P R O S P E C T U S
FMI
FOCUS FUND
A NO-LOAD
MUTUAL FUND
P R O S P E C T U S DECEMBER 16, 1996
FMI FOCUS FUND
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FMI Funds, Inc. (the "Company") is an open-end, non-diversified management
investment company -- a mutual fund. The Company presently consists of a single
portfolio, the FMI Focus Fund (the "Fund"). The Fund's investment objective is
capital appreciation. In seeking its investment objective of capital
appreciation, the Fund will invest primarily in common stocks and warrants,
engage in short sales, invest in foreign securities which are publicly traded in
the United States and effect transactions in stock index futures contracts,
options on stock index futures contracts, and options on securities and stock
indexes. The Fund may leverage its investments.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Fund has filed with the Securities and Exchange
Commission. A Statement of Additional Information, dated December 16, 1996,
which is a part of such Registration Statement is incorporated by reference in
this Prospectus. Copies of the Statement of Additional Information will be
provided without charge to each person to whom a Prospectus is delivered upon
written or oral request made by writing to the address or calling the telephone
number, stated below. All such requests should be directed to the attention of
the Corporate Secretary.
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FMI FOCUS FUND
225 EAST MASON STREET
MILWAUKEE, WISCONSIN 53202
(414) 226-4555
FMI FOCUS FUND
TABLE OF CONTENTS
PAGE NO.
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Expense Information............ 1
Introduction................... 2
Investment Objective and Policies 2
Management of the Fund......... 9
Determination of Net Asset Value 10
Purchase of Shares............. 10
Redemption of Shares........... 11
Dividend Reinvestment.......... 13
Automatic Investment Plan...... 13
Systematic Withdrawal Plan..... 13
Exchange Privilege............. 14
Individual Retirement Account and
Simplified Employee Pension Plan 14
Retirement Plan................ 15
Dividends, Distributions and Taxes 15
Brokerage Transactions......... 16
Capital Structure.............. 16
Shareholder Reports............ 16
Performance Information........ 17
Share Purchase Application..... 19
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases or Reinvested Dividends..... NONE
Deferred Sales Load................................................. NONE
Redemption Fee...................................................... NONE(1)
<F1>
Exchange Fee........................................................ NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.....................................................1.00%
12b-1 Fees..........................................................0.25%(2)
<F2>
Other Expenses (net of reimbursements)..............................1.50%(3)
<F3>
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TOTAL FUND OPERATING EXPENSES.......................................2.75%(3)
<F3>
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(1)<F1>A fee of $10.00 is charged for each wire redemption.
(2)<F2>The maximum level of distribution expenses is 0.25% per annum of the
Fund's average net assets. See "Purchase of Shares" for further information.
The distribution expenses for long-term shareholders may total more than the
maximum sales charge that would have been permissible if imposed entirely as an
initial sales charge.
(3)<F3>Other expenses are estimated and reflect the fact that the Fund's
investment adviser, Fiduciary Management, Inc., has agreed to reimburse the Fund
to ensure that Total Fund Operating Expenses do not exceed 2.75% for the fiscal
year ending September 30, 1997. Absent reimbursement, Other expenses and Total
Operating Expenses for the Fund for the fiscal year ending September 30, 1997
Fund are estimated to be 1.75% and 3.00%, respectively, of average net assets.
EXAMPLE: 1 YEAR 3 YEARS
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An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
$28 $85
The purpose of the preceding table is to assist investors in understanding
the various costs that an investor in the Fund will bear, directly or
indirectly. THEY SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
The example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Fund.
INTRODUCTION
FMI Funds, Inc. (the "Company") was incorporated under the laws of Maryland
on September 5, 1996 and is an open-end non-diversified management investment
company registered under the Investment Company Act of 1940 (the "Act"). The
Company presently consists of a single portfolio, the FMI Focus Fund (the
"Fund"). The Fund obtains its assets by continuously selling shares to the
public. Proceeds from such sales are invested by the Fund in securities of
other companies and certain other instruments. In this manner, the resources of
many investors are combined and each individual investor has an interest in
every one of the securities and instruments owned by the Fund. The Fund
furnishes experienced management to select and watch over its investments. As
an open-end investment company, the Fund will redeem any of its outstanding
shares on demand of the owner at their net asset value.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital appreciation. In seeking its
investment objective of capital appreciation, the Fund will invest primarily in
common stocks and warrants, engage in short sales, invest in foreign securities
which are publicly traded in the United States, and effect transactions in stock
index futures contracts, options on stock index futures contracts, and options
on securities and stock indexes. Dividend income and other income are not
factors considered in selecting these investments. The Fund may leverage its
investments. Warrants, stock index futures contracts, options on stock index
future contracts and options on securities and stock indexes are derivatives.
In managing the investment portfolio for the Fund, the Fund's investment
adviser, Fiduciary Management, Inc. (the "Adviser") may focus on a relatively
limited number of securities (i.e., generally 25 or less, other than money
market instruments). The Adviser believes this focused investment strategy has
the potential for higher total returns than an investment strategy calling for
investment in a large number of securities. However, the use of this focused
investment strategy may increase the volatility of the Fund's investment
performance. Additionally, the Fund could incur greater losses than it would
have had it invested in a greater number of securities if the securities in
which the Fund invests perform poorly.
The Adviser will invest in securities which it believes will appreciate
significantly over a one to two-year period. In doing so, it will employ a
diverse investment approach. For example, it may purchase stocks of any size
market capitalization or in any industry sector. As a consequence, the
performance of the Fund will be more dependent on the Adviser's ability to make
good investment decisions than on whether a particular sector of the market is
performing well or "in favor" with investors.
The Fund may invest in the following portfolio securities and may engage in
the following investment techniques.
COMMON STOCKS
The Fund's common stock investments primarily will be made in companies in
which the Adviser believes to be underpriced relative to the issuing
corporation's future growth prospects. The Adviser will also purchase common
stocks where the price is significantly below the estimated market value of the
issuing corporation's assets less its liabilities on a per share basis.
The Fund may invest in companies with modest capitalization, as well as
start-up companies. Such companies often involve greater risks than larger
companies because they lack the management experience, financial resources,
product diversification, markets, distribution channels and competitive
strengths of larger companies. Additionally, in many instances, the frequency
and volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies as well as start-up
companies may be subject to wider price fluctuations. The spreads between the
bid and asked prices of the securities of these companies in the U.S. over-the-
counter market typically are larger than the spreads for more actively traded
securities. As a result, the Fund could incur a loss if it determined to sell
such a security shortly after its acquisition. When making large sales, the
Fund may have to sell portfolio holdings at discounts from quoted prices or may
have to make a series of small sales over an extended period of time due to the
trading volume of smaller company securities.
FOREIGN SECURITIES
The Fund may invest without limitation in common stocks of foreign issuers
which are publicly traded on U.S. exchanges or in the U.S. over-the-counter
market either directly or in the form of American Depository Receipts ("ADRs").
The Fund will only invest in ADRs that are issuer sponsored. Sponsored ADRs
typically are issued by a U.S. bank or trust company and evidence ownership of
underlying securities issued by a foreign corporation. Investments in foreign
securities involve risks which are in addition to the risks inherent in domestic
investments. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available information
about issuers than is available in the reports and ratings published about
companies in the United States. Additionally, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards. Dividends
and interest on foreign securities may be subject to foreign withholding taxes.
To the extent such taxes are not offset by credits or deductions allowed to
investors under U.S. federal income tax laws, such taxes may reduce the net
return to shareholders. Although the Fund intends to invest in securities of
foreign issuers domiciled in nations which the Adviser considers as having
stable and friendly governments, there is the possibility of expropriation,
confiscation, taxation, currency blockage or political or social instability
which could affect investments of foreign issuers domiciled in such nations.
