State
of New York Common Retirement
Fund; Director, Duke Management
Company and LaSalle Street Fund;
Trustee or Director of a number
of investment companies for which
MLAM is the advisor.
- ---------------------------------------------------------------------------------------------------------
John F. Hotchkis* (65) Trustee Managing Director and Portfolio Trustee since 1985.
800 West 6th Street Manager of the Advisor.
Los Angeles, CA 90017
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NOMINEE'S NAME, ADDRESS POSITION WITH PRINCIPAL OCCUPATIONS DURING PERIOD DURING WHICH
AND AGE TRUST PAST FIVE YEARS NOMINEE HAS BEEN A
TRUSTEE OF TRUST
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert B. Hutchinson (76) Trustee Consultant; Former Chairman Trustee since 1988.
c/o Simpson Investment Co. (1987-88) and Director (1976-88),
1201 3rd Avenue Prudential Bank (savings
Seattle, WA 98101 bank); Director and former Senior
Vice President, Finance and
Secretary, Simpson Investment Co.
(holding company for a wood
products company, a pulp and
paper company and a PVC products
company); Director, Enterprises
International, Inc. (industrial
strapping material manufacturer).
</TABLE>
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<PAGE> 11
<TABLE>
<S><C>
- ---------------------------------------------------------------------------------------------------------
Michael L. Quinn (50)** Nominee for Trustee Head of Merrill Lynch Capital None.
Merrill Lynch Capital Management Group since April
Management Group 1995; co-head of the Equity
800 Scudders Mill Road Division of Merrill, Lynch,
Plainsboro, NJ 08536 Pierce, Fenner & Smith
Incorporated from February
1991-April 1995; Trustee, Valley
Hospital and the University of
Denver.
- ---------------------------------------------------------------------------------------------------------
Merle T. Welshans (77) Trustee Adjunct Professor of Finance, Trustee since 1985.
14360 Ladue Road Washington University; Director,
Chesterfield, MO 63017 Prudential Utility Fund, Inc.,
Prudential Structured Maturity
Fund, Inc.
- ---------------------------------------------------------------------------------------------------------
Richard R. West (58) Nominee for Dean Emeritus of New York None.
Box 604 Trustee. University's Leonard N. Stern
Genoa, NV 89411 School of Business (since 1993);
formerly Dean (1984-1993) and
Professor of Finance
(1984-1995), New York
University's Leonard N. Stern
School of Business; Director,
Vornado, Inc., Alexander's Inc.,
Bowne & Co., Inc. and Smith
Corona Corp.; Trustee or Director
of a number of investment
companies for which MLAM is the
advisor.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* "Interested" Trustee, as defined in the 1940 Act, due to the relationship
indicated with the Advisor.
** Will be an "interested" Trustee, as defined in the 1940 Act, due to the
relationship indicated with Merrill Lynch.
As noted above, two of the current "interested" Trustees have decided not
to stand for re-election, but will continue to serve as Trustees until the
shareholders' meeting. Information relating to Nancy Celick, the first of the
Trustees who will not stand for re-election, is shown in the table below. Ms.
Celick has been a Trustee since 1994 and will continue to serve as President of
the Funds. The other "interested" Trustee who will not be standing for
re-election is George Wiley. He is 72 years old, is a managing director and
portfolio manager of the Advisor, and has been a Trustee since 1985.
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<PAGE> 12
The executive officers of the Trust are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
EXECUTIVE'S NAME, POSITION WITH TRUST PRINCIPAL PERIOD DURING WHICH
ADDRESS AND AGE OCCUPATIONS DURING INDIVIDUAL HAS BEEN
PAST FIVE YEARS AN EXECUTIVE OF
TRUST
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nancy D. Celick (45) President and Principal Chief Financial Since January 1994.
800 West 6th Street Executive Officer Officer of the
Los Angeles, CA 90017 Advisor; Chief
Financial Officer,
Kennedy-Wilson,
Inc. (Auction
Marketing Services,
1992-1993); Chief
Financial Officer,
First National
Corporation (Bank
Holding Company,
1984-1992).
- --------------------------------------------------------------------------------------------
Roger DeBard, PhD (54) Executive Vice President Managing Director Since May 1985.
800 West 6th Street and Portfolio
Los Angeles, CA 90017 Manager of the
Advisor.
- --------------------------------------------------------------------------------------------
Employee of the Since January 1994.
Advisor; Retail
Mark D. Cone (28) Account Manager,
800 West 6th Street Neuberger & Berman
Los Angeles, CA 90017 Vice President (1991-1994).
- --------------------------------------------------------------------------------------------
Gracie Fermelia (34) Secretary, Treasurer, Employee of the Since June 1994.
800 West 6th Street and Principal Financial Advisor; Senior
Los Angeles, CA 90017 and Accounting Officer Manager, Price
Waterhouse
(1985-1994).
- --------------------------------------------------------------------------------------------
</TABLE>
The Trustees have appointed an Audit Committee consisting of all the
Trustees who are not "interested persons" of the Advisor. Briefly, the
functions of the committee relate to (i) recommending a firm of independent
public accountants to the Board of Trustees for selection by the Trustees
(subject to shareholder ratification); (ii) reviewing the methods, scope and
result of audits and the fees charged and (iii) reviewing the adequacy of the
Trust's internal accounting procedures and controls. Two meetings of the audit
committee were held in the last fiscal year. The Trustees have no nominating
or compensation committees.
During the fiscal year ended June 30, 1996, the Trustees held four
regularly scheduled meetings. No Trustee, other than Robert Burch, attended
fewer than seventy-five percent of the meetings of the Trustees and any
committees thereof of which the Trustee was a member.
The Trust does not pay salaries to any of its officers or fees to any of
its Trustees who are affiliated with the Advisor. The fees paid to the other
Trustees during the Trust's fiscal year ended June 30, 1996 were as follows:
11
<PAGE> 13
Compensation Paid By Each Fund to the Trustees:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE
SHORT- TOTAL COMPENSATION
BALANCED SMALL EQUITY EQUITY FUND LOW TERM RETURN FROM TRUST
INCOME CAP INCOME INTERNATIONAL FOR INSURANCE DURATION INVESTMENT BOND AND FUND
NAME FUND FUND FUND FUND COMPANIES FUND FUND FUND COMPLEX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Burch III $1,000 $225 $2,500 $4,500 $350 $2,600 $225 $600 $12,000
- ------------------------------------------------------------------------------------------------------------------------------------
John A. G. Gavin $650 $150 $2,000 $3,300 $250 $2,000 $200 $450 $9,000
- ------------------------------------------------------------------------------------------------------------------------------------
Robert B. Hutchinson $1,000 $225 $2,500 $4,500 $350 $2,600 $225 $600 $12,000
- ------------------------------------------------------------------------------------------------------------------------------------
Merle T. Welshans $1,000 $225 $2,500 $4,500 $350 $2,600 $225 $600 $12,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Each Trustee who is not affiliated with the Advisor or MLAM is paid
$12,000 per annum. Following their election, Richard West and Joe Grills will
also be paid as directors of MLAM funds. In 1995, Richard West served on the
boards of 41 investment companies (consisting of 54 portfolios) advised by MLAM
and its advisory affiliates and received $294,600 in total compensation. During
the same period, Joe Grills served on the boards of 18 investment companies
(consisting of 38 portfolios) advised by MLAM and its advisory affiliates and
received $153,883 in total compensation.
