<PAGE> 1
HOTCHKIS AND WILEY FUNDS
INVESTOR CLASS SHARES
EQUITY INCOME FUND TOTAL RETURN BOND FUND
MID-CAP FUND LOW DURATION FUND
SMALL CAP FUND SHORT-TERM INVESTMENT FUND
INTERNATIONAL FUND
GLOBAL EQUITY FUND
BALANCED FUND
SUPPLEMENT TO PROSPECTUS
DATED AUGUST 27, 1999
Investment Adviser Name Change. Effective June 30, 2000, the investment
adviser changed its name to Mercury Advisors. (Mercury Advisors is a trading
name of Merrill Lynch Investment Managers, L.P., which is the new name of
Merrill Lynch Asset Management, L.P., of which Hotchkis and Wiley was formerly a
division.)
Change in Portfolio Managers of the Global Equity Fund. Effective July
1, 2000, James Doyle and Mark Morris became the portfolio managers of the Global
Equity Fund. Mr. Doyle is a Vice President of the investment adviser and has
been an investment professional with the firm since 1997. From 1992 to 1995, Mr.
Doyle was a financial analyst at LaSalle Partners, a real estate investment
firm. Mr. Morris is a Director of the investment adviser and has been with the
firm since 1998. Mr. Morris was a portfolio manager with Trust Company of the
West from 1996 to 1998, and a technology analyst from 1991 to 1998.
Change in Portfolio Manager of the Balanced Fund. Effective July 1,
2000, Roger DeBard retired as portfolio manager of the Balanced Fund. Michael
Sanchez continues as portfolio manager with responsibility for the day-to-day
management of the bond portion of the Fund's portfolio. Sheldon Lieberman
replaces Mr. DeBard, and is responsible for the day-to-day management of the
equity portion of the Fund's portfolio and the asset allocation strategy. Mr.
Lieberman is also a portfolio manager of the Equity Income Fund.
Change in Portfolio Manager of the Total Return Bond, Low Duration and
Short-Term Investment Funds. Effective July 1, 2000, Roger DeBard retired as
portfolio manager of these Funds. John Queen and Michael Sanchez continue as
portfolio managers.
Name Changes of Funds and Trust, Multi-Class Load Distribution Structure
and Conversion of Total Return Bond and Low Duration Funds to Master/Feeder
Structure. The Board of Trustees of Hotchkis and Wiley Funds (the "Trust") has
adopted the recommendation of Mercury Advisors to (i) change the names of the
Trust and each fund of the Trust (each a "Fund"), (ii) establish a multi-class
load distribution structure, and (iii) authorize the Total Return
-1-
<PAGE> 2
Bond and Low Duration Funds to transfer their assets to a "master" fund in a
master/feeder structure. The conversion to master/feeder is subject to the prior
approval of the shareholders of these two Funds. Proxy materials describing the
necessary shareholder approvals will be mailed in advance of shareholder
meetings of the Total Return Bond and Low Duration Funds, which are expected to
be held in September 2000. All of these changes are proposed to take effect on
or about October 5, 2000.
