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EXHIBIT 99.(D)(3)
MERCURY HW FUNDS
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of November, 1996, and amended and restated
as of October 6, 2000, by and between MERCURY HW FUNDS (formerly known as
HOTCHKIS AND WILEY FUNDS), a Massachusetts business trust (the "Trust"), on
behalf of the Mercury HW International Value Fund (formerly known as the
International Series) (the "Fund"), and FUND ASSET MANAGEMENT, L.P., an
affiliate of HOTCHKIS AND WILEY, which was formerly operated as a division of
the Capital Management Group of Xxxxxxx Xxxxx Asset Management, L.P. (now known
as Xxxxxxx Xxxxx Investment Managers, L.P.), and which has assumed its duties
under this Agreement (the "Advisor").
WITNESSETH:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940 ("1940 Act") and is
currently comprised of ten series, one of which is the Fund; and each series
engages in the business of investing and reinvesting its assets; and
WHEREAS, the Advisor is a registered investment adviser under the
Investment Advisers 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:
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(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 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.
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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, 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
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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
.75%.
(b) In the event the expenses of the Fund (including the fees of
the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions, extraordinary
expenses and sales charges and any distribution fees) for any
fiscal year exceed the limits set by applicable regulations of
state securities commissions, the Advisor will reduce its fee by
the amount of such excess. Any such reductions are subject to
readjustment during the year. The payment of the management fee at
the end of any month will be reduced or postponed or, if
necessary, a refund will be made to the Trust as to the Fund so
that at no time will there be any accrued but unpaid liability
under this expense limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof and
shall, unless terminated as hereinafter provided, continue in
effect until November 12, 1998, and thereafter from year to year,
but only so long as such continuance is specifically approved at
least annually by the Trust's Board of Trustees, including the
vote of a majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the 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
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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.
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.
MERCURY HW FUNDS
/s/
Xxxxx X. Xxxxxx
President
ATTEST:
/s/ Xxxxxx Swan
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Secretary
FUND ASSET MANAGEMENT, L.P.
/s/
Xxxxx X. Xxxxxx
First Vice President
ATTEST:
/s/ Xxxxxx Swan
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