<TABLE>
<CAPTION>
TOTAL PENSION ESTIMATED TOTAL COMPEN-
OR RETIREMENT ANNUAL SATION FROM TRUST
AGGREGATE BENEFITS ACCRUED BENEFITS AND FUND COMPLEX
COMPENSATION AS PART OF TRUST UPON PAID TO
NAME AND POSITION FROM TRUST EXPENSES RETIREMENT TRUSTEE
- ----------------------------- ------------ ---------------- ---------- -----------------
<S> <C> <C> <C> <C>
Robert L. Burch III, Trustee $12,000 none n/a $12,000
John A.G. Gavin, Trustee $9,000 none n/a $9,000
Robert B. Hutchinson, Trustee $12,000 none n/a $12,000
Merle T. Welshans, Trustee $12,000 none n/a $12,000
</TABLE>
12
<PAGE> 14
SHARES OWNED BENEFICIALLY ON JUNE 30, 1996 BY TRUSTEES AND OFFICERS
The percentages displayed in the chart indicate the number and percentage
of shares of each Fund owned beneficially by the Trustees, the nominees for
Trustee and the officers of the Trust.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
JOHN F. HOTCHKIS GEORGE WILEY
800 W. 6TH STREET 800 W. 6TH STREET THE TRUST'S
LOS ANGELES, CA LOS ANGELES, CA OFFICERS AND
FUND 90017 90017 TRUSTEES AS A GROUP
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY INCOME 386,225.247 shares 389,326.906 shares
FUND none 4.0% 4.2%
- ---------------------------------------------------------------------------------
SMALL CAP 21,313.438 shares 71,516.093 shares
FUND 2.7% none 9.3%
- ---------------------------------------------------------------------------------
INTERNATIONAL 16,850.252 shares 41,190.721 shares
FUND 0.1% none 0.2%
- ---------------------------------------------------------------------------------
BALANCED 3,821.321 shares 59,526.848 shares
INCOME FUND none 0.0% 1.5%
- ---------------------------------------------------------------------------------
LOW DURATION 36,426.353 shares 79,251.911 shares
FUND 1.9% none 2.1%
- ---------------------------------------------------------------------------------
SHORT-TERM 8,286.557 shares
INVESTMENT none none 0.4%
FUND
- ---------------------------------------------------------------------------------
</TABLE>
REQUIRED VOTE. Trustees must be elected by a plurality of the votes cast.
The Board of Trustees recommends approval of this Proposal.
13
<PAGE> 15
PROPOSAL 2. (A) APPROVAL OF THE NEW INVESTMENT ADVISORY
AGREEMENT FOR THE EQUITY INCOME FUND
(SHAREHOLDERS OF THE EQUITY INCOME FUND ONLY)
(B) APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT FOR
THE SMALL CAP FUND (SHAREHOLDERS OF THE SMALL CAP FUND ONLY)
(C) APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT FOR
THE INTERNATIONAL FUND (SHAREHOLDERS OF THE INTERNATIONAL
FUND ONLY)
(D) APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT FOR
THE BALANCED INCOME FUND (SHAREHOLDERS OF THE BALANCED INCOME
FUND ONLY)
(E) APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT FOR
THE TOTAL RETURN BOND FUND (SHAREHOLDERS OF THE TOTAL RETURN
BOND FUND ONLY)
(F) APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT FOR
THE LOW DURATION FUND (SHAREHOLDERS OF THE LOW DURATION FUND
ONLY)
(G) AMENDMENT OF THE INVESTMENT ADVISORY AGREEMENT FOR THE
SHORT-TERM INVESTMENT FUND (SHAREHOLDERS OF THE SHORT-TERM
INVESTMENT FUND ONLY)
(H) APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT FOR
THE EQUITY FUND FOR INSURANCE COMPANIES (SHAREHOLDERS OF THE
EQUITY FUND FOR INSURANCE COMPANIES ONLY)
THE CURRENT INVESTMENT ADVISORY AGREEMENTS
As noted above under "Introduction," consummation of the Acquisition would
constitute an "assignment," as that term is defined in the 1940 Act, of each
Fund's current investment advisory agreement (the "Current Agreements"). As
required by the 1940 Act, the Current Agreements provide for automatic
termination in the event of assignment. In anticipation of the Acquisition,
and in order to assure that the Advisor can continue to serve as investment
advisor to the Funds, shareholders of each of the Funds are being asked to
approve a New Agreement for their Fund. A
14
<PAGE> 16
copy of the form of the New Agreement for each Fund is attached hereto
as Annex B (with certain language applicable only to the Equity Fund for
Insurance Companies appearing in brackets). EXCEPT FOR THE EFFECTIVE AND
TERMINATION DATES AND THE DESCRIPTION OF THE ENTITY TO ACT AS INVESTMENT
ADVISOR, THE NEW AGREEMENTS WILL CONTAIN TERMS SUBSTANTIALLY SIMILAR TO THOSE
IN THE CURRENT AGREEMENTS.
The Advisor currently serves as investment advisor to 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 Insurance Companies under the Current Agreements.
The Current Agreements are dated June 24, 1987, July 23, 1985, December 11,
1990, July 23, 1985, October 31, 1995, October 31, 1995, May 7, 1993 and
December 9, 1992, respectively. The Trustees most recently reviewed and
approved the continuation of each of the Current Agreements at their April 23,
1996 meeting.
