Securities Act Registration No. 33-_____
Investment Company Act Reg. No. 811-____
__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. __ [_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. __ [_]
(Check appropriate box or boxes.)
______________________
FMI FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
225 East Mason Street
Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices) (Zip Code)
(414) 226-4555
(Registrant's Telephone Number, including Area Code)
Copy to:
Ted D. Kellner W. David Knox, II
Fiduciary Management, Inc. Foley & Lardner
225 East Mason Street 777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
In accordance with Rule 24f-2(a)(1) under the Investment Company Act of
1940, the Registrant declares that an indefinite number or amount of
shares of its common stock, $0.0001 par value, is being registered by this
Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a) may determine.
<PAGE>
FMI FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in
Prospectus or Statement of
Item No. on Form N-1A Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Financial Highlights Performance Information
4. General Description of Introduction, Investment
Registrant Objectives and Policies
5. Management of the Fund Management of the Fund;
Brokerage Transactions
5A. Management's Discussion of *
Fund Performance
6. Capital Stock and Other Dividends, Distributions
Securities and Taxes; Capital
Structure; Shareholder
Reports
7. Purchase of Securities Being Purchase of Shares,
Offered Dividend Reinvestment,
Automatic Investment Plan,
Individual Retirement
Account and Simplified
Employee Pension Plan,
Retirement Plan
8. Redemption of Repurchase Redemption of Shares,
Systematic Withdrawal Plan,
Exchange Privilege
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and *
History
13. Investment Objectives and Investment Restrictions;
Policies Investment Considerations
14. Management of the Fund Directors and Officers of
the Corporation
15. Control Persons and Principal Stockholders
Principal Holders of
Securities
16. Investment Advisory and Investment Adviser and
Other Services Administrator; Distribution
of Shares; Custodian;
Independent Accountants
17. Brokerage Allocation Allocation of Portfolio
Securities
18. Capital Stock and Other Included in Prospectus
Securities under "CAPITAL STRUCTURE"
19. Purchase, Redemption and Included in Prospectus
Pricing of Securities Being under "DETERMINATION OF NET
Offered ASSET VALUE"; "PURCHASE OF
SHARES"; "DIVIDEND
REINVESTMENT"; "AUTOMATIC
INVESTMENT PLAN";
"SYSTEMATIC WITHDRAWAL
PLAN"; "EXCHANGE
PRIVILEGE"; "INDIVIDUAL
RETIREMENT ACCOUNT AND
SIMPLIFIED EMPLOYEE PENSION
PLAN"; "RETIREMENT PLAN";
"Determination of Net Asset
Value and Performance";
Distribution of Shares
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Determination of Net Asset
Data Value and Performance
23. Financial Statements Financial Statements
_______________________
* Answer negative or inapplicable
<PAGE>
P R O S P E C T U S October __, 1996
FMI FOCUS FUND
_______________
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 October __, 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.
_______________
FMI Focus Fund
225 East Mason Street
Milwaukee, Wisconsin 53202
(414) 226-4555
<PAGE>
FMI Focus Fund
Table of Contents
Page No. Page No.
Expense Information . 1 Exchange Privilege . 20
Introduction . . . . 2 Individual Retirement
Account and
Simplified Employee
Pension Plan . . . 21
Investment Objective Retirement Plan . . . 22
and Policies . . . 2
Management of the Fund 14 Dividends,
Distributions and
Taxes . . . . . . 22
Determination of Net Brokerage
Asset Value . . . 15 Transactions . . . 23
Purchase of Shares . 15 Capital Structure . . 23
Redemption of Shares 17 Shareholder Reports . 24
Dividend Reinvestment 18 Performance 24
Information . . .
Automatic Share Purchase
Investment Plan . 19 Application . . .
Systematic Withdrawal 19
Plan . . . . . . .
