HOTCHKIS & WILEY FUNDS /DE/ (Form: 485BPOS, Received: 08/29/2006 16:47:29)

STATEMENT OF ADDITIONAL INFORMATION

Hotchkis and Wiley Funds

725 South Figueroa Street, 39th Floor, Los Angeles, California 90017-5439

Phone No. 1-866-HW-FUNDS (1-866-493-8637)

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Hotchkis and Wiley Core Value Fund (“Core Value Fund”), Hotchkis and Wiley Large Cap Value Fund (“Large Cap Value Fund”), Hotchkis and Wiley Mid-Cap Value Fund (“Mid-Cap Value Fund”), Hotchkis and Wiley Small Cap Value Fund (“Small Cap Value Fund”) and Hotchkis and Wiley All Cap Value Fund (“All Cap Value Fund”) (each, a “Fund” and collectively, the “Funds”) are funds (or series) of Hotchkis and Wiley Funds (the “Trust”). The Trust is an open-end, management investment company which is organized as a Delaware statutory trust.

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This Statement of Additional Information (“SAI”) is not a prospectus and should be read in conjunction with the Prospectus dated August 29, 2006 for the Core Value, Large Cap Value, Mid-Cap Value, Small Cap Value and All Cap Value Funds’ Class I shares, and the Prospectus dated August 29, 2006 for the Large Cap Value and Mid-Cap Value Funds’ Class A, Class C and Class R shares, and the Small Cap Value, All Cap Value and Core Value Funds’ Class A and Class C shares (each, a “Prospectus”). The Prospectuses have been filed with the Securities and Exchange Commission (the “Commission”) and can be obtained, without charge, by calling the Funds at 1-866-HW-FUNDS (1-866-493-8637) or your financial consultant or other financial intermediary, or by writing to the Funds at U.S. Bancorp Fund Services, LLC, 615 East Michigan Street, Milwaukee, WI 53202. The Prospectuses are incorporated by reference into this SAI Information, and this SAI is incorporated by reference into the Prospectuses. The Funds’ audited financial statements are incorporated into this SAI by reference to their Annual Report for the fiscal year ended June 30, 2006. You may request a copy of the Annual Report at no charge by calling 1-866-HW-FUNDS (1-866-493-8637).

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Hotchkis and Wiley Capital Management, LLC — (“Advisor”)

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The date of this SAI is August 29, 2006.

TABLE OF CONTENTS

	Page
TRUST HISTORY	1
DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS	1
Investment Restrictions	1
Repurchase Agreements	2
Bonds	2
U.S. Government Securities	2
Corporate Loans	3
Corporate Debt Securities	3
Convertible Securities	3
Derivative Instruments	3
Foreign Securities	6
Foreign Currency Options and Related Risks	6
Forward Foreign Currency Exchange Contracts	7
Foreign Investment Risks	8
Swap Agreements	9
Illiquid or Restricted Securities	9
144A Securities	9
Borrowing	10
When-Issued Securities	10
Real Estate Investment Trusts	10
Shares of Other Investment Companies	10
Limited Partnerships	10
Short Sales Against-the-Box	11
MANAGEMENT	11
Compensation of Trustees	13
Investment Advisory Agreements	14
Portfolio Managers	14
Principal Underwriter and Administrator	16
Codes of Ethics	16
Proxy Voting Policy	16
Portfolio Transactions and Brokerage	17
Disclosure of Portfolio Holdings	19
Marketing and Support Payments	20
Sub-Transfer Agency Expenses	20
PURCHASE OF SHARES	21
Initial Sales Charge Alternative -- Class A Shares	21
Deferred Sales Charge Alternatives -- Class C Shares	22
Class R Shares	23
Distribution Plan	23
Limitations on the Payment of Deferred Sales Charges	24
Anti-Money Laundering	24
REDEMPTION OF SHARES	24
PRICING OF SHARES	25
Determination of Net Asset Value	25
Computation of Offering Price Per Share	26
DIVIDENDS AND TAX STATUS	27
GENERAL INFORMATION	28
Description of Shares	28
Issuance of Fund Shares for Securities	29
Redemption in Kind	29
Independent Registered Public Accounting Firm	29
Custodian	29
Transfer Agent	30
Legal Counsel for the Trust	30
Legal Counsel for the Independent Trustees	30
Reports to Shareholders	30
Shareholder Inquiries	30
Additional Information	30
Principal Holders	30
FINANCIAL STATEMENTS	32
APPENDIX A - PROXY VOTING POLICIES AND PROCEDURES	A-1
APPENDIX B - DESCRIPTION OF RATINGS	B-1

TRUST HISTORY

The Trust was formed on July 23, 2001 as a Delaware statutory trust. The Trust is an open-end, management investment company currently consisting of four separate diversified series (the Core Value Fund, the Large Cap Value Fund, the Mid-Cap Value Fund and the Small Cap Value Fund) and one separate non-diversified series (the All Cap Value Fund). The performance of certain Funds includes the historical performance of their predecessors.

DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS

The investment objectives, principal investment strategies and related principal risks of the Funds are set forth in the Prospectuses. This SAI includes additional information about those investment strategies and risks as well as information about other investment strategies in which the Funds may engage and the risks associated with such strategies.

Investment Restrictions

Each Fund has adopted the following restrictions (in addition to their investment objectives) as fundamental policies, which may not be changed without the favorable vote of the holders of a “majority” of that Fund’s outstanding voting securities, as defined in the Investment Company Act of 1940 (the “1940 Act”). Under the 1940 Act, the vote of the holders of a “majority” of a Fund’s outstanding voting securities means the vote of the holders of the lesser of (1) 67% or more of the shares of the Fund represented at a meeting at which the holders of more than 50% of its outstanding shares are represented or (2) more than 50% of the outstanding shares.

Except as noted, none of the Funds may:

Purchase any security, other than obligations of the U.S. government, its agencies, or instrumentalities (“U.S. government securities”), if as a result: (i) with respect to 75% of its total assets, more than 5% of the Fund’s total assets (determined at the time of investment) would then be invested in securities of a single issuer; or (ii) 25% or more of the Fund’s total assets (determined at the time of investment) would be invested in one or more issuers having their principal business activities in a single industry. This restriction does not apply to the All Cap Value Fund.

Purchase securities on margin (but any Fund may obtain such short-term credits as may be necessary for the clearance of transactions), provided that the deposit or payment by a Fund of initial or maintenance margin in connection with futures or options is not considered the purchase of a security on margin.

Make short sales of securities or maintain a short position, unless at all times when a short position is open it owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short (short sale against-the-box), and unless not more than 25% of the Fund’s net assets (taken at current value) is held as collateral for such sales at any one time.

Issue senior securities, borrow money or pledge its assets except that any Fund may borrow from a bank for temporary or emergency purposes in amounts not exceeding 10% (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) and pledge its assets to secure such borrowings; none of the Funds will purchase any additional portfolio securities while such borrowings are outstanding.

Purchase any security (other than U.S. government securities) if as a result, with respect to 75% of the Fund’s total assets, the Fund would then hold more than 10% of the outstanding voting securities of an issuer. This restriction does not apply to the All Cap Value Fund.

Purchase or sell commodities or commodity contracts or real estate or interests in real estate, although it may purchase and sell securities which are secured by real estate and securities of companies which invest or deal in real estate. (For the purposes of this restriction, forward foreign currency exchange contracts are not deemed to be commodities or commodity contracts.)

Act as underwriter except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws.

Make investments for the purpose of exercising control or management.

Make loans, except through repurchase agreements.

In addition, the All Cap Value Fund may not:

Purchase any security (other than U.S. government securities) if as a result, 25% or more of the Fund’s total assets (determined at the time of investment) would be invested in one or more issuers having their principal business activities in a single industry, except for temporary defensive purposes.

2.	Purchase any security (other than U.S. government securities) if as a result, the Fund would then hold more than 10% of the outstanding voting securities of an issuer.

Any percentage limitation on a Fund’s investments is determined when the investment is made, unless otherwise noted.

The Large Cap Value Fund, the Mid-Cap Value Fund and the Small Cap Value Fund will provide 60 days’ prior written notice to shareholders of a change in that Fund’s non-fundamental policy of investing at least 80% of its net assets plus borrowings for investment purposes in the type of investments suggested by the Fund’s name.

Repurchase Agreements

The Small Cap Value Fund may purchase debt securities maturing more than one year from the date of purchase only if they are purchased subject to repurchase agreements. The Core Value Fund, the Large Cap Value Fund, the Mid-Cap Value Fund and the All Cap Value Fund have no such restriction on maturities of portfolio securities. A repurchase agreement is an agreement where the seller agrees to repurchase a security from a Fund at a mutually agreed-upon time and price. The period of maturity is usually quite short, possibly overnight or a few days, although it may extend over a number of months. The resale price is more than the purchase price, reflecting an agreed-upon rate of return effective for the period of time a Fund’s money is invested in the repurchase agreement. A Fund’s repurchase agreements will at all times be fully collateralized in an amount at least equal to the resale price. The instruments held as collateral are valued daily, and if the value of those instruments declines, a Fund will require additional collateral. In the event of a default, insolvency or bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral. In such circumstances, the Fund could experience a delay or be prevented from disposing of the collateral. To the extent that the proceeds from any sale of such collateral upon a default in the obligation to repurchase are less than the repurchase price, the Fund will suffer a loss.

Bonds

The term “bond” or “bonds” as used in the Prospectuses and this SAI is intended to include all manner of fixed-income securities, debt securities and other debt obligations unless specifically defined or the context requires otherwise.

U.S. Government Securities

U.S. government agencies or instrumentalities which issue or guarantee securities include the Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Tennessee Valley Authority, Inter-American Development Bank, Asian Development Bank, Student Loan Marketing Association and the International Bank for Reconstruction and Development.

Except for U.S. Treasury securities, obligations of U.S. government agencies and instrumentalities may or may not be supported by the full faith and credit of the United States. Some are backed by the right of the issuer to borrow from the Treasury; others by discretionary authority of the U.S. government to purchase the agencies’ obligations; while still others, such as the Student Loan Marketing Association, are supported only by the credit of the instrumentality. In the case of securities not backed by the full faith and credit of the United States, the investor must look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment, and may not be able to assert a claim against the United States itself in the event the agency or instrumentality does not meet its commitment. Each Fund will invest in securities of such instrumentality only when the Advisor is satisfied that the credit risk with respect to any instrumentality is acceptable.

The Funds may invest in component parts of U.S. Treasury notes or bonds, namely, either the corpus (principal) of such Treasury obligations or one of the interest payments scheduled to be paid on such obligations. These obligations may take the form of (1) Treasury obligations from which the interest coupons have been stripped; (2) the interest coupons that are stripped; (3) book-entries at a Federal Reserve member bank representing ownership of Treasury obligation components; or (4) receipts evidencing the component parts (corpus or coupons) of Treasury obligations that have not actually been stripped. Such receipts evidence ownership of component parts of Treasury obligations (corpus or coupons) purchased by a third party (typically an investment banking firm) and held on behalf of the third party in physical or book-entry form by a major commercial bank or trust company pursuant to a custody agreement with the third party. These custodial receipts are known by various names, including “Treasury Receipts,” “Treasury Investment Growth Receipts” (“TIGRs”) and “Certificates of Accrual on Treasury Securities” (“CATS”), and are not issued by the U.S. Treasury; therefore they are not U.S. government securities, although the underlying bonds represented by these receipts are debt obligations of the U.S. Treasury.

Corporate Loans

The Funds can invest in corporate loans. Commercial banks and other financial institutions make corporate loans to companies that need capital to grow or restructure. Borrowers generally pay interest on corporate loans at rates that change in response to changes in market interest rates such as the London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks. As a result, the value of corporate loan investments is generally less responsive to shifts in market interest rates. Because the trading market for corporate loans is less developed than the secondary market for bonds and notes, a Fund may experience difficulties from time to time in selling its corporate loans. Borrowers frequently provide collateral to secure repayment of these obligations. Leading financial institutions often act as agent for a broader group of lenders, generally referred to as a “syndicate.” The syndicate’s agent arranges the corporate loans, holds collateral and accepts payments of principal and interest. If the agent developed financial problems, a Fund may not recover its investment, or there might be a delay in the Fund’s recovery. By investing in a corporate loan, the Fund becomes a member of the syndicate.

Corporate Debt Securities

A Fund’s investments in corporate debt securities of domestic or foreign issuers are limited to corporate debt securities (corporate bonds, debentures, notes and other similar corporate debt instruments) which meet the minimum ratings criteria set forth for the Fund, or, if unrated, are in the Advisor’s opinion comparable in quality to corporate debt securities in which the Fund may invest. The rate of return or return of principal on some debt obligations may be linked or indexed to the level of exchange rates between the U.S. dollar and a foreign currency or currencies.

Convertible Securities

The Funds may invest in convertible securities of domestic or foreign issuers rated investment grade (any of the four highest grades) by a major rating agency or, if unrated, of comparable quality in the Advisor’s opinion. The Mid-Cap Value Fund and the Small Cap Value Fund also may invest up to 5% of their respective total assets in convertible securities rated below investment grade, but not below B, or, if unrated, of comparable quality in the Advisor’s opinion. A convertible security is a fixed-income security (a bond or preferred stock) which may be converted at a stated price within a specified period of time into a certain quantity of common stock or other equity securities of the same or a different issuer. Convertible securities rank senior to common stock in a corporation’s capital structure but are usually subordinated to similar non-convertible securities. While providing a fixed-income stream (generally higher in yield than the income derivable from common stock but lower than that afforded by a similar non-convertible security), a convertible security also affords an investor the opportunity, through its conversion feature, to participate in the capital appreciation attendant upon a market price advance in the convertible security’s underlying common stock.

In general, the market value of a convertible security is at least the higher of its “investment value” (that is, its value as a fixed-income security) or its “conversion value” (that is, its value upon conversion into its underlying stock). As a fixed-income security, a convertible security tends to increase in market value when interest rates decline and tends to decrease in value when interest rates rise. However, the price of a convertible security is also influenced by the market value of the security’s underlying common stock. The price of a convertible security tends to increase as the market value of the underlying stock rises, whereas it tends to decrease as the market value of the underlying stock declines. While no securities investment is without some risk, investments in convertible securities generally entail less risk than investments in the common stock of the same issuer.

Derivative Instruments

To the extent consistent with their investment objectives and policies and the investment restrictions listed in this SAI, the Funds may purchase and write call and put options on securities, securities indexes and on foreign currencies and enter into futures contracts and use options on futures contracts. The Funds also may enter into swap agreements with respect to foreign currencies, interest rates and securities indexes. The Funds may use these techniques to hedge against changes in interest rates, foreign currency exchange rates, or securities prices or as part of their overall investment strategies. Each Fund will mark as segregated cash or other liquid, unencumbered assets, marked-to-market daily (or, as permitted by applicable regulation, enter into certain offsetting positions), to cover its obligations under forward contracts, futures contracts, swap agreements and options to avoid leveraging of the Fund.

Options on Securities and on Securities Indexes. A Fund may purchase put options on securities to protect holdings in an underlying or related security against a substantial decline in market value. A Fund may purchase call options on securities to protect against substantial increases in prices of securities the Fund intends to purchase pending its ability to invest in such securities in an orderly manner. A Fund may sell put or call options it has previously purchased, which could result in a net gain or loss depending on whether the amount realized on the sale is more or less than the premium and other transaction costs paid on the put or call option which is sold. A Fund may write a call or put option only if the option is “covered” by the Fund holding a position in the underlying securities or by other means which would permit immediate satisfaction of the Fund’s obligation as writer of the option. Prior to exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series.

The purchase and writing of options involve certain risks. During the option period, the covered call writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the underlying securities above the exercise price, but, as long as its obligation as a writer continues, has retained the risk of loss should the price of the underlying securities decline. The writer of an option has no control over the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver the underlying securities at the exercise price. If a put or call option purchased by the Fund is not sold when it has remaining value, and if the market price of the underlying security, in the case of a put, remains equal to or greater than the exercise price or, in the case of a call, remains less than or equal to the exercise price, the Fund will lose its entire investment in the option. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security. There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position. Furthermore, if trading restrictions or suspensions are imposed on the options markets, a Fund may be unable to close out a position.

There are several risks associated with transactions in options on securities and on indexes. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.

There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position. If a Fund were unable to close out an option that it had purchased on a security, it would have to exercise the option in order to realize any profit or the option may expire worthless. If a Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option expired without exercise. As the writer of a covered call option, a Fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the exercise price of the call.

If trading were suspended in an option purchased by a Fund, the Fund would not be able to close out the option. If restrictions on exercise were imposed, the Fund might be unable to exercise an option it had purchased. Except to the extent that a call option on an index written by the Fund is covered by an option on the same index purchased by the Fund, movements in the index may result in a loss to the Fund; however, such losses may be mitigated by changes in the value of the Fund’s securities during the period the option was outstanding.

Futures Contracts and Options on Futures Contracts. A Fund may use interest rate, foreign currency or index futures contracts, as specified for that Fund in the Prospectuses and if permitted by its investment restrictions. An interest rate, foreign currency or index futures contract provides for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, foreign currency or the cash value of an index at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of these securities is made.

A Fund may purchase and write call and put options on futures. Options on futures possess many of the same characteristics as options on securities and indexes (discussed above). An option on a futures contract gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.

Each Fund will use futures contracts and options on futures contracts in accordance with the rules of the Commodity Futures Trading Commission (“CFTC”). For example, a Fund might use futures contracts to hedge against anticipated changes in interest rates that might adversely affect either the value of the Fund’s securities or the price of the securities which the Fund intends to purchase. A Fund’s hedging activities may include sales of futures contracts as an offset against the effect of expected increases in interest rates, and purchases of futures contracts as an offset against the effect of expected declines in interest rates. Although other techniques could be used to reduce that Fund’s exposure to interest rate fluctuations, the Fund may be able to hedge its exposure more effectively and perhaps at a lower cost by using futures contracts and options on futures contracts.

A Fund will only enter into futures contracts and options on futures contracts which are standardized and traded on a U.S. or foreign exchange, board of trade, or similar entity, or quoted on an automated quotation system.

When a purchase or sale of a futures contract is made by a Fund, the Fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of cash or U.S. government securities (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract which is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. Each Fund expects to earn interest income on its initial margin deposits. A futures contract held by a Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures contract. This process is known as “marking to market.” Variation margin does not represent a borrowing or loan by a Fund but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset value, each Fund will mark to market its open futures positions.

A Fund is also required to deposit and maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option, and other futures positions held by the Fund.

Although some futures contracts call for making or taking delivery of the underlying securities, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs must also be included in these calculations.

Limitations on Use of Futures and Options Thereon. When purchasing a futures contract, a Fund will mark as segregated (and mark-to-market on a daily basis) cash or other liquid, unencumbered assets that, when added to the amounts deposited with a futures commission merchant as margin, are equal to the market value of the futures contract. Alternatively, the Fund may “cover” its position by purchasing a put option on the same futures contract with a strike price as high or higher than the price of the contract held by the Fund.

When selling a futures contract, a Fund will mark as segregated (and mark-to-market on a daily basis) liquid assets that, when added to the amount deposited with a futures commission merchant as margin, are equal to the market value of the instruments underlying the contract. Alternatively, the Fund may “cover” its position by owning the instruments underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that of the index on which the futures contract is based), or by holding a call option permitting the Fund to purchase the same futures contract at a price no higher than the price of the contract written by the Fund (or at a higher price if the difference is maintained in liquid assets with the Trust’s custodian).

When selling a call option on a futures contract, a Fund will mark as segregated (and mark-to-market on a daily basis) cash or other liquid, unencumbered assets that, when added to the amounts deposited with a futures commission merchant as margin, equal the total market value of the futures contract underlying the call option. Alternatively, the Fund may cover its position by entering into a long position in the same futures contract at a price no higher than the strike price of the call option, by owning the instruments underlying the futures contract, or by holding a separate call option permitting the Fund to purchase the same futures contract at a price not higher than the strike price of the call option sold by the Fund.

When selling a put option on a futures contract, a Fund will mark as segregated (and mark-to-market on a daily basis) cash or other liquid, unencumbered assets that equal the purchase price of the futures contract, less any margin on deposit. Alternatively, the Fund may cover the position either by entering into a short position in the same futures contract, or by owning a separate put option permitting it to sell the same futures contract so long as the strike price of the purchased put option is the same or higher than the strike price of the put option sold by the Fund.

Risk Factors in Futures Transactions and Options. Investment in futures contracts involves the risk of imperfect correlation between movements in the price of the futures contract and the price of the security being hedged. The hedge will not be fully effective when there is imperfect correlation between the movements in the prices of two financial instruments. For example, if the price of the futures contract moves more than the price of the hedged security, a Fund will experience either a loss or gain on the futures contract which is not completely offset by movements in the price of the hedged securities. To compensate for imperfect correlations, the Fund may purchase or sell futures contracts in a greater dollar amount than the hedged securities if the volatility of the hedged securities is historically greater than the volatility of the futures contracts. Conversely, the Fund may purchase or sell fewer futures contracts if the volatility of the price of the hedged securities is historically less than that of the futures contracts.

The particular securities comprising the index underlying the index financial futures contract may vary from the securities held by a Fund. As a result, the Fund’s ability to hedge effectively all or a portion of the value of its securities through the use of such financial futures contracts will depend in part on the degree to which price movements in the index underlying the financial futures contract correlate with the price movements of the securities held by the Fund. The correlation may be affected by disparities in the Fund’s investments as compared to those comprising the index and general economic or political factors. In addition, the correlation between movements in the value of the index may be subject to change over time as additions to and deletions from the index alter its structure. The trading of futures contracts also is subject to certain market risks, such as inadequate trading activity, which could at times make it difficult or impossible to liquidate existing positions.

Each Fund expects to liquidate a majority of the futures contracts it enters into through offsetting transactions on the applicable contract market. There can be no assurance, however, that a liquid secondary market will exist for any particular futures contract at any specific time. Thus, it may not be possible to close out a futures position. In the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. In such situations, if the Fund has insufficient cash, it may be required to sell portfolio securities to meet daily variation margin requirements at a time when it may be disadvantageous to do so. The inability to close out futures positions also could have an adverse impact on the Fund’s ability to hedge effectively its investments. The liquidity of a secondary market in a futures contract may be adversely affected by “daily price fluctuation limits” established by commodity exchanges which limit the amount of fluctuation in a futures contract price during a single trading day. Once the daily limit has been reached in the contract, no trades may be entered into at a price beyond the limit, thus preventing the liquidation of open futures positions. Prices have in the past moved beyond the daily limit on a number of consecutive trading days. A Fund will enter into a futures position only if, in the judgment of the Advisor, there appears to be an actively traded secondary market for such futures contracts.

The successful use of transactions in futures and related options also depends on the ability of the Advisor to forecast correctly the direction and extent of interest rate movements within a given time frame. To the extent interest rates remain stable during the period in which a futures contract or option is held by a Fund or such rates move in a direction opposite to that anticipated, the Fund may realize a loss on a hedging transaction which is not fully or partially offset by an increase in the value of portfolio securities. As a result, the Fund’s total return for such period may be less than if it had not engaged in the hedging transaction.

Because of low initial margin deposits made upon the opening of a futures position, futures transactions involve substantial leverage. As a result, relatively small movements in the price of the futures contracts can result in substantial unrealized gains or losses. There is also the risk of loss by a Fund of margin deposits in the event of the bankruptcy of a broker with whom the Fund has an open position in a financial futures contract.

The amount of risk a Fund assumes when it purchases an option on a futures contract is the premium paid for the option plus related transaction costs. In addition to the correlation risks discussed above, the purchase of an option on a futures contract also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the option purchased.

Foreign Securities

The Funds may invest in American Depositary Receipts (“ADRs”), other securities convertible into securities of issuers based in foreign countries or other foreign securities. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts, usually issued by a U.S. bank or trust company, evidencing ownership of the underlying securities. Generally, ADRs are issued in registered form, denominated in U.S. dollars, and are designed for use in the U.S. securities markets.

Foreign Currency Options and Related Risks

The Funds may take positions in options on foreign currencies to hedge against the risk of foreign exchange rate fluctuations on foreign securities the Funds hold in their portfolios or intend to purchase. For example, if a Fund were to enter into a contract to purchase securities denominated in a foreign currency, it could effectively fix the maximum U.S. dollar cost of the securities by purchasing call options on that foreign currency. Similarly, if a Fund held securities denominated in a foreign currency and anticipated a decline in the value of that currency against the U.S. dollar, it could hedge against such a decline by purchasing a put option on the currency involved. The markets in foreign currency options are relatively new, and a Fund’s ability to establish and close out positions in such options is subject to the maintenance of a liquid secondary market. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. In addition, options on foreign currencies are affected by all of those factors that influence foreign exchange rates and investments generally.

The quantities of currencies underlying option contracts represent odd lots in a market dominated by transactions between banks, and as a result extra transaction costs may be incurred upon exercise of an option.

There is no systematic reporting of last sale information for foreign currencies or any regulatory requirement that quotations be firm or revised on a timely basis. Quotation information is generally representative of very large transactions in the interbank market and may not reflect smaller transactions where rates may be less favorable. Option markets may be closed while round-the-clock interbank currency markets are open, and this can create price and rate discrepancies.

Risks of Options Trading. The Funds may effectively terminate their rights or obligations under options by entering into closing transactions. Closing transactions permit a Fund to realize profits or limit losses on its options positions prior to the exercise or expiration of the option. The value of a foreign currency option depends on the value of the underlying currency relative to the U.S. dollar. Other factors affecting the value of an option are the time remaining until expiration, the relationship of the exercise price to market price, the historical price volatility of the underlying currency and general market conditions. As a result, changes in the value of an option position may have no relationship to the investment merit of a foreign security. Whether a profit or loss is realized on a closing transaction depends on the price movement of the underlying currency and the market value of the option.

Options normally have expiration dates of up to nine months. The exercise price may be below, equal to or above the current market value of the underlying currency. Options that expire unexercised have no value, and a Fund will realize a loss of any premium paid and any transaction costs. Closing transactions may be effected only by negotiating directly with the other party to the option contract, unless a secondary market for the options develops. Although the Funds intend to enter into foreign currency options only with dealers which agree to enter into, and which are expected to be capable of entering into, closing transactions with the Funds, there can be no assurance that a Fund will be able to liquidate an option at a favorable price at any time prior to expiration. In the event of insolvency of the counter-party, a Fund may be unable to liquidate a foreign currency option. Accordingly, it may not be possible to effect closing transactions with respect to certain options, with the result that a Fund would have to exercise those options that it had purchased in order to realize any profit.

Forward Foreign Currency Exchange Contracts

The Funds may use forward contracts to protect against uncertainty in the level of future exchange rates. The Funds will not speculate with forward contracts or foreign currency exchange rates.

A Fund may enter into forward contracts with respect to specific transactions. For example, when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when a Fund anticipates the receipt in a foreign currency of dividend or interest payments on a security that it holds, the Fund may desire to “lock in” the U.S. dollar price of the security or the U.S. dollar equivalent of the payment, by entering into a forward contract for the purchase or sale, for a fixed amount of U.S. dollars or foreign currency, of the amount of foreign currency involved in the underlying transaction. A Fund will thereby be able to protect itself against a possible loss resulting from an adverse change in the relationship between the currency exchange rates during the period between the date on which the security is purchased or sold, or on which the payment is declared, and the date on which such payments are made or received.

A Fund also may use forward contracts in connection with portfolio positions to lock in the U.S. dollar value of those positions, to increase the Fund’s exposure to foreign currencies that the Advisor believes may rise in value relative to the U.S. dollar or to shift the Fund’s exposure to foreign currency fluctuations from one country to another. For example, when the Advisor believes that the currency of a particular foreign country may suffer a substantial decline relative to the U.S. dollar or another currency, it may enter into a forward contract to sell the amount of the former foreign currency approximating the value of some or all of the Fund’s portfolio securities denominated in such foreign currency. This investment practice generally is referred to as “cross-hedging” when another foreign currency is used.

The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date the forward contract is entered into and the date it matures. Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot (that is, cash) market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency the Fund is obligated to deliver. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Forward contracts involve the risk that anticipated currency movements will not be accurately predicted, causing the Fund to sustain losses on these contracts and transaction costs. A Fund may enter into forward contracts or maintain a net exposure to such contracts only if (1) the consummation of the contracts would not obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund’s portfolio securities or other assets denominated in that currency, or (2) the Fund maintains in a segregated account cash, U.S. government securities, equity securities or other liquid, unencumbered assets, marked-to-market daily, in an amount not less than the value of the Fund’s total assets committed to the consummation of the contracts. Under normal circumstances, consideration of the prospect for currency parities will be incorporated into the longer term investment decisions made with regard to overall diversification strategies. However, the Advisor believes it is important to have the flexibility to enter into such forward contracts when it determines that the best interests of the Fund will be served.

At or before the maturity date of a forward contract that requires a Fund to sell a currency, the Fund may either sell a portfolio security and use the sale proceeds to make delivery of the currency or retain the security and offset its contractual obligation to deliver the currency by purchasing a second contract pursuant to which the Fund will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. Similarly, a Fund may close out a forward contract requiring it to purchase a specified currency by entering into a second contract entitling it to sell the same amount of the same currency on the maturity date of the first contract. The Fund would realize a gain or loss as a result of entering into such an offsetting forward contract under either circumstance to the extent the exchange rate between the currencies involved moved between the execution dates of the first and second contracts.

The cost to the Fund of engaging in forward contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward contracts does not eliminate fluctuations in the prices of the underlying securities the Fund owns or intends to acquire, but it does fix a rate of exchange in advance. In addition, although forward contracts limit the risk of loss due to a decline in the value of the hedged currencies, at the same time they limit any potential gain that might result should the value of the currencies increase.

Although the Funds value their assets daily in terms of U.S. dollars, they do not intend to convert holdings of foreign currencies into U.S. dollars on a daily basis. The Funds may convert foreign currency from time to time, and investors should be aware of the costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer.

Foreign Investment Risks

Foreign Market Risk. Each Fund may invest a portion of its assets in foreign securities. Foreign security investment involves special risks not present in U.S. investments that can increase the chances that a Fund will lose money.

Foreign Economy Risk. The economies of certain foreign markets often do not compare favorably with that of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources, and balance of payments position. Certain such economies may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets, or the imposition of punitive taxes. In addition, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain industries. Any of these actions could severely affect security prices, impair a Fund’s ability to purchase or sell foreign securities or otherwise adversely affect a Fund’s operations. Other foreign market risks include difficulties in pricing securities, defaults on foreign government securities, difficulties in enforcing favorable legal judgments in foreign courts, and political and social instability. Legal remedies available to investors in certain foreign countries may be less extensive than those available to investors in the United States or other foreign countries.

Governmental Supervision and Regulation/Accounting Standards. Many foreign governments supervise and regulate stock exchanges, brokers and the sale of securities less than the U.S. government does. Some countries may not have laws to protect investors the way that the United States securities laws do. Accounting standards in other countries are not necessarily the same as in the United States. If the accounting standards in another country do not require as much disclosure or detail as U.S. accounting standards, it may be harder for a Fund’s portfolio managers to completely and accurately determine a company’s financial condition.

Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes, and special U.S. tax considerations may apply.

Swap Agreements

The Funds may enter into interest rate, index and currency exchange rate swap agreements for purposes of attempting to obtain a particular desired return at a lower cost to a Fund than if the Fund had invested directly in an instrument that yielded the desired return. Swap agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a “notional amount,” i.e., the dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities representing a particular index. The “notional amount” of the swap agreement is only a fictive basis on which to calculate the obligations which the parties to a swap agreement have agreed to exchange. A Fund’s obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). A Fund’s obligations under a swap agreement will be accrued daily (offset against any amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counter-party will be covered by marking as segregated cash, U.S. government securities, equity securities or other liquid, unencumbered assets, marked-to-market daily, to avoid any potential leveraging of a Fund’s portfolio. A Fund will not enter into a swap agreement with any single party if the net amount owed or to be received under existing contracts with that party would exceed 5% of the Fund’s assets.

Whether a Fund’s use of swap agreements will be successful in furthering its investment objective will depend on the Advisor’s ability to correctly predict whether certain types of investments are likely to produce greater returns than other investments. Because they are two party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid. Moreover, each Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counter-party. Restrictions imposed by the Internal Revenue Code may limit a Fund’s ability to use swap agreements. The swaps market is a relatively new market and is largely unregulated. It is possible that developments in the swaps market, including potential government regulation, could adversely affect a Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements.

Illiquid or Restricted Securities

Each Fund may invest up to 15% of its net assets in securities that lack an established secondary trading market or otherwise are considered illiquid. Liquidity of a security relates to the ability to dispose easily of the security and the price to be obtained upon disposition of the security, which may be less than would be obtained for a comparable more liquid security. Illiquid securities may trade at a discount from comparable, more liquid investments. Investment of a Fund’s assets in illiquid securities may restrict the ability of the Fund to dispose of its investments in a timely fashion and for a fair price as well as its ability to take advantage of market opportunities. The risks associated with illiquidity will be particularly acute where a Fund’s operations require cash, such as when the Fund redeems shares or pays dividends, and could result in the Fund borrowing to meet short term cash requirements or incurring capital losses on the sale of illiquid investments.

A Fund may invest in securities that are not registered (“restricted securities”) under the Securities Act of 1933, as amended (the “Securities Act”). Restricted securities may be sold in private placement transactions between issuers and their purchasers and may be neither listed on an exchange nor traded in other established markets. In many cases, privately placed securities may not be freely transferable under the laws of the applicable jurisdiction or due to contractual restrictions on resale. As a result of the absence of a public trading market, privately placed securities may be less liquid and more difficult to value than publicly traded securities. To the extent that privately placed securities may be resold in privately negotiated transactions, the prices realized from the sales, due to illiquidity, could be less than those originally paid by the Fund or less than their fair market value. In addition, issuers whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that may be applicable if their securities were publicly traded. If any privately placed securities held by a Fund are required to be registered under the securities laws of one or more jurisdictions before being resold, the Fund may be required to bear the expenses of registration. Certain of the Fund’s investments in private placements may consist of direct investments and may include investments in smaller, less seasoned issuers, which may involve greater risks. These issuers may have limited product lines, markets or financial resources, or they may be dependent on a limited management group. In making investments in such securities, a Fund may obtain access to material nonpublic information, which may restrict the Fund’s ability to conduct portfolio transactions in such securities.

144A Securities

A Fund may purchase restricted securities that can be offered and sold to “qualified institutional buyers” under Rule 144A under the Securities Act. The Trustees have determined to treat as liquid Rule 144A securities that are either freely tradable in their primary markets offshore or have been determined to be liquid in accordance with the policies and procedures adopted by the Fund’s Trustees. The Trustees have adopted guidelines and delegated to the Advisor the daily function of determining and monitoring liquidity of restricted securities. The Trustees, however, will retain sufficient oversight and be ultimately responsible for the determinations. Since it is not possible to predict with assurance exactly how this market for restricted securities sold and offered under Rule 144A will continue to develop, the Trustees will carefully monitor a Fund’s investments in these securities. This investment practice could have the effect of increasing the level of illiquidity in a Fund to the extent that qualified institutional buyers become for a time uninterested in purchasing these securities.

Borrowing

The Funds may borrow for temporary or emergency purposes in amounts not exceeding 10% of each Fund’s total assets. The 1940 Act requires a Fund to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed. Borrowing subjects a Fund to interest costs which may or may not be recovered by appreciation of the securities purchased, and can exaggerate the effect on net asset value of any increase or decrease in the market value of a Fund’s portfolio. This is the speculative factor known as leverage.

When-Issued Securities

The Funds may purchase securities on a when-issued or delayed-delivery basis, generally in connection with an underwriting or other offering. When-issued and delayed-delivery transactions occur when securities are bought with payment for and delivery of the securities scheduled to take place at a future time, beyond normal settlement dates, generally from 15 to 45 days after the transaction. The price that the Fund is obligated to pay on the settlement date may be different from the market value on that date. While securities may be sold prior to the settlement date, the Funds intend to purchase such securities with the purpose of actually acquiring them, unless a sale would be desirable for investment reasons. At the time the Fund makes a commitment to purchase a security on a when-issued basis, it will record the transaction and reflect the value of the security each day in determining the Fund’s net asset value. The Fund will also mark as segregated with its custodian cash, U.S. government securities, equity securities or other liquid, unencumbered assets, marked-to-market daily, equal in value to its obligations for when-issued securities.

Real Estate Investment Trusts

Each Fund may invest in securities of companies in the real estate industry generally or in real estate investment trusts (REITs). Unlike corporations, REITs do not have to pay income taxes if they meet certain Internal Revenue Code requirements. REITs offer investors greater liquidity and diversification than direct ownership of properties, as well as greater income potential than an investment in common stocks.

Companies in the real estate industry and real estate related investments may include, for example, REITs that either own properties or make construction or mortgage loans, real estate developers, companies with substantial real estate holdings, and other companies whose products and services are related to the real estate industry, such as building supply manufacturers, mortgage lenders, or mortgage servicing companies. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry. The real estate industry is particularly sensitive to economic downturns. The value of securities of issuers in the real estate industry can be affected by changes in real estate values and rental income, property taxes, interest rates, and tax and regulatory requirements. In addition, the value of a REIT can depend on the structure of and cash flow generated by the REIT.

Shares of Other Investment Companies

The Funds can invest in securities of other investment companies except to the extent prohibited by law. Like all equity investments, these investments may go up or down in value. They also may not perform in correlation with a Fund’s principal strategies. The Funds will pay additional fees through their investments in other investment companies.

Limited Partnerships

The Funds can invest in limited partnership interests.

Short Sales Against-the-Box

Each Fund can borrow and sell “short” securities when a Fund also owns an equal amount of those securities (or their equivalent). No more than 25% of a Fund’s total assets can be held as collateral for short sales at any one time.

MANAGEMENT

The Trustees of the Trust consist of six individuals, five of whom are not “interested persons” of the Trust as defined in the 1940 Act (the “Independent Trustees”). The Trustees oversee the actions of the Funds’ Advisor and other service providers and decide upon matters of general policy. The Trustees also review the actions of the Trust’s officers, who conduct and supervise the daily business operations of the Funds.

Each Independent Trustee is a member of the Trust’s Audit Committee (the “Audit Committee”). The principal responsibilities of the Audit Committee are to: (i) approve, and recommend to the Board, the appointment, retention or termination of the Funds’ independent registered public accounting firm; (ii) review with the independent registered public accounting firm the scope, performance and anticipated cost of their audits; (iii) discuss with the independent registered public accounting firm certain matters relating to the Funds’ financial statements, including any adjustment to such financial statements recommended by the independent registered public accounting firm, or any other results of any audit; (iv) request and review the independent registered public accounting firm’s annual representations with respect to their independence, and discuss with the independent registered public accounting firm any relationships or services disclosed in the statement that may impact the independence of the Funds’ independent registered public accounting firm; and (v) consider the comments of the independent registered public accounting firm and management’s responses thereto with respect to the quality and adequacy of the Funds’ accounting and financial reporting policies and practices and internal controls. The Board of Trustees of the Trust has adopted a written charter for the Audit Committee. The Audit Committee held five meetings during the Trust’s last fiscal year.

Each Independent Trustee also is a member of the Trust’s Nominating and Governance Committee. This Committee reviews and nominates candidates to serve as Trustees. The Nominating and Governance Committee will consider shareholder proposals for candidates to serve as Trustees. Any such proposals should be sent to the Trust in care of the Nominating and Governance Committee chairperson. The final recommendation of a prospective Independent Trustee rests solely with the Nominating and Governance Committee. This Committee held three meetings during the Trust’s last fiscal year. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties.

Two of the Trustees are also members of the Trust’s Valuation Committee (the “Valuation Committee”). The other Trustees are alternate members and will participate in the Valuation Committee meeting if either or both Valuation Committee members are unable. The Valuation Committee meets whenever a proposed fair valuation of a security would impact a Fund by more than a penny per share. The Valuation Committee did not hold any meetings during the Trust’s last fiscal year.

Biographical Information. Certain biographical and other information relating to the Independent Trustees of the Trust is set forth below, including their year of birth, their principal occupations for at least the last five years, the length of time served, the total number of portfolios overseen for funds advised by the Advisor and public directorships held.