Each Current Agreement sets forth the terms pursuant to which the Advisor
acts as investment advisor to the Fund. For its services, the Advisor receives
the following fees:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ADVISORY FEES FOR
ASSETS AS OF FISCAL YEAR ENDED
FUND COMPENSATION JUNE 30, 1996 JUNE 30, 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY INCOME FUND .75 of 1% of average daily net assets $182,538,112 $1,238,052
- ------------------------------------------------------------------------------------------------------
SMALL CAP FUND .75 of 1% of average daily net assets 16,480,011 159,346
- ------------------------------------------------------------------------------------------------------
INTERNATIONAL FUND .75 of 1% of average daily net assets 330,997,678 1,108,545
- ------------------------------------------------------------------------------------------------------
BALANCED INCOME FUND .75 of 1% of average daily net assets 70,598,198 377,471
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN BOND
FUND .55 of 1% of average daily net assets 43,420,194 164,707
- ------------------------------------------------------------------------------------------------------
LOW DURATION FUND .46 of 1% of average daily net assets 189,166,289 706,115
- ------------------------------------------------------------------------------------------------------
SHORT-TERM .40 of 1% (net assets under $100 million),
INVESTMENT FUND .35 of 1% (net assets $100 million to
$249,999,999),
.30 of 1% (net assets $250 million to
$499,999,999) and
.25 of 1% (net assets $500 million or
more) 18,725,497 71,031
- ------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
THE EQUITY FUND FOR .60 of 1% ($10 million or less) and .50
INSURANCE COMPANIES of 1% (in excess of $10 million) 24,646,400 115,773
- ------------------------------------------------------------------------------------------------------
</TABLE>
Merrill Lynch has represented to the Trustees that it would not seek an
advisory fee increase for the next two years.
Although not required to do so, for the fiscal year ended June 30, 1996,
the Advisor limited the Funds' expenses, as hereinafter described, and the
Advisor is currently continuing to limit the annual expenses of the Equity
Income Fund, Small Cap Fund, International Fund and Balanced Income Fund to 1%
of each Fund's average net assets and the annual expenses of the Total Return
Bond Fund to .65%, the Low Duration Fund to .58% and the Short-Term Investment
Fund to .48% of each Fund's average net assets. There is no such limitation on
the annual expenses of the Equity Fund for Insurance Companies, all of the
operating expenses of which are borne by the Advisor. Merrill Lynch has made
no commitment regarding continuation of the voluntary expense limitations,
although it has informed the Trustees that there are no current plans to change
the expense limitations.
Each Agreement provides that the Advisor shall give the Trust the benefit
of its best judgment and effort in rendering services thereunder. Nothing in
the Agreement shall 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 the Agreement.
THE NEW AGREEMENTS
Under each New Agreement (as under the Current Agreements), the Advisor
will be responsible for both administrative and investment advisory services to
the Fund. For its services, each Fund will pay the Advisor a fee, computed
daily and payable monthly, at an annual rate as shown in the chart. In
addition to the fee payable to the Advisor, each Fund is responsible for its
operating expenses (other than the Equity Fund for Insurance Companies, for
which the Advisor assumes all operating costs and expenses),
including: (i) interest and taxes; (ii) brokerage commissions; (iii) insurance
premiums; (iv) compensation and expenses of the Trustees other than those
affiliated with the Advisor; (v) legal and audit expenses; (vi) fees and
expenses of the Funds' custodian, shareholder servicing or transfer agent and
accounting services agent; (vii) expenses incident to the issuance of its
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 Fund or its shares; (ix) expenses of preparing, printing
and mailing reports and notices and proxy material 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
16
<PAGE> 18
Institute or any successor; (xii) such non-recurring expenses as may arise,
including litigation affecting the Funds and the legal obligations which the
Funds may have to indemnify the officers and Trustees with respect thereto; and
(xiii) all expenses which the Fund agrees to bear in any distribution agreement
or in any plan adopted by the Fund pursuant to Rule 12b-1 under the Act. All
of the Current Agreements contain the same list of permitted expenses, with the
exception of those agreements that apply to the oldest three Funds, the Equity
Income Fund, the Small Cap Fund and the Balanced Income Fund, none of which
contain clause (xiii).
Under the Current and New Agreements, the Advisor has undertaken to reduce
its fee to the extent that the expenses of each Fund in any fiscal year
(including the advisory fee but excluding the amortization of organizational
expenses, taxes, interest, brokerage commissions, distribution fees and
extraordinary expenses) exceed the most stringent expense limitation imposed
under state law applicable to the Fund.
DESCRIPTION OF THE ADVISOR AND MLAM
For the purposes of the following paragraph, "MLAM" shall only refer to
Merrill Lynch Asset Management, L.P.
MLAM
Merrill Lynch Asset Management, L.P. is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536. MLAM is a limited partnership, 100% of the
interests in which are owned by Merrill Lynch or its subsidiaries. Princeton
Services, Inc. is the general partner of MLAM (owned through a holding company
by Merrill Lynch). Arthur Zeikel is the President of MLAM.
HOTCHKIS AND WILEY
The Managing Directors of the Advisor are John Hotchkis, George Wiley,
Roger DeBard, George Davis, Michael Baxter and Gail Bardin. Each of these
individuals, whose address is 800 West 6th Street, Los Angeles, CA 90017, is
also a portfolio manager of the Advisor. With the exception of George Wiley,
each will sign a long-term employment agreement with Merrill Lynch Capital
Management Group and will serve as a managing director of Merrill Lynch Capital
Management Group.
The Advisor is a California limited partnership which, in 1995,
reorganized through a transaction in which all the General Partners of the
Advisor contributed their interests to Hotchkis and Wiley, a newly organized
Delaware limited liability company (the "LLC"). The General Partners then
became members of the LLC and the LLC became the new general partner of the
Advisor. Effective upon the reorganization, the majority of the voting
interests in the LLC are held by Mr. Hotchkis and Mr. Wiley and entities
controlled by Mr. Wiley.
17
<PAGE> 19
In 1996, the following Funds paid the following brokerage commissions to
Merrill Lynch, Pierce, Fenner & Smith:
<TABLE>
<CAPTION>
EQUITY FUND SMALL CAP BALANCED
FOR INSURANCE FUND INCOME FUND
COMPANIES
<S> <C> <C>
$175.00 $375.00 $200.00
</TABLE>
18
<PAGE> 20
The Advisor also acts as the investment advisor or subadvisor for the
following investment companies, in addition to the Trust:
<TABLE>
<CAPTION>
ANNUAL FEE (AS A PERCENTAGE
NAME OF FUND OF AVERAGE NET ASSETS) ASSETS AS OF JUNE 30, 1996
<S> <C> <C>
American AAdvantage Funds For all accounts (including $222,912,606
separate accounts) combined:
American AAdvantage .60% of the first $10 million,
Balanced Fund .50% of the next $140 million,
.30% of the next $50 million and
.20% over $200 million.