_______________
Expense Information
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases or Reinvested
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . None
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . None
Redemption Fee . . . . . . . . . . . . . . . . . . . . . . . . None(1)
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees . . . . . . . . . . . . . . . . . . . . . . .1.00%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%(2)
Other expenses (net of reimbursements) . . . . . . . . . . . 1.50%(3)
-----
Total Fund Operating Expenses (net of reimbursements) . . . 2.75%(3)
=====
_______________
(1) A fee of $10.00 is charged for each wire redemption.
(2) 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) Other expenses and Total Fund Operating 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%. Absent reimbursement, Other expenses and
Total Fund Operating Expenses for the Fund for the fiscal year ending
September 30, 1997 are estimated to be 1.75% and 3.00%, respectively, of
average net assets.
Example: 1 Year 3 Years
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. 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 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 long 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. Dividend income is not a factor in
selecting common stocks.
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 securities 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 high grade debt 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.
The Fund may purchase and sell futures contracts and options thereon
only to the extent that such activities would be consistent with the
requirements of Section 4.5 of the regulations under the Commodity
Exchange Act promulgated by the Commodity Futures Trading Commission (the
"CFTC Regulations"), under which the Fund would be excluded from the
definition of a "commodity pool operator." Under Section 4.5 of the CFTC
Regulations, the Fund may engage in futures transactions, either for "bona
fide hedging" purposes, as this term is defined in the CFTC Regulations,
or for non-hedging purposes to the extent that the aggregate initial
margins and premiums required to establish such non-hedging positions do
not exceed 5% of the liquidation value of the Fund's portfolio. In the
case of an option on a futures contract that is "in-the-money" at the time
of purchase (i.e., the amount by which the exercise price of the put
option exceeds the current market value of the underlying instrument or
the amount by which the current market value of the underlying instrument
exceeds the exercise price of the call option), the in-the-money amount
may be excluded in calculating this 5% limitation.
When the Fund purchases or sells a stock index futures contract, the
Fund "covers" its position. To cover its position, the Fund may maintain
with its custodian bank (and mark-to-market on a daily basis) a segregated
account consisting of cash or high-quality liquid debt instruments,
including U.S. Government Securities or repurchase agreements secured by
U.S. Government Securities that, when added to any amounts deposited with
a futures commission merchant as margin, are equal to the market value of
the futures contract or otherwise cover its position. If the Fund
continues to engage in the described securities trading practices and
properly segregates assets, the segregated account will function as a
practical limit on the amount of leverage which the Fund may undertake and
on the potential increase in the speculative character of the Fund's
outstanding portfolio securities. Additionally, such segregated accounts
will assure the availability of adequate funds to meet the obligations of
the Fund arising from such investment activities.
The Fund may cover its long position in a futures contract by
purchasing a put option on the same futures contract with a strike price
(i.e., an exercise price) as high or higher than the price of the futures
contract, or, if the strike price of the put is less than the price of the
futures contract, the Fund will maintain in a segregated account cash or
high-grade liquid debt securities equal in value to the difference between
the strike price of the put and the price of the futures contract. The
Fund may also cover its long position in a futures contract by taking a
short position in the instruments underlying the futures contract, or by
taking positions in instruments the prices of which are expected to move
relatively consistently with the futures contract. The Fund may cover its
short position in a futures contract by taking a long position in the
instruments underlying the futures contract, or by taking positions in
instruments the prices of which are expected to move relatively
consistently with the futures contract.
The Fund may cover its sale of a call option on a futures contract by
taking a long position in the underlying futures contract at a price less
than or equal to the strike price of the call option, or, if the long
position in the underlying futures contract is established at a price
greater than the strike price of the written call, the Fund will maintain
in a segregated account cash or high-grade liquid debt securities equal in
value to the difference between the strike price of the call and the price
of the futures contract. The Fund may also cover its sale of a call
option by taking positions in instruments the prices of which are expected
to move relatively consistently with the call option.
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 ("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."