Name and Year of Birth	Position Held with the Trust	Term of *Office and Length of Time Served**	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Public Directorships
Randall H. Breitenbach (born 1960)	Trustee	Trustee since 2001	Co-Founder, Director and CEO, BreitBurn Energy Company LP (1988 — present); Chairman, Finance Committee, Stanford University PIC Endowment (1999 — present).	1 registered investment company consisting of 5 portfolios	None
Robert L. Burch III (born 1934)	Trustee	Trustee since 2001	Managing Partner, A.W. Jones Co. (investments) (1984 - present); Chairman, Jonathan Mfg. Corp. (slide manufacturing) (1977 - 2004).	1 registered investment company consisting of 5 portfolios	None

Name and Year of

Birth

Position

Held with

the Trust

Term of

Office* and

Length of

Time Served

Principal Occupation(s) During Past

Five Years

Number of

Portfolios in

Fund

Complex

Overseen by

Trustee

Public

Directorships

Marcy Elkind Ph.D. (born 1947)	Trustee	Trustee since 2005	President, Elkind Economics, Inc. (1980 - present).	1 registered investment company consisting of 5 portfolios	None
Robert Fitzgerald (born 1952)	Trustee	Trustee since 2005	Chief Financial Officer of National Retirement Partners, Inc. (2005 - present); Executive Vice President and Chief Financial Officer of PIMCO Advisors L.P. (1995 - 2001).	1 registered investment company consisting of 5 portfolios	None
John Gavin (born 1931)	Trustee	Trustee since 2001	Senior Counselor, Hicks Holdings (private equity investment firm) (2001 - present); Chairman, Gamma Holdings (international capital and consulting) (1968 - present); Partner and Managing Director, Hicks, Muse, Tate & Furst (Latin America) (private equity investment firm) (1994 — 2001); U.S. Ambassador to Mexico (1981 — 1986).	1 registered investment company consisting of 5 portfolios	Causeway Capital Management Trust; Claxson S.A.; TCW Galileo Funds

* Each Trustee serves until his or her successor is elected and qualified, until he or she retires in accordance with the Trust’s retirement policy, or until his or her death or resignation or removal as provided in the Trust’s Agreement and Declaration of Trust.

Certain biographical and other information relating to the Trustee who is an “interested person” of the Trust as defined in the 1940 Act (the “interested Trustee”) and to the officers of the Trust is set forth below, including, as relevant, their year of birth, their principal occupations for at least the last five years, the length of time served, the total number of portfolios overseen and public directorships held.

Name and Year of Birth	Position Held with t he Trust	Term of *Office and Length of Time Served**	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Public Directorships
Nancy D. Celick* (born 1951)	President and Trustee	President and Trustee* since 2001	Chief Operating Officer of the Advisor (2001 - present); First Vice President of Merrill Lynch Investment Advisors, L.P. (“MLIM”) (2000 — 2001); Director of MLIM (1993 — 1999).	1 registered investment company consisting of 5 portfolios	None
Anna Marie Lopez (born 1967)	Vice President, Treasurer and Chief Compliance Officer	Treasurer since 2001 Vice President since 2004 CCO since 2004**	Chief Compliance Officer of the Advisor (2001 - present); Compliance Officer of MLIM (1997 — 2001).	Not applicable	Not applicable
Mark McMahon (born 1968)	Vice President and Secretary	Vice President and Secretary since 2006**	Director of Mutual Fund Operations of the Advisor (2006 - present); Client Relations Manager of Boston Financial Data Services (1991 - 2006).	Not applicable	Not applicable

* Ms. Celick is an “interested person,” as defined in the 1940 Act, of the Trust based on her position as Chief Operating Officer of the Advisor.

** Appointed by and serves at the pleasure of the Board of Trustees of the Trust.

***	As Trustee, Ms. Celick serves until her successor is elected and qualified, until she retires in accordance with the Trust’s retirement policy, or until her death or resignation or removal as provided in the Trust’s Agreement and Declaration of Trust.

The address for all Trustees and officers of the Trust is c/o Hotchkis and Wiley Capital Management, LLC, 725 South Figueroa Street, 39 ^th Floor, Los Angeles, CA 90017, attention: Trust Secretary.

Share Ownership. Information relating to each Trustee’s share ownership in the Trust as of December 31, 2005 is set forth in the following chart.

Name	Aggregate Dollar Range of Equity Securities in the Trust	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in Family of Investment Companies
Interested Trustee:
Nancy D. Celick	Core Value Fund - over $100,000 Large Cap Value Fund - over $100,000 Mid-Cap Value Fund - $50,001 - $100,000 Small Cap Value Fund - over $100,000 All Cap Value Fund - over $100,000	over $100,000
Independent Trustees:
Randall Breitenbach	Core Value Fund - over $100,000 Large Cap Value Fund - none Mid-Cap Value Fund - none Small Cap Value Fund - none All Cap Value Fund - over $100,000	over $100,000
Robert L. Burch III	Core Value Fund - over $100,000 Large Cap Value Fund - over $100,000 Mid-Cap Value Fund - over $100,000 Small Cap Value Fund - none All Cap Value Fund - over $100,000	over $100,000
Marcy Elkind	Core Value Fund - $10,001 - $50,000 Large Cap Value Fund - $50,001 - $100,000 Mid-Cap Value Fund - $10,001 - $50,000 Small Cap Value Fund - none All Cap Value Fund - $10,001 - $50,000	over $100,000
Robert Fitzgerald	Core Value Fund - over $100,000 Large Cap Value Fund - over $100,000 Mid-Cap Value Fund - none Small Cap Value Fund - none All Cap Value Fund - none	over $100,000
John A. Gavin	Core Value Fund - over $100,000 Large Cap Value Fund - none Mid-Cap Value Fund - none Small Cap Value Fund - over $100,000 All Cap Value Fund - over $100,000	over $100,000

Compensation of Trustees

The Trust does not pay salaries to any of its officers or fees to any of its Trustees affiliated with the Advisor. The Trust pays to each Independent Trustee, for service to the Trust, a fee of $9,000 per meeting, which includes a $6,000 retainer and $3,000 per regularly scheduled quarterly Board meeting attended. The Audit Committee Chair also receives an additional $1,000 per meeting. As of October 25, 2005, the Lead Trustee receives an additional $1,000 per meeting. The Trust reimburses each Independent Trustee for his or her out-of-pocket expenses relating to attendance at Board and Committee meetings.

The following table sets forth the compensation earned by the Independent Trustees for the most recent fiscal year.

Name	Position Held with the Trust	Compensation from the Trust	Pension or Retirement Benefits Accrued as Part of Trust Expense	Estimated Annual Benefits upon Retirement	Aggregate Compensation from Trust and Other Advisor Advised Funds
Randall Breitenbach	Trustee	$39,000	None	None	$39,000
Robert L. Burch III	Trustee	$36,000	None	None	$36,000
Marcy Elkind	Trustee	$36,000	None	None	$36,000
Robert Fitzgerald	Trustee	$40,000	None	None	$40,000
John A.G. Gavin	Trustee	$36,000	None	None	$36,000

Investment Advisory Agreements

Hotchkis and Wiley Capital Management, LLC provides the Funds with management and investment advisory services and is located at 725 South Figueroa Street, 39th Floor, Los Angeles, California 90017-5439. The Advisor is a limited liability company the primary members of which are HWCap Holdings, a limited liability company whose members are employees of the Advisor, and Stephens-H&W, a limited liability company whose primary member is SF Holding Corp., which is a diversified holding company. The Advisor supervises and arranges the purchase and sale of securities held in the Funds’ portfolios and manages the Funds. The Advisor also manages other investment company portfolios and separate investment advisory accounts.

The Advisor receives a fee, computed daily and payable monthly, at the annual rates presented below as applied to each Fund’s daily net assets. The Advisor also agreed to annual caps on expenses for the fiscal years ended June 30, 2006, 2005 and 2004, or such times as the applicable Fund or class commenced operations. The Advisor has contractually agreed to pay all operating expenses in excess of the annual rates presented below as applied to such Fund’s daily net assets through October 31, 2007.

	Core Value Fund	Large Cap Value Fund	Mid-Cap Value Fund	Small Cap Value Fund	All Cap Value Fund
Annual Advisory Fee Rate	0.75%	0.75%	0.75%	0.75%	0.75%
Annual cap on expenses - Class I	0.95%	1.05%	1.15%	1.25%	1.25%
Annual cap on expenses - Class A	1.20%	1.30%	1.40%	1.50%	1.50%
Annual cap on expenses - Class C	1.95%	2.05%	2.15%	2.25%	2.25%
Annual cap on expenses - Class R	N/A	1.55%	1.65%	N/A	N/A

N/A: Not applicable.

For the periods indicated below, the Advisor earned fees and waived fees as follows:

	Core Value Fund*	Large Cap Value Fund	Mid-Cap Value Fund	Small Cap Value Fund	All Cap Value Fund
Investment advisory fees earned for the fiscal year 2006	$ 6,806,720	$ 39,634,791	$ 30,973,724	$ 6,239,839	$ 1,873,979
Fees waived for the fiscal year 2006	$ 310,185	$ 0	$ 0	$ 0	$ 0
Investment advisory fees earned for the fiscal year 2005	$ 246,950	$ 14,673,264	$ 20,915,296	$ 5,034,683	$ 938,380
Fees waived for the fiscal year 2005	$ 111,969	$ 0	$ 0	$ 0	$ 0
Investment advisory fees earned for the fiscal year 2004	N/A	$ 1,965,806	$ 6,813,743	$ 3,563,811	$ 311,361
Fees waived for the fiscal year 2004	N/A	$ 77,645	$ 0	$ 0	$ 40,056

The Core Value Fund commenced operations on August 30, 2004.

The Advisor serves as investment adviser to each fund pursuant to separate investment advisory agreements (the “Advisory Agreements”) with the Trust. Each of the Advisory Agreements provides that the Advisor shall not be liable to the Trust for any error of judgment by the Advisor or for any loss sustained by any of the Funds except in the case of a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages will be limited as provided in the 1940 Act) or of willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

Unless earlier terminated as described below, each Advisory Agreement will continue in effect for two years from the effective date and will remain in effect from year to year thereafter if approved annually (a) by the Board of Trustees of the Trust or by a majority of the outstanding shares of the applicable Fund and (b) by a majority of the Trustees of the Trust who are not parties to the Advisory Agreement or interested persons (as defined in the 1940 Act) of any such party. Each Advisory Agreement is not assignable and will automatically terminate in the event of its assignment. In addition, such contract may be terminated by the vote of a majority of the outstanding voting securities of the applicable Fund or by the Advisor without penalty on 60 days’ written notice to the other party. A discussion regarding the basis for the Board of Trustees’ approval of the Advisory Agreements is available in the Funds’ annual report to shareholders dated June 30, 2006.

Portfolio Managers

Each Fund is managed by the investment team of the Advisor (“Investment Team”) including portfolio managers (the “Portfolio Managers”). The Investment Team also has responsibility for the day-to-day management of accounts other than the Funds. Information regarding these other accounts is set forth below. The number of accounts and assets is shown as of June 30, 2006.

Number of Other Accounts Managed and Assets by Account Type			Number of Accounts and Assets for Which Advisory Fee is Performance-Based
Registered Investment Companies	Other Pooled Investment Vehicles	Other Accounts	Registered Investment Companies	Other Pooled Investment Vehicles	Other Accounts
14 $4.1 billion	10 $1.2 billion	165 $14.3 billion	1 $2.3 billion	0 $0	6 $1.1 billion

The Investment Team also manages institutional accounts and other mutual funds in several different investment strategies. The portfolios within an investment strategy are managed using a target portfolio; however, each portfolio may have different restrictions, cash flows, tax and other relevant considerations which may preclude a portfolio from participating in certain transactions for that investment strategy. Consequently, the performance of portfolios may vary due to these different considerations. The Investment Team may place transactions for one investment strategy that are directly or indirectly contrary to investment decisions made on behalf of another investment strategy. The Advisor may be restricted from purchasing more than a limited percentage of the outstanding shares of a company. If a company is a viable investment for more than one investment strategy, the Advisor has adopted policies and procedures reasonably designed to ensure that all of its clients are treated fairly and equitably.

Different types of accounts and investment strategies may have different fee structures. Additionally, certain accounts pay the Advisor performance-based fees, which may vary depending on how well the account performs compared to a benchmark. Because such fee arrangements have the potential to create an incentive for the Advisor to favor such accounts in making investment decisions and allocations, the Advisor has adopted policies and procedures reasonably designed to ensure that all of its clients are treated fairly and equitably, including in respect of allocation decisions, such as initial public offerings.

Since accounts are managed to a target portfolio by the Investment Team, adequate time and resources are consistently applied to all accounts in the same investment strategy.

The Portfolio Managers are compensated in various forms. Portfolio Managers of the Funds are supported by the full research team of the Advisor. Compensation is used to reward, attract and retain high quality investment professionals. An investment professional, such as a Portfolio Manager, has a base salary and is eligible for an annual bonus. Some Portfolio Managers also are involved in client servicing, marketing and in the general management of the Advisor and are evaluated and compensated based on these functions as well as their investment management activities.

The Advisor believes consistent execution of the proprietary research process results in superior, risk-adjusted portfolio returns. It is the quality of the investment professional’s execution of this process rather than the performance of particular securities that is evaluated in determining compensation. Compensation likewise is not tied to performance of the Funds or separate accounts, specific industries within the Funds or separate accounts or to any type of asset or revenue-related objective, other than to the extent that the overall revenues of the Advisor attributable to such factors may affect the size of the Advisor’s overall bonus pool.

Bonuses and salaries for investment professionals are determined by the Chief Executive Officer of the Advisor using tools which may include, but are not limited to, annual evaluations, compensation surveys, feedback from other employees and advice from members of the Advisor’s Executive Committee and the Advisor’s Compensation Committee. The amount of the bonus usually is shaped by the total amount of the Advisor’s bonus pool available for the year, which is generally a function of net income, but no investment professional receives a bonus that is a pre-determined percentage of net income.

Each of the Portfolio Managers owns equity in the Advisor. The Advisor believes that the ownership structure of the firm is a significant factor in ensuring a motivated and stable employee base.

Certain Portfolio Managers beneficially owned shares of one or more Funds as of the end of each Fund’s most recent fiscal year. A Portfolio Manager’s beneficial ownership of a Fund is defined as the Portfolio Manager having the opportunity to share in any profit from transactions in the Fund, either directly or indirectly, as the result of any contract, understanding, arrangement and relationship or otherwise. Therefore, ownership of Fund shares by members of the Portfolio Manager’s immediate family or by a trust of which the Portfolio Manager is a trustee could be considered ownership by the Portfolio Manager. The reporting of Fund share ownership in this SAI shall not be construed as an admission that the Portfolio Manager has any direct or indirect beneficial ownership in the Fund listed. The tables below set forth each Portfolio Manager’s beneficial ownership of the Fund(s) under that Portfolio Manager’s management as of June 30, 2006.

Name of Portfolio Manager	Core Value Fund	Large Cap Value Fund	Mid-Cap Value Fund	Small Cap Value Fund	All Cap Value Fund	Total for all Funds
George Davis	$100,001-$500,000	$100,001-$500,000	$50,001-$100,000	$500,001-$1,000,000	$100,001-$500,000	Over $1,000,000
David Green	None	$10,001-$50,000	$10,001-$50,000	$100,001-$500,000	$100,001-$500,000	$100,001-$500,000
Joe Huber	None	None	None	None	$100,001-$500,000	$100,001-$500,000
Sheldon Lieberman	$100,001-$500,000	$10,001-$50,000	$10,001-$50,000	$10,001-$50,000	$10,001-$50,000	$100,001-$500,000
Stan Majcher	None	$1-$10,000	$500,001-$1,000,000	None	$100,001-$500,000	$500,001 - $1,000,000
Patricia McKenna	$100,001-$500,000	$10,001-$50,000	$100,001-$500,000	$100,001-$500,000	$100,001-$500,000	$500,001 - $1,000,000
Jim Miles	None	$10,001-$50,000	$100,001-$500,000	$100,001-$500,000	$100,001-$500,000	$500,001 - $1,000,000

Principal Underwriter and Administrator

Effective April 1, 2005, Quasar Distributors, LLC, 615 East Michigan Street, Milwaukee, Wisconsin 53202, a Delaware limited liability company, is the principal underwriter and distributor for the shares of the Funds (“Quasar” or the “Distributor”). Quasar is a registered broker-dealer and member of the National Association of Securities Dealers, Inc. The Distributor is affiliated with the Funds’ Transfer Agent, Fund Accountant and Administrator, U.S. Bancorp Fund Services, LLC. Prior to April 1, 2005, the Funds’ Distributor was Stephens Inc. (“Stephens”).

The Funds’ shares are offered to the public on a continuous basis. The Distributor, as the principal underwriter of the shares, has certain obligations under the distribution agreement concerning the distribution of the shares. These obligations and the compensation the Distributor receives are described in the section titled “Purchases of Shares”.

As of April 1, 2005, U.S. Bancorp Fund Services, LLC (the “Administrator” or “USBFS”), 615 East Michigan Street, Milwaukee, Wisconsin 53202, is the administrator for each Fund. For its services as administrator, USBFS receives an annual fee at the rate of 0.050% of the Funds’ aggregate net assets up to $2 billion, 0.045% of the Funds’ aggregate net assets for the next $2 billion, 0.035% of the Funds’ aggregate net assets for the next $2 billion, 0.02% of the Funds’ aggregate net assets for the next $2 billion, and 0.01% on the balance. Prior to April 1, 2005, the Funds’ administrator was Stephens. For the fiscal years ended June 30, 2006, 2005 and 2004, total fees paid by the Funds to USBFS and Stephens were as follows:

	Core Value Fund*	Large Cap Value Fund	Mid-Cap Value Fund	Small Cap Value Fund	All Cap Value Fund
U.S. Bancorp Fund Services, LLC
Fiscal year ended June 30, 2006	$ 266,216	$ 1,478,927	$ 1,125,242	$ 229,624	$ 71,166
Period April 1, 2005 to June 30, 2005	$ 5,458	$ 327,739	$ 332,946	$ 72,044	$ 17,464

Stephens Inc.
Period July 1, 2004 to March 31, 2005	$ 15,522	$ 916,420	$ 1,590,429	$ 400,005	$ 66,011
Fiscal year ended June 30, 2004	N/A	$ 222,928	$ 772,796	$ 408,801	$ 35,113

*The Core Value Fund commenced operations on August 30, 2004.

Codes of Ethics

The Board of Trustees of the Trust has approved a Code of Ethics under Rule 17j-1 of the 1940 Act that covers the Trust and the Advisor and a Code of Ethics for the Distributor (the “Codes of Ethics”). The Codes of Ethics permit personnel subject to the Codes to invest in securities, including securities that may be purchased or held by a Fund. The protective provisions of the Codes of Ethics prohibit certain investments and limit these personnel from making investments during periods when a Fund is making such investments. The Codes of Ethics are on public file with, and are available from, the Securities and Exchange Commission. The Board of Trustees has also approved a separate Code of Ethics for the Principal Executive Officer and Principal Financial Officer.

Proxy Voting Policy

Generally, the Advisor will vote (by proxy or otherwise) in all matters for which a shareholder vote is solicited by, or with respect to, issuers of securities beneficially held in the Funds’ accounts in such manner as the Advisor deems appropriate in accordance with its written policies and procedures. These policies and procedures set forth guidelines for voting typical proxy proposals. However, each proxy issue will be considered individually in order that the Advisor may consider what would be in a Fund’s best interest. Further, where a proxy proposal raises a material conflict of interest between the interests of the Advisor and a Fund, the Advisor will vote according to its predetermined specific policy. The Advisor’s Compliance Department will review the vote to determine that the decision was based on the Fund’s best interest and was not the product of the conflict. See Appendix A for the Advisor’s Proxy Voting Policies and Procedures.

Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge on the Funds’ website at www.hwcm.com and on the Commission’s website at http://www.sec.gov.

Portfolio Transactions and Brokerage

Transactions on U.S. stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by a Fund of negotiated brokerage commissions. Such commissions vary among different brokers. A particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. Transactions in foreign investments often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. In the case of securities traded in the over-the-counter markets, the price paid by a Fund usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid by a Fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer.

It has for many years been a common practice in the investment advisory business for advisers of investment companies and other investors to receive brokerage and research services (as defined in the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder (the "1934 Act")) from broker-dealers that execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, the Advisor may receive brokerage and research services and other similar services from many broker-dealers with which the Advisor places the Funds' portfolio transactions. These services may include such matters as trade execution services, general economic and market reviews, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, newspapers, magazines, pricing services, quotation services, news services and personal computers utilized by the Advisor’s investment professionals. Where the services referred to above are not used exclusively by the Advisor for brokerage or research purposes, the Advisor, based upon allocations of expected use, would bear that portion of the cost of these services which directly relates to their non-brokerage or non-research use. Some of these services may be of value to the Advisor in advising a variety of its clients (including the Funds), although not all of these services would necessarily be useful and of value in managing the Funds or any particular Fund. The management fee paid by each Fund is not reduced because the Advisor may receive these services even though the Advisor might otherwise be required to purchase some of these services for cash.

The Advisor places orders for the purchase and sale of portfolio investments for the Funds and buy and sell investments for the Funds through a substantial number of brokers and dealers. In so doing, the Advisor uses its best efforts to obtain for the Funds the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, the Advisor, having in mind each Fund's best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions.

As permitted by Section 28(e) of the 1934 Act, and by each Investment Advisory Agreement, the Advisor may cause a Fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to the Advisor an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for such Fund on an agency basis in excess of the commission which another broker-dealer would have charged for effecting that transaction. The Advisor’s authority to cause the Funds to pay any such greater commissions is also subject to such policies as the Trustees may adopt from time to time. It is the position of the staff of the Commission that Section 28(e) does not apply to the payment of such greater commissions in "principal" transactions. Accordingly the Advisor will use its best efforts to obtain the most favorable price and execution available with respect to such transactions, as described above.

From time to time, the Advisor may purchase new issues of securities for clients, including the Funds, in a fixed price offering. In these situations, the broker may be a member of the selling group that will, in addition to selling securities, provide the Advisor with research services. The National Association of Securities Dealers, Inc. (“NASD”) has adopted rules expressly permitting these types of arrangements under certain circumstances. Generally, the broker will provide research “credits” in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e).

Foreign equity securities may be held by the Trust in the form of ADRs, EDRs, GDRs or other securities convertible into foreign equity securities. ADRs, EDRs and GDRs may be listed on stock exchanges, or traded in the OTC markets in the United States or Europe, as the case may be. ADRs traded in the United States, like other securities traded in the United States, will be subject to negotiated commission rates. The Trust’s ability and decisions to purchase or sell portfolio securities of foreign issuers may be affected by laws or regulations relating to the convertibility and repatriation of assets.

Because the shares of each Fund are redeemable on a daily basis in U.S. dollars, the Advisor intends to manage the Funds so as to give reasonable assurance that it will be able to obtain U.S. dollars to the extent necessary to meet anticipated redemptions. Under present conditions, it is not believed that these considerations will have significant effect on the Funds’ portfolio strategies.

Securities held by a Fund may also be held by, or be appropriate investments for, other funds or investment advisory clients for which the Advisor acts as an adviser. Because of different objectives or other factors, a particular security may be bought for one or more clients of the Advisor when one or more clients of the Advisor are selling the same security. If purchases or sales of securities arise for consideration at or about the same time that would involve the Funds or other clients or funds for which the Advisor acts as adviser, transactions in such securities will be made, insofar as feasible, for the respective funds and clients in a manner deemed equitable to all. To the extent that transactions on behalf of more than one client of the Advisor during the same period may increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price.

Aggregate brokerage commissions paid by each of the Funds for the three most recent fiscal years ended June 30 are shown in the table below.

	2004	2005		2006
Core Value Fund*	N/A	$ 23,916	$	749,830
Large Cap Value Fund	$ 216,096	$ 1,526,125	$	2,372,350
Mid-Cap Value Fund	$ 1,255,098	$ 1,439,944	$	3,002,117
Small Cap Value Fund	$ 902,656	$ 701,807	$	898,079
All Cap Value Fund	$ 72,282	$ 162,955	$	285,107

* The Core Value Fund commenced operations on August 30, 2004.

Aggregate brokerage commissions increased in general from fiscal years 2004 to 2006 due to the increase in net assets for all Funds. Total Fund assets as of June 30, 2003 were $597 million, compared to approximately $12.6 billion as of June 30, 2006. Brokerage commissions for the Small Cap Value Fund decreased from 2004 to 2005 due to a decrease in turnover, and increased from 2005 to 2006 due to an increase in turnover.

The value of the Funds’ aggregate holdings of the securities of their regular broker or dealers (as defined in Rule 10b-1 of the 1940 Act) if any portion of such holdings were purchased during the fiscal year ended June 30, 2006 are as follows:

Fund	Regular Broker-Dealer	Debt-Equity	Value
Core Value Fund	JP Morgan Chase & Co.	Equity	$ 51,643,200
Large Cap Value Fund	JP Morgan Chase & Co.	Equity	152,388,600

Turnover

Turnover measures the percentage of a fund’s total portfolio market value that was purchased or sold during the period. A fund’s turnover rate provides an indication of how transaction costs (which are not included in a fund’s expenses), may affect a fund’s performance. Also, funds with a high turnover may be more likely to distribute capital gains that may be taxable to shareholders.

The Funds’ portfolio turnover rate for the fiscal years ending June 30, 2005 and 2006 is stated below. Portfolio turnover rates could change significantly in response to turbulent market conditions.

	Fiscal Year Ended June 30,
	2005	2006
Core Value Fund	13%*	13%
Large Cap Value Fund	14%	27%
Mid-Cap Value Fund	27%	55%
Small Cap Value Fund	49%	52%
All Cap Value Fund	39%	73%

* Period August 30, 2004 through June 30, 2005.

The portfolio turnover rates for Large Cap Value Fund, Mid-Cap Value Fund and All Cap Value Fund increased from 2005 to 2006. The increases can be attributed to the Funds’ investment strategies and increases in the Funds’ asset levels. Such strategies seek the highest possible return and may call for the sale of a holding when a more attractive investment opportunity is identified.

Disclosure of Portfolio Holdings

The Funds have adopted, and the Board of Trustees has approved, policies and procedures reasonably designed to ensure that non-public disclosure of the Funds’ portfolio holdings is in the best interests of Fund shareholders, or at least do no harm to Fund shareholders.

The Funds’ portfolio holdings are made public, as required by law, in the Funds’ annual and semi-annual reports. These reports are filed with the Commission, mailed to shareholders and posted to the Funds’ website generally within 60 days after the end of the relevant fiscal period. In addition, the Funds’ portfolio holdings for the fiscal quarters not covered by the annual and semi-annual reports are filed with the Commission and posted to the Funds’ website generally within 60 days after the end of each quarter.

Portfolio Holdings on the Funds’ Website and in Marketing Materials

The Funds’ complete portfolio holdings as of each month-end generally will be available on the last business day of the following month. Each Fund’s month-end Top 10 holdings reports and monthly attribution reports, which show the top five and bottom five contributors to performance, generally will be available by the eighth business day after month-end. Quarterly commentary for each Fund, which may discuss a Fund’s sectors, industries and individual holdings, generally is available approximately two weeks after the end of each calendar quarter. Aggregate month-end portfolio characteristics, such as industry and sector classification, aggregate book value, market cap and price-to-earnings ratios of the Funds, generally are available by the eighth business day after month-end. This information may be obtained through the Funds’ website or by calling 800-796-5606.

This information will, at a minimum, remain on the Funds’ website until the Funds file holdings with the Commission for the relevant periods.

Disclosure of Holdings to Analytical Companies

The Funds’ portfolio holdings generally are sent to certain analytical companies (Morningstar, Lipper and Bloomberg, etc.) on the day after a complete set of holdings is available on the Funds’ website.

Disclosure of Holdings to Service Providers and Other Parties

The Funds’ portfolio holdings are disclosed to service providers on an on-going basis in the performance of their contractual duties. These providers include the Funds’ custodian, fund accountant, fund administrator, printing companies, public accounting firm and attorneys. Holdings are disclosed to service providers that perform operational services for all of the accounts managed by the Advisor, including the Funds, which include back office services, portfolio accounting and performance systems services, proxy voting services, analytical and trading systems (such as FactSet and Charles River). Employees of the Advisor also may have frequent access to portfolio holdings. The frequency of disclosure to these parties varies and may be as frequently as intra-day with no lag.

Various broker/dealers and other parties involved in the trading and settlement process have access to Fund portfolio information when a Fund is buying and selling Fund securities.

Disclosure of the Funds’ portfolio holdings will only be made to service providers and other parties who are under a duty of confidentiality to the Funds, whether by explicit written agreement or by virtue of their duties to the Funds. The Funds and/or the Advisor will make reasonable efforts to obtain a written confidentiality agreement and prohibition on trading based on knowledge of the Funds’ portfolio holdings with service providers and other parties who receive the Funds’ portfolio information prior to the holdings being made public. Employees of the Advisor are subject to the Funds’ and the Advisor’s Code of Ethics, but the improper use of Fund portfolio holdings by other parties is possible, notwithstanding contractual and confidentiality obligations.

Other Clients of the Advisor

Various non-Fund portfolios of other clients of the Advisor may hold securities substantially similar to those held by the Funds, since the Advisor maintains a “target portfolio” for each of its investment strategies which often utilizes similar securities for various client portfolios (including the Funds’) managed with a particular investment strategy. The Advisor has implemented separate policies and procedures with respect to appropriate disclosure of such non-Fund holdings and target portfolios, including to the Advisor’s clients and their agents.

Board of Trustees Oversight of Disclosure of Fund Portfolio Holdings

In approving the Disclosure of Fund Portfolio Holdings Policy, the Board of Trustees determined that disclosure prior to Fund holdings being made public to the parties mentioned above, was in the best interest of Fund shareholders or at least did no harm to Fund shareholders. Potential conflicts of interest between the Funds, the Advisor or affiliates of the Advisor, were considered. In addition, in no event shall the Advisor, its affiliates or employees, or the Funds receive any direct or indirect compensation in connection with the disclosure of the Funds’ portfolio holdings.

Distribution of Fund portfolio holdings to parties not mentioned above requires the prior approval of the Trust’s President or Chief Compliance Officer. In making the decision to provide Fund portfolio holdings to parties not mentioned above, the Trust’s President or Chief Compliance Officer will resolve any conflicts relating to the disclosure in the best interests of the Funds’ shareholders. Any such disclosure of Fund portfolio holdings is reviewed by the Board of Trustees at its next regular meeting.

There is no assurance that the Funds’ policies on portfolio holdings disclosure will protect the Funds from potential misuse of holdings information by individuals in possession of that information.

Marketing and Support Payments

The Funds’ Advisor, out of its own resources and without additional cost to the Funds or their shareholders, may provide additional cash payments or other compensation to certain financial intermediaries who sell shares of the Funds. Such payments are in addition to upfront sales commissions paid by the Advisor and Rule 12b-1 fees and service fees paid by the Funds, and may be divided into categories as follows:

Support Payments. Payments may be made by the Advisor to certain financial intermediaries in connection with the eligibility of the Funds to be offered in certain programs and/or in connection with meetings between Fund representatives and financial intermediaries and their sales representatives. Such meetings may be held for various purposes, including providing education and training about the Funds and other general financial topics to assist financial intermediaries’ sales representatives in making informed recommendations to, and decisions on behalf of, their clients.

As of June 30, 2006, the Advisor has agreements with five firms to pay such Support Payments, which are structured as a percentage of sales or as a percentage of assets.

Support Payments to these dealers for calendar year 2005 were approximately 0.01% of 2005 average total Funds assets, and in dollars were:

AG Edwards	$ 185,500
Legg Mason Wood Walker	$ 24,602
Merrill Lynch, Pierce, Fenner & Smith	$ 822,616
Morgan Stanley DW Inc.	$ 36,677
UBS Financial Services	$ 4,783
	$1,074,178

Entertainment, Conferences and Events. The Advisor also may pay cash or non-cash compensation to sales representatives of financial intermediaries in the form of (i) occasional gifts; (ii) occasional meals, tickets or other entertainment; and/or (iii) sponsorship support for the financial intermediary’s client seminars and cooperative advertising. In addition, the Advisor pays for exhibit space or sponsorships at regional or national events of financial intermediaries.

Certain Service Fees. Certain service fees charged by financial intermediaries, such as sub-administration, sub-transfer agency and other shareholder services fees, which exceed the amounts payable pursuant to the Funds’ Sub-Transfer Agency Policy and the 12b-1 Plan (as described in this SAI), are paid by the Advisor. The total amount of such service fees paid by the Advisor for calendar year 2005 was $2.1 million, which was .02% of average 2005 total Fund assets.

The prospect of receiving, or the receipt of, additional payments or other compensation as described above by financial intermediaries may provide such intermediaries and/or their salespersons with an incentive to favor sales of shares of the Funds, and other mutual funds whose affiliates make similar compensation available, over sale of shares of mutual funds (or non-mutual fund investments) not making such payments. You may wish to take such payment arrangements into account when considering and evaluating any recommendations relating to Fund shares.

Sub-Transfer Agency Expenses

Fund shares are sold through administrators, broker-dealers, fund supermarkets, 401(k) recordkeepers and other institutions (“intermediaries”) that provide accounting, record keeping, and/or other services to investors and that have a services agreement or selling agreement with the Funds’ Distributor and/or the Advisor to make Fund shares available to their clients.

Each intermediary renders sub-transfer agency services similar to the Funds’ transfer agency services, which generally consist of:

·	Processing all purchase, redemption and exchange orders;

·	Generating and delivering confirmations;

·	Sending account statements;

·	Sending prospectuses, statements of additional information, financial reports, proxy materials, and other Fund communications;

·	Handling routine investor inquiries;

·	Tax reporting;

·	Maintaining records of account activity; and

·	Distributing dividends, distributions and redemption proceeds.

In addition, some of the sub-transfer agency fees are for maintaining the records of individual participants in 401(k) or other defined contribution plans. The Board of Trustees has approved payments to these intermediaries from Fund assets for providing these sub-transfer agency services based on charges for similar services if such services were provided directly by the Funds’ transfer agent.

Sub-transfer agency fees for non-401(k) accounts.

The Funds will pay the lesser of (i) the fee actually charged by the intermediary, or (ii) .15% (or $18 per account).

Sub-transfer agency fees for 401(k) accounts.

The Funds will pay the lesser of (i) the fee actually charged by the intermediary, or (ii) .25% (or $30 per account).

The Funds treat any intermediary fees exceeding the above sub-transfer agency charges as distribution charges. For Class I, the Advisor pays these distribution charges out of its own resources. For other classes, distribution charges are paid with rule 12b-1 fees, and the Advisor pays any distribution charges above the amount able to be paid under the rule 12b-1 plan.

PURCHASE OF SHARES

Initial Sales Charge Alternative — Class A Shares

Class A Shares — Purchases Subject to an Initial Sales Charge. For purchases of Class A shares subject to an initial sales charge, the Distributor reallows a portion of the initial sales charge to dealers (which is alike for all dealers), as shown in the Prospectus. (The term “dealer” includes any broker, dealer, bank (including bank trust departments), registered investment adviser, financial planner and any other financial institution having a selling agreement or any other similar agreement with the Distributor.) The difference between the total amount invested and the sum of (a) the net proceeds to the Fund and (b) the dealer reallowance, is the amount of the initial sales charge retained by the Distributor. Because of rounding in the computation of offering price, the portion of the sales charge retained by the Distributor may vary and the total sales charge may be more or less than the sales charge calculated using the sales charge expressed as a percentage of the offering price or as a percentage of the net amount invested as listed in the Prospectus.

Class A Shares — Purchases Subject to a Contingent Deferred Sales Charge (but not an Initial Sales Charge). Shareholders who invest $1,000,000 or more in Class A shares do not pay an initial sales charge. If the shareholder redeems the shares within one year after purchase, a deferred sales charge of 0.75% of the original cost of the shares being redeemed may be charged. For purchases of Class A shares subject to a contingent deferred sales charge (“CDSC”), the Distributor pays commissions to dealers on new investments made through such dealers as follows:

Dealer Compensation as a % of Offering Price	Cumulative Purchase Amount
0.75%	$1,000,000 to $2,000,000, plus
0.50%	Over $2,000,000 to $3,000,000, plus
0.30%	Over $3,000,000 to $50,000,000, plus
0.20%	Over $50,000,000 to $100,000,000, plus
0.10%	Over $100,000,000

Class A Sales Charge Information - The Distributor of the Funds received the following sales charges from investors on sales of Class A shares:

		Gross Sales Charges Collected		Sales Charges Retained by Quasar		Sales Charges Retained by Stephens		Sales Charges Paid to Quasar		Sales Charges Paid to Stephens		CDSCs Received on Redemption of Load-Waived Shares
Core Value Fund

Fiscal year ended 6/30/06	$	2,232,383	$	2,684	$	0	$	63,078	$	0	$	0
Period 8/30/04* - 6/30/05	$	139,704	$	3,528	$	4,377	$	1,124	$	1,829	$	0
Large Cap Value Fund
Fiscal year ended 6/30/06	$	1,002,915	$	763	$	0	$	9,299	$	0	$	0
Fiscal year ended 6/30/05	$	4,888,652	$	108,726	$	150,018	$	7,309	$	182,173	$	0
Fiscal year ended 6/30/04	$	519,902			$	27,267			$	43,701	$	0
Mid-Cap Value Fund
Fiscal year ended 6/30/06	$	197,467	$	192	$	0	$	3,053	$	0	$	0
Fiscal year ended 6/30/05	$	421,446	$	2,932	$	19,007	$	721	$	15,201	$	0
Fiscal year ended 6/30/04	$	2,114,609			$	114,850	$		$	98,021	$	0
Small Cap Value Fund
Fiscal year ended 6/30/06	$	29,914	$	141	$	0	$	2,230	$	0	$	0
Fiscal year ended 6/30/05	$	31,583	$	156	$	2,021	$	30	$	3,104	$	0
Fiscal year ended 6/30/04	$	168,293			$	9,549	$		$	9,442	$	0
All Cap Value Fund
Fiscal year ended 6/30/06	$	242,911	$	669	$	0	$	14,909	$	0	$	0
Fiscal year ended 6/30/05	$	1,100,156	$	23,899	$	33,553	$	1,593	$	121,998	$	0
Fiscal year ended 6/30/04	$	490,242			$	28,986	$		$	58,377	$	0

* The Core Value Fund commenced operations on August 30, 2004.

(Prior to April 1, 2005, the distributor of the Funds was Stephens.)

Deferred Sales Charge Alternative —Class C Shares

Proceeds from the CDSC and the distribution fee are paid to the Distributor and are used in whole or in part by the Distributor to defray the expenses of dealers and other financial intermediaries related to providing distribution-related services to a Fund in connection with the sale of the Class C shares, such as the payment of compensation to financial consultants for selling Class C shares from the dealer’s own funds. The combination of the CDSC and the ongoing distribution fee facilitates the ability of a Fund to sell the Class C shares without a sales charge being deducted at the time of purchase. See “Distribution Plan” below. The Distributor will pay dealers (as previously defined) a commission of 1.0% of the purchase price for Class C shares. Imposition of the CDSC and the distribution fee on Class C shares is limited by the NASD asset-based sales charge rule. See “Limitations on the Payment of Deferred Sales Charges” below.

Class C Sales Charge Information - Sales charges received by the Distributor of the Funds from shareholders of Class C shares were as follows:

	CDSCs Received by Quasar	CDSCs Received by Stephens	CDSCs Retained by Quasar	CDSCs Retained by Stephens
Core Value Fund*
Fiscal year ended 6/30/06	$ 38,303	$ 0	$ 742	$ 0
Period 8/30/04 - 6/30/05	$ 243	$ 8,972	$ 30	$ 7,165
Large Cap Value Fund
Fiscal year ended 6/30/06	$ 87,521	$ 0	$ 559	$ 0
Fiscal year ended 6/30/05	$ 59,533	$ 71,030	$ 1,693	$ 61,660
Fiscal year ended 6/30/04		$ 15,092		$ 2,529
Mid-Cap Value Fund
Fiscal year ended 6/30/06	$ 6,988	$ 0	$ 1,619	$ 0
Fiscal year ended 6/30/05	$ 8,860	$ 52,065	$ 397	$ 15,353
Fiscal year ended 6/30/04		$ 67,153		$ 28,178
Small Cap Value Fund
Fiscal year ended 6/30/06	$ 5,900	$ 0	$ 1,013	$ 0
Fiscal year ended 6/30/05	$ 441	$ 11,438	$ 0	$ $4,685
Fiscal year ended 6/30/04		$ 28,477		$ 12,933
All Cap Value Fund
Fiscal year ended 6/30/06	$ 10,890	$ 0	$ 0	$ 0
Fiscal year ended 6/30/05	$ 8,797	$ 14,707	$ 2,017	$ 8,990
Fiscal year ended 6/30/04		$ 10,487		$ 6,492

* The Core Value Fund commenced operations on August 30, 2004.

(Prior to April 1, 2005, the distributor of the Funds was Stephens.)