American AAdvantage $233,800,475
Growth and Income Fund
American AAdvantage $126,898,203
International Equity Fund
Asset Allocation Portfolio For all accounts combined:
.60% on the first $10 million,
.55% on the next $40 million,
.45% on the next $100 million,
.35% on the next $150 million
and .30% over $350 million.
Citibank Asset Allocation $762,667
Portfolio 200
Citibank Asset Allocation $3,459,253
Portfolio 300
Citibank Asset Allocation $9,688,084
Portfolio 400
The Target Portfolio Trust
Large Capitalization Value .30% $104,189,998
Portfolio
</TABLE>
19
<PAGE> 21
DELIBERATION AND RECOMMENDATION OF BOARD OF TRUSTEES
The Board of Trustees of the Trust met on July 23, 1996 to consider the
Acquisition and its anticipated effects upon the Advisor and the investment
advisory and other services provided to each of the Funds. At this meeting,
the Trustees, including a majority of the Trustees who are not parties to the
Current Agreements or the New Agreements or interested persons of any such
party (i.e., the Independent Trustees), voted to approve the New Agreements and
to recommend the New Agreements to the shareholders of each Fund for their
approval.
The Trust's Board of Trustees believes that the terms and conditions of
the New Agreements are fair to, and in the best interest of, the Trust, each
Fund and its shareholders. The Board of Trustees, including the Independent
Trustees, has approved the New Agreements and unanimously recommends
shareholder approval. In evaluating the New Agreements and making their
recommendation, the Trustees reviewed and contrasted the operations of the
Trust with the operation of other similar funds advised by Merrill Lynch and
its affiliates. The Independent Trustees also were advised by the law firm of
Gardner, Carton & Douglas in connection with their deliberations concerning the
New Agreements.
The Trustees examined the experience, practices and overall investment
management capabilities of Merrill Lynch and its key personnel. The Trustees,
including the Independent Trustees, considered the fact that the investment
management fees payable under the New Agreements will remain the same as those
under the Current Agreements. The Trustees, including the Independent Trustees,
also reviewed other relevant factors, including, but not limited to: (1) the
fees and expense ratios of comparable mutual funds; (2) the differences between
the Current and New Agreements; (3) the services expected to be rendered to the
Funds by Merrill Lynch and its affiliates and (4) other factors deemed relevant.
The Trust, the Advisor and Merrill Lynch intend to comply with Section
15(f) of the 1940 Act. Section 15(f) provides a non-exclusive "safe harbor"
for an investment advisor to an investment company or any of its affiliated
persons to receive any amount or benefit in connection with a change in control
of the investment advisor so long as two conditions are met. First, for a
period of three years after the transaction, at least 75% of the Trustees of
the investment company must not be interested persons of the predecessor or
successor investment advisor. Proposal 1 includes the nominees for Trustee,
75% of whom are not interested persons of the Advisor or Merrill Lynch.
Accordingly, the composition of the Board of Trustees would be in compliance
with this provision of Section 15(f). Second, an "unfair burden" must not be
imposed upon the investment company as result of such transaction or any
express or implied terms, conditions or understandings applicable thereto. The
term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction whereby the advisor, or any
interested person of any such advisor, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
shareholders (other than fees for bona fide investment advisory or other
20
<PAGE> 22
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). Merrill Lynch has represented to the Trustees that it
would not seek an advisory fee increase for the next two years. It has made no
commitment regarding continuation of the voluntary expense limitation,
although Merrill Lynch has informed the Trustees that there are no current plans
to change the expense limitations. Neither Merrill Lynch nor the Advisor, after
due inquiry, is aware of any express or implied term, condition, arrangement or
understanding that would impose an "unfair burden" on any Fund as a result of
the transaction. Merrill Lynch and the Advisor have agreed that they and their
affiliates will take no action that would have the effect of imposing an "unfair
burden" on any Fund as a result of the Acquisition.
As a result of their review and consideration of the Acquisition and the
New Agreements, at the meeting on July 23, 1996 the Trustees, including the
Independent Trustees, voted to approve the New Agreements and to recommend them
to the shareholders of each Fund for their approval.
OTHER AGREEMENTS WITH THE TRUST
The Trust is a party to a sales agreement with First Fund Distributors,
Inc., 479 West 22nd Street, New York, New York 10011, which serves as the
principal underwriter of the Trust.
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin
53202, serves as administrator to the Trust pursuant to a Fund Administration
Servicing Agreement.
REQUIRED VOTE. The New Agreement for each Fund requires the approval of a
"majority" of each such Fund's outstanding voting securities. Under the 1940
Act, a majority of a Fund's outstanding voting securities is defined as the
lesser of (i) 67% of the outstanding shares represented at a meeting at which
more than 50% of the outstanding shares are present in person or represented by
proxy, or (ii) more than 50% of the Fund's outstanding voting securities. If
the Proposal is not approved with respect to any Fund, the Current Agreement
for the Fund will continue in its present form until the Acquisition, should it
occur (since one of the conditions to closing, which may be waived by Merrill
Lynch, is the approval of the New Agreements), and the Advisor then may
re-propose the New Agreement or consider other options.
The Trustees recommend approval of this Proposal.
PROPOSAL 3. RATIFICATION OF INDEPENDENT AUDITORS
A majority of the Board of Trustees has selected Price Waterhouse LLP,
independent accountants, to examine and audit the Trust's financial statements
for the current fiscal year. The firm has served the Trust in this capacity
since the Trust's inception and has no direct or indirect financial interest in
the Trust or the Advisor except as independent accountants. The selection of
21
<PAGE> 23
Price Waterhouse LLP as independent accountants is being submitted to the
shareholders for ratification. A representative of Price Waterhouse LLP is
expected to be present at the shareholder meeting and will be available to
respond to questions.
REQUIRED VOTE. The affirmative vote of a majority of the Trust's shares
present, in person or by proxy, at the Meeting is required for ratification.
The Trustees recommend approval of this Proposal.
PROPOSAL 4. APPROVAL OF THE AMENDMENTS TO THE TRUST'S DECLARATION OF TRUST
The Declaration of Trust is proposed to be amended (i) to permit each Fund
(as well as any series to be created in the future), upon authorization by the
Trustees, to issue and sell one or more classes of shares of beneficial
interest, and (ii) to revise other provisions of the Declaration of Trust as
described below. Multiple classes of shares permit potential investors,
whether individual or institutional, to choose among different sales charge and
fee alternatives. This choice permits investors to tailor their investment to
suit their particular needs. The amended Declaration of Trust will also
include all changes described below that are appropriate for multiple classes
of shares.