Each of the Exchanges has established limitations governing the
maximum number of call or put options on the same index which may be
bought or written (sold) by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different Exchanges or are held or written on one or more accounts
or through one or more brokers). Under these limitations, options
positions of certain other accounts advised by the same investment adviser
are combined for purposes of these limits. Pursuant to these limitations,
an Exchange may order the liquidation of positions and may impose other
sanctions or restrictions. These position limits may restrict the number
of listed options which the Fund may buy or sell; however, the Adviser
intends to comply with all limitations.
Index options are subject to substantial risks, including the risk of
imperfect correlation between the option price and the value of the
underlying securities comprising the stock index selected and the risk
that there might not be a liquid secondary market for the option. Because
the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Fund will
realize a gain or loss from the purchase of writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market
segment, rather than upon movements in the price of a particular stock.
Trading in index options requires different skills and techniques than are
required for predicting changes in the prices of individual stocks. The
Fund will not enter into an option position that exposes the Fund to an
obligation to another party, unless the Fund either (i) owns an offsetting
position in securities or other options; and/or (ii) maintains with the
Fund's custodian bank (and marks-to-market, on a daily basis) a segregated
account consisting of cash, U.S. Government Securities, or other liquid
high-grade debt securities that, when added to the premiums deposited with
respect to the option, are equal to the market value of the underlying
stock index not otherwise covered.
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 greater than then 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.
When writing call options on securities, the Fund may cover its
position by owning the underlying security on which the option is written.
Alternatively, the Fund may cover its position by owning a call option on
the underlying security, on a share for share basis, which is deliverable
under the option contract at a price no higher than the exercise price of
the call option written by the Fund or, if higher, by owning such call
option and depositing and maintaining in a segregated account cash or
liquid high-grade debt securities equal in value to the difference between
the two exercise prices. In addition, the Fund may cover its position by
depositing and maintaining in a segregated account cash or liquid high-
grade debt securities equal in value to the exercise price of the call
option written by the Fund. The principal reason for the Fund to write
call options on stocks held by the Fund is to attempt to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone.
When the Fund wishes to terminate the Fund's obligation with respect
to an option it has written, the Fund may effect a "closing purchase
transaction." The Fund accomplishes this by buying an option of the same
series as the option previously written by the Fund. The effect of the
purchase is that the writer's position will be canceled. However, a
writer may not effect a closing purchase transaction after the writer has
been notified of the exercise of an option. When the Fund is the holder
of an option, it may liquidate its position by effecting a "closing sale
transaction." The Fund accomplishes this by selling an option of the same
series as the option previously purchased by the Fund. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected. If any call or put option is not exercised or sold, the
option will become worthless on its expiration date.
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 loss. 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 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.
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 13 months 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.
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.
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 high-
grade liquid debt in a segregated account as "cover" for the investment
techniques the Fund employs. The Fund anticipates that the securities
maintained in the segregated account of the Fund will be U.S. Government
Securities and repurchase agreements secured by such 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. 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. The rate of the annual advisory fee is higher
than that paid by many mutual funds.
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 .1% (.1% per annum) of the first $30,000,000 of daily net
assets of the Fund and 1/12 of .05 (0.5% per annum) of the daily net
assets of the Fund over $30,000,000, 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, the
cost of stock certificates, 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. 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 $15 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 #_________, 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 the Fund's office,
(414) 226-4555 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, Mutual Fund Services, 615 East Michigan Avenue, 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 Redemption request signed by all person(s)
Tenants Sole required to sign for the account, exactly
Proprietor, Custodial as it is registered.
(Uniform Gift to
Minors Act), General
Partnership
Corporations, Redemption request and a corporate
Associations 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 coy 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
(1-800-338-1579), 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 cases 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 1-800-338-1579. 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. 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.
Shareholders may change the date or amount of investments at any time by
writing to or calling Firstar Trust Company at 1-800-338-1579. 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. To utilize the Systematic
Withdrawal Plan, the shares cannot be held in certificate form. 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 1-800-338-1579. 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, at any time without prior notice, 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.