SHORT SALES
The Fund may engage in short sales transactions, including short sales
transactions in which the Fund sells a security the Fund does not own. To
complete such a transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund then is obligated to replace the security borrowed by
purchasing the security at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund. Until the security is replaced, the Fund is required to pay
to the lender amounts equal to any dividends or interest which accrue during the
period of the loan. To borrow the security, the Fund also may be required to
pay a premium, which would increase the cost of the security sold. The proceeds
of the short sale will be retained by the broker, to the extent necessary to
meet the margin requirements, until the short position is closed out.
Until the Fund closes its short position or replaces the borrowed security,
the Fund will: (a) maintain a segregated account containing cash or liquid
securities at such a level that the amount deposited in the account plus the
amount deposited with the broker as collateral will equal the current value of
the security sold short; or (b) otherwise cover the Fund's short position. Up
to 100% of the Fund's assets may be used to cover the Fund's short positions.
The Fund may also engage in short sales when, at the time of the short sale,
the Fund owns or has the right to acquire an equal amount of the security being
sold at no additional cost ("selling short against the box"). The Fund may make
a short sale against the box when the Fund wants to sell the security the Fund
owns at a current attractive price, but also wishes to defer recognition of a
gain or loss for Federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code.
FUTURES CONTRACTS AND OPTIONS THEREON
The Fund may purchase and write (sell) stock index futures contracts as a
substitute for a comparable market position in the underlying securities. A
futures contract obligates the seller to deliver (and the purchaser to take
delivery of) the specified commodity on the expiration date of the contract. A
stock index futures contract obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. It is the
practice of holders of futures contracts to close out their positions on or
before the expiration date by use of offsetting contract positions and physical
delivery is thereby avoided.
The Fund may purchase put and call options and write call options on stock
index futures contracts. When the Fund purchases a put or call option on a
futures contract, the Fund pays a premium for the right to sell or purchase the
underlying futures contract for a specified price upon exercise at any time
during the options period. By writing a call option on a futures contract, the
Fund receives a premium in return for granting to the purchaser of the option
the right to buy from the Fund the underlying futures contract for a specified
price upon exercise at any time during the option period.
Some futures and options strategies tend to hedge the Fund's equity positions
against price fluctuations, while other strategies tend to increase market
exposure. Whether the Fund realizes a gain or loss from futures activities
depends generally upon movements in the underlying stock index. The extent of
the Fund's loss from an unhedged short position in futures contracts or call
options on futures contracts is potentially unlimited. The Fund may engage in
related closing transactions with respect to options on futures contracts. The
Funds will purchase or write options only on futures contracts that are traded
on a United States exchange or board of trade. In addition to the uses set
forth hereunder, the Fund may also engage in futures and futures options
transactions in order to hedge or limit the exposure of its position and for
satisfying certain tests applicable to regulated investment companies under the
Internal Revenue Code.
Although the Fund intends to sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
day. Futures contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting the Fund to substantial losses. If
trading is not possible, or the Fund determines not to close a futures position
in anticipation of adverse price movements, the Fund will be required to make
daily cash payments of variation margin. The risk that the Fund will be unable
to close out a futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary market.
INDEX OPTIONS TRANSACTIONS
The Fund may purchase put and call options and write call options on stock
indexes. A stock index fluctuates with changes in the market values of the
stock included in the index. Options on stock indexes give the holder the right
to receive an amount of cash upon exercise of the options. Receipt of this cash
amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received,
if any, will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple. The
writer (seller) of the option is obligated, in return for the premiums received
from the purchaser of the option, to make delivery of this amount to the
purchaser. Unlike the options on securities discussed below, all settlements of
index options transactions are in cash.
Some stock index options are based on a broad market index such as the S&P
500 Index, the NYSE Composite Index or the AMEX Major Market Index, or on a
narrower index such as the Philadelphia Stock Exchange Over-the-Counter Index.
Options currently are traded on the Chicago Board of Options Exchange, the AMEX
and other exchanges. Over-the-counter index options, purchased over-the-counter
options and the cover for any written over-the-counter options would be subject
to the Fund's 15% limitation on investment in illiquid securities. See
"Illiquid Securities."
The Adviser may utilize index options as a technique to leverage the
portfolio of the Fund. If the Adviser is correct in its assessment of the
future direction of stock prices, the share price of the Fund will be enhanced.
If the Adviser has the Fund take a position in options and stock prices move in
a direction contrary to the Adviser's forecast however, the Fund would incur
losses greater than the Fund would have incurred without the options position.
OPTIONS ON SECURITIES
The Fund may buy put and call options and write (sell) call options on
securities. By writing a call option and receiving a premium, the Fund may
become obligated during the term of the option to deliver the securities
underlying the option at the exercise price if the option is exercised. By
buying a put option, the Fund has the right, in return for a premium paid during
the term of the option, to sell the securities underlying the option at the
exercise price. By buying a call option, the Fund has the right, in return for
a premium paid during the term of the option, to purchase the securities
underlying the option at the exercise price. Options on securities written by
the Fund will be traded on recognized securities exchanges.
The Fund will realize a gain (or a loss) on a closing purchase transaction
with respect to a call option previously written by the Fund if the premium,
plus commission costs, paid by the Fund to purchase the put option is less (or
greater) than the premium, less commission costs, received by the Fund on the
sale of the call option. The Fund also will realize a gain if a call option
which the Fund has written lapses unexercised, because the Fund would retain the
premium.
The Fund will realize a gain (or a loss) on a closing sale transaction with
respect to a call or a put option previously purchased by the Fund if the
premium, less commission costs, received by the Fund on the sale of the call or
the put option is greater (or less) than the premium, plus commission costs,
paid by the Fund to purchase the call or the put option. If a put or a call
option which the Fund has purchased expires out-of-the-money, the option will
become worthless on the expiration date, and the Fund will realize a loss in the
amount of the premium paid, plus commission costs.
Although certain securities exchanges attempt to provide continuously liquid
markets in which holders and writers of options can close out their positions at
any time prior to the expiration of the option, no assurance can be given that a
market will exist at all times for all outstanding options purchased or sold by
the Fund. In such event, the Fund would be unable to realize its profits or
limit its losses until the Fund would exercise options it holds and the Fund
would remain obligated until options it wrote were exercised or expired.
Because option premiums paid or received by the Fund are small in relation to
the market value of the investments underlying the options, buying and selling
put and call options can be more speculative than investing directly in common
stocks.
U.S. TREASURY SECURITIES
The Fund may invest in U.S. Treasury Securities as "cover" for the investment
techniques the Fund employs. The Fund may also invest in U.S. Treasury
Securities as part of a cash reserve or for liquidity purposes. U.S. Treasury
Securities are backed by the full faith and credit of the U.S. Treasury. U.S.
Treasury Securities differ only in their interest rates, maturities and dates of
issuance. Treasury Bills have maturities of one year or less. Treasury Notes
have maturities of one to ten years and Treasury Bonds generally have maturities
of greater than ten years at the date of issuance. Yields on short-,
intermediate- and long-term U.S. Treasury Securities are dependent on a variety
of factors, including the general conditions of the money and bond markets, the
size of a particular offering and the maturity of the obligation. Debt
securities with longer maturities tend to produce higher yields and are
generally subject to potentially greater capital appreciation and depreciation
than obligations with shorter maturities and lower yields. The market value of
U.S. Treasury Securities generally varies inversely with changes in market
interest rates. An increase in interest rates, therefore, would generally
reduce the market value of the Fund's portfolio investments in U.S. Treasury
Securities, while a decline in interest rates would generally increase the
market value of a Fund's portfolio in investments in these securities.
U.S. Treasury Securities may be purchased at a discount. Such securities,
when retired, may include an element of capital gain. Capital losses may be
realized when such securities purchased at a premium are called or redeemed at a
price lower than their purchase price. Capital gains or losses also may be
realized upon the sale of U.S. Treasury Securities.
REPURCHASE AGREEMENTS
The Fund, as part of a cash reserve or to "cover" investment strategies, may
purchase repurchase agreements secured by U.S. Government Securities. Under a
repurchase agreement, the Fund purchases a debt security and simultaneously
agrees to sell the security back to the seller at a mutually agreed-upon future
price and date, normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon market interest rate
during the purchaser's holding period. While the maturities of the underlying
securities in repurchase transactions may be more than one year, the term of
each repurchase agreement will always be less than one year. The Fund will
enter into repurchase agreements only with member banks of the Federal Reserve
system or primary dealers of U.S. Government Securities. The Adviser will
monitor the creditworthiness of each of the firms which is a party to a
repurchase agreement with the Fund. In the event of a default or bankruptcy by
the seller, the Fund will liquidate those securities (whose market value,
including accrued interest, must be at least equal to 100% of the dollar amount
invested by the Fund in each repurchase agreement) held under the applicable
repurchase agreement, which securities constitute collateral for the seller's
obligation to pay. However, liquidation could involve costs or delays and, to
the extent proceeds from the sale of these securities were less than the agreed-
upon repurchase price the Fund would suffer a loss. The Fund also may
experience difficulties and incur certain costs in exercising its rights to the
collateral and may lose the interest the Fund expected to receive under the
repurchase agreement. Repurchase agreements usually are for short periods, such
as one week or less, but may be longer. It is the current policy of the Fund to
treat repurchase agreements that do not mature within seven days as illiquid for
the purposes of its investment policies.
BORROWING
The Fund may borrow money, including borrowing for investment purposes.
Borrowing for investment is known as leveraging. Leveraging investments, by
purchasing securities with borrowed money, is a speculative technique which
increases investment risk, but also increases investment opportunity. Since
substantially all of the Fund's assets will fluctuate in value, whereas the
interest obligations on borrowings may be fixed, the net asset value per share
of the Fund when it leverages its investments will increase more when the Fund's
portfolio assets increase in value and decrease more when the Fund's portfolio
assets decrease in value than would otherwise be the case. Moreover, interest
costs on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the returns on the borrowed funds. Under adverse
conditions, the Fund might have to sell portfolio securities to meet interest or
principal payments at a time investment considerations would not favor such
sales. The Fund intends to use leverage during periods when the Advisor
believes that the Fund's investment objective would be furthered by increasing
the Fund's investments in common stocks.
The Fund may borrow money to facilitate management of the Fund's portfolio by
enabling the Fund to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous. Such borrowing is not for
investment purposes and will be repaid by the Fund promptly.
As required by the Act, the Fund must maintain continuous asset coverage
(total assets, including assets acquired with borrowed funds, less liabilities
exclusive of borrowings) of 300% of all amounts borrowed. If, at any time, the
value of the Fund's assets should fail to meet this 300% coverage test, the
Fund, within three days (not including Sundays and holidays), will reduce the
amount of the Fund's borrowings to the extent necessary to meet this 300%
coverage. Maintenance of this percentage limitation may result in the sale of
portfolio securities at a time when investment considerations otherwise indicate
that it would be disadvantageous to do so.
In addition to the foregoing, the Fund is authorized to borrow money from a
bank as a temporary measure for extraordinary or emergency purposes in amounts
not in excess of 5% of the value of the Fund's total assets. This borrowing is
not subject to the foregoing 300% asset coverage requirement. The Fund is
authorized to pledge portfolio securities as the Adviser deems appropriate in
connection with any borrowings.
WARRANTS
The Fund may invest in warrants and similar rights, which are privileges
issued by corporations enabling the owners to subscribe to and purchase a
specified number of shares of the corporation at a specified price during a
specified period of time. The purchase of warrants involve the risks that the
Fund could lose the purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrants expiration. Also the
purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.
MONEY MARKET INSTRUMENTS
The Fund, as part of a cash reserve or to "cover" investment strategies, may
invest in short-term, high quality money market instruments in addition to
repurchase agreements and U.S. Treasury Securities with a remaining maturity of
397 days or less. The Fund may invest in commercial paper and other cash
equivalents rated A-1 or A-2 by Standard & Poor's Corporation ("S&P") or Prime-1
or Prime-2 by Moody's Investors Service, Inc. ("Moody's"), including commercial
paper master notes (which are demand instruments bearing interest at rates which
are fixed to known lending rates and automatically adjusted when such lending
rates change) of issuers whose commercial paper is rated A-1 or A-2 by S&P or
Prime-1 or Prime-2 by Moody's.
The Fund may also invest in securities issued by other investment companies
that invest in high quality, short-term debt securities (i.e., money market
instruments). In addition to the advisory fees and other expenses the Fund
bears directly in connection with its own operations, as a shareholder of
another investment company, the Fund would bear its pro rata portion of the
other investment company's advisory fees and other expenses, and such fees and
other expenses will be borne indirectly by the Fund's shareholders.
ILLIQUID SECURITIES
While the Fund does not anticipate doing so, it may purchase illiquid
securities, including restricted securities. The Fund will not invest more than
15% of its net assets in illiquid securities. Securities eligible to be resold
pursuant to Rule 144A under the Securities Act of 1933 may be considered liquid.
The Board of Directors of the Company has delegated to the Adviser the day-to-
day determination of the liquidity of a security although it has retained
oversight and ultimate responsibility for such determinations. Although no
definite quality criteria are used, the Board of Directors has directed the
Adviser to consider such factors as (i) the nature of the market for a security
(including the institutional private resale markets); (ii) the terms of these
securities or other instruments allowing for the disposition to a third party or
the issuer thereof (e.g. certain repurchase obligations and demand instruments);
(iii) the availability of market quotations; and (iv) other permissible factors.
Investing in Rule 144A securities could have the effect of decreasing the
liquidity of the Fund to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing these securities.
PORTFOLIO TURNOVER
The Fund will generally purchase and sell securities and effect transactions
in futures contracts without regard to the length of time the security has been
held or the futures contract open and, accordingly, it can be expected that the
rate of portfolio turnover may be substantial. In selling a security or closing
a futures contract, the Adviser will consider that profits from sales of
securities held less than three months must be limited in order to meet the
requirements of Subchapter M of the Internal Revenue Code. Subject to the
foregoing, the Fund may sell a given security or close a futures contract, no
matter for how long or short a period it has been held in the portfolio, and no
matter whether the sale is at a gain or loss, if the Adviser believes that it is
not fulfilling its purpose. Since investment decisions are based on the
anticipated contribution of the security in question to the Fund's investment
objective, the rate of portfolio turnover is irrelevant when the Adviser
believes a change is in order to achieve those objectives, and the Fund's annual
portfolio turnover rate may vary from year to year. The Fund's portfolio
turnover rate will generally not exceed 200%. Pursuant to Securities and
Exchange Commission requirements, the portfolio turnover rate of the Fund is
calculated without regard to securities, including short sales, options and
futures contracts, having a maturity of less than one year. The Fund may have a
significant portion of its assets in short-term options and futures contracts
which are excluded for purposes of calculating portfolio turnover.
High portfolio turnover in any year will result in the payment by the Fund of
above-average transaction costs and could result in the payment by shareholders
of above-average amounts of taxes on realized investment gains. Distributions
to shareholders of such investment gains, to the extent they consist of net
short-term capital gains, will be considered ordinary income for federal income
tax purposes.
ADDITIONAL RISKS
In addition to the risks discussed above, investors should understand that
there can be no assurance that the Fund will achieve its investment objective.
Many of the investments made by the Fund are subject to significant volatility.