The amended Declaration of Trust will become effective as soon as possible
after the required shareholder approval. Its implementation is not dependent
upon consummation of the Acquisition.
A description of the significant revisions to the Declaration of Trust is
set forth below.
CHANGES TO PERMIT THE DESIGNATION AND ISSUANCE OF MULTIPLE CLASSES OF SHARES
As amended, the Declaration of Trust would specifically authorize the
Trustees to designate and issue an unlimited number of classes of shares of a
Fund (the "Multiple Class System"). The Declaration of Trust does not
currently provide for a Multiple Class System. Under a Multiple Class System,
marketing and distribution activities on behalf of the Funds could be tailored
to reach a broader segment of the investing public and sales activities and
services currently provided to customers could be enhanced.
At the current time, the Board of Trustees has no intent to institute a
Multiple Class System. Nevertheless, shareholders and investors may benefit if
the Board of Trustees has the flexibility to establish multiple distribution
options within each Fund. With such options available, the Funds would be
competitive with other mutual funds which feature, or are in the process of
implementing, distribution methods similar to the Multiple Class System.
22
<PAGE> 24
If a Multiple Class System were implemented, each class of shares of a
Fund would represent interests in the same series of shares and portfolio of
investments. They would be identical in all respects, except that the Trustees
would be authorized to differentiate among the classes as to the allocation of
expenses, rights of redemptions, special and related rights as to dividends and
on liquidation, conversion rights and voting rights.
OTHER CHANGES TO REVISE THE DECLARATION OF TRUST
If the amendments to the Declaration of Trust are approved, the Declaration of
Trust will also be amended to include the following new or revised provisions:
SHAREHOLDER VOTING. The amended Declaration of Trust would provide that, as to
any action requiring shareholder approval (with the exception of the election
of Trustees as to which a plurality vote will continue to be required), such
action be approved by the affirmative vote of a 1940 Act Majority. The
current Declaration of Trust requires a 1940 Act Majority where required by the
1940 Act, a plurality vote of all outstanding shares for the election of
Trustees, and a majority vote of all outstanding shares for all other matters
submitted to shareholders.
Under the amended Declaration of Trust, the shareholders will be entitled
to vote (i) for the election and removal of Trustees; (ii) with respect to the
approval or termination of any investment advisory or management contract or
other contract as to which shareholder approval is required by the 1940 Act;
(iii) with respect to amendments of the Declaration of Trust for which a
shareholders' vote is required; (iv) with respect to any merger or
consolidation of, or for any sale other than a sale solely for cash of all or
substantially all the assets of the Trust or a Fund; (v) with respect to any
proposal to incorporate the Trust or any Fund; (vi) 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 be brought or
maintained derivatively or as a class action on behalf of the Trust or a Fund
or the holders of shares of any class thereof; (vii) with respect to any
plan to be adopted pursuant to Rule 12b-1 under the 1940 Act; and (viii) with
respect to such additional matters relating to the Trust as may be
required by the 1940 Act, the Declaration of Trust, the By-Laws or any
registration of the Trust or any Fund with the Securities and Exchange
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. The current Declaration of Trust permits the
shareholders to vote with respect to the election or removal of Trustees, the
amendment of the Declaration, and with respect to the matters referred to in
clauses (vi) and (viii) above. Matters submitted to shareholders will be voted
on separately by the shareholders of each Fund, unless the Declaration of Trust
otherwise provides.
TERMINATION. The amended Declaration of Trust would permit termination of a
Fund or of any other series or class by the vote or written consent of a
majority of the Trustees or by the approval of a 1940 Act Majority of
shareholders. Currently, the Trust may be terminated only upon the
recommendation of a majority of the Trustees and approval by the affirmative
vote of more than 50%
23
<PAGE> 25
of the Trust's outstanding shares. This change to the Declaration of Trust
will allow the Trustees to act quickly when they deem it necessary and will
spare a Fund the expense of a costly proxy solicitation and a shareholder
meeting, thereby preserving assets for ultimate distribution to the
shareholders.
MERGER, CONSOLIDATION, SALE OF ASSETS, ETC. The amended Declaration of Trust
would specifically permit a Fund, or any future series to be created under the
Declaration of Trust, to merge or consolidate with any corporation,
association, trust or other organization or sell or otherwise transfer or
convey all or substantially all of the property belonging to a Fund, or any
future series to be created under the Declaration of Trust, upon the vote or
written consent of a 1940 Act Majority of such Fund's shareholders.
AMENDMENTS. The amended Declaration of Trust would permit the Trustees to
amend the Declaration of Trust without a shareholder vote (i) to make any
changes which do not adversely affect the rights of Trust shareholders; (ii) to
change the name of the Trust, a Fund or a series or class thereof; (iii) to
authorize additional Funds, series or classes; (iv) to supply any omission,
to cure, correct or supplement any ambiguous, defective or inconsistent
provision; or (v) to make any changes required by any federal, state or
similar regulatory authority or required by the Internal Revenue Code to
eliminate or reduce any federal, state or local taxes which may be payable by a
Fund or its shareholders. The current Declaration of Trust only provides for
amendment without shareholder approval in the case of a name change of the
Trust, although it does not require shareholder approval to change the name of a
Fund. The Trustees believe that the flexibility to amend the Declaration of
Trust for the reasons described above does not affect adversely shareholders'
rights and would save the Funds the future expense of a proxy solicitation.
TRUSTEES' RECOMMENDATION. At a meeting of the Trustees held on July 23, 1996,
the Trustees, including the Independent Trustees, unanimously approved and
voted to recommend to shareholders that they approve a proposal to amend the
Declaration of Trust as described herein, and as more fully set forth in the
amendments to the Declaration of Trust contained in Annex C. In taking this
action and making this recommendation, the Trustees took into consideration the
possibility that the ability of the Board of Trustees to adopt a Multiple Class
System may improve the distribution of its shares and benefit existing
shareholders. The Board of Trustees also considered the likelihood that the
amended Declaration of Trust will result in a more efficient and economical
operation of the Funds by giving the Board of Trustees more flexibility to
manage the Funds. These changes should reduce the need for costly proxy
solicitations and shareholder meetings.
REQUIRED VOTE. Approval of this proposal will require the affirmative vote of
a majority of the outstanding shares of the Trust.
The Trustees recommend approval of this Proposal.
24
<PAGE> 26
OTHER MATTERS
No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of shareholders arise,
including any question as to an adjournment of the Meeting, the persons named
in the enclosed Proxy will vote thereon according to their best judgment in the
interest of the Trust.