Name Changes. The names of the Trust and Funds will change as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
CURRENT NAME NEW NAME
----------------------------------------------------------------------------------------------
Hotchkis and Wiley Funds Mercury HW Funds
----------------------------------------------------------------------------------------------
<S> <C>
1. Hotchkis and Wiley Equity Income Fund 1. Mercury HW Large Cap Value Fund
2. Hotchkis and Wiley Mid-Cap Fund 2. Mercury HW Mid-Cap Value Fund
3. Hotchkis and Wiley Small Cap Fund 3. Mercury HW Small Cap Value Fund
4. Hotchkis and Wiley International Fund 4. Mercury HW International Value Fund
5. Hotchkis and Wiley Global Equity Fund 5. Mercury HW Global Value Fund
6. Hotchkis and Wiley Balanced Fund 6. Mercury HW Balanced Fund
7. Hotchkis and Wiley Total Return Bond Fund 7. Mercury Total Return Bond Fund
8. Hotchkis and Wiley Low Duration Fund 8. Mercury Low Duration Fund
9. Hotchkis and Wiley Short-Term Investment Fund 9. Mercury Short-Term Investment Fund
----------------------------------------------------------------------------------------------
</TABLE>
Multi-Class Load Distribution Structure. The multi-class load
distribution structure will offer investors up to four alternative ways to
purchase shares. The share classes that will be available to each Fund are
summarized below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY HW Class I Class A Class B Class C
INTERNATIONAL VALUE
FUND
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 5.25% 5.25% None None
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None 4.00% 1.00%
Sales Charge (Load)
-----------------------------------------------------------------
Annual None 0.25% 1.00% 1.00%
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY TOTAL Class I Class A Class B Class C
RETURN BOND FUND
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 4.00% 4.00% None None
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None 4.00% 1.00%
Sales Charge (Load)
-----------------------------------------------------------------
Annual None 0.25% 0.75% 0.80%
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY LOW Class I Class A Class B Class C
DURATION FUND
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 2.00% 2.00% None None
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None 2.00% 1.00%
Sales Charge (Load)
-----------------------------------------------------------------
Annual None 0.25% 0.75% 0.80%
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY HW SMALL Class I Class A Class B Class C
CAP AND BALANCED
FUNDS
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 5.25% 5.25% n/a n/a
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None n/a n/a
Sales Charge
(Load)
-----------------------------------------------------------------
Annual None 0.25% n/a n/a
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY SHORT- Class I Class A Class B Class C
TERM INVESTMENT
FUND
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 2.00% n/a n/a n/a
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None n/a n/a n/a
Sales Charge (Load)
-----------------------------------------------------------------
Annual None n/a n/a n/a
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY HW LARGE Class I Class A Class B Class C
CAP VALUE, MID-CAP
VALUE, AND GLOBAL
VALUE FUNDS
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 5.25% n/a n/a n/a
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None n/a n/a n/a
Sales Charge (Load)
-----------------------------------------------------------------
Annual None n/a n/a n/a
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
The multi-class load distribution structure will provide investors with
different options for purchasing shares. Class I shares and Class A shares will
be equivalent to current Investor Class shares and Distributor Class shares,
respectively, except that new investors may pay the front-end loads listed
above. The new Class B and Class C shares will have contingent deferred sales
charges ("CDSCs") plus Rule 12b-1 distribution fees and account maintenance
fees. Investors in these classes will pay no front-end load, but may pay a load
when they redeem shares, depending on how long shares are held.
-3-
<PAGE> 4
Existing shareholders at the time the multi-class conversion takes place
will not be adversely affected. If you hold Investor Class shares, they will be
redesignated as Class I shares, and your future investments in Class I shares
will be load-waived. If you hold Distributor Class shares, they will be
redesignated as Class A shares, and your future investments in Class A shares
will be load-waived. Existing shareholders will also gain the right to exchange
shares for the same class of shares in the other funds in the Mercury family of
mutual funds, including certain money market funds, without a load.
(Subsequent purchases after an exchange would be subject to loads.)
Although the legal rights of each class of shares will be identical,
each class may bear certain distribution and other expenses specifically
allocated to that class. The different expenses of each class will result in
different net asset values and dividends. For example, Class B shares will have
a Rule 12b-1 fee, which will cause them to have a higher expense ratio and to
pay lower dividends than Class I shares, which will not have a 12b-1 fee. Each
class (other than Class I) will have exclusive voting rights regarding its Rule
12b-1 plan.
Not everyone will be eligible to purchase every class. The Funds'
prospectuses and Statements of Additional Information will describe in detail
the different fees and expenses (including 12b-1 fees) that may be paid for
different classes of shares and their exchange and conversion features.
Conversion of Total Return Bond and Low Duration Funds to Master/Feeder
Structure. Shareholders of the Total Return Bond and Low Duration Funds will be
asked to approve (i) the transfer of each Fund's assets to a "master" fund in a
"master/feeder" structure, (ii) investment advisory and administration
agreements providing for the same aggregate fee as under the current advisory
agreement, and (iii) the modification of certain fundamental investment
restrictions to permit investment in a "master" fund. In a master/feeder
structure, a "feeder" fund sells its shares to public investors and then invests
the money it obtains from those sales in a master fund that has substantially
the same investment objective and policies. The master fund invests directly in
securities. A master/feeder structure permits greater pooling of assets than
does a stand-alone fund. A proxy statement relating to these proposals will be
sent to shareholders of the Total Return Bond and Low Duration Funds in July
2000.
