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HOTCHKIS AND WILEY FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of January, 1997, by and between HOTCHKIS AND
WILEY FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the
Mid-Cap Series (the "Fund"), and HOTCHKIS AND WILEY, a division of the Capital
Management Group of Xxxxxxx Xxxxx 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 0000 Xxx) of any such party, and the Fund's shareholders have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Trust with respect to the investment of the
assets of the Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO INVESTMENT OF
ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Trust, the
Advisor shall:
(i) Decide what securities or other assets shall be purchased or sold
by the Trust with respect to the Fund and when; and
(ii) Arrange for the purchase and the sale of securities or other
assets held in the portfolio of the Fund by placing purchase and sale
orders for the Trust with respect to the Fund.
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(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 0000 Xxx) of the Advisor from
acting as investment advisor or manager and/or principal underwriter
for any other person, firm or corporation and shall not in any way
limit or restrict the Advisor or any such affiliated person from
buying, selling or trading any securities for its or their own
accounts or the accounts of others for whom it or they may be acting,
provided, however, that the Advisor expressly represents that it will
undertake no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this Agreement.
(e) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Trust's
Registration Statement under the 1940 Act or the Securities Act of
1933 except for information supplied by the Advisor for inclusion
therein. The Trust may indemnify the Advisor to the full extent
permitted by the Trust's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
The Advisor is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection, and negotiation of brokerage commission
rates. The Advisor's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of
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the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor an amount of commission
for effecting a portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Trust.
The Advisor is further authorized to allocate the orders placed by it on behalf
of the Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Trust, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor (or an affiliate thereof) will also pay all compensation of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Advisor. All operating costs and expenses relating to the Fund not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust from the
assets of the Fund, as applicable, including, but not limited to (i) interest
and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Trust's custodian, shareholder servicing or transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Fund's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or the shares of the Fund; (ix) expenses of preparing, printing and
mailing reports and notices and proxy materials to shareholders of the Fund; (x)
all other expenses incident to holding meetings of the Fund's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agree to bear in any distribution agreement
or in any plan adopted by the Trust and/or the Fund pursuant to Rule 12b-1 under
the 1940 Act.
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5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the Advisor
hereunder, an annual management fee, payable monthly and computed on
the value of the average net assets of the Fund as of the close of
business each business day, at the annual rate of .75%.
(b) In the event the expenses of the Fund (including the fees of the
Advisor and amortization of organization expenses but excluding
interest, taxes, brokerage commissions, extraordinary expenses and
sales charges and any distribution fees) for any fiscal year exceed
the limits set by applicable regulations of state securities
commissions, the Advisor will reduce its fee by the amount of such
excess. Any such reductions are subject to readjustment during the
year. The payment of the management fee at the end of any month will
be reduced or postponed or, if necessary, a refund will be made to
the Trust as to the Fund so that at no time will there be any accrued
but unpaid liability under this expense limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and shall,
unless terminated as hereinafter provided, continue in effect until
January 1, 1999, and thereafter from year to year, but only so long
as such continuance is specifically approved at least annually by the
Trust's Board of Trustees, including the vote of a majority of the
Trustees who are not parties to this Agreement or "interested
persons" (as defined in the 0000 Xxx) 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 0000 Xxx) 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
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that it has notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
HOTCHKIS AND WILEY FUNDS
By /s/ Xxxxx X. Xxxxxx
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ATTEST:
/s/ Xxxxxx Xxxxxxxx
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HOTCHKIS AND WILEY, a division of the
Capital Management Group of Xxxxxxx
Xxxxx Asset Management, L.P.
By /s/ Xxxxx X. Xxxxxx
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ATTEST:
/s/ Xxxxx Xxxxxx
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