25
<PAGE> 27
SHAREHOLDER PROPOSALS
As a Massachusetts business trust, the Trust is not required to hold
annual meetings of shareholders and the Trustees currently do not intend to
hold such meetings unless shareholder action is required in accordance with the
1940 Act or the Trust's Declaration of Trust. A shareholder proposal intended
to be presented at any meeting of shareholders of the Trust hereinafter called
must be received by the Trust a reasonable time before the Trustees'
solicitation relating thereto is made in order to be included in the Trust's
proxy statement and form of proxy relating to that meeting and presented at the
meeting. The mere submission of a proposal by a shareholder does not guarantee
that such proposal will be included in the proxy statement because certain
rules under the federal securities laws must be complied with before inclusion
of the proposal is required.
Gracie Fermelia
Secretary
Dated: August 13, 1996
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH
TO HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
26
<PAGE> 28
ANNEX A
Persons owning more than 5% of any Fund as of June 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OF BENEFICIAL PERCENT OF
FUND OWNER OWNERSHIP FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income Fund Lykes Bros. Inc. 1,045,499.866 shares owned 10.83%
P.O. Box 1690 of record and beneficially
Tampa, FL 33601
- ------------------------------------------------------------------------------------------------
Equity Income Fund McDonald's Children's Charities 778,047.782 shares owned 8.06%
State Street Bank, Custodian of record and beneficially
225 Franklin Street
Boston, MA 02110-2804
- ------------------------------------------------------------------------------------------------
Equity Income Fund Northern States Power Corp. 551,668.566 shares owned of 5.72%
P. O. Box 64482 record and beneficially
St. Paul, MN 55164-0482
- ------------------------------------------------------------------------------------------------
Balanced Income Fund Retirement Plan for Employees 977,839.275 shares owned of 25.30%
of Texas Utilities Company record and beneficially
System
P.O. Box 320
Pittsburgh, PA 15230-0320
- ------------------------------------------------------------------------------------------------
Balanced Income Fund Oakland Police Officers 221,706.733 shares owned of 5.74%
Association record and beneficially
717 Washington Street
Oakland, CA 94607-3979
- ------------------------------------------------------------------------------------------------
Small Cap Fund Frances C. Mayhan 38,781.488 shares owned of 5.02%
26 Edgehill Rd. record and beneficially
Little Rock, AR 72207-5462
- ------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 29
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OF BENEFICIAL PERCENT OF
FUND OWNER OWNERSHIP FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Cap Fund Preston Hotchkis (IRA) 43,485.431 shares owned of 5.63%
523 W. 6th Street, #316 record and beneficially
Los Angeles, CA 90014-1004
- ------------------------------------------------------------------------------------------------
International Fund Retirement Plan for Employees 977,839.275 shares owned of 11.18%
of Texas Utilities Company record and beneficially
System
P.O. Box 320
Pittsburgh, PA 15230-0320
- ------------------------------------------------------------------------------------------------
Low Duration Fund M.J. Murdock Charitable Trust 1,762,199.968 shares owned of 9.42%
USNB of Oregon, Custodian record and beneficially
555 SW Oak
Portland, OR 97204
- ------------------------------------------------------------------------------------------------
Low Duration Fund Alliance HealthCare Foundation 1,015,911.871 shares owned of 5.43%
5251 ViewRidge Court record and beneficially
San Diego, CA 92123
- ------------------------------------------------------------------------------------------------
Low Duration Fund Santa Fe Energy Resources, Inc. 956,820.558 shares owned of 5.12%
Retirement Income Plan record and beneficially
1616 South Voss Road, Suite 1000
Houston, Texas 77057
- ------------------------------------------------------------------------------------------------
Short-Term United Airlines Group 654,007.951 shares owned of 35.52%
Investment Fund Investment Trust record and beneficially
P.O. Box 66100
Chicago, IL 60666
</TABLE>
A-2
<PAGE> 30
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OF BENEFICIAL PERCENT OF
FUND OWNER OWNERSHIP FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term InterMind Corp. 375,155.723 shares owned of 20.38%
Investment Fund 217 Pine St. record and beneficially
8th Floor
Seattle, WA 98101
- ------------------------------------------------------------------------------------------------
Short-Term Mercantile Stores Company, Inc. 174,779.486 shares owned of 9.49%
Investment Fund Pension Plan record and beneficially
9450 Seward Road
Fairfield, OH 45014
- ------------------------------------------------------------------------------------------------
Short-Term Susan Shanor 145,937.376 shares owned of 7.93%
Investment Fund 4336 Town Commons Circle record and beneficially
Atlanta, GA 30319
- ------------------------------------------------------------------------------------------------
Total Return Bond Santa Fe Energy Resources, Inc. 390,357.817 shares owned of 11.49%
Fund Retirement Income Plan record and beneficially
1616 South Voss Road, Suite 1000
Houston, Texas 77057
- ------------------------------------------------------------------------------------------------
Total Return Bond YMCA of Metropolitan 365,676.841 shares owned of 10.77%
Fund Los Angeles record and beneficially
201 3rd Street, 11th Floor
San Francisco, CA 94163-9991
- ------------------------------------------------------------------------------------------------
Total Return Bond Vesper Society 413,190.609 shares owned of 12.17%
Fund Jack London Square record and beneficially
384 Embarcadero West, Suite 200
Oakland, CA 94607
- ------------------------------------------------------------------------------------------------
Total Return Bond Wyle Electronics 386,601.83 shares owned of 11.38%
Fund 15370 Barranca Pkwy. record and beneficially
P.O. Box 19675
Irvine, CA 92713
</TABLE>
A-3
<PAGE> 31
<TABLE>
- ------------------------------------------------------------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OF BENEFICIAL PERCENT OF
FUND OWNER OWNERSHIP FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Fund for The Prudential Insurance Company 1,823,835.847 shares owned of 100%
Insurance Companies of America record and beneficially
751 Broad Street
Newark, NJ 07102
- ------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 32
ANNEX B
FORM OF
HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of __________, 1996, by and between HOTCHKIS
AND WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
_______________ 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:
B-1
<PAGE> 33
(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.
(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
B-2
<PAGE> 34
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 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 [For Equity Fund for Insurance
Companies: All operating costs and expenses relating to the Fund are hereby
expressly assumed by
B-3
<PAGE> 35
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.
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 __%
[For Equity Fund for Insurance Companies: 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 __________, 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
B-4
<PAGE> 36
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 that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
B-5
<PAGE> 37
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:
_____________________________________
B-6
<PAGE> 38
ANNEX C
The amendments of the Declaration of Trust proposed by the foregoing Proxy
Statement are as follows:
I. Amending Article SECOND of the Declaration:
A. By restating sub-section 6 thereof to read in its entirety as follows:
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.