The Fund is intended for investors who can accept this risk. An investment in
the Fund does not constitute a complete investment program. Investors may wish
to complement an investment in the Fund with other types of investments. The
fact that the Fund has no operating history should be considered a risk factor.
As a result of the investment techniques used by the Fund, the Fund may have
a significant portion (up to 100%) of its assets held in a segregated account as
"cover" for the investment techniques the Fund employs. The securities
maintained in the segregated account of the Fund will be liquid securities.
These assets may not be sold while the position in the corresponding instrument
or transaction (e.g. short sale, option or futures contract) is open unless they
are replaced by similar assets. As a result, the commitment of a large portion
of the Fund's assets to "cover" investment techniques could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
Participation in the options or futures markets by the Fund involves
investment risks and transaction costs to which the Fund would not be subject
absent the use of these strategies. In particular, the loss from investing in
futures contracts is potentially unlimited. Risks inherent in the use of
options, futures contracts and options on futures contracts include: (1)
adverse changes in the value of such instruments; (2) imperfect correlation
between the price of options and futures contracts and options thereon and
movements in the price of the underlying securities, index or futures contracts;
(3) the fact that the skills needed to use these strategies are different from
those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; and (5) the
possible need to defer closing out certain positions to avoid adverse tax
consequences.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may be
changed only with the approval of a majority of the Fund's outstanding shares.
These restrictions include the Fund's limitations on borrowing described under
the caption "INVESTMENT OBJECTIVE AND POLICIES" and the following restrictions:
(1) The Fund will not purchase the securities of any issuer if the purchase
would cause more than 5% of the value of the Fund's total assets to be invested
in securities of such issuer (except securities of the U.S. government or any
agency or instrumentality thereof), or purchase more than 10% of the outstanding
voting securities of any one issuer, except that up to 50% of the Fund's total
assets may be invested without regard to these limitations. As such the Fund is
classified as a non-diversified investment company under the Act. A non-
diversified portfolio may be more volatile than a diversified portfolio.
(2) The Fund will not invest 25% or more of its total assets at the time of
purchase in securities of issuers whose principal business activities are in the
same industry.
A list of the Fund's policies and restrictions, both fundamental and
nonfundamental, is set forth in the Statement of Additional Information. In
order to provide a degree of flexibility, the Fund's investment objective, as
well as other policies which are not deemed fundamental, may be modified by the
Board of Directors without shareholder approval. Any change in the Fund's
investment objective may result in the Fund having an investment objective
different from the investment objective which the shareholder considered
appropriate at the time of investment in the Fund. However the Fund will not
change its investment objective without sending written notice to shareholders
at least 30 days in advance of any such change.
MANAGEMENT OF THE FUND
As a Maryland corporation, the business and affairs of the Fund are managed
by its Board of Directors. Under an investment advisory agreement (the
"Advisory Agreement") with the Fund, Fiduciary Management, Inc. (the "Adviser"),
225 East Mason Street, Milwaukee, Wisconsin 53202, furnishes continuous
investment advisory services and management to the Fund. The Adviser is the
investment adviser to individuals and institutional clients (including
investment companies) with substantial investment portfolios. The Adviser was
organized in 1980 and is wholly owned by Ted D. Kellner and Donald S. Wilson.
Since that time, Mr. Kellner has served as Chairman of the Board and Chief
Executive Officer and Mr. Wilson has served as President and Treasurer of the
Adviser. Messrs. Kellner and Wilson are primarily responsible for the day-to-
day management of the Fund's portfolio. They have held this responsibility
since the Fund commenced operations. Mr. Kellner has been President, Treasurer
and a Director of the Fund and Mr. Wilson has been Vice President, Secretary and
a Director of the Fund during the same period.
The Adviser supervises and manages the investment portfolio of the Fund and
subject to such policies as the Board of Directors of the Fund may determine,
directs the purchase or sale of investment securities in the day to day
management of the Fund's investment portfolio. Under the Advisory Agreement,
the Adviser, at its own expense and without reimbursement from the Fund,
furnishes office space, and all necessary office facilities, equipment and
executive personnel for managing the Fund's investments, and bears all sales and
promotional expenses of the Fund, other than distribution expenses paid by the
Fund pursuant to the Service and Distribution Plan and expenses incurred in
complying with laws regulating the issue or sale of securities. For the
foregoing, the Adviser receives a monthly fee of 1/12th of 1% (1% per annum) of
the daily net assets of the Fund.
Under an Administration Agreement (the "Administration Agreement") with the
Fund, the Adviser supervises all aspects of the Fund's operations except those
performed by it pursuant to the Advisory Agreement. Under the Administration
Agreement, the Adviser at its own expense and without reimbursement from the
Fund, furnishes office space, and all necessary office facilities, equipment and
executive personnel for supervising the Fund's operations. For the foregoing,
the Adviser receives a monthly fee of 1/12 of .2% (.2% per annum) of the first
$30,000,000 of daily net assets of the Fund, 1/12 of .1% (.1% per annum) on the
next $70,000,000 of daily net assets of the Fund and 1/12 of .05% (0.05% per
annum) of the daily net assets of the Fund over $100,000,000, subject to a
fiscal year minimum of $20,000.
The Fund pays all of its expenses not assumed by the Adviser pursuant to the
Advisory Agreement or the Administration Agreement described below including,
but not limited to, the professional costs of preparing and the cost of printing
its registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto, the expense of
registering its shares with the Securities and Exchange Commission and in the
various states, the printing and distribution cost of prospectuses mailed to
existing shareholders, director and officer liability insurance, reports to
shareholders, reports to government authorities and proxy statements, interest
charges, brokerage commissions and expenses in connection with portfolio
transactions. The Fund also pays the fees of directors who are not interested
persons of the Adviser or officers or employees of the Fund, salaries of
administrative and clerical personnel, association membership dues, auditing and
accounting services, fees and expenses of any custodian or trustees having
custody of Fund assets, expenses of repurchasing and redeeming shares, printing
and mailing expenses, charges and expenses of dividend disbursing agents,
registrars and stock transfer agents, including the cost of keeping all
necessary shareholder records and accounts and handling any problems related
thereto.
DETERMINATION OF NET ASSET VALUE
The per share net asset value of the Fund is determined by dividing the total
value of its net assets (meaning its assets less its liabilities excluding
capital and surplus) by the total number of its shares outstanding at that time.
The net asset value is determined as of the close of regular trading (currently
4:00 p.m. Eastern time) on the New York Stock Exchange on each day the New York
Stock Exchange is open for trading. This determination is applicable to all
transactions in shares of the Fund prior to that time and after the previous
time as of which net asset value was determined. Accordingly, purchase orders
accepted or shares tendered for redemption prior to the close of regular trading
on a day the New York Stock Exchange is open for trading will be valued as of
the close of trading, and purchase orders accepted or shares tendered for
redemption after that time will be valued as of the close of the next trading
day.
Common stocks and securities sold short that are listed on any national stock
exchange or quoted on the NASDAQ Stock Market will be valued at the last sale
price on the date valuation is made. Price information on listed securities is
taken from the exchange where the security is primarily traded. Common stocks
and securities sold short which are listed on any national stock exchange or the
NASDAQ Stock Market but which are not traded on the valuation date are valued at
the average of the current bid and asked prices. Unlisted equity securities for
which market quotations are readily available will be valued at the average of
the current bid and asked prices. Options purchased or written by the Fund are
valued at the average of the current bid and asked prices. The value of a
futures contract equals the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract acquired on the day on which the futures contract is being valued. A
settlement price may not be moved if the market makes a limit move in which
event the futures contract will be valued at its fair value as determined by the
Adviser in accordance with procedures approved by the Board of Directors. Debt
securities are valued at the latest bid prices furnished by independent pricing
services. Any securities for which there are no readily available market
quotations and other assets will be valued at their fair value as determined in
good faith by the Board of Directors. Short-term instruments (those with
remaining maturities of 60 days or less) are valued at amortized cost, which
approximates market.
PURCHASE OF SHARES
Shares of the Fund may be purchased directly from the Fund. Share purchase
application forms are included at the back of the Prospectus. The price per
share is the next determined per share net asset value after receipt of an
application. Additional purchase applications may be obtained from the Fund.
Purchase applications should be mailed directly to: FMI Focus Fund, c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal
Service and other independent delivery services are not agents of the Fund.
Therefore, deposit of purchase applications in the mail or with such services
does not constitute receipt by Firstar Trust Company or the Fund. PLEASE DO NOT
mail letters by overnight courier to the Post Office Box address. To purchase
shares by overnight or express mail, please use the following street address:
FMI Focus Fund, c/o Firstar Trust Company, Mutual Fund Services, 615 East
Michigan Street, Milwaukee, Wisconsin 53202. All applications must be
accompanied by payment in the form of a check made payable to FMI Focus Fund, or
by direct wire transfer. All purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks. No cash will be accepted. Firstar Trust Company
will charge a $20 fee against a shareholder's account for any payment check
returned by the custodian. THE SHAREHOLDER WILL ALSO BE RESPONSIBLE FOR ANY
LOSSES SUFFERED BY THE FUND AS A RESULT. When a purchase is made by check
(other than a cashiers or certified check), the Fund may delay the mailing of a
redemption check until it is satisfied that the check has cleared. (It will
normally take up to 3 days to clear local personal or corporate checks and up to
7 days to clear other personal and corporate checks.) To avoid redemption
delays, purchases may be made by cashiers or certified check or by direct wire
transfers. Funds should be wired to: Firstar Bank Milwaukee, NA, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin, ABA #75000022, Firstar Trust Company,
Account #112-952137, for further credit to: FMI Focus Fund, "name of
shareholder and existing account number" if any. The establishment of a new
account by wire transfer should be preceded by a phone call to Firstar Trust
Company 1-800-811-5311, to provide information for the setting up of the
account. A follow up application should be sent for all new accounts opened by
wire transfer. Applications are subject to acceptance by the Fund, and are not
binding until so accepted. The Fund does not accept telephone orders for
purchase of shares and reserves the right to reject applications in whole or in
part. The Board of Directors of the Fund has established $1,000 as the minimum
initial purchase price and $100 as the minimum for any subsequent purchase
(except through dividend reinvestment and the automatic investment plan), which
minimum amounts are subject to change at any time. Shareholders will be advised
at least thirty days in advance of any increases in such minimum amounts. Stock
certificates for shares are not issued.
Shares may be purchased through registered broker-dealers who may charge a
fee, either at the time of purchase or redemption. The fee, if charged, is
retained by the broker-dealer and not remitted to the Fund or the Adviser.
The Fund had adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the Act. The Plan authorizes payments by the Fund in
connection with the distribution of its shares at an annual rate, as determined
from time to time by the Board of Directors, of up to 0.25% of the Fund's
average daily net assets. Payments made pursuant to the Plan may only be used
to pay distribution expenses in the year incurred. Amounts paid under the Plan
by the Fund may be spent by the Fund on any activities or expenses primarily
intended to result in the sale of shares of the Fund, including but not limited
to, advertising, compensation for sales and marketing activities of financial
institutions and others such as dealers and distributors, shareholder account
servicing, the printing and mailing of prospectuses to other than current
shareholders and the printing and mailing of sales literature. The Plan permits
the Fund to employ a distributor of its shares, in which event payments under
the Plan will be made to the distributor and may be spent by the distributor on
any activities or expenses primarily intended to result in the sale of shares of
the Fund, including but not limited to, compensation to, and expenses (including
overhead and telephone expenses) of, employees of the distributor who engage in
or support distribution of the Fund's shares, printing of prospectuses and
reports for other than existing shareholders, advertising and preparation and
distribution of sales literature. Allocation of overhead (rent, utilities,
etc.) and salaries will be based on the percentage of utilization in, and time
devoted to, distribution activities. If a distributor is employed by the Fund,
the distributor will directly bear all sales and promotional expenses of the
Fund, other than expenses incurred in complying with laws regulating the issue
or sale of securities. (In such event, the Fund will indirectly bear sales and
promotional expenses to the extent it makes payments under the Plan.) The Fund
has no present plans to employ a distributor. Pending the employment of a
distributor, the Fund's distribution expenses will be authorized by the officers
of the Company. To the extent any activity is one which the Fund may finance
without a plan pursuant to Rule 12b-1, the Fund may also make payments to
finance such activity outside of the Plan and not subject to its limitations.
REDEMPTION OF SHARES
A shareholder may require the Fund to redeem his shares in whole or part at
any time during normal business hours. Redemption requests must be made in
writing and directed to: FMI Focus Fund, c/o Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service and other
independent delivery services are not agents of the Fund. Therefore, deposit of
redemption requests in the mail or with such services does not constitute
receipt by Firstar Trust Company or the Fund. PLEASE DO NOT mail letters by
overnight courier to the Post Office Box address. Redemption requests sent by
overnight or express mail should be directed to: FMI Focus Fund, c/o Firstar
Trust Company, Mutual Fund Services, 3rd Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202. If a redemption request is inadvertently sent to
the Fund, it will be forwarded to Firstar Trust Company, but the effective date
of redemption will be delayed until the request is received by Firstar Trust
Company. Requests for redemption by telephone or telegram and requests which
are subject to any special conditions or which specify an effective date other
than as provided herein cannot be honored.
Redemption requests should specify the name of the Fund, the number of shares
or dollar amount to be redeemed, shareholder's name, account number and the
additional requirements listed below that apply to the particular account.
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
Individual, Joint Tenants Redemption request signed by all person(s)
Sole Proprietor, Custodial required to sign for the account, exactly as
(Uniform Gift to Minors Act), it is registered.
General Partnership
Corporations, Associations Redemption request and a corporate
resolution, signed by person(s) required to
sign for the account, accompanied by
signature guarantee(s).
Trusts Redemption request signed by the trustee(s)
with a signature guarantee. (If the trustee's
name is not registered on the account, a copy
of the trust document certified within the
last 60 days is also required.)
Redemption requests from shareholders in an Individual Retirement Account
must include instructions regarding federal income tax withholding. Unless
otherwise indicated, these redemptions, as well as redemptions of other
retirement plans not involving a direct rollover to an eligible plan, will be
subject to federal income tax withholding. If a shareholder is not included in
any of the above registration categories (e.g., executors, administrators,
conservators or guardians), the shareholder should call the transfer agent,
Firstar Trust Company (1-800-811-5311), for further instructions.
Signatures need not be guaranteed unless the proceeds of redemption are
requested to be sent by wire transfer, to a person other than the registered
holder or holders of the shares to be redeemed, or to be mailed to other than
the address of record, in which case each signature on the redemption request
must be guaranteed by a commercial bank or trust company in the United States, a
member firm of the New York Stock Exchange or other eligible guarantor
institution. Redemptions will not be effective or complete until all of the
foregoing conditions, including receipt of all required documentation by Firstar
Trust Company in its capacity as transfer agent, have been satisfied.
The redemption price is the net asset value next determined after receipt by
Firstar Trust Company in its capacity as transfer agent of the written request
in proper form with all required documentation. The amount received will depend
on the market value of the investments in the Fund's portfolio at the time of
determination of net asset value, and may be more or less than the cost of the
shares redeemed. A check in payment for shares redeemed will be mailed to the
holder no later than the seventh day after receipt of the redemption request in
proper form and all required documentation except as indicated in "Purchase of
Shares" for certain redemptions of shares purchased by check.
The right to redeem shares of the Fund will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension, or
(c) an emergency, as defined by rules and regulations of the Securities and
Exchange Commission, exists as a result of which it is not reasonably
practicable for the Fund to dispose of its securities or fairly to determine the
value of its net assets.
DIVIDEND REINVESTMENT
Shareholders may elect to have all income dividends and capital gains
distributions reinvested or paid in cash, or elect to have income dividends
reinvested and capital gains distributions paid in cash or capital gains
distributions reinvested and income dividends paid in cash. See the Share
Purchase Application included at the back of this Prospectus for further
information. If the shareholder does not specify an election, all income
dividends and capital gains distributions will automatically be reinvested in
full and fractional shares of the Fund, calculated to the nearest 1,000th of a
share. Shares are purchased at the net asset value in effect on the business
day after the dividend record date and are credited to the shareholder's account
on the dividend payment date. As in the case of normal purchases, stock
certificates are not issued. Shareholders will be advised of the number of
shares purchased and the price following each reinvestment. An election to
reinvest or receive dividends and distributions in cash will apply to all shares
of the Fund registered in the same name, including those previously purchased.
A shareholder may change an election at any time by notifying the Fund in
writing or by calling Firstar Trust Company at 1-800-811-5311. If such a notice
is received between a dividend declaration date and payment date, it will become
effective on the day following the payment date. The Fund may modify or
terminate its dividend reinvestment program at any time on thirty days' notice
to participants.
AUTOMATIC INVESTMENT PLAN
Shareholders wishing to invest fixed dollar amounts in the Fund on a regular
basis can make automatic purchases in amounts of $50 or more, on any date
specified by the shareholder each month or calendar quarter by using the Fund's
Automatic Investment Plan. If such date is a weekend or holiday, such purchase
shall be made on the next business day. There is no service fee for
participating in this Plan. A $20 fee will be charged by Firstar Trust Company
if sufficient funds are not available in the shareholder's account at the time
of the automatic transaction. To use this service, the shareholder must
authorize the transfer of funds from his checking or NOW account by completing
the Automatic Investment Plan application included as part of the Share Purchase
Application located at the back of the Prospectus or by calling the Fund's
office at (414) 226-4555. The Automatic Investment Plan must be implemented
with a financial institution that is a member of the Automated Clearing House.
Shareholders may change the date or amount of investments at any time by writing
to or calling Firstar Trust Company at 1-800-811-5311. The Fund reserves the
right to suspend, modify or terminate the Automatic Investment Plan without
notice.
The Automatic Investment Plan is designed to be a method to implement dollar
cost averaging. Dollar cost averaging is an investment approach providing for
the investment of a specific dollar amount on a regular basis thereby precluding
emotions dictating investment decisions. Dollar cost averaging does not insure
a profit nor protect against a loss.
SYSTEMATIC WITHDRAWAL PLAN
The Fund has available to shareholders a Systematic Withdrawal Plan, pursuant
to which a shareholder who owns Fund shares worth at least $10,000 at current
net asset value may provide that a fixed sum will be distributed to him at
regular intervals. To participate in the Systematic Withdrawal Plan, a
shareholder deposits his Fund shares with the Fund and appoints it as his agent
to effect redemptions of Fund shares held in his account for the purpose of
making monthly or quarterly withdrawal payments of a fixed amount to him out of
his account. The Systematic Withdrawal Plan does not apply to Fund shares held
in Individual Retirement Accounts or defined contribution retirement plans. An
application for participation in the Systematic Withdrawal Plan is included as
part of the Share Purchase Application located at the back of this Prospectus or
may be obtained by calling the Fund at (414) 226-4555.
The minimum amount of a withdrawal payment is $100. These payments will be
made from the proceeds of periodic redemption of shares in the account at net
asset value. Redemptions will be made at periodic intervals no more frequent
than monthly on the date specified by the shareholder or, if that day is a
weekend or holiday, on the next business day. See the Share Purchase
Application located in the back of this Prospectus for further information.
Participation in the Systematic Withdrawal Plan constitutes an election by the
shareholder to reinvest in additional Fund shares, at net asset value all income
dividends and capital gains distributions payable by the Fund on shares held in
such account, and shares so acquired will be added to such account. The
shareholder may deposit additional Fund shares in his account at any time.
Withdrawal payments cannot be considered as yield or income on the
shareholder's investment, since portions of each payment will normally consist
of a return of capital. Depending on the size or the frequency of the
disbursements requested, and the fluctuation in the value of the Fund's
portfolio, redemptions for the purpose of making such disbursements may reduce
or even exhaust the shareholder's account.
The shareholder may vary the amount or frequency of withdrawal payments or
temporarily discontinue them by notifying Firstar Trust Company in writing or by
telephone at 1-800-811-5311. To change the designated payee or payee's address,
you must notify Firstar Trust Company in writing.
EXCHANGE PRIVILEGE
A shareholder may redeem all or any portion of his Fund shares and use the
proceeds to purchase shares of Fiduciary Capital Growth Fund, Inc., another
mutual fund managed by the Adviser, or Portico Money Market Fund, a money market
mutual fund not affiliated with the Fund or the Adviser, if such shares are
offered in his state of residence. The redemption of shares of the Fund and the
purchase of shares of Fiduciary Capital Growth Fund, Inc. and/or Portico Money
Market Fund will be effected at the respective net asset values of such funds.
An exchange transaction is a sale and purchase of shares for federal income tax
purposes and may result in the realization of a capital gain or loss. Prior to
exercising the Exchange Privilege a shareholder should obtain and carefully read
the prospectus for Fiduciary Capital Growth Fund, Inc. and/or Portico Money
Market Fund. The Exchange Privilege does not in any way constitute an offering
of, or recommendation on the part of the Adviser or the Fund or Fiduciary
Capital Growth Fund, Inc. of, an investment in Portico Money Market Fund. The
registration of both the account from which the exchange is being made and the
account to which the exchange is made must be identical.
Exchange requests must be made in writing. Exchange request forms may be
obtained by writing the Fund or by calling (414) 226-4555. Written requests
should include the account numbers for both the Fund and Fiduciary Capital
Growth Fund, Inc. or Portico Money Market Fund, if an account is already opened,
and the amount of the exchange. If a new account is to be opened by the
exchange, the registration must be identical to that of the original account.
The Fund reserves the right upon prior notice (except as provided below) to
suspend, limit, modify or terminate the Exchange Privilege or its use in any
manner by any person or class. In particular, since an excessive number of
exchanges may be disadvantageous to the Fund, the Fund reserves the right to
terminate the Exchange Privilege of any shareholder who makes more than five
exchanges of shares in a year or three in a calendar quarter. The Fund will not
notify any such shareholder in advance of terminating its Exchange Privilege.
INDIVIDUAL RETIREMENT ACCOUNT AND SIMPLIFIED EMPLOYEE PENSION PLAN
Individual shareholders may establish their own tax-sheltered Individual
Retirement Account ("IRA"). The Fund has a prototype IRA plan using IRS Form
5305-A. An individual may contribute to the IRA an annual amount equal to the
lesser of 100% of annual earned income or $2,000 ($2,250 maximum ($4,000 in 1997
and later tax years) in the case of a married couple where one spouse is not
working and certain other conditions are met).
Earnings on amounts held under the IRA accumulate free of federal income
taxes. Distributions from the IRA may begin at age 59-1/2, and must begin by
April 1 following the calendar year end in which a person reaches age 70-1/2.
Excess contributions, certain distributions prior to age 59-1/2 and failure to
begin distribution after age 70-1/2 may result in adverse tax consequences.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
has the right to revoke his account within seven days after receiving the
disclosure statement in accordance with IRS regulations and obtain a full refund
of his contribution should he so elect. The custodian may, in its discretion,
hold the initial contribution uninvested until the expiration of the seven-day
revocation period. It anticipates that it will not so exercise its discretion
but reserves the right to do so.