July 13, 2000
-4-
<PAGE> 5
HOTCHKIS AND WILEY FUNDS
DISTRIBUTOR CLASS SHARES
SMALL CAP FUND TOTAL RETURN BOND FUND
INTERNATIONAL FUND LOW DURATION FUND
BALANCED FUND
SUPPLEMENT TO PROSPECTUS
DATED AUGUST 27, 1999
Investment Adviser Name Change. Effective June 30, 2000, the investment
adviser changed its name to Mercury Advisors. (Mercury Advisors is a trading
name of Merrill Lynch Investment Managers, L.P., which is the new name of
Merrill Lynch Asset Management, L.P., of which Hotchkis and Wiley was formerly a
division.)
Change in Portfolio Manager of the Balanced Fund. Effective July 1,
2000, Roger DeBard retired as portfolio manager of the Balanced Fund. Michael
Sanchez continues as portfolio manager with responsibility for the day-to-day
management of the bond portion of the Fund's portfolio. Sheldon Lieberman
replaces Mr. DeBard, and is responsible for the day-to-day management of the
equity portion of the Fund's portfolio and the asset allocation strategy.
Change in Portfolio Manager of the Total Return Bond and Low Duration
Funds. Effective July 1, 2000, Roger DeBard retired as portfolio manager of
these Funds. John Queen and Michael Sanchez continue as portfolio managers.
Name Changes of Funds and Trust, Multi-Class Load Distribution Structure
and Conversion of Total Return Bond and Low Duration Funds to Master/Feeder
Structure. The Board of Trustees of Hotchkis and Wiley Funds (the "Trust") has
adopted the recommendation of Mercury Advisors to (i) change the names of the
Trust and each fund of the Trust (each a "Fund"), (ii) establish a multi-class
load distribution structure, and (iii) authorize the Total Return Bond and Low
Duration Funds to transfer their assets to a "master" fund in a master/feeder
structure. The conversion to master/feeder is subject to the prior approval of
the shareholders of these two Funds. Proxy materials describing the necessary
shareholder approvals will be mailed in advance of shareholder meetings of the
Total Return Bond and Low Duration Funds, which are expected to be held in
September 2000. All of these changes are proposed to take effect on or about
October 5, 2000.
Name Changes. The names of the Trust and Funds will change as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CURRENT NAME NEW NAME
----------------------------------------------------------------------------------------
Hotchkis and Wiley Funds Mercury HW Funds
----------------------------------------------------------------------------------------
<S> <C>
1. Hotchkis and Wiley Small Cap Fund 1. Mercury HW Small Cap Value Fund
2. Hotchkis and Wiley International Fund 2. Mercury HW International Value Fund
3. Hotchkis and Wiley Balanced Fund 3. Mercury HW Balanced Fund
4. Hotchkis and Wiley Total Return Bond Fund 4. Mercury Total Return Bond Fund
5. Hotchkis and Wiley Low Duration Fund 5. Mercury Low Duration Fund
----------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE> 6
Multi-Class Load Distribution Structure. The multi-class load
distribution structure will offer investors up to four alternative ways to
purchase shares. The share classes that will be available to each Fund are
summarized below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY HW Class I Class A Class B Class C
INTERNATIONAL
VALUE FUND
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 5.25% 5.25% None None
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None 4.00% 1.00%
Sales Charge
(Load)
-----------------------------------------------------------------
Annual None 0.25% 1.00% 1.00%
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY TOTAL Class I Class A Class B Class C
RETURN BOND FUND
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 4.00% 4.00% None None
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None 4.00% 1.00%
Sales Charge
(Load)
-----------------------------------------------------------------
Annual None 0.25% 0.75% 0.80%
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY LOW Class I Class A Class B Class C
DURATION FUND
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 2.00% 2.00% None None
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None 2.00% 1.00%
Sales Charge
(Load)
-----------------------------------------------------------------
Annual None 0.25% 0.75% 0.80%
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MERCURY HW SMALL Class I Class A Class B Class C
CAP AND BALANCED
FUNDS
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales 5.25% 5.25% n/a n/a
Charge (Load)
-----------------------------------------------------------------
Maximum Deferred None None n/a n/a
Sales Charge
(Load)
-----------------------------------------------------------------
Annual None 0.25% n/a n/a
Distribution
and/or Account
Maintenance Fee
(12b-1)
-----------------------------------------------------------------
</TABLE>
The multi-class load distribution structure will provide investors with
different options for purchasing shares. Class I shares and Class A shares will
be equivalent to current Investor Class shares and Distributor Class shares,
respectively, except that new investors may pay the front-end loads listed
above. The new Class B and Class C shares will have contingent deferred sales
charges ("CDSCs") plus Rule 12b-1 distribution fees and account maintenance
fees. Investors in these classes will pay no front-end load, but may pay a load
when they redeem shares, depending on how long shares are held.