B. By inserting the following six additional definitions in Article
SECOND:
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 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
C-1
<PAGE> 39
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
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.
II. Amending Article FOURTH of the Declaration to read in its entirety as
follows:
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 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 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
C-2
<PAGE> 40
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.
(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
C-3
<PAGE> 41
by an officer of the Trust pursuant to the vote of a Majority of the
Trustees, of an 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 12 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.
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
C-4
<PAGE> 42
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 3 of this Article 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 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
C-5
<PAGE> 43
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
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 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.
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(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 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 at any
time: (i) if the
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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 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.
(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
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<PAGE> 46
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 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.
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
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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.
III. Amending Article FIFTH to read in its entirety as follows:
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 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
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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 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.
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
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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 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 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
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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.
IV. Amending paragraph 13 of Article SEVENTH of the Declaration:
A. By restating the preamble and sub-sections (a) through (c) of such
paragraph 13 to read in their entirety as follows:
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 advisor,
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:
(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;
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(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.
V. Deleting subsection (d) and redesignating sub-sections (e) and (f)
of paragraph 13 of Article SEVENTH as sub-sections (c), and (d), and restating
paragraph (d), as so redesignated, to read in its entirety as follows:
(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.
VI. Amending Article EIGHTH of the Declaration:
A. By restating the preamble to paragraph 4 of Article EIGHTH to read as
follows:
4. This Trust, and each Fund of the Trust, shall continue without
limitation of time, but subject to the provisions of sub-sections (a) through
(e) of this paragraph 4:
B. By inserting new sub-sections (d) and (e) in such paragraph 4, as
follows:
(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
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<PAGE> 52
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
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.
C. By deleting paragraph 7 of Article EIGHTH, and renumbering succeeding
paragraphs accordingly.
D. By restating paragraph 11, as so renumbered, to read in its entirety as
follows:
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.
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<PAGE> 53
(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 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.
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<PAGE> 54
HOTCHKIS AND WILEY FUNDS
EQUITY INCOME FUND
SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated ________________, 1996
If you are signing as attorney, executor,
administrator, trustee, or guardian, please
give full title as such. If as a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in the partnership
name by authorized person.
-----------------------------------------
Signature(s) if held jointly
<PAGE> 55
<TABLE>
<S><C>
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK. DO NOT USE RED INK. [x]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
FOR all WITHHOLD
nominees listed AUTHORITY
(except as to vote for all
1. Election of marked to the nominees listed
Trustees: contrary below) below
Nominee: Robert L. Burch III Robert B. Hutchinson
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- -----------------------------------------------------
2. To approve a new investment advisory agreement for the Fund on FOR AGAINST ABSTAIN
substantially the same terms as the current agreement. / / / / / /
L L L
3. To ratify the selection by the Board of Trustees of Price
Waterhouse LLP as independent accountants for the current fiscal / / / / / /
year.
4. To approve amendments to the Declaration of Trust that would / / / / / /
permit the Trustees to authorize classes of shares of the Trust,
among other things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come before the
meeting or any adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE SELECTIONS MADE ABOVE.
HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR EACH OF THE PROPOSALS.
</TABLE>
<PAGE> 56
HOTCHKIS AND WILEY FUNDS
SMALL CAP FUND
SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated ________________, 1996
If you are signing as attorney, executor,
administrator, trustee, or guardian, please
give full title as such. If as a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in the partnership
name by authorized person.
-----------------------------------------
Signature(s) if held jointly
<PAGE> 57
<TABLE>
<S><C>
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR BLACK INK. DO NOT USE RED INK. [X]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
FOR all WITHHOLD
nominees listed AUTHORITY
1. Election of (except as to vote for all
Trustees: marked to the nominees listed
Nominee: Robert L. Burch III Robert B. Hutchinson contrary below) below
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEE(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- --------------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve a new investment advisory agreement for the Fund on / / / / / /
substantially the same terms as the current agreement
L L L
3. To ratify the selection by the Board of Trustees of Price Waterhouse
LLP as independent accountants for the current fiscal year. / / / / / /
4. To approve amendments to the Declaration of Trust that would permit
the Trustees to authorize classes of shares of the Trust, among other / / / / / /
things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come before the meeting or any
adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE SELECTIONS MADE ABOVE.
HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR EACH OF THE PROPOSALS.
</TABLE>
<PAGE> 58
HOTCHKIS AND WILEY FUNDS
INTERNATIONAL FUND
SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated ________________, 1996
If you are signing as attorney, executor,
administrator, trustee, or guardian, please
give full title as such. If as a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in the partnership
name by authorized person.
-----------------------------------------
Signature(s) if held jointly
<PAGE> 59
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK. DO NOT USE RED INK. [X]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
<TABLE>
<S><C>
FOR all WITHHOLD
nominees listed AUTHORITY
(except as to vote for all
marked to the nominees listed
contrary below) below
1. Election of
Trustees:
Nominee: Robert L. Burch III Robert B. Hutchinson
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- ---------------------------------------------------- FOR AGAINST ABSTAIN
2. To approve a new investment advisory agreement for the / / / / / /
Fund on substantially the same terms as the current
agreement L L L
3. To ratify the selection by the Board of Trustees of Price / / / / / /
Waterhouse LLP as independent accountants for the current
fiscal year.
4. To approve amendments to the Declaration of Trust that / / / / / /
would permit the Trustees to authorize classes of shares
of the Trust, among other things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come
before the meeting or any adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE
SELECTIONS MADE ABOVE. HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR
EACH OF THE PROPOSALS.
</TABLE>
2
<PAGE> 60
HOTCHKIS AND WILEY FUNDS
BALANCED INCOME FUND SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated___________________________, 1996
If you are signing as attorney,
executor, administrator, trustee, or
guardian, please give full title as
such. If as a corporation, please sign
in full corporate name by president or
other authorized officer. If a
partnership, please sign in the
partnership name by authorized person.
----------------------------------------
Signature(s) if held jointly
<PAGE> 61
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK. DO NOT USE RED INK. [X]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
<TABLE>
<S><C>
FOR all WITHHOLD
nominees listed AUTHORITY
(except as to vote for all
marked to the nominees listed
contrary below) below
1. Election of
Trustees:
Nominee: Robert L. Burch III Robert B. Hutchinson
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- ---------------------------------------------------- FOR AGAINST ABSTAIN
2. To approve a new investment advisory agreement for the / / / / / /
Fund on substantially the same terms as the current
agreement L L L
3. To ratify the selection by the Board of Trustees of Price / / / / / /
Waterhouse LLP as independent accountants for the current
fiscal year.