Firstar Trust Company, Milwaukee, Wisconsin, serves as custodian and
furnishes the services provided for in the IRA plan as required by the Employee
Retirement Income Security Act of 1974 ("ERISA"). The custodian invests all
cash contributions, dividends and capital gains distributions in shares of the
Fund. For such services, the following fees are charged against the accounts of
the participants: $12.50 annual maintenance fee; $15 for transferring to a
successor trustee; $15 for distribution(s) to a participant; and $15 for
refunding any contribution in excess of the deductible limit.
The Fund's prototype IRA plan may also be used to establish a Simplified
Employee Pension Plan ("SEP/IRA"). The SEP/IRA is available to employers and
employees, including self-employed individuals, who wish to purchase shares with
tax deductible contributions not exceeding annually for any one participant the
lesser of $30,000 or 15% of earned income. Under this plan, employer
contributions are made directly to the IRA accounts of eligible participants.
Requests for information and forms concerning the IRA and SEP/IRA should be
directed to the Fund. Included with the forms is a disclosure statement which
the IRS requires to be furnished to individuals who are considering an IRA or
SEP/IRA. Consultation with a competent financial and tax adviser regarding the
IRA and SEA/IRA is recommended.
RETIREMENT PLAN
A prototype defined contribution plan is available for employers who wish to
purchase shares of the Fund with tax-deductible contributions not exceeding
annually the lesser of $30,000 or 25% of earned income. This plan includes a
cash or deferred 401(k) arrangement for employers who wish to allow employees to
elect to reduce their compensation and have such amounts contributed to the
plan, not to exceed $9,500 annually (as adjusted for cost-of-living increases).
The Fund has received an opinion letter from the Internal Revenue Service that
the prototype defined contribution retirement plan is acceptable for use under
Section 401 of the Internal Revenue Code, as amended (the "Code").
Firstar Trust Company, Milwaukee, Wisconsin, serves as custodian and
furnishes the services provided for in the retirement plan. The custodian
invests all cash contributions, dividends and capital gains distributions in
shares of the Fund. For such services, the following fees will be charged
against the accounts of the participants: $12.50 for annual maintenance fee per
participation account; $15 for a transfer to successor trustee; $15 for
distribution(s) to a participant; and $15 for a refund of an excess
contribution.
Requests for information and forms concerning the retirement plan should be
directed to the Fund. Consultation with a competent financial and tax adviser
regarding the retirement plan is recommended.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund will endeavor to qualify annually for and elect tax treatment
applicable to a registered investment company under Subchapter M of the Code.
Pursuant to the requirements of the Code, the Fund intends normally to
distribute substantially all of its net investment income and net realized
capital gains, if any, less any available capital loss carryover, to its
shareholders annually so as to avoid paying income tax on its net investment
income and net realized capital gains or being subject to a federal excise tax
on undistributed net investment income and net realized capital gains. For
federal income tax purposes, distributions by the Fund, whether invested in
additional shares of Common Stock or received in cash, will be taxable to the
Fund's shareholders except those shareholders that are not subject to tax on
their income.
Shareholders will be notified annually as to the federal tax status of
dividends and distributions. For federal income tax purposes, a shareholder's
cost of his shares is his basis and on redemption his gain or loss is the
difference between such basis and the redemption price. Distributions and
redemptions may also be taxed under state and local tax laws which may differ
from the Code.
BROKERAGE TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select the brokers or
dealers that will execute the purchases and sale of the Fund's portfolio
securities. In placing purchase and sale orders for the Fund, it is the policy
of the Adviser to seek the best execution of orders at the most favorable price
in light of the overall quality of brokerage and research services provided.
The Advisory Agreement permits the Adviser to cause the Fund to pay a broker
which provides brokerage and research services to the Adviser a commission for
effecting securities transactions in excess of the amount another broker would
have charged for executing the transaction, provided the Adviser believes this
to be in the best interests of the Fund. The Fund may place portfolio orders
with broker-dealers who recommend the purchase of Fund shares to clients if the
Adviser believes the commission and transaction quality are comparable to that
available from other brokers and allocate portfolio brokerage on that basis.
CAPITAL STRUCTURE
The Company's Articles of Incorporation permit the Board of Directors to
issue 500,000,000 shares of common stock. The Board of Directors has the power
to designate one or more classes ("series") of shares of common stock and to
classify or reclassify any unissued shares with respect to such series.
Currently the shares of the Fund are the only class of shares being offered by
the Company. Shareholders are entitled: (i) to one vote per full share; (ii)
to such distributions as may be declared by the Company's Board of Directors out
of funds legally available; and (iii) upon liquidation, to participate ratably
in the assets available for distribution. There are no conversion or sinking
fund provisions applicable to the shares, and the holders have no preemptive
rights and may not cumulate their votes in the election of directors.
Consequently the holders of more than 50% of the shares of the Fund voting for
the election of directors can elect the entire Board of Directors and in such
event the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the Board of Directors. The
shares are redeemable and are transferable. All shares issued and sold by the
Fund will be fully paid and nonassessable. Fractional shares entitle the holder
to the same rights as whole shares. The Fund will not issue certificates
evidencing shares. Instead the shareholder's account will be credited with the
number of shares purchased, relieving shareholders of responsibility for
safekeeping of certificates and the need to deliver them upon redemption.
Written confirmations are issued for all purchases of shares. Firstar Trust
Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202 acts as the
Fund's transfer agent and dividend disbursing agent.
The Maryland Business Corporation Law permits registered investment
companies, such as the Fund, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the Act. The Fund has adopted the appropriate provisions in its Bylaws and
does not anticipate holding an annual meeting of shareholders to elect directors
unless otherwise required by the Act. The Fund has also adopted provisions in
its Bylaws for the removal of directors by its shareholders.
SHAREHOLDER REPORTS
Shareholders will be provided at least semi-annually with a report showing
the Fund's portfolio and other information and annually after the close of the
Fund's fiscal year, which ends September 30, with an annual report containing
audited financial statements. Shareholders who have questions about the Fund
should call Firstar Trust Company, 1-800-811-5311 or (414) 765-4124 or write to:
FMI Focus Fund, 225 East Mason Street, Milwaukee, Wisconsin 53202, Attention:
Secretary.
PERFORMANCE INFORMATION
The Fund may provide from time to time in advertisements, reports to
shareholders and other communications with shareholders its average annual total
return. An average annual total return refers to the rate of return which, if
applied to an initial investment in the Fund at the beginning of a stated period
and compounded over the period, would result in the redeemable value of the
investment in the Fund at the end of the stated period assuming reinvestment of
all dividends and distributions and reflecting the effect of all recurring fees.
The Fund may also provide "aggregate" total return information for various
periods, representing the cumulative change in value of an investment in the
Fund for a specific period (again reflecting changes in share price and assuming
reinvestment of dividends and distributions).
Any reported performance results will be based on historical earnings and
should not be considered as representative of the performance of the Fund in the
future. An investment in the Fund will fluctuate in value and at redemption its
value may be more or less than the initial investment. The Fund may compare its
performance to other mutual funds with similar investment objectives and to the
industry as a whole, as reported by Lipper Analytical Services, Inc., Money,
Forbes, Business Week and Barron's magazines and The Wall Street Journal.
(Lipper Analytical Services, Inc. is an independent service that ranks over
1,000 mutual funds based upon total return performance.) The Fund may also
compare its performance to the Dow Jones Industrial Average, Nasdaq Composite
Index, Nasdaq Industrials Index, Value Line Composite Index, the Standard &
Poor's 500 Stock Index and the Consumer Price Index. Such comparisons may be
made in advertisements, shareholder reports or other communications to
shareholders.
FMI FOCUS FUND
- --- This is a follow-up application
(Investment by wire transfer. See page 10 of the Prospectus.)
SHARE PURCHASE APPLICATION
Minimum Initial Investment $1,000
Minimum Subsequent Investment $100
Mail Completed Application to:
FMI Focus Fund
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Overnight Express Mail to:
FMI Focus Fund
c/o Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 E. Michigan Street
Milwaukee, Wisconsin 53202
Use this form for individual, custodial, trust, profit-sharing or pension plan
accounts, including self-directed IRA and 401(k) plans. DO NOT USE THIS FORM
FOR FMI FOCUS FUND-SPONSORED 401(K), IRA OR DEFINED CONTRIBUTION PLANS (KEOGH
OR CORPORATE PROFIT-SHARING AND MONEY-PURCHASE) WHICH REQUIRE FORMS AVAILABLE
FROM THE FUND. For information please call 1-800-811-5311 or 1-414-765-4124.
- ------------------------------------------------------------------------------
o ACCOUNT REGISTRATION
Individual ---
Name
----------------------------------------------------------------------------
Social Security Number Citizen of --- U.S. --- Other
-----------------------------------------------------------------------------
Joint Owner*<F4> ---
Name
-----------------------------------------------------------------------------
Social Security Number Citizen of --- U.S. --- Other
-----------------------------------------------------------------------------
Gift to Minor ---
Custodian
-----------------------------------------------------------------------------
Minor Minor's Birthdate
-----------------------------------------------------------------------------
Minor's Social Security Number Citizen of --- U.S. --- Other
----------------------------------------------------------------------------
Corporation, Partnership or Other Entity ---
Name of Entity
-----------------------------------------------------------------------------
Taxpayer Identification Number
-----------------------------------------------------------------------------
o A corporate resolution form or certificate is required for corporate
accounts.
-----------------------------------------------------------------------------
Trust, Estate or Guardianship ---
*<F4>(Registration will be Joint Tenants with Rights of Survivorship
(JTWROS) unless otherwise specified)
Name
-----------------------------------------------------------------------------
* Name of Fiduciary(s)
-----------------------------------------------------------------------------
Taxpayer Identification Number Date of Trust
-----------------------------------------------------------------------------
o Additional documentation and certification may be requested.
- ------------------------------------------------------------------------------
o MAILING ADDRESS
--- Send Duplicate Confirmations To:
- ------------------------------------------------------------------------------
Street, Apt. Name
- ------------------------------------------------------------------------------
City, State, Zip Code Street, Apt.
- ------------------------------------------------------------------------------
Daytime Phone Number City, State, Zip Code
- ------------------------------------------------------------------------------
o INVESTMENT, PAYMENT FOR INITIAL PURCHASE AND DISTRIBUTIONS
By --- check
or --- wire**<F5>
The minimum initial Investment is $1,000 for shares of FMI Focus Fund.
Minimum additions to the Fund are $100.
DISTRIBUTION OPTIONS
Capital Gains Capital Gains
Capital Gains Reinvested in Cash Capital Gains
& Dividends & Dividends & Dividends & Dividends
Amount Reinvested in Cash Reinvested In Cash
$ ---- ---- ---- ----
- ------------------------------------------------------------------------------
(If no dividend option is checked, dividends and capital gains will be
reinvested.)
- ---- If you would like your cash payments automatically deposited to your
checking or savings account, please check the box at left and attach
a voided check.
**<F5>Indicate date and total amount of wire:
Date------------------------------ Amount $--------------------------
WIRING INSTRUCTIONS: The establishment of a new account by wire transfer
should be preceded by a telephone call to Firstar Trust Company at 1-800-811-
5311 or 1-414-765-4124 to provide information for the setting up of the
account. A completed share purchase application also must be sent to FMI Focus
Fund at the above address immediately following the investment. A purchase
request for the Fund should be wired through the Federal Reserve System as
follows:
Firstar Bank of Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 0750-00022
For credit to Firstar Trust Company
Account Number 112-952-137
For further credit to: FMI Focus Fund
Shareholder name:-------------------------------------------
Shareholder account number (if known): ---------------------
- ------------------------------------------------------------------------------
o EXCHANGE PRIVILEGE
If investment is by exchange, such exchange should be made from:
- --- Fiduciary Capital Growth Fund --- Portico Money Market Fund
Account# ------------------------ Account# ----------------------
(I understand that exchanges between the Funds are taxable transactions.)
Amount of Exchange $ --------------or Number of Shares --------------------
- ------------------------------------------------------------------------------
o AUTOMATIC INVESTMENT PLAN
Important: Attach an unsigned, voided check (for checking accounts) or a savings
account deposit slip here, and complete this form.
I would like to establish an Automatic Investment Plan for FMI Focus Fund as
described in the Prospectus. Based on these instructions, Firstar Trust
Company, the Transfer Agent for FMI Focus Fund, will automatically transfer
money directly from my checking or NOW account on the --- day of the month, or
the first business day thereafter, to purchase shares in FMI Focus Fund. If the
automatic purchase cannot be made due to insufficient funds or stop payment, a
$20 fee will be assessed.
Please start the Automatic Investment Plan on this month, day and year: --------
- -----------------------
Please debit my bank account $------------- ($50 minimum) on a --- monthly ---
quarterly basis, to be invested in my FMI Focus Fund account (account number,
if known----------------------------------).
I (we) authorize you via the ACH Network to honor all debit entries initiated
- --- monthly OR --- quarterly through Firstar Bank of Milwaukee, N.A. on behalf
of the Firstar Trust Company. All such debits are subject to sufficient
collected funds in my account to pay the debit when presented.
- -------------------------------------------------------------------------------
Name(s) on your Bank Account Signature of Bank Account Owner
- -------------------------------------------------------------------------------
Signature of Joint Owner (if
any)
- -----------------------------------------
Account Number
- ------------------------------------------------------------------------------
o SYSTEMATIC WITHDRAWALS
A balance of at least $10,000 is required for this option.
I would like to withdraw from FMI Focus Fund -------------- (exact dollars
per payment - $100 minimum)
- --- I would like to have payments made to me on or about the --- day of each
month
OR
- --- I would like to have payments made to me on or about the --- day of these
months:
- --- Jan. --- Feb. --- Mar. --- Apr. --- May --- June
- --- July --- Aug. --- Sept. --- Oct. --- Nov. --- Dec.
- --- I would like my payments automatically deposited to my checking or savings
account. I have attached a voided check.
- ------------------------------------------------------------------------------
o SIGNATURES AND CERTIFICATION
Under the penalty of perjury, I certify that (1) the Social Security Number or
Taxpayer Identification Number shown on this form is my correct Taxpayer
Identification Number, and (2) I am not subject to backup withholding either
because I have not been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure to report all
interest or dividends, or the IRS has notified me that I am no longer subject
to backup withholding. The IRS does not require your consent to any provision
of this document other than the certifications required to avoid backup
withholding.
- ------------------------------------------------------------------------------
Signature*<F6> Signature of Co-Owner, if any
- ------------------------------------
Date
*<F6>If shares are to be registered in (1) joint names, both persons should
sign, (2) a custodian for a minor, the custodian should sign, (3) a trust, the
trustee(s) should sign, or (4) a corporation or other entity, an officer should
sign and print name and title on space provided below.
- ------------------------------------------------------------------------------
Print name and title of officer signing for a corporation or other entity.
FMI FOCUS FUND
225 East Mason Street
Milwaukee, Wisconsin 53202
414-226-4555
BOARD OF DIRECTORS
BARRY K. ALLEN
TED D. KELLNER
THOMAS W. MOUNT
DONALD S. WILSON
INVESTMENT ADVISER AND ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-811-5311
or
414-765-4124
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