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 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;
provided that no more than $9,500 annually (as adjusted for cost-of-living
increases) may be contributed through elective deferrals.
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, 1-800-338-1579
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.
<PAGE>
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
1-800-338-1579
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
P R O S P E C T U S
FMI FOCUS FUND
A NO-LOAD
MUTUAL FUND
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION October __, 1996
FMI FUNDS, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of FMI Funds, Inc.,
dated October __, 1996. Requests for copies of the Prospectus should be
made by writing to FMI Funds, Inc., 225 East Mason Street, Milwaukee,
Wisconsin 53202, Attention: Secretary or by calling (414) 226-4555.
<PAGE>
FMI FUNDS, INC.
Table of Contents
Page No.
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS AND OFFICERS OF THE CORPORATION . . . . . . . . . . . . . . 4
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENT ADVISER AND ADMINISTRATOR . . . . . . . . . . . . . . . . 6
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . 8
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . 9
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . 9
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . 13
DESCRIPTION OF SECURITIES RATINGS . . . . . . . . . . . . . . . . . . 14
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . 15
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 15
No person has been authorized to give any information or to make any
representations other than those contain in this Statement of Additional
Information and the Prospectus dated October __, 1996 and, if given or
made, such information or representations may not be relied upon as having
been authorized by FMI Funds, Inc..
This Statement of Additional Information does not constitute an offer
to sell securities.
<PAGE>
INVESTMENT RESTRICTIONS
As set forth in the Prospectus dated October __, 1996 of FMI Funds,
Inc. (the "Corporation") under the caption "Investment Objective and
Policies", the investment objective of FMI Focus Fund (the "Fund") is
capital appreciation. Consistent with its investment objective, the Fund
has adopted the following investment restrictions which are matters of
fundamental policy and cannot be changed without approval of the holders
of the lesser of: (i) 67% of the Fund's shares present or represented at
a stockholders meeting at which the holders of more than 50% of such
shares are present or represented; or (ii) more than 50% of the
outstanding shares of the Fund.
1. The Fund will not purchase securities on margin (except for such
short term credits as are necessary for the clearance of transactions);
provided, however, that the Fund may (i) borrow money to the extent set
forth in investment restriction no. 3; (ii) purchase or sell futures
contracts and options on futures contracts; (iii) make initial and
variation margin payments in connection with purchases or sales of futures
contracts or options on futures contracts; and (iv) write or invest in put
or call options.
2. The Fund may sell securities short and write put and call
options to the extent permitted by the Investment Company Act of 1940 (the
"Act").
3. The Fund may borrow money or issue senior securities to the
extent permitted by the Act.
4. The Fund may pledge or hypothecate its assets to secure its
borrowings.
5. The Fund will not lend money (except by purchasing publicly
distributed debt securities, purchasing securities of a type acquired by
institutional investors or entering into repurchase agreements) and will
not lend its portfolio securities.
6. The Fund will not make investments for the purpose of exercising
control or management of any company.
7. The Fund will not purchase securities of any issuer (other than
the United States or an instrumentality of the United States) if, as a
result of such purchase,the Fund would hold more than 10% of any class of
securities, including voting securities, of such issuer or more than 5% of
the Fund's assets, taken at current value, would be invested in securities
of such issuer, except that up to 50% of the Fund's total assets may be
invested without regard to these limitations.
8. The Fund will not concentrate more than 25% of the value of its
assets, determined at the time an investment is made, exclusive of
government securities, in securities issued by companies primarily engaged
in the same industry.
9. The Fund will not acquire or retain any security issued by a
company, an officer or director of which is an officer or director of the
Fund or an officer, director or other affiliated person of its investment
adviser.
10. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund (except to the extent that the
Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), in the
disposition of restricted securities).
11. The Fund will not purchase any interest in any oil, gas or other
mineral leases or any interest in any oil, gas or any other mineral
exploration or development program.
12. The Fund will not purchase or sell real estate or real estate
mortgage loans or real estate limited partnerships.