Class R Shares

The Large Cap Value Fund and the Mid-Cap Value Fund offer Class R shares as described in the Prospectus. Class R shares are available only to certain retirement plans. Class R shares are not subject to an initial sales charge or a contingent deferred sales charge but are subject to ongoing annual distribution and service fees of 0.50%. Distribution and service fees are used to support a Fund’s marketing and distribution efforts, such as compensating financial intermediaries, advertising and promotion, and are also used to compensate securities dealers and other financial intermediaries for shareholder servicing activities. If Class R shares are held over time, these fees may exceed the maximum sales charge that an investor would have paid as a shareholder of Class A or Class C shares.

Distribution Plan

The distribution plan for the Class A, Class C and Class R shares (the “Distribution Plan”) provides that each Fund pays a distribution and service fee relating to the shares of the relevant class, accrued daily and paid monthly, at the annual rate of up to 0.25% of the average daily net assets of the Class A shares of the relevant Fund, at the annual rate of up to 1.00% of the average daily net assets of that Fund attributable to Class C shares, and at the annual rate of up to 0.50% of the average daily net assets of the Class R shares of the Large Cap Value Fund and the Mid-Cap Value Fund only, in order to compensate the distribution coordinator, as appointed by the Board of Trustees from time to time (the “Distribution Coordinator”), and selected securities dealers or other financial intermediaries in connection with providing shareholder and distribution services, and bearing certain distribution-related expenses of the Fund, including payments to securities dealers and other intermediaries for selling Class A, Class C and Class R shares of that Fund. Each of those classes has exclusive voting rights with respect to the Distribution Plan adopted with respect to such class pursuant to which distribution and service fees are paid.

The Distribution Plan as it relates to Class C and Class R shares is designed to permit an investor to purchase Class C and Class R shares through securities dealers and other financial intermediaries without the assessment of an initial sales charge and at the same time permit the Distribution Coordinator to compensate securities dealers and other financial intermediaries in connection with the sale of the Class C and Class R shares. In this regard, the purpose and function of the ongoing distribution fees and the CDSC are the same as those of the initial sales charge with respect to the Class A shares of the Funds in that the ongoing distribution fees and deferred sales charges provide for the financing of the distribution of the Funds’ Class C and Class R shares.

The Funds’ Distribution Plan is subject to the provisions of Rule 12b-1 under the 1940 Act. In their consideration of the Distribution Plan, the Trustees must consider all factors they deem relevant, including information as to the benefits of the Distribution Plan to each Fund and its shareholders. The Distribution Plan further provides that, so long as the Distribution Plan remains in effect, the selection and nomination of Independent Trustees shall be committed to the discretion of the Independent Trustees then in office. In approving the Distribution Plan in accordance with Rule 12b-1, the Independent Trustees concluded that there is a reasonable likelihood that the Distribution Plan will benefit the Funds and their shareholders. The Distribution Plan can be terminated as to a class of a Fund at any time, without penalty, by the vote of a majority of the Independent Trustees or by the vote of the holders of a majority of the outstanding related class of voting securities of the Fund. The Distribution Plan cannot be amended to increase materially the amount to be spent by a Fund without the approval of the related class of shareholders, and all material amendments are required to be approved by the vote of the Trustees, including a majority of the Independent Trustees who have no direct or indirect financial interest in the Distribution Plan, cast in person at a meeting called for that purpose. Rule 12b-1 further requires that a Fund preserve copies of the Distribution Plan and any report made pursuant to such Plan for a period of not less than six years from the date of the Distribution Plan or such report, the first two years in an easily accessible place.

Among other things, the Distribution Plan provides that the Distribution Coordinator shall provide and the Trustees shall review quarterly reports of the disbursement of the distribution and service fees paid under the Plan. Payments under the Distribution Plan are based on a percentage of average daily net assets attributable to the shares regardless of the amount of expenses incurred and, accordingly, distribution-related revenues from the Distribution Plan may be more or less than distribution-related expenses. Information with respect to the distribution-related revenues and expenses is presented to the Trustees for their consideration in connection with their deliberations as to the continuance of the Distribution Plan.

For the fiscal year ended June 30, 2006, the Funds paid the following amounts under the Distribution Plan:

	Core	Large Cap	Mid-Cap	Small Cap	All Cap
Distribution and service fees - Class A	$ 1,108,419	$ 7,200,502	$ 2,817,906	$ 587,705	$ 294,947
Distribution and service fees - Class B*	N/A	$ 12,123	$ 68,535	$ 18,087	N/A
Distribution and service fees - Class C	$ 1,009,707	$ 5,270,092	$ 2,591,039	$ 259,328	$ 696,235
Distribution and service fees - Class R	N/A	$ 283,680	$ 109,094	N/A	N/A

* No longer offered.

These payments were made to dealers for compensation to their representatives (Class B and Class C) and for advertising, sales promotion, marketing expenses and shareholder services such as account maintenance.

Limitations on the Payment of Deferred Sales Charges

The maximum sales charge rule in the Conduct Rules of the NASD imposes a limitation on certain asset-based sales charges such as the distribution fee paid by Class C and Class R shares and the CDSC borne by the Class C shares, but not the service fee. The maximum sales charge rule is applied separately to each class. The maximum sales charge rule limits the aggregate of distribution fee payments and CDSCs payable by a Fund charging a service fee to (1) 6.25% of eligible gross sales of Class C and Class R shares, computed separately (defined to exclude shares issued pursuant to dividend reinvestments and exchanges), plus (2) interest on the unpaid balance for the respective class, computed separately, at the prime rate plus 1% (the unpaid balance being the maximum amount payable minus amounts received from the payment of the distribution fee and the CDSC).

Anti-Money Laundering

The Trust has established an Anti-Money Laundering Compliance Program (the “Program”) as required by the USA PATRIOT Act. The Trust’s Program provides for the development of internal practices, procedures and controls; designation of an anti-money laundering compliance officer; an ongoing training program; and an independent testing function to determine the effectiveness of the Program.

Procedures to implement the Program include determining that the Trust’s Distributor and Transfer Agent have established proper anti-money laundering procedures; checking shareholder names against designated government lists, including that of the Office of Foreign Asset Control (“OFAC”); and a complete and thorough review of all new account applications. The Trust will not transact business with any person or entity whose identity cannot be adequately verified under the provisions of the Program.

REDEMPTION OF SHARES

Each Fund is required to redeem for cash all shares of the Fund upon receipt of a written request in proper form. The redemption price is the net asset value per share next determined after the initial receipt of proper notice of redemption. Shareholders liquidating their holdings will receive upon redemption all dividends reinvested through the date of redemption.

The right to redeem shares or to receive payment with respect to any such redemption may be suspended for more than seven days only for any period during which trading on the New York Stock Exchange (the “NYSE”) is restricted as determined by the Commission or during which the NYSE is closed (other than customary weekend and holiday closings), for any period during which an emergency exists, as defined by the Commission, as a result of which disposal of portfolio securities or determination of the net asset value of a Fund is not reasonably practicable, and for such other periods as the Commission may by order permit for the protection of shareholders of the Funds.

The value of shares of a Fund at the time of redemption may be more or less than the shareholder’s cost, depending in part on the market value of the securities held by that Fund at such time.

In electing a telephone redemption, the investor authorizes the Funds and the Transfer Agent to act on telephone instructions from any person representing himself to be the investor, and reasonably believed by the Funds or the Transfer Agent to be genuine. Neither the Funds nor the Transfer Agent may be liable for any loss, cost or expense for acting on instructions (whether in writing or by telephone) believed by the party receiving such instructions to be genuine and in accordance with the procedures described in the Prospectuses. Since this account feature involves a risk of loss from unauthorized or fraudulent transactions, the Transfer Agent will take certain precautions to protect your account from fraud. Telephone redemption may be refused if the caller is unable to provide: the account number, the name and address registered on the account and the social security number registered on the account. The Funds or the Transfer Agent may temporarily suspend telephone transactions at any time.

For shareholders redeeming directly with the Transfer Agent, payments will be mailed within seven days of receipt of a proper notice of redemption. At various times a Fund may be requested to redeem shares for which it has not yet received good payment (e.g., shares purchased with any manner of payment other than federal funds). A Fund may delay or cause to be delayed the mailing of a redemption check until such time as good payment has been collected for the purchase of such Fund shares, which usually will not exceed 12 days. In the event that a shareholder account held directly with the Transfer Agent contains a fractional share balance, such fractional share balance will be automatically redeemed by that Fund.

PRICING OF SHARES

Determination of Net Asset Value

The net asset value of the shares of all classes of each Fund is determined once daily Monday through Friday as of the close of regular trading on the NYSE on each day the NYSE is open for trading based on prices at the time of the close of regular trading. Regular trading on the NYSE generally closes at 4:00 p.m., Eastern time. Any assets or liabilities initially expressed in terms of non-U.S. dollar currencies are translated into U.S. dollars at the prevailing market rates as quoted by one or more banks or dealers on the day of valuation.

Net asset value of a Fund is computed by dividing the value of the securities held by that Fund plus any cash or other assets (including interest and dividends accrued but not yet received) minus all liabilities (including accrued expenses) by the total number of shares outstanding at such time, rounded to the nearest cent. Expenses, including the fees payable to the Advisor, are accrued daily.

For each Fund, the per share net asset value of Class A, Class C and Class R shares generally will be lower than the per share net asset value of Class I shares, reflecting the daily expense accruals of the distribution and service fees applicable with respect to Class A, Class C and Class R shares. Moreover, the per share net asset value of the Class C and Class R shares of a Fund generally will be lower than the per share net asset value of Class A shares of that Fund, reflecting the daily expense accruals of the higher distribution and service fees applicable with respect to Class C and Class R shares of the Fund. In addition, the per share net asset value of Class C shares generally will be lower than the per share net asset value of Class R shares due to the daily expense accruals of the higher distribution and service fees applicable to Class C shares. It is expected, however, that the per share net asset value of all classes of each Fund will tend to converge (although not necessarily meet) immediately after the payment of dividends which will differ by approximately the amount of the expense accrual differentials between the classes.

Securities are valued by an independent pricing agent to the extent possible. In determining the net asset value of each Fund’s shares, equity securities that are traded on stock exchanges or The NASDAQ Stock Market (“NASDAQ”) are valued at the last sale price or official closing price on the exchange on which such securities are traded, as of the close of business on the day the securities are being valued or, in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange or on NASDAQ. Unlisted equity securities that are not included in NASDAQ are valued at the average of the quoted bid and asked prices in the over-the-counter market.

Fixed-income securities which are traded on a national securities exchange will be valued at the last sale price or, if there was no sale on such day, at the average of readily available closing bid and asked prices on such exchange. However, securities with a demand feature exercisable within one to seven days are valued at par. Prices for fixed-income securities may be based on quotations received from one or more market-makers in the securities, or on evaluations from pricing services. Fixed-income securities for which quotations or prices are not readily available are valued at their fair value as determined by the Advisor under guidelines established by the Board of Trustees, with reference to fixed-income securities whose prices are more readily obtainable or to an appropriate matrix utilizing similar factors. As a broader market does not exist, the proceeds received upon the disposal of such securities may differ from their recorded value. Short-term investments which mature in less than 60 days are valued at amortized cost (unless the Board of Trustees determines that this method does not represent fair value), if their original maturity was 60 days or less or by amortizing the value as of the 61st day prior to maturity, if their original term to maturity exceeded 60 days.

Options, futures contracts and options thereon which are traded on exchanges are valued at their last sale or settlement price as of the close of the exchanges or, if no sales are reported, at the average of the quoted bid and asked prices as of the close of the exchange.

Trading in securities listed on foreign securities exchanges or over-the-counter markets is normally completed before the close of regular trading on the NYSE. In addition, foreign securities trading may not take place on all business days in New York and may occur on days on which the NYSE is not open. In addition, foreign currency exchange rates are generally determined prior to the close of trading on the NYSE. Events affecting the values of foreign securities and currencies will not be reflected in the determination of net asset value unless the Board of Trustees determines that the particular event would materially affect net asset value, in which case an adjustment will be made. Investments quoted in foreign currency are valued daily in U.S. dollars on the basis of the foreign currency exchange rate prevailing at the time of valuation. Foreign currency exchange transactions conducted on a spot basis are valued at the spot rate prevailing in the foreign exchange market.

Securities and other assets for which market quotations are not readily available are valued at their fair value as determined by the Advisor under guidelines established by and under the general supervision and responsibility of the Board of Trustees.

Each investor in each Fund may add to or reduce his or its investment in that Fund on each day the NYSE is open for trading. The value of each investor’s interest in each Fund will be determined as of the close of regular trading on the NYSE by multiplying the net asset value of that Fund by the percentage, effective for that day, that represents that investor’s share of the aggregate interests in the Fund. Any additions or withdrawals to be effected on that day will then be effected. The investor’s percentage of the aggregate beneficial interests in that Fund will then be recomputed as the percentage equal to the fraction (i) the numerator of which is the value of such investor’s investment in the Fund as of the time of determination on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the investor’s investment in the Fund effected on such day, and (ii) the denominator of which is the aggregate net asset value of the Fund as of such time on such day plus or minus, as the case may be, the amount of the net additions to or withdrawals from the aggregate investments in the Fund by all investors in the Fund. The percentage so determined will then be applied to determine the value of the investor’s interest in the Fund after the close of regular trading on the NYSE on the next determination of net asset value of that Fund.

Computation of Offering Price Per Share

An illustration of the computation of the offering price for Class I, Class A and Class C shares of each Fund, based on the value of the Fund’s net assets and number of shares outstanding on June 30, 2006, is calculated as set forth below:

Core Value Fund

	Class A	Class A	Class C
Net Assets	$ 765,091,515	$ 673,032,258	$ 162,884,792
Number of Shares Outstanding	59,561,265	52,575,530	12,864,139
Net Asset Value Per Share (net assets divided by number of shares outstanding)	$ 12.85	$ 12.80	$ 12.66
Sales Charge (for Class A shares:
5.25% of offering price (5.55% of net asset value per share))*		0.71	**
Offering Price	$ 12.85	$ 13.51	$ 12.66

Large Cap Value Fund

	Class I	Class A	Class C	Class R
Net Assets	$ 2,119,374,420	$ 2,959,443,570	$ 488,479,586	$ 82,769,530
Number of Shares Outstanding	90,482,589	126,885,854	21,274,947	3,526,051
Net Asset Value Per Share (net assets divided by number of shares outstanding)	$ 23.42	$ 23.32	$ 22.96	$ 23.47
Sales Charge (for Class A shares:
5.25% of offering price (5.55% of net asset value per share))*		1.29	**
Offering Price	$ 23.42	$ 24.61	$ 22.96	$ 23.47

Mid-Cap Value Fund

	Class I	Class A	Class C	Class R
Net Assets	$ 2,873,683,824	$ 1,088,853,674	$ 246,241,917	$ 22,500,761
Number of Shares Outstanding	99,404,318	37,849,983	8,848,713	774,671
Net Asset Value Per Share (net assets divided by number of shares outstanding)	$ 28.91	$ 28.77	$ 27.83	$ 29.05
Sales Charge (for Class A shares:
5.25% of offering price (5.55% of net asset value per share))*		1.59	**
Offering Price	$ 28.91	$ 30.36	$ 27.83	$ 29.05

Small Cap Value Fund

	Class I	Class A	Class C
Net Assets	$ 553,660,130	$ 184,473,122	$ 20,717,337
Number of Shares Outstanding	11,503,223	3,819,311	452,014
Net Asset Value Per Share (net assets divided by number of shares outstanding)	$ 48.13	$ 48.30	$ 45.83
Sales Charge (for Class A shares:
5.25% of offering price (5.55% of net asset value per share))*		2.68	**
Offering Price	$ 48.13	$ 50.98	$ 45.83

All Cap Value Fund

	Class I	Class A	Class C
Net Assets	$ 59,890,674	$ 92,688,967	$ 59,822,049
Number of Shares Outstanding	3,092,910	4,776,903	3,148,070
Net Asset Value Per Share (net assets divided by number of shares outstanding)	$ 19.36	$ 19.40	$ 19.00
Sales Charge (for Class A shares:
5.25% of offering price (5.55% of net asset value per share))*		1.07	**
Offering Price	$ 19.36	$ 20.47	$ 19.00

_______

* Rounded to the nearest one-hundredth percent; assumes maximum sales charge is applicable.

** Class C shares are not subject to an initial sales charge but may be subject to a CDSC on redemption. See “Purchase of Shares — Deferred Sales Charge Alternative —Class C Shares” herein.

DIVIDENDS AND TAX STATUS

The following is intended to be a general summary of certain federal income tax consequences of investing in one or more Funds. It is not intended to be a complete discussion of all such tax consequences, nor does it purport to deal with all types of investors and should not be construed as tax advice. Investors are therefore advised to consult with their own tax advisors before making an investment in a Fund.

Each Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Qualification as a regulated investment company requires, among other things, that (1) at least 90% of each Fund’s annual gross income be derived from payments with respect to securities loans, interest, dividends and gains from the sale or other disposition of stock, securities, or foreign currencies or other income (including, but not limited to, gains from options, futures or forward contracts) in connection with its business of investing in such stock, securities, or currencies; and (2) each Fund diversify its holdings so that, at the end of each quarter of the taxable year, (i) at least 50% of the market value of the Fund’s total assets is represented by cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to an amount not greater in value than 5% of the Fund’s total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. government securities or the securities of other regulated investment companies) or of two or more issuers controlled by the Fund that are engaged in the same, similar or related trades or businesses.

As a regulated investment company, in any fiscal year in which a Fund distributes at least 90% of its net investment income (i.e., the Fund’s investment company taxable income, as that term is defined in the Code, without regard to the deduction for dividends paid), such Fund (but not its shareholders) will generally be relieved of paying U.S. federal income taxes on its net investment income and net capital gain (i.e., the Fund’s net long-term capital gain in excess of the sum of net short-term capital loss and capital loss carryovers from prior years, if any) that it distributes to shareholders. However, a Fund will be subject to federal income tax (currently imposed at a maximum rate of 35%) on any undistributed net investment income and net capital gain.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax payable by the Fund. To prevent imposition of this excise tax, the Fund must distribute to its shareholders, during each calendar year, at least 98% of its ordinary income for that calendar year, at least 98% of the excess of its capital gains over its capital losses for the one-year period ending October 31 in such calendar year, and all undistributed ordinary income and capital gains from preceding year(s), if any. The Funds intend to meet these distribution requirements in order to avoid this excise tax liability.

If in any taxable year a Fund fails to qualify as a regulated investment company under the Code, the Fund will be taxed in the same manner as an ordinary corporation and distributions to its shareholders will not be deductible by the Fund in computing its taxable income. In addition, in the event of a failure to qualify as a regulated investment company, the Fund’s distributions, to the extent derived from its current or accumulated earnings and profits, will constitute dividends which although generally eligible for the dividends received deduction available to corporate shareholders, will be taxable to shareholders as ordinary income, even though such distributions might otherwise, at least in part, have been treated as long-term capital gain in such shareholders’ hands. Furthermore, in such event, non-corporate shareholders of the Fund generally would be able to treat such distributions as “qualified dividend income” eligible for reduced rates of federal income taxation.

A Fund’s transactions in certain forward and futures contracts, forward foreign currency exchange contracts (Section 1256 contracts) and certain listed options will be subject to special provisions of the Code that, among other things, may affect the character of gain or loss realized by the Fund (i.e., may affect whether gain or loss is ordinary or capital), accelerate recognition of income to the Fund, defer Fund losses, and affect the determination of whether capital gain and loss is characterized as long-term or short-term capital gain or loss. These rules could therefore affect the character, amount and timing of distributions to shareholders. For example, at the end of each year, certain investments held by a Fund must be “marked to market” for federal income tax purposes; that is, they are treated as having been sold at their fair market value, which may cause the Fund to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the distribution requirement for avoiding income and excise taxes.

A shareholder’s sale of shares of a Fund will be a taxable transaction if such person is subject to U.S. federal income tax. Shareholders will generally recognize gain or loss in an amount equal to the difference between their adjusted tax basis in the shares sold and the amount received in exchange therefor. If such shares are held as a capital asset, the gain or loss will be a capital gain or loss. Any loss realized on a sale, redemption or exchange of shares of a Fund by a shareholder will be disallowed to the extent that shares disposed of are reacquired within a 61-day period beginning 30 days before and ending 30 days after the disposition of shares. In such a case, the basis of the shares reacquired will be adjusted to reflect the disallowed loss. Shares received in connection with the payment of a dividend by a Fund will generally constitute a reacquisition of shares for purposes of this loss disallowance rule. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as a long-term capital loss to the extent of any distributions of net capital gain received with respect to such shares.

The per share dividends on Class C shares will be lower than the per share dividends on Class I, Class A and Class R shares of the same Fund, as a result of the distribution and service fees applicable to the Class C shares. Similarly, the per share dividends on Class A and Class R shares will be lower than the per share dividends on Class I shares as a result of the distribution and service fees applicable with respect to the Class A and Class R shares. The per share distributions of net capital gains, if any, will be paid in the same amount for each class of the same Fund.

Each Fund may be required to withhold for U.S. federal income tax purposes, a portion of all taxable distributions payable to shareholders who fail to provide the Fund with their correct taxpayer identification number or who fail to make required certifications, or if the Fund or a shareholder has been notified by the Internal Revenue Service that they are required to backup withhold. Any amounts withheld may be credited against such shareholder’s U.S. federal income tax liability.

A portion of a Fund's ordinary income distributions may be taxable to non-corporate shareholders at a reduced rate, if that Fund receives “qualifying dividend income” from its investments. The Funds intend to compute the percentage of a shareholder's ordinary income distributions that may qualify for the reduced tax rate, at least annually, if applicable.

GENERAL INFORMATION

Description of Shares

The Core Value Fund, the Large Cap Value Fund, the Mid-Cap Value Fund, the Small Cap Value Fund and the All Cap Value Fund are currently closed to new investors, except as described in the Prospectuses.

The Agreement and Declaration of Trust permits the Trustees to establish and designate separate portfolios or funds of the Trust holding the assets of the Trust, the beneficial interests in each of which are represented by a separate series of shares. The Trustees are permitted to issue an unlimited number of full and fractional shares of beneficial interest and to divide or combine the shares into a greater or lesser number of shares without thereby changing the proportionate beneficial interest in the particular Fund. Each share represents an interest in a Fund proportionately equal to the interest of each other share, except that the Class A, Class C and Class R shares are subject to distribution and service fees payable under the Distribution Plan. Upon the Trust’s liquidation, all shareholders would share pro rata in the net assets of the Fund in question available for distribution to shareholders. The Board of Trustees may create additional classes of shares if deemed in the best interest of shareholders. The Board of Trustees has created five series of shares, and may create additional series in the future, which have separate assets and liabilities.

The Agreement and Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law, but nothing in the Agreement and Declaration of Trust protects a Trustee against any liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The Agreement and Declaration of Trust also provides that the Trust shall indemnify any shareholder for any loss arising out of a claim or demand relating to such person being or having been a shareholder.

Ten shareholders holding the lesser of $25,000 worth or one percent of the Trust’s shares may advise the Trustees in writing that they wish to communicate with other shareholders for the purpose of requesting a meeting to remove a Trustee. The Trustees will then, if requested by the applicants, mail at the applicants’ expense the applicants’ communication to all other shareholders.

The Trust or any Fund may be terminated if approved by the vote of a majority of the Trustees. If not so terminated, the Trust will continue indefinitely.

Rule 18f-2 under the 1940 Act provides that as to any investment company which has two or more series outstanding and as to any matter required to be submitted to shareholder vote, such matter is not deemed to have been effectively acted upon unless approved by the holders of a “majority” (as defined in the Rule) of the voting securities of each series affected by the matter. Such separate voting requirements do not apply to the election of Trustees or the ratification of the selection of accountants. The Rule contains special provisions for cases in which an advisory contract is approved by one or more, but not all, series. A change in investment policy may go into effect as to one or more series whose holders so approve the change even though the required vote is not obtained as to the holders of other affected series.

Common expenses incurred by the Trust are allocated among the Funds based upon relative net assets or evenly among the Funds, depending on the nature of the expenditure.

Except for any amendment that is required to be approved by shareholders by the 1940 Act or by this registration statement, the Trustees may, without shareholder vote, restate, amend or otherwise supplement the Agreement and Declaration of Trust. Shareholders do not have preemptive or conversion rights. Shares, when issued pursuant to a Prospectus of a Fund, are fully paid and non-assessable.

Issuance of Fund Shares for Securities

Investors may purchase Fund shares for consideration consisting of securities rather than cash when, in the judgment of the Advisor, the securities: (a) meet the investment objective and policies of the Fund, (b) are liquid and not subject to restrictions on resale, and (c) have a value that is readily ascertainable via listing on or trading in a recognized United States or international exchange or market.

Redemption in Kind

If the Board of Trustees determines that it would be detrimental to the best interests of the remaining shareholders of the Fund to make payment wholly in cash, a Fund may pay the redemption price in part by a distribution in kind of readily marketable securities from the portfolio of the Fund, in lieu of cash. The Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or one percent of the net asset value of the Fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation the Fund will have the option of redeeming the excess in cash or in kind. If shares are redeemed in kind, the redeeming shareholder would incur brokerage costs in converting the assets into cash.

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP, 350 South Grand Avenue, Los Angeles, California 90071, has been selected as the independent registered public accounting firm of the Funds. The independent registered public accounting firm is responsible for auditing the annual financial statements of the Funds.

Custodian

Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, acts as custodian of each Fund’s assets (the “Custodian”). The Custodian is responsible for safeguarding and controlling a Fund’s cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the Fund’s investments.

Transfer Agent

U.S. Bancorp Fund Services, LLC (“Transfer Agent”), 615 East Michigan Street, Milwaukee, Wisconsin 53202, acts as the Funds’ transfer agent pursuant to a transfer agency agreement and as the Funds’ fund accountant pursuant to a separate agreement. The Transfer Agent is responsible for the issuance, transfer and redemption of shares and the opening, maintenance and servicing of shareholder accounts.

Legal Counsel for the Trust

Paul, Hastings, Janofsky & Walker LLP, 55 Second Street, 24 ^th Floor, San Francisco, California 94105, is counsel for the Trust.

Legal Counsel for the Independent Trustees

Vedder, Price, Kaufman & Kammholz, P.C., 222 North LaSalle Street, Chicago, Illinois 60601, is counsel for the Independent Trustees.

Reports to Shareholders

The fiscal year of each Fund ends on June 30 of each year. Each Fund sends to its shareholders at least semi-annually reports showing the Fund’s portfolio and other information. An annual report containing financial statements audited by independent registered public accounting firm is sent to shareholders each year. After the end of each year, shareholders will receive federal income tax information regarding dividends and capital gains distributions. Only one copy of these reports is sent to the same household, unless a shareholder instructs otherwise.

Shareholder Inquiries

Shareholder inquiries may be addressed to a Fund at the address or telephone number set forth on the cover page of this SAI.

Additional Information

The Prospectuses and this SAI do not contain all the information set forth in the Registration Statement and the exhibits relating thereto, which the Trust has filed with the Commission, Washington, D.C., under the Securities Act and the 1940 Act, to which reference is hereby made.

Hotchkis and Wiley Capital Management, LLC has granted the Trust the right to use the “Hotchkis and Wiley” name and has reserved the right to withdraw its consent to the use of such name by the Trust at any time or to grant the use of such name to any other company.

Principal Holders

All Trustees and officers as a group owned less than 1% of the outstanding shares of the Large Cap Value, Mid-Cap Value, Small Cap Value and Core Value Funds, and 1.66% of the All Cap Value Fund as of July 31, 2006. In addition, to the knowledge of the Trust, the following entities owned 5% or more of the outstanding shares of a class of a Fund as of July 31, 2006:

*Core Value Fund*	*Class I*	*Class A*	*Class C*
Merrill Lynch Pierce Fenner & Smith Inc., * For the Sole Benefit of Our Customers 4800 Deer Lake Drive East Jacksonville, FL 32246-6484		12.24%	50.79%

Charles Schwab & Co. Inc., * Reinvestment Account 101 Montgomery Street San Francisco, CA 94104-4122	20.96%	8.02%

Prudential Investment Management, * 100 Mulberry Street 3 Gateway Center Suite 11 Newark, NJ 07102-4000	46.49%

Benefit Trust Company* 5901 College Blvd. Suite 100 Overland Park, KS 66211-1834	5.33%

*Large Cap Value Fund*	*Class I*	*Class A*	*Class C*	Class R
Merrill Lynch Pierce Fenner & Smith Inc., * For the Sole Benefit of Our Customers 4800 Deer Lake Drive East Jacksonville, FL 32246-6484	11.50%	16.06%	57.59%	33.12%

Charles Schwab & Co. Inc.* Reinvestment Account 101 Montgomery Street San Francisco, CA 94104-4122	13.82%	6.16%

Hartford Life Insurance, * P.O. Box 2999 Hartford, CT 06104-2999		5.31%		39.95%

American Express* 996 AXP Financial Center Minneapolis, MN 55474-00009	5.91%

Fidelity Investments Institutional* 100 Magellan Way Covington, KY 41015-1999	14.02%

*Mid-Cap Value Fund*	*Class I*	*Class A*	*Class C*	*Class R*
Merrill Lynch Pierce Fenner & Smith Inc., * For the Sole Benefit of Our Customers 4800 Deer Lake Drive East Jacksonville, FL 32246-6484	10.64%	23.32%	59.50%	63.32%

Charles Schwab & Co. Inc.* Reinvestment Account 101 Montgomery Street San Francisco, CA 94104-4122	9.32%	12.91%

Hartford Life Insurance* PO Box 2999 Hartford, CT 06104-2999				19.45%

Fidelity Investments Institutional, * 100 Magellan Way Covington, KY 41015-1999	32.83%

Prudential Investment Management* 100 Mulberry Street 3 Gateway Center Suite 11 Newark, NJ 07102-4000	6.41%

*Small Cap Value Fund*	*Class I*	*Class A*	*Class C*
Merrill Lynch Pierce Fenner & Smith Inc. , * For the Sole Benefit of Our Customers 4800 Deer Lake Drive East Jacksonville, FL 32246-6484	56.75%	25.74%	71.30%

PIMS/Prudential Retirement As Nominee for the Trustee The City of Seattle 100 Mulberry Street 710 Second Avenue, 12 ^th Floor Seattle, WA 98104	5.82%

JP Morgan Chase 50534 AXP Financial Center Minneapolis, MN 55474-0505	5.56%

*All Cap Value Fund*	*Class I*	*Class A*	*Class C*
Merrill Lynch Pierce Fenner & Smith Inc., * For the Sole Benefit of Our Customers 4800 Deer Lake Drive East Jacksonville, FL 32246-6484		37.22%	60.02%

Charles Schwab & Co. Inc.* Reinvestment Account 101 Montgomery Street San Francisco, CA 94104-4122		6.46%

Middlesex School Massachusetts* 1400 Lowell Road Concord, MA 01742-5255	10.60%

National Financial Services LLC* 200 Liberty Street New York, NY 10281-1003	10.35%

Hughes Investment Partnership LLC* U/A 12/16/1999 % Mark Hughes Family Trust 10100 Santa Monica Boulevard Suite 800 Los Angeles, CA 90067-4105	10.40%

Balsa & Co.* 14221 Dallas Parkway Dallas, TX 75254-2942	6.26%

Stephens Inc.* 111 Center Street Little Rock, AR 72201-4402	9.15%

*	Shares are believed to be held only as nominee.

**	Entity was the owner of record (although not necessarily the beneficial owner) of 25% or more of the outstanding shares of the Fund, and therefore may be presumed to “control” the Funds, as that term is defined by 1940 Act.

FINANCIAL STATEMENTS

The audited financial statements of the Funds are incorporated in this SAI by reference to the Funds’ June 30, 2006 Annual Report. You may request a copy of the Annual Report at no charge by calling 1-866-HW-FUNDS (1-866-493-8637).

APPENDIX A - PROXY VOTING POLICIES AND PROCEDURES

HOTCHKIS AND WILEY CAPITAL MANAGEMENT

PURPOSE

The purpose of these Proxy Voting Policies and Procedures is to memorialize the procedures and policies adopted by Hotchkis and Wiley Capital Management (“HWCM”) to enable it to comply with its accepted responsibilities and the requirements of Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (“Advisers Act”).

POLICY

HWCM acts as discretionary investment adviser for various clients, including clients governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). Unless a client (including a “named fiduciary” under ERISA) specifically reserves the right to vote its own proxies, HWCM will vote all proxies in sufficient time prior to their deadlines as part of its full discretionary authority over the assets.

When voting proxies for clients, HWCM’s primary concern is that all decisions be made solely in the best interest of the shareholder (for ERISA accounts, plan beneficiaries and participants, in accordance with the letter and spirit of ERISA). HWCM will act in a manner it deems prudent and diligent and which is intended to enhance the economic value of the assets of the account.

GUIDELINES

Each proxy issue will be considered individually. The following guidelines are a partial list to be used in voting on proposals often contained in proxy statements, but will not be used as rigid rules. The voting policies below are subject to modification in certain circumstances and will be reexamined from time to time. With respect to matters that do not fit in the categories stated below, HWCM will exercise its best judgment as a fiduciary to vote in the manner which will most enhance shareholder value.

Management Proposals

The majority of votes presented to shareholders are proposals made by management, which have been approved and recommended by its board of directors. Generally, in the absence of any unusual or non-routine information, the following items are likely to be supported:

·	Ratification of appointment of independent registered public accounting firm

·	General updating/corrective amendments to charter

·	Increase in common share authorization for a stock split or share dividend

·	Stock option plans that are incentive based and not excessive

·	Election of directors

The following items will always require company specific and case-by-case review and analysis when submitted by management to a shareholder vote:

·	Directors’ liability and indemnity proposals

·	Executive compensation plans

·	Mergers, acquisitions, and other restructurings submitted to a shareholder vote

·	Anti-takeover and related provisions

A-1

Shareholder Proposals

Under ERISA standards, it is inappropriate to use (vote) plan assets to carry out social agendas or purposes. Thus, shareholder proposals are examined closely for their relationship to the best interest of beneficiaries, and economic impact. In general, HWCM will vote in accordance with the recommendation of the company’s board of directors on all shareholder proposals. However, HWCM will support shareholder proposals that are consistent with HWCM’s proxy voting guidelines for board-approved proposals.

Generally, shareholder proposals related to the following items are supported:

·	Confidential voting

·	Bylaw and charter amendments only with shareholder approval

·	Majority of independent directors in a board

Generally, shareholder proposals related to the following items are not supported:

·	Limitations on the tenure of directors

·	Declassification of the board

·	Cumulative voting

·	Restrictions related to social, political, or special interest issues that impact the ability of the company to do business or be competitive and that have a significant financial or vested interest impact.

·	Reports which are costly to provide or expenditures which are of a non-business nature or would provide no pertinent information from the perspective of shareholders.

Conflict of Interest

Due to the nature of HWCM’s business and its small size, it is unlikely that conflicts of interest will arise in voting proxies of public companies,. However, if a potential conflict of interest did arise it would typically be a proxy for a company that is also HWCM’s client. In this event, the Compliance Department will review these votes to make sure that HWCM’s proposed votes are consistent with the established guidelines and not prompted by any conflict of interest.

HWCM may receive proxies for companies which are clients of Stephens Inc., a full service broker-dealer and investment bank whose parent company, Stephens Group Inc., owns a non-controlling minority interest in HWCM. Stephens does not directly or indirectly participate in HWCM’s policies or decisions with respect to proxy voting.

PROCEDURES

HWCM’s Portfolio Services Department is responsible for ensuring that all proxies received by HWCM are voted in a timely manner and voted consistently across all portfolios. Although many proxy proposals can be voted in accordance with our established guidelines, we recognize that some proposals require special consideration, which may dictate that we make an exception to our broad guidelines.

HWCM subscribes to an independent third party proxy research firm which provides analysis and recommendation for company proxies. On specific items where the board-approved recommendation and the research firm’s recommendation do not agree, HWCM will generally approve the board-approved recommendation if it is consistent with our established guidelines. The HWCM analyst responsible for research for the company makes a determination on how to vote the proxies using our established guidelines.

Whenever HWCM is proposing to vote against the board-approved recommendations or against its established guidelines, the Compliance Department will review these votes to make sure that HWCM’s proposed vote is not prompted by any conflict of interest.

A-2

RECORD KEEPING

In accordance with Rule 204-2 under the Advisers Act, HWCM will maintain for the time periods set forth in the Rule (i) these proxy voting procedures and policies, and all amendments thereto; (ii) all proxy statements received regarding client securities (provided however, that HWCM may rely on the proxy statement filed on EDGAR as its records); (iii) a record of all votes cast on behalf of clients; (iv) records of all client requests for proxy voting information; (v) any documents prepared by the HWCM that were material to making a decision how to vote or that memorialized the basis for the decision; and (vi) all records relating to requests made by clients regarding conflicts of interest in voting the proxy.

HWCM will describe in its Part II of Form ADV (or other brochure fulfilling the requirement of Rule 204-3) its proxy voting policies and procedures and advise clients how they may obtain information about how HWCM voted their securities. Clients may obtain information about how their securities were voted or a copy of our Proxy Voting Policies and Procedures free of charge by written request addressed to HWCM.

A-3

APPENDIX B — DESCRIPTION OF RATINGS

Moody’s Investors Service

BOND RATINGS:

“Aaa” — Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt-edged.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

“Aa” — Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.

“A” — Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.

“Baa” — Bonds which are rated Baa are considered as medium-grade obligations (that is, they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Moody’s applies numerical modifiers “1,” “2” and “3” in each generic rating classification from Aa through Baa. The modifier “1” indicates that the obligation ranks in the higher end of its generic rating category; the modifier “2” indicates a mid-range ranking; and the modifier “3” indicates that the company ranks in the lower end of that generic rating category.

SHORT-TERM DEBT RATINGS:

Moody’s short-term debt ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. These obligations have an original maturity not exceeding one year, unless explicitly noted.

“Prime-1” — Issuers rated “Prime-1” (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of these characteristics:

• Leading market positions in well-established industries.

• High rates of return on funds employed.

• Conservative capitalization structure with moderate reliance on debt and ample asset protection.

• Broad margins in earnings coverage of fixed financial charges and high internal cash generation.

• Well-established access to a range of financial markets and assured sources of alternate liquidity.

“Prime-2” — Issuers rated “Prime-2” (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

B-1

Standard & Poor’s Ratings Group

BOND RATINGS:

“AAA” — An obligation rated AAA has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

“AA” — An obligation rated AA differs from the highest-rated obligations only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

“A” — An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

“BBB” — An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its commitment on the obligation.

COMMERCIAL PAPER RATINGS:

“A-1” — This designation indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.

“A-2” — Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.

Fitch Ratings Co.

BOND RATINGS:

“AAA” — Highest credit quality. “AAA” ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

“AA” — Very high credit quality. “AA” ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

“A” — High credit quality. “A” ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

“BBB” — Good credit quality. “BBB” ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category.

Plus (+) Minus (-) — Plus and minus signs may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the “AAA” long-term rating category or to short-term ratings other than “F1.”

SHORT-TERM DEBT RATINGS:

“F1” — Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.

“F2” — Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.

“F3” — Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.

B-2

HOTCHKIS AND WILEY FUNDS

PART C

OTHER INFORMATION

Item 23. Exhibits

(a)

(i)

Agreement and Declaration of Trust was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2004 and is incorporated herein by reference.

(ii)

Certificate of Trust was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 30, 2001 and is incorporated herein by reference.

(b)	By-laws were previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 30, 2001 and are incorporated herein by reference.

(c)	Instruments Defining Rights of Shareholders was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 30, 2001 and are incorporated herein by reference.

(d)

(i)

Investment Advisory Agreement relating to the Hotchkis and Wiley Large Cap Value Fund was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(ii)	Investment Advisory Agreement relating to the Hotchkis and Wiley Mid-Cap Value Fund was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(iii)

Investment Advisory Agreement relating to the Hotchkis and Wiley Small Cap Value Fund was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(iv)

Investment Advisory Agreement relating to the Hotchkis and Wiley All Cap Value Fund was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on June 26, 2003 and is incorporated herein by reference.

(v)

Investment Advisory Agreement relating to the Hotchkis and Wiley Core Value Fund was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2004 and is incorporated herein by reference.

(e)

(i)

Distribution Agreement dated February 18, 2005 between Hotchkis and Wiley Funds, Hotchkis and Wiley Capital Management, LLC and Quasar Distributors, LLC. -

was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 26, 2005 and is incorporated herein by reference.

(ii)

Amendment to Distribution Agreement dated August 15, 2005 - was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 26, 2005 and is incorporated herein by reference.

(iii)

Second Amendment to Distribution Agreement dated February 6, 2006 - filed herewith.

(f)	Bonus or Profit Sharing Contracts is not applicable.

(g)	Custodian Agreement dated October 10, 2001 was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(i)	Amendment to Custodian Agreement dated July 16, 2004 was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2004 and is incorporated herein by reference.

(ii)	First Amendment to Custodian Agreement dated October 26, 2005 - filed herewith.

(h)	Other Material Contracts:

(i)	Fund Accounting Servicing Agreement dated October 19, 2001 was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(ii)	Amendment to Fund Accounting and Transfer Agent Servicing Agreements dated January 6, 2004 - was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 26, 2005 and is incorporated herein by reference.

(iii)

Amendment to Fund Accounting Servicing Agreement dated August 25, 2004 was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2004 and is incorporated herein by reference.

(iv)	Amended and Restated Fund Accounting Servicing Agreement dated October 26, 2005 - filed herewith.

(v)	License Agreement with Hotchkis and Wiley Capital Management, LLC was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(vi)	Transfer Agent Servicing Agreement dated October 19, 2001 was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(vii)

First Amendment to Transfer Agent Servicing Agreement dated July 24, 2002 was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2002 and is incorporated herein by reference.

(viii)

Amendment to Transfer Agent Servicing Agreement dated October 1, 2003 - was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 26, 2005 and is incorporated herein by reference.

(ix)	Amendment to Transfer Agent Servicing Agreement dated August 25, 2004 was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2004 and is incorporated herein by reference.

(x)	Fund Administration Servicing Agreement dated February 18, 2005 - was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 26, 2005 and is incorporated herein by reference.

(xi)	First Amendment to Fund Administration Servicing Agreement dated February 8, 2006 - filed herewith.

(xii)

Amendment to Fund Administration Servicing Agreement dated August 23, 2006 - filed herewith.

(xiii)

Operating Expenses Limitation Agreement was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2004 and is incorporated herein by reference.

(xiv)

Amendment to Operating Expense Limitation Agreement dated July 28, 2005 - was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 26, 2005 and is incorporated herein by reference.

(xv)	Amendment to Operating Expense Limitation dated August 23, 2006 - filed herewith.

(i)	Opinion of Counsel

(i)	For the Core Value Fund was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 27, 2004 and is incorporated herein by reference.

(ii)	For the Large Cap Value Fund, the Mid-Cap Cap Value Fund, the Small Value Fund and the All Cap Value Fund was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 28, 2003 and is incorporated herein by reference.

(j)	Consent of Independent Registered Public Accounting Firm - filed herewith.

(k)	Omitted Financial Statements is not applicable.

(l)	Initial Capital Agreements was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on October 19, 2001 and is incorporated herein by reference.

(m)	Distribution Plan pursuant to Rule 12b-1 - was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 26, 2005 and is incorporated herein by reference.

(n)	Rule 18f-3 Plan was previously filed with the Registration Statement on Form N-1A (File No. 333-68740) on August 28, 2003 and is incorporated herein by reference.

(o)

Reserved.

(p)	Code of Ethics dated May 9, 2006 for Hotchkis and Wiley Funds and Hotchkis and Wiley Capital Management, LLC - filed herewith.

Item 24. Persons Controlled by or under Common Control with the Fund

No person is directly or indirectly controlled by or under common control with the Fund.

Item 25. Indemnification

As permitted by Section 17(h) and (i) of the and (i) of the Investment Company Act of 1940, as amended (the “1940 Act”), and pursuant to Sections 2, 3 and 4 of Article VII of the Registrant’s Agreement and Declaration of Trust (Exhibit (a)(i) to this Registrant Statement), Trustees, officers, employees and agents of the Trust will be indemnified to the maximum extent permitted by Delaware law and the 1940 Act.

Article VII, Sections 2 and 3 provide, inter alia, that no Trustee of the Registrant shall be liable to the Registrant, its holders, or to any other Trustee for any action or failure to act (including, without limitation, the failure to compel in any way any former or acting Trustee to redress any breach of trust) except for his own bad faith, willful misfeasance, gross negligence or reckless disregard of his duties.

Article VII, Section 2 of the Registrant’s Agreement and Declaration of Trust provides:

Section 2. Indemnification and Limitation of Liability. A Trustee, when acting in such capacity, shall not be personally liable to any Person, other than the Trust or a Shareholder to the extent provided in this Article VII, for any act, omission or obligation of the Trust, of such Trustee or of any other

Trustee. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, Manager, adviser, sub-adviser or Principal Underwriter of the Trust. The Trust shall indemnify each Person who is, or has been, a Trustee, officer, employee or agent of the Trust and any Person who is serving or has served at the Trust’s request as a director, officer, trustee, employee or agent of another organization in which the Trust has any interest as a shareholder, creditor or otherwise to the extent and in the manner provided in the By-Laws. All persons extending credit to, contracting with or having any claim against the Trust or the Trustees shall look only to the assets of the Series that such person extended credit to, contracted with or has a claim against, or, if the Trustees have yet to establish Series, of the Trust for payment under such credit, contract or claim; and neither the Trustees nor the Shareholders, nor any of the Trust’s officers, employees or agents, whether past, present or future, shall be personally liable therefor. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees by any of them in connection with the Trust shall conclusively be deemed to have been executed or done only in or with respect to his or her capacity as Trustee or Trustees and such Trustee or Trustees shall not be personally liable thereon. At the Trustees’ discretion, any note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officer or officers may give notice that the Certificate of Trust is on file in the Office of the Secretary of State of the State of Delaware and that a limitation on liability of Series exists and such note, bond, contract, instrument, certificate or undertaking may, if the Trustees so determine, recite that the same was executed or made on behalf of the Trust by a Trustee or Trustees in such capacity and not individually or by an officer or officers in such capacity and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only on the assets and property of the Trust or a Series thereof, and may contain such further recital as such Person or Persons may deem appropriate. The omission of any such notice or recital shall in no way operate to bind any Trustees, officers or Shareholders individually.

Article 11, Section 3 of the Registrant’s By-laws further provides:

Section 3. Limitations, Settlements. No indemnification shall be provided hereunder to an agent:

(1) who shall have been adjudicated by the court or other body before which the proceeding was brought to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office (collectively, “disabling conduct”); or

(2) with respect to any proceeding disposed of (whether by settlement, pursuant to a consent decree or otherwise) without an adjudication by the court or other body before which the proceeding was brought that such agent was liable to the Trust or its Shareholders by reason of disabling conduct, unless there has been a determination that such agent did not engage in disabling conduct:

(i)	by the court or other body before which the proceeding was brought;

(ii)	by at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the proceeding based upon a review of readily available facts as opposed to a full trial-type inquiry); or

(iii)

by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry); provided, however, that indemnification shall be provided hereunder to an agent with respect to any proceeding in the event of (1) a final decision on the merits by the court or other body before which the proceeding was brought that the agent was not liable by reason of disabling conduct, or (2) the dismissal of the proceeding by the court or other body before which it was brought for insufficiency of evidence of any disabling conduct with which such agent has been charged.

As permitted by Article VII, Section 4 of the Registrant's Agreement and Declaration of Trust, the Trustees may maintain insurance for Trustees, officers, employees and agents in the amount the Trustees deem adequate.

The Registrant hereby undertakes that it will apply the indemnification provisions of its Agreement and Declaration of Trust and Bylaws in a manner consistent with Release No. 11330 of the Securities and Exchange Commission under the 1940 Act so long as the interpretation of Section 17(h) and 17(i) of such Act remain in effect and are consistently applied.

Item 26. Business and Other Connections of Investment Adviser

Set forth below is a list of each executive officer of Hotchkis and Wiley Capital Management, LLC (“H&W”) indicating each business, profession, vocation or employment of a substantial nature in which each such person or entity has been engaged since July 1, 2001 for his, her or its own account or in the capacity of director, officer, partner or trustee.

Name and Address	Position with H&W and Principal Occupation
George H. Davis, Jr. 725 S. Figueroa Street, 39 ^th Floor Los Angeles, CA 90017-5439	Member of Executive Committee and Chief Executive Officer of H&W. Member of HWCap Holdings, LLC (since 2001); Managing Director of Merrill Lynch Investment Managers, L.P. (“MLIM”) (1996-2001).
Nancy D. Celick 725 S. Figueroa Street, 39 ^th Floor Los Angeles, CA 90017-5439	Member of Executive Committee and Chief Operating Officer of H&W. Member of HWCap Holdings, LLC (since 2001); First Vice President of MLIM (1998-2001).

Name and Address

Position with H&W

and Principal Occupation

Nigel Hurst-Brown 26 Cresswell Place London SW10 9RB	Member of Executive Committee of H&W. Chief Executive of Hotchkis and Wiley (UK) Limited (since 2003); Managing Director of MLIM (1998-2001).
Warren A. Stephens 111 Center Street Little Rock, AR 72201	Member of Executive Committee of H&W. President and Chief Executive Officer of Stephens Inc.
Douglas H. Martin 111 Center Street Little Rock, AR 72201	Member of Executive Committee of H&W. Executive Vice President of Stephens Inc.

Item 27. Principal Underwriter.

(a) Quasar Distributors, LLC, the Registrant’s principal underwriter, acts as principal underwriter for the following investment companies:

Advisors Series Trust	Julius Baer Investment Funds
AIP Alternative Strategies Funds	The Kensington Funds
Allied Asset Advisors Funds	Keystone Mutual Funds
Alpine Equity Trust	Kiewit Investment Fund L.P.
Alpine Income Trust	Kirr, Marbach Partners Funds, Inc.
Alpine Series Trust	LKCM Funds
Brandes Investment Trust	Masters’ Select Funds
Brandywine Blue Fund, Inc.	Matrix Advisors Value Fund, Inc.
Brazos Mutual Funds	MDT Funds
Bridges Investment Fund, Inc.	Monetta Fund, Inc.
Buffalo Funds	Monetta Trust
Buffalo Balanced Fund, Inc.	The MP 63 Fund, Inc.
Buffalo High Yield Fund, Inc.	MUTUALS.com
Buffalo Large Cap Fund, Inc.	Nicholas Equity Income Fund, Inc.
Buffalo Small Cap Fund, Inc.	Nicholas Family of Funds, Inc.
Buffalo USA Global Fund, Inc.	Nicholas Fund, Inc.
Country Mutual Funds Trust	Nicholas High Income Fund, Inc.
Cullen Funds Trust	Nicholas II, Inc.
Everest Funds	Nicholas Limited Edition, Inc.
FFTW Funds, Inc.	Nicholas Money Market Fund, Inc.
First American Funds, Inc.	Permanent Portfolio Funds
First American Investment Funds, Inc.	P erritt Funds, Inc.
First American Strategy Funds, Inc.	P erritt MicroCap Opportunities Fund, Inc.
Fort Pitt Capital Funds	PRIMECAP Odyssey Funds
The Glenmede Fund, Inc.	Professionally Managed Portfolios
The Glenmede Portfolios	Prudent Bear Funds, Inc.
Greenspring Fund	The Purisima Funds
Guinness Atkinson Funds	Rainier Investment Management Mutual Funds
Harding, Loevner Funds, Inc.	Rockland Trust
The Hennessy Funds, Inc.	Summit Mutual Funds, Inc.
Hennessy Mutual Funds, Inc.	Thompson Plumb Funds, Inc.
Hotchkis and Wiley Funds	TIFF Investment Program, Inc.
Intrepid Capital Management Funds Trust	Trust For Professional Managers
Jacob Internet Fund Inc.	Wexford Trust
The Jensen Portfolio, Inc.

(b) To the best of Registrant’s knowledge, the directors and executive officers of Quasar Distributors, LLC are as follows:

Name and Principal Business Address	Position and Offices with Quasar Distributors, LLC	Positions and Offices with Registrant
James R. Schoenike	President, Board Member	None
Andrew Strnad	Secretary	None
Joe Redwine	Board Member	None
Bob Kern	Board Member	None
Eric W. Falkeis	Board Member	None
Teresa Cowan	Assistant Secretary	None
The address of each of the foregoing is 615 East Michigan Street, Milwaukee, Wisconsin, 53202.

Item 28. Location of Accounts and Records

The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder are in the possession of Registrant or Registrant’s investment adviser, 725 S. Figueroa Street, 39 ^th Floor, Los Angeles, California 90017, or 400 South Hope Street, Los Angeles, California 90071, or Registrant’s Transfer Agent, Fund Accountant and Fund Administrator, U.S. Bancorp Fund Services, LLC, 615 East Michigan Street, Milwaukee, Wisconsin 53202, Registrant’s custodian, Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, or Registrant’s distributor, Quasar Distributors, LLC, 615 East Michigan Street, Milwaukee, Wisconsin 53202.

Item 29. Management Services

Not applicable

Item 30. Undertakings

Not applicable

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that this Post-Effective Amendment No. 12 to its Registration Statement meets all the requirements for effectiveness pursuant to Rule 485(b) of the Securities Act of 1933, as amended, and the Registrant has duly caused this Post-Effective Amendment No. 12 to its Registration Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles and the State of California on August 29, 2006.

Hotchkis and Wiley Funds

/s/ Nancy D. Celick

Nancy D. Celick

President

Pursuant to the requirements of the Securities Act of 1933, as amended, this Post-Effective Amendment No. 12 to its Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Nancy D. Celick	Trustee and Principal	August 29, 2006
Nancy D. Celick	Executive Officer	Date

/s/ Anna Marie Lopez	Principal Financial and	August 29, 2006
Anna Marie Lopez	Accounting Officer	Date

/s/ Randall H. Breitenbach	Trustee	August 29, 2006
Randall H. Breitenbach		Date

______________________	Trustee	____________
Robert L. Burch III		Date

______________________	Trustee	_____________
John A.G. Gavin		Date

/s/ Marcy Elkind	Trustee	August 29, 2006
Marcy Elkind		Date

/s/ Robert Fitzgerald	Trustee	August 29, 2006
Robert Fitzgerald		Date

		INDEX TO EXHIBITS

Exhibit Number		Description
(e)(iii)		Second Amendment to Distribution Agreement dated February 6, 2006
(g)(ii)		First Amendment to Custodian Agreement dated October 26, 2005
(h)(iv)		Amended and Restated Fund Accounting Servicing Agreement dated October 26, 2005
(h)(xi)		First Amendment to Fund Administration Servicing Agreement dated February 8, 2006
(h)(xii)		Amendment to Fund Administration Servicing Agreement dated August 23, 2006
(h)(xv)		Amendment to Operating Expense Limitation Agreement dated August 23, 2006
(j)		Consent of Independent Registered Public Accounting Firm
(p)		Code of Ethics dated May 9, 2006

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933	[X]
Pre-Effective Amendment No. _	[ ]
Post-Effective Amendment No. 12	[X]

[X]	immediately upon filing pursuant to paragraph (b)
[ ]	on (date) pursuant to paragraph (b)
[ ]	60 days after filing pursuant to paragraph (a)(1)
[ ]	on (date) pursuant to paragraph (a)(1)
[ ]	75 days after filing pursuant to paragraph (a)(2)
[ ]	on (date) pursuant to paragraph (a)(2) of Rule 485.

			The bar chart shows calendar year return for Class A shares and does not reflect sales loads. If sales loads were reflected, returns would be less than those shown. During the period shown in the bar chart, the highest return for a quarter was 5.15% (quarter ended June 30, 2005) and the lowest return for a quarter was 1.22% (quarter ended March 31, 2005). The year-to-date return as of June 30, 2006 was -0.47%. See page 5 for a discussion regarding performance information.
Average Annual Total Returns (%)		Since	After-tax returns are calculated using the historical highest individual Federal marginal income tax rates and do not reflect the impact of state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than other returns for the same period due to a tax benefit of realizing a capital loss upon the sale of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for only Class A. After-tax returns for other classes will vary.
For the periods ended December 31, 2005	1 Year	8/30/04 ⁽¹⁾
Core Value Fund
Return Before Taxes — Class A	6.39%	16.67%
Return After Taxes on Distributions — Class A	6.30	16.56
Return After Taxes on Distributions and Sale of Fund Shares — Class A	4.28	14.22
Return Before Taxes — Class C	10.46	20.55
S&P 500 ^® Index	4.91	12.02
Russell 1000 ^® Index	6.27	13.72
Russell 1000 ^® Value Index	7.05	15.20
⁽¹⁾ Commencement of Class A and Class C.

*Shareholder Fees (fees paid directly* *from your* *investment)* ^(a) :	Class A	Class C ^(b)	^(a) Certain securities dealers or other financial intermediaries may charge a fee to process a purchase or sale of shares. See “How to Buy, Sell, Transfer and Exchange Shares.” There is a $15 fee on outgoing wire transactions. ^(b) Class C shares automatically convert to Class A shares approximately eight years after you buy them and will then be subject to lower distribution and service fees. ^(c) Some investors may qualify for reductions in or waivers of the sales charge (load). ^(d) You may pay a deferred sales charge if you purchase $1 million or more and you redeem within one year. For information regarding deferred sales charges, please see “Class A Shares” and “Reduction or Waiver of Deferred Sales Charge Applicable to Class A and Class C Shares” in the “Shareholder Services” section. ^(e) The Advisor has contractually agreed to waive management fees and/or reimburse expenses through October 31, 2007 to certain limits: Class A - 1.20%, Class C - 1.95% ^(f) If you hold Class C shares over time, it may cost you more in distribution (12b-1) fees than the maximum sales charge that you would have paid if you had bought the other class.
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of offering price)	5.25% ^(c)	None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price)	None ^(d)	1.00% ^(c)
Maximum Sales Charge (Load) imposed on
Dividend Reinvestments	None	None
Redemption Fee	None	None
Exchange Fee	None	None
*Annual Fund Operating Expenses (* *expenses*
*that are deducted from the* *Fund’s total assets):*
Management Fees ^(e)	0.75%	0.75%
Distribution and/or Service (12b-1) Fees ^(f)	0.25	1.00
Other Expenses (including transfer agency fees)	0.23	0.23
Total Annual Fund Operating Expenses	1.23	1.98
Fee Waiver and/or Expense Reimbursement ^(e)	-0.03	-0.03
Net Annual Fund Operating Expenses ^(e)	1.20	1.95

Example	Expenses if you *did* redeem your shares		Expenses if you *did not* redeem your shares		This example is intended to help you compare the cost of investing in the Funds with the cost of investing in other mutual funds. This example assumes that you invest $10,000 in a Fund for the time periods indicated, that your investment has a 5% return each year, that you pay the sales charges, if any, that apply to that particular class and that the Funds’ operating expenses remain the same except for the expense reimbursement in effect for the first year. This assumption is not meant to indicate you will receive a 5% annual rate of return. Your annual return may be more or less than the 5% used in these examples. Although your actual costs may be higher or lower, based on these assumptions, your costs would be as shown.
	Class A	Class C**	Class A	Class C**
One year	$ 641	$ 298	$ 641	$ 198
Three years*	892	618	892	618
Five years*	1,162	1,065	1,162	1,065
Ten years*	1,933	2,110	1,933	2,110
* These expenses do not reflect the continuation beyond the first year of the contractual arrangement between the Advisor and the Trust that limits expenses incurred by each class of the Funds. This arrangement expires on October 31, 2007 and is renewable. ** Assumes conversion to Class A shares approximately eight years after purchase.

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 13	[X]

How the Funds Invest	11

Investment Risks	12

Additional Information	14

About Class A, Class C and Class R Shares	15

How to Buy, Sell, Transfer and Exchange Shares	18

How Shares are Priced	23

Dividends and Taxes	23

*Shareholder Fees (fees paid* *directly from* *your investment)* ^(a) :	Class A	Class C ^(b)	Class R	^(a) Certain securities dealers or other financial intermediaries may charge a fee to process a purchase or sale of shares. See “How to Buy, Sell, Transfer and Exchange Shares.” There is a $15 fee on outgoing wire transactions. ^(b) Class C shares automatically convert to Class A shares approximately eight years after you buy them and will then be subject to lower distribution and service fees. ^(c) Some investors may qualify for reductions in or waivers of the sales charge (load). ^(d) You may pay a deferred sales charge if you purchase $1 million or more and you redeem within one year. For information regarding deferred sales charges, please see “Class A Shares” and “Reduction or Waiver of Deferred Sales Charge Applicable to Class A and Class C Shares” in the “Shareholder Services” section. ^(e) The Advisor has contractually agreed to waive management fees and/or reimburse expenses through October 31, 2007 to certain limits: Class A - 1.30%, Class C - 2.05%, Class R - 1.55%. ^(f) If you hold Class C or Class R shares over time, it may cost you more in distribution (12b-1) fees than the maximum sales charge that you would have paid if you had bought one of the other classes.
Maximum Sales Charge (Load) imposed on purchases (as a percentage of
offering price)	5.25% ^(c)	None	None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price)	None ^(d)	1.00% ^(c)	None
Maximum Sales Charge (Load) imposed on
Dividend Reinvestments	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None
*Annual Fund Operating Expenses (expenses*
*that are deducted from the* *Fund’s total assets):*
Management Fees ^(e)	0.75%	0.75%	0.75%
Distribution and/or Service (12b-1) Fees ^(f)	0.25	1.00	0.50
Other Expenses (including transfer agency fees)	0.22	0.22	0.24
Total Annual Fund Operating Expenses	1.22	1.97	1.49

	Class A	Class C	Class R
Availability	Generally available through selected securities dealers and other financial intermediaries.	Generally available through selected securities dealers and other financial intermediaries.	Available only to certain retirement plans.
Initial Sales Charge?	Yes. Payable at time of purchase. Lower sales charges available or waived for certain investments.	No. Entire purchase price is invested in shares of the Fund.	No. Entire purchase price is invested in shares of the Fund.
Deferred Sales Charge?	No. (May be charged for purchases over $1 million that are redeemed within one year.)	Yes. Payable if you redeem within one year of purchase.	No.
Redemption Fee?	No.	No.	No.
Distribution and Service Fees?	0.25%	1.00%	0.50%

Conversion to A Shares?	Not applicable.	Yes. Automatically after approximately eight years.	No.

			Compensation
	As a % of	As a % of	as a % of
Your Investment	Offering Price	Your Investment*	Offering Price
Less than $25,000	5.25%	5.54%	5.00%
$25,000 but less than $50,000	4.75%	4.99%	4.50%
$50,000 but less than $100,000	4.00%	4.17%	3.75%
$100,000 but less than $250,000	3.00%	3.09%	2.75%
$250,000 but less than $1,000,000	2.00%	2.04%	1.80%
$1,000,000 and over	0.00%	0.00%	0.00%
*Rounded to the nearest one-hundredth percent.

If You Want To	Your Choices	Information Important for You to Know
Buy Shares	First, select the share class appropriate for you.	Refer to the pricing of shares table on page 15. Be sure to read this prospectus carefully.
	Next, determine the amount of your investment	The minimum initial investment is $2,500 ($1,000 for IRA or other individual retirement accounts). There is no minimum initial investment for retirement plans. (The minimums for initial investments may be reduced or waived under certain circumstances.)

		Have your financial consultant, selected securities dealer or other financial intermediary submit your purchase order		The price of your shares is based on the next calculation of NAV after receipt of your order. Purchase orders received prior to the close of regular trading on the New York Stock Exchange (generally, 4:00 p.m. Eastern time) are priced at the NAV determined that day (plus applicable sales charges for Class A shares). Certain financial intermediaries, however, may require submission of orders prior to that time. Purchase orders received after that time are priced at the NAV determined on the next business day. The Fund may reject any order to buy shares and may suspend the sale of shares at any time. Certain financial intermediaries may charge a fee to process a purchase.
		Purchase through the Transfer Agent		Purchase By Mail Send a completed account application along with a check payable to HOTCHKIS AND WILEY FUNDS to the following address: (regular mail) Hotchkis and Wiley Funds c/o U.S. Bancorp Fund Services, LLC P.O. Box 701 Milwaukee, Wisconsin 53201-0701 (overnight) Hotchkis and Wiley Funds c/o U.S. Bancorp Fund Services, LLC 615 E. Michigan Street, 3rd Floor Milwaukee, Wisconsin 53202-5207 The Funds do not consider the U.S. Postal Service or other independent delivery services to be their agents. Checks must be drawn on a U.S. bank in U.S. dollars for the exact amount of the purchase. You will receive the NAV (plus applicable sales charges for Class A shares) next determined after the Transfer Agent receives your check and completed application. The Funds will not accept payment in cash, money orders, and cashier ’s checks in an amount less than $10,000, U.S. Treasury checks, credit card checks, traveler’s checks, starter checks, drafts or third party checks. If your check does not clear, you will be charged a $25 service charge and for any other losses sustained by the Funds.
				Purchase By Wire If you are making your first investment in the Funds, before you wire funds, the Transfer Agent must have a completed account application. You may mail or overnight deliver your account application to the Transfer Agent. Upon receipt of your completed account application, the Transfer Agent will establish an account for you. The account number assigned will be required as part of the instruction that should be provided to your financial institution to send the wire. Your financial institution must include the name of the Fund you are purchasing, the account number, and your name so that the wire may be correctly applied. Your bank should transmit funds by wire to: U.S. Bank, N.A. 777 East Wisconsin Avenue Milwaukee, WI 53202 ABA #075000022 For credit to U.S. Bancorp Fund Services, LLC Account #112-952-137 For further credit to HOTCHKIS AND WILEY FUNDS [Name of Fund] shareholder name and account number

Add to Your Investment	Purchase additional shares	The minimum investment for additional purchases is generally $100. (The minimums for additional purchases may be waived under certain circumstances.) If you purchased your shares through the Transfer Agent, forms for additional contributions are included with your account statements or by calling 1-866- HW-FUNDS (1-866-493-8637). You may purchase additional shares via wire. Before sending your wire, please contact the Transfer Agent to advise them of your intent to wire funds. This will ensure prompt and accurate credit of your wire. Your financial consultant, selected securities dealer or other financial intermediary may also submit your order.
	Acquire additional shares through the automatic dividend reinvestment plan	All dividends are automatically reinvested without a sales charge.
	Participate in the automatic investment plan	You may invest a specific amount on a periodic basis through the Transfer Agent. The current minimum for such automatic investments is $100 (subsequent to the minimum initial investment). The minimum may be waived or revised under certain circumstances. To participate in the plan, your financial institution must be a member of the Automated Clearing House (“ACH”) network. You may change or terminate your participation in the plan at any time by notifying the Transfer Agent 5 days prior to your next transaction. To change your financial institution, a signature guarantee is required. If your financial institution rejects your transaction, the Transfer Agent will charge a $25 fee to your account. Selected securities dealers or other financial intermediaries may also offer automatic investment plans.
Transfer Shares to Another Securities Dealer or Other Financial Intermediary	Transfer to a participating securities dealer or other financial intermediary	You may transfer your Fund shares to another selected securities dealer or other financial intermediary if authorized dealer agreements are in place between the Distributor and the transferring intermediary and the Distributor and the receiving intermediary. Certain shareholder services may not be available for all transferred shares. You may only purchase additional shares of Funds previously owned before the transfer. All future trading of these assets must be coordinated by the receiving intermediary.
	Transfer to a non-participating securities dealer or other financial intermediary	You must either: · Transfer your shares to an account with the Transfer Agent or · Sell your shares, paying any applicable deferred sales charge.
Sell Your Shares	Have your financial consultant, selected securities dealer or other financial intermediary submit your sales order	The price of your shares is based on the next calculation of NAV after receipt of your order. For your redemption request to be priced at the NAV on the day of your request (minus applicable deferred sales charges for Class A and Class C shares), you must submit your request to your selected securities dealer or other financial intermediary prior to that day’s close of regular trading on the New York Stock Exchange (generally, 4:00 p.m. Eastern time). Certain financial intermediaries, however, may require submission of orders prior to that time. Redemption requests received after that time are priced (less applicable deferred sales charges for Class A and Class C shares) at the NAV at the close of regular trading on the next business day. Certain financial intermediaries may charge a fee to process a sale of shares. No processing fee is charged if you redeem the shares directly through the Transfer Agent. The Fund may reject an order to sell shares under certain circumstances permitted by the Securities and Exchange Commission, including during unusual market conditions or emergencies when the Fund can’t determine the value of its assets or sell its holdings.

		Income from investment operations			Dividends and distributions						Ratios to Average Net Assets
Core Value Fund	Net asset value, beginning of period	Net investment income ²	Net gains (losses) on securities (both realized and unrealized)	Total from investment operations	Dividends (from net investment income)	Distributions (from capital gains)	Total distributions	Net asset value, end of period	Total return ³	Net assets, end of period (in thousands)	Expenses, net of reimbursement	Expenses	Investment income - net
Class A
Year ended
6/30/2006	$12.26	$0.11	$0.50	$0.61	$(0.04)	$(0.03)	$(0.07)	$12.80	5.01%	$673,032	1.20%	1.23%	0.82%
Period from
8/30/2004 ¹ to
6/30/2005	10.00	0.05	2.24	2.29	(0.03)	—	(0.03)	12.26	22.93	21,684	1.20 ⁴	1.50 ⁴	0.73 ⁴
Class C
Year ended
6/30/2006	12.19	0.01	0.50	0.51	(0.01)	(0.03)	(0.04)	12.66	4.24	162,885	1.95	1.98	0.06
Period from
8/30/2004 ¹ to
6/30/2005	10.00	0.01	2.20	2.21	(0.02)	—	(0.02)	12.19	22.10	15,483	1.95 ⁴	2.26 ⁴	(0.02) ⁴

	Year ended June 30, 2006	Period August 30, 2004 ¹ Through June 30, 2005
*Portfolio turnover rate*	13%	13%

		Income from investment operations			Dividends and distributions						Ratios to Average Net Assets
Large Cap Value Fund	Net asset value, beginning of period	Net investment income ²	Net gains (losses) on securities (both realized and unrealized)	Total from investment operations	Dividends (from net investment income)	Distributions (from capital gains)	Total distributions	Net asset value, end of period	Total return ³	Net assets, end of period (in thousands)	Expenses, net of reimbursement	Expenses	Investment income - net
Class A
Year ended
6/30/2006	$23.39	$0.27	$0.39	$0.66	$(0.20)	$(0.53)	$(0.73)	$23.32	2.82%	$2,959,444	1.22%	1.22%	1.15%
6/30/2005	20.04	0.15	3.38	3.53	(0.10)	(0.08)	(0.18)	23.39	17.68	2,440,384	1.24	1.24	0.96
6/30/2004	15.25	0.11	4.85	4.96	(0.10)	(0.07)	(0.17)	20.04	32.78	311,596	1.28	1.31	0.60
6/30/2003	15.98	0.16	0.35	0.51	(0.14)	(1.10)	(1.24)	15.25	4.79	28,704	1.30	1.59	1.07
Period from
10/26/2001 ¹ to
6/30/2002	15.57	0.13	0.87	1.00	(0.09)	(0.50)	(0.59)	15.98	6.51	6,546	1.25 ⁴	1.75 ⁴	1.05 ⁴
Class C
Year ended
6/30/2006	23.07	0.09	0.39	0.48	(0.06)	(0.53)	(0.59)	22.96	2.08	488,480	1.97	1.97	0.40
6/30/2005	19.84	0.04	3.29	3.33	(0.02)	(0.08)	(0.10)	23.07	16.80	506,674	1.99	1.99	0.22
6/30/2004	15.15	(0.13)	4.93	4.80	(0.04)	(0.07)	(0.11)	19.84	31.83	78,986	2.03	2.06	(0.14)
6/30/2003	15.92	(0.16)	0.56	0.40	(0.07)	(1.10)	(1.17)	15.15	4.05	2,408	2.05	2.34	0.32
Period from
2/4/2002 ¹ to
6/30/2002	15.60	0.03	0.29	0.32	—	—	—	15.92	2.05	1,092	2.00 ⁴	2.50 ⁴	0.30 ⁴
Class R
Year ended
6/30/2006	23.56	0.22	0.39	0.61	(0.17)	(0.53)	(0.70)	23.47	2.59	82,770	1.49	1.49	0.92
6/30/2005	20.25	0.14	3.36	3.50	(0.11)	(0.08)	(0.19)	23.56	17.35	25,933	1.49	1.49	0.77
Period from
8/28/2003 ¹ to
6/30/2004	16.26	0.02	3.97	3.99	—	—	—	20.25	24.54	1,665	1.71 ⁴	1.74 ⁴	0.53 ⁴

	Year ended June 30,
	2006	2005	2004	2003	2002
*Portfolio turnover rate*	27%	14%	5%	35%	96%

	Year ended June 30,			Period December 31, 2002 ¹
	2006	2005	2004	Through June 30, 2003
*Portfolio turnover rate*	73%	39%	30%	11%


	NASDAQ	CUSIP
Core Value Fund
Class A	HWCAX	44134R750
Class C	HWCCX	44134R743
Large Cap Value Fund
Class A	HWLAX	44134R107
Class C	HWLCX	44134R701
Class R	HWLRX	44134R784
Mid-Cap Value Fund
Class A	HWMAX	44134R206
Class C	HWMCX	44134R875
Class R	HWMRX	44134R776
Small Cap Value Fund
Class A	HWSAX	44134R305
Class C	HWSCX	44134R842
All Cap Value Fund
Class A	HWAAX	44134R792
Class C	HWACX	44134R826

About Class I Shares	15

How to Buy Shares	16

How to Sell Shares	18

How to Exchange Shares	20

How Shares are Priced	21

Dividends and Taxes	21

Average Annual Total Returns (%)			After-tax returns are calculated using the historical highest individual Federal marginal income tax rates and do not reflect the impact of state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than other returns for the same period due to a tax benefit of realizing a capital loss upon the sale of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
For the periods ended December 31, 2005	1 Year	Since 8/30/04 ⁽¹⁾
Core Value Fund - Class I
Return Before Taxes	12.61%	21.76%
Return After Taxes on Distributions	12.50	21.63
Return After Taxes on Distributions and Sale of Fund Shares	8.34	18.58
S&P 500 ^® Index	4.91	12.02
Russell 1000 ^® Index	6.27	13.72
Russell 1000 ^® Value Index	7.05	15.20

⁽¹⁾ Commencement of Class I.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets) ^(a)		^(a) Certain securities dealers or other financial intermediaries may charge a fee to process a purchase or sale of shares. See “How to Buy Shares,” “How to Sell Shares” and “How to Exchange Shares.” There is a $15 fee on outgoing wire transactions. ^(b) The Advisor has contractually agreed to waive advisory fees and/or reimburse expenses through October 31, 2007 to 0.95%.
Management Fees	0.75%
Distribution and Service (12b-1) Fees	None
Other Expenses	0.24
Total Annual Fund Operating Expenses ^(b)	0.99
Fee Waiver and/or Expense Reimbursement ^(b)	(0.04)
Net Annual Fund Operating Expenses ^(b)	0.95

(regular mail)	(overnight)
Hotchkis and Wiley Funds	Hotchkis and Wiley Funds
c/o U.S. Bancorp Fund Services, LLC	c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701	615 E. Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53201-0701	Milwaukee, Wisconsin 53201-5207

	Class I
		Period
	Year ended	August 30, 2004 ⁽¹⁾
*Increase (Decrease) in Net Asset Value:*	June 30, 2006	through June 30, 2005
Net asset value, beginning of period	$12.28	$10.00
Income from investment operations:
Net investment income ⁽²⁾	0.14	0.08
Net gains (losses) on securities (both realized and unrealized)	0.51	2.23
Total from investment operations	0.65	2.31
Dividends and distributions:
Dividends (from net investment income)	(0.05)	(0.03)
Distributions (from capital gains)	(0.03)	-
Total distributions	(0.08)	(0.03)
Net asset value, end of period	$12.85	$12.28
Total return ⁽³⁾	5.31%	23.16%
Net assets, end of period (in thousands)	$765,092	$36,586
Ratios to Average Net Assets:
Expenses, net of reimbursement	0.95%	0.95% ⁽⁴⁾
Expenses	0.99%	1.30% ⁽⁴⁾
Investment income — net	1.08%	0.96% ⁽⁴⁾
Portfolio turnover rate	13%	13%

	Class I
	Year ended June 30,
*Increase (Decrease) in Net Asset Value:*	2006	2005	2004	2003	2002
Net asset value, beginning of period	$23.47	$20.09	$15.26	$15.99	$16.82
Income from investment operations:
Net investment income ⁽¹⁾	0.33	0.17	0.10	0.17	0.22
Net gains (losses) on securities (both realized and unrealized)	0.40	3.42	4.92	0.36	(0.32)
Total from investment operations	0.73	3.59	5.02	0.53	(0.10)
Dividends and distributions:
Dividends (from net investment income)	(0.25)	(0.13)	(0.12)	(0.16)	(0.15)
Distributions (from capital gains)	(0.53)	(0.08)	(0.07)	(1.10)	(0.58)
Total distributions	(0.78)	(0.21)	(0.19)	(1.26)	(0.73)
Net asset value, end of period	$23.42	$23.47	$20.09	$15.26	$15.99
Total return ⁽²⁾	3.10%	17.95%	33.20%	4.95%	(0.38)%
Net assets, end of period (in thousands)	$2,119,375	$1,235,903	$200,719	$44,077	$39,215
Ratios to Average Net Assets:
Expenses, net of reimbursement	0.98%	0.99%	1.03%	1.05%	1.00%
Expenses	0.98%	0.99%	1.06%	1.34%	1.50%
Investment income — net	1.40%	1.22%	0.85%	1.32%	1.30%
Portfolio turnover rate	27%	14%	5%	35%	96%

	Class I
	Year ended June 30,			Period December 31, 2002 ⁽¹⁾
*Increase (Decrease) in Net Asset Value:*	2006	2005	2004	through June 30, 2003
Net asset value, beginning of period	$20.36	$17.02	$12.58	$10.00
Income from investment operations:
Net investment income ⁽²⁾	0.21	0.16 ⁽⁵⁾	0.00 ⁽⁵⁾	0.02 ⁽⁵⁾
Net gains (losses) on securities (both realized and unrealized)	(0.26)	3.27 ⁽⁵⁾	4.46 ⁽⁵⁾	2.56 ⁽⁵⁾
Total from investment operations	(0.05)	3.43	4.46	2.58
Dividends and distributions:
Dividends (from net investment income)	(0.27)	(0.03)	(0.01)	—
Distributions (from capital gains)	(0.68)	(0.06)	(0.01)	—
Total distributions	(0.95)	(0.09)	(0.02)	—
Net asset value, end of period	$19.36	$20.36	$17.02	$12.58
Total return ⁽³⁾	(0.24)%	20.14%	35.48%	25.80%
Net assets, end of period (in thousands)	$59,891	$54,969	$22,678	$3,560
Ratios to Average Net Assets:
Expenses, net of reimbursement	0.97%	1.04%	1.15%	1.10% ⁽⁴⁾
Expenses	0.97%	1.04%	1.25%	5.84% ⁽⁴⁾
Investment income — net	1.01%	0.88% ⁽⁵⁾	0.03% ⁽⁵⁾	0.40% ⁽⁴⁾⁽⁵⁾
Portfolio turnover rate	73%	39%	30%	11%


	NASDAQ	CUSIP
Core Value Class I	HWCIX	44134R768
Large Cap Value Class I	HWLIX	44134R503
Mid-Cap Value Class I	HWMIX	44134R800
Small Cap Value Class I	HWSIX	44134R867
All Cap Value Class I	HWAIX	44134R834

HOTCHKIS AND WILEY FUNDS	QUASAR DISTRIBUTORS, LLC
By: /s/ Nancy D. Celick	By: /s/ James R. Scholenike
Nancy D. Celick	James R. Schoenike
Title: President	Title: President

HOTCHKIS AND WILEY CAPITAL MANAGEMENT, LLC
By: /s/ Nancy D. Celick
Nancy D. Celick
Title: Chief Operating Officer

HOTCHKIS AND WILEY FUNDS	U.S BANCORP FUND SERVICES, LLC

By: /s/ Nancy D. Celick	By: /s/ Joe Redwine

Name: Nancy D. Celick	Name: Joe Redwine

Title: President	Title: President

Name of Series	Date Added
Hotchkis and Wiley All Cap Value Fund	12-31-2002
Hotchkis and Wiley Core Value Fund	08-24-2004
Hotchkis and Wiley Large Cap Value Fund	10-19-2001
Hotchkis and Wiley Mid-Cap Value Fund	10-19-2001
Hotchkis and Wiley Small Cap Value Fund	10-19-2001

HOTCHKIS AND WILEY FUNDS		U.S. BANCORP FUND SERVICES, LLC


By: _ /s/ Nancy D. Celick _____________		By: __ /s/ Michael R. McVoy ____________

Printed Name: Nancy D. Celick		Printed Name: Michael R. McVoy

Title: President		Title: Sr. Vice President

Expense Limit (as a percentage of average net assets)
Fund	Class I	Class A	Class C	Class R

Large Cap Value	1.05%	1.30%	2.05%	1.55%
Mid-Cap Value	1.15%	1.40%	2.15%	1.65%
Small Cap Value	1.25%	1.50%	2.25%	N/A
All Cap Value	1.25%	1.50%	2.25%	N/A
Core Value	0.95%	1.20%	1.95%	N/A