-2-
<PAGE> 7
Existing shareholders at the time the multi-class conversion takes place
will not be adversely affected. If you hold Investor Class shares, they will be
redesignated as Class I shares, and your future investments in Class I shares
will be load-waived. If you hold Distributor Class shares, they will be
redesignated as Class A shares, and your future investments in Class A shares
will be load-waived. Existing shareholders will also gain the right to exchange
shares for the same class of shares in the other funds in the Mercury family of
mutual funds, including certain money market funds, without a load. (Subsequent
purchases after an exchange would be subject to loads.)
Although the legal rights of each class of shares will be identical,
each class may bear certain distribution and other expenses specifically
allocated to that class. The different expenses of each class will result in
different net asset values and dividends. For example, Class B shares will have
a Rule 12b-1 fee, which will cause them to have a higher expense ratio and to
pay lower dividends than Class I shares, which will not have a 12b-1 fee. Each
class (other than Class I) will have exclusive voting rights regarding its Rule
12b-1 plan.
Not everyone will be eligible to purchase every class. The Funds'
prospectuses and Statements of Additional Information will describe in detail
the different fees and expenses (including 12b-1 fees) that may be paid for
different classes of shares and their exchange and conversion features.
Conversion of Total Return Bond and Low Duration Funds to Master/Feeder
Structure. Shareholders of the Total Return Bond and Low Duration Funds will be
asked to approve (i) the transfer of each Fund's assets to a "master" fund in a
"master/feeder" structure, (ii) investment advisory and administration
agreements providing for the same aggregate fee as under the current advisory
agreement, and (iii) the modification of certain fundamental investment
restrictions to permit investment in a "master" fund. In a master/feeder
structure, a "feeder" fund sells its shares to public investors and then invests
the money it obtains from those sales in a master fund that has substantially
the same investment objective and policies. The master fund invests directly in
securities. A master/feeder structure permits greater pooling of assets than
does a stand-alone fund. A proxy statement relating to these proposals will be
sent to shareholders of the Total Return Bond and Low Duration Funds in July
2000.
July 13, 2000
-3-
<PAGE> 8
HOTCHKIS AND WILEY FUNDS
EQUITY FUND FOR INSURANCE COMPANIES
SUPPLEMENT TO PROSPECTUS
DATED AUGUST 27, 1999
Investment Adviser Name Change. Effective June 30, 2000, the investment
adviser changed its name to Mercury Advisors. (Mercury Advisors is a trading
name of Merrill Lynch Investment Managers, L.P., which is the new name of
Merrill Lynch Asset Management, L.P., of which Hotchkis and Wiley was formerly a
division.)
Name Changes of Fund and Trust. The Board of Trustees of Hotchkis and
Wiley Funds (the "Trust") has adopted the recommendation of Mercury Advisors to
change the name of the Trust and the Fund. The name of the Trust and Fund will
change as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
CURRENT NAME NEW NAME
----------------------------------------------------------------------------------------------
<S> <C>
Hotchkis and Wiley Funds Mercury HW Funds
----------------------------------------------------------------------------------------------
Hotchkis and Wiley Equity Fund for Insurance Mercury HW Equity Fund for
Companies Insurance Companies
----------------------------------------------------------------------------------------------
</TABLE>
July 13, 2000
-1-