13. The Fund will not purchase or sell commodities or commodity
contracts, except that the Fund may enter into futures contracts and
options on futures contracts.
The Fund has adopted certain other investment restrictions which are
not fundamental policies and which may be changed by the Corporation's
Board of Directors without stockholder approval. These additional
restrictions are as follows:
1. The Fund will not purchase illiquid securities if, as a result
of such purchase, more than 15% of the total value of its total assets
would be invested in such securities.
2. The Fund's investments in warrants will be limited to 5% of the
Fund's net assets. Included within such 5%, but not to exceed 2% of the
value of the Fund's net assets, may be warrants which are not listed on
either the New York Stock Exchange or the American Stock Exchange.
3. The Fund will not purchase the securities of other investment
companies except: (a) as part of a plan of merger, consolidation or
reorganization approved by the stockholders of the Fund; (b) securities of
registered open-end investment companies that invest exclusively in high
quality, short-term debt securities; or (c) securities of registered
closed-end investment companies on the open market where no commission
results, other than the usual and customary broker's commission. No
purchases described in (b) and (c) will be made if as a result of such
purchases (i) the Fund and its affiliated persons would hold more than 3%
of any class of securities, including voting securities, of any registered
investment company; (ii) more than 5% of the Fund's net assets would be
invested in shares of any one registered investment company; and (iii)
more than 10% of the Fund's net assets would be invested in shares of
registered investment companies.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions are adhered to at the time an investment is
made, and such percentage subsequently changes as a result of changing
market values or some similar event, no violation of the Fund's
fundamental restrictions will be deemed to have occurred. Any changes in
the Fund's investment restrictions made by the Board of Directors will be
communicated to stockholders prior to their implementation.
INVESTMENT CONSIDERATIONS
Illiquid Securities
The Fund may invest up to 15% of its net assets in securities for
which there is no readily available market ("illiquid securities"). The
15% limitation includes certain securities whose disposition would be
subject to legal restrictions ("restricted securities"). However certain
restricted securities that may be resold pursuant to Rule 144A under the
Securities Act may be considered liquid. The Board of Directors of the
Corporation 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.
Restricted securities may be sold in private negotiated or other
exempt transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act. When
registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable time may elapse between the
decision to sell and the sale date. If, during such period, adverse
market conditions were to develop, the Fund might obtain a less favorable
price than the price which prevailed when it decided to sell. Restricted
securities will be priced at fair value as determined in good faith by the
Board of Directors.
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.
DIRECTORS AND OFFICERS OF THE CORPORATION
The name, address principal occupations during the past five years
and other information with respect to each of the directors and offices of
the Fund are as follows:
BARRY K. ALLEN Age 48
30 South Wacker Drive
Suite 3800
Chicago, IL 60606
(A DIRECTOR OF THE FUND)
Mr. Allen is Executive Vice President, Communications & Information
Products, Ameritech, Chicago, Illinois and has served in that capacity
since August, 1995. From September, 1993 to August 1995, Mr. Allen was
President and Chief Operating Officer of Marquette Electronics, Inc., a
manufacturer of medical electronic equipment and systems, Milwaukee,
Wisconsin. From July, 1989 to July, 1995, Mr. Allen was President and
Chief Executive Officer of Wisconsin Bell and from July, 1993 to
September, 1993, Mr. Allen was President and Chief Executive Officer of
Ameritech Illinois. Mr. Allen is a director of Harley-Davidson Inc. Mr.
Allen is also a director of Fiduciary Capital Growth Fund, Inc., an
investment company for which the Adviser serves as investment adviser.
TED D. KELLNER* Age 50
225 East Mason Street
Milwaukee, Wisconsin
(PRESIDENT, TREASURER AND A DIRECTOR OF THE FUND)
Mr. Kellner is Chairman of the Board and Chief Executive Officer of
Fiduciary Management, Inc., an investment advisory firm, which he
co-founded with Mr. Donald S. Wilson in 1980. Mr. Kellner is also
President, Treasