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HOTCHKIS AND WILEY FUNDS
SUPPLEMENT TO PROSPECTUS
DATED JANUARY 1, 1997
SECURITIES AND TECHNIQUES USED BY THE FUNDS
DOLLARS ROLLS. The Total Return Bond Fund, the Low Duration Fund and the
Short-Term Investment Fund (collectively, the "Fixed-Income Funds") and the
Balanced Income Fund may use dollar rolls as part of their investment strategy.
In a dollar roll, a Fund sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar securities (same
type and coupon) on a specified future date from the same party. During the roll
period, the Fund forgoes principal and interest paid on the securities. The Fund
is compensated by the difference between the current sales price and the forward
price for the future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale. A "covered roll"
is a specified type of dollar roll for which there is an offsetting cash
position or cash equivalent security position that matures on or before the
forward settlement date of the dollar roll transaction.
The Balanced Income Fund and the Fixed-Income Funds will establish a segregated
account with the Custodian in which they will maintain cash, U.S. Government
securities, equity securities or other liquid, unencumbered assets,
marked-to-market daily, equal in value to their obligations in respect of dollar
rolls. Dollar rolls involve the risk that the market value of the securities
retained by the Fund may decline below the price of the securities the Fund has
sold but is obligated to repurchase under the agreement. If the buyer of the
securities under a dollar roll files for bankruptcy or becomes insolvent, the
Fund's use of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Fund's obligation to repurchase the securities. Dollar rolls are speculative
techniques involving leverage and are considered borrowings by the Funds,
subject to their limitations on borrowings.
PREFERRED STOCK. The Fixed-Income Funds may invest in preferred stock of issuers
whose assets consist of mortgage-backed securities of U.S. Government agencies.
ORGANIZATION AND MANAGEMENT
PORTFOLIO MANAGERS
Effective May 1997, the portfolio manager for the Small Cap Fund is Jim Miles.
His biography is on page 28 of the Prospectus.
Effective May 1997, John Queen is a co-portfolio manager for the Fixed-Income
Funds. Mr. Queen joined the Advisor as Vice President -- Fixed Income in 1997.
Prior to joining the Advisor, Mr. Queen was associated with The Capital Group,
Los Angeles, as a member of an analyst team responsible for $8 billion in
fixed-income assets.
May 8, 1997