4. To approve amendments to the Declaration of Trust that / / / / / /
would permit the Trustees to authorize classes of shares
of the Trust, among other things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come
before the meeting or any adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE
SELECTIONS MADE ABOVE. HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR
EACH OF THE PROPOSALS.
</TABLE>
2
<PAGE> 62
HOTCHKIS AND WILEY FUNDS
TOTAL RETURN BOND FUND
SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated ________________, 1996
If you are signing as attorney, executor,
administrator, trustee, or guardian, please
give full title as such. If as a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in the partnership
name by authorized person.
-----------------------------------------
Signature(s) if held jointly
<PAGE> 63
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK. DO NOT USE RED INK. [X]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
<TABLE>
<S><C>
FOR all WITHHOLD
nominees listed AUTHORITY
(except as to vote for all
marked to the nominees listed
contrary below) below
1. Election of
Trustees:
Nominee: Robert L. Burch III Robert B. Hutchinson
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- ---------------------------------------------------- FOR AGAINST ABSTAIN
2. To approve a new investment advisory agreement for the / / / / / /
Fund on substantially the same terms as the current
agreement L L L
3. To ratify the selection by the Board of Trustees of Price / / / / / /
Waterhouse LLP as independent accountants for the current
fiscal year.
4. To approve amendments to the Declaration of Trust that / / / / / /
would permit the Trustees to authorize classes of shares
of the Trust, among other things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come
before the meeting or any adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE
SELECTIONS MADE ABOVE. HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR
EACH OF THE PROPOSALS.
</TABLE>
2
<PAGE> 64
HOTCHKIS AND WILEY FUNDS
LOW DURATION FUND
SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated ________________, 1996
If you are signing as attorney, executor,
administrator, trustee, or guardian, please
give full title as such. If as a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in the partnership
name by authorized person.
-----------------------------------------
Signature(s) if held jointly
<PAGE> 65
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK. DO NOT USE RED INK. [X]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
<TABLE>
<S><C>
FOR all WITHHOLD
nominees listed AUTHORITY
(except as to vote for all
marked to the nominees listed
contrary below) below
1. Election of
Trustees:
Nominee: Robert L. Burch III Robert B. Hutchinson
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- ---------------------------------------------------- FOR AGAINST ABSTAIN
2. To approve a new investment advisory agreement for the / / / / / /
Fund on substantially the same terms as the current
agreement L L L
3. To ratify the selection by the Board of Trustees of Price / / / / / /
Waterhouse LLP as independent accountants for the current
fiscal year.
4. To approve amendments to the Declaration of Trust that / / / / / /
would permit the Trustees to authorize classes of shares
of the Trust, among other things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come
before the meeting or any adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE
SELECTIONS MADE ABOVE. HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR
EACH OF THE PROPOSALS.
</TABLE>
2
<PAGE> 66
HOTCHKIS AND WILEY FUNDS
SHORT-TERM INVESTMENT FUND
SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated ________________, 1996
If you are signing as attorney, executor,
administrator, trustee, or guardian, please
give full title as such. If as a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in the partnership
name by authorized person.
-----------------------------------------
Signature(s) if held jointly
<PAGE> 67
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK. DO NOT USE RED INK. [X]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
<TABLE>
<S><C>
FOR all WITHHOLD
nominees listed AUTHORITY
(except as to vote for all
marked to the nominees listed
contrary below) below
1. Election of
Trustees:
Nominee: Robert L. Burch III Robert B. Hutchinson
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- ---------------------------------------------------- FOR AGAINST ABSTAIN
2. To approve a new investment advisory agreement for the / / / / / /
Fund on substantially the same terms as the current
agreement L L L
3. To ratify the selection by the Board of Trustees of Price / / / / / /
Waterhouse LLP as independent accountants for the current
fiscal year.
4. To approve amendments to the Declaration of Trust that / / / / / /
would permit the Trustees to authorize classes of shares
of the Trust, among other things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come
before the meeting or any adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE
SELECTIONS MADE ABOVE. HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR
EACH OF THE PROPOSALS.
</TABLE>
2
<PAGE> 68
HOTCHKIS AND WILEY FUNDS
EQUITY FUND FOR INSURANCE COMPANIES
SOLICITED BY THE BOARD OF TRUSTEES
PROXY CARD
Please mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope. Your signature on the Proxy Card also appoints Nancy D. Celick, Mark
Cone and Gracie V. Fermelia as Proxies, each with the power of substitution,
and authorizes each of them to represent and to vote, as designated above, all
the shares of the Fund you held of record on August 2, 1996 at the Special
Meeting of Shareholders to be held on September 27, 1996 or any adjournment
thereof.
Dated ________________, 1996
If you are signing as attorney, executor,
administrator, trustee, or guardian, please
give full title as such. If as a corporation,
please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in the partnership
name by authorized person.
-----------------------------------------
Signature(s) if held jointly
<PAGE> 69
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK. DO NOT USE RED INK. [X]
The Board of Trustees recommends a vote "FOR" each of the following proposals:
<TABLE>
<S><C>
FOR all WITHHOLD
nominees listed AUTHORITY
(except as to vote for all
marked to the nominees listed
contrary below) below
1. Election of
Trustees:
Nominee: Robert L. Burch III Robert B. Hutchinson
John A.G. Gavin Michael L. Quinn
Joe Grills Merle T. Welshans
John F. Hotchkis Richard R. West
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES(S), BY WRITING THE NOMINEE(S) NAME(S) ON THE / / / /
LINE BELOW
- ---------------------------------------------------- FOR AGAINST ABSTAIN
2. To approve a new investment advisory agreement for the / / / / / /
Fund on substantially the same terms as the current
agreement L L L
3. To ratify the selection by the Board of Trustees of Price / / / / / /
Waterhouse LLP as independent accountants for the current
fiscal year.
4. To approve amendments to the Declaration of Trust that / / / / / /
would permit the Trustees to authorize classes of shares
of the Trust, among other things.
5. In their discretion, the Proxies are authorized to transact such other business as may properly come
before the meeting or any adjournment thereof.
REMEMBER: SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE
SELECTIONS MADE ABOVE. HOWEVER, IF NO INSTRUCTIONS ARE SPECIFIED, SHARES WILL BE VOTED FOR
EACH OF THE PROPOSALS.
</TABLE>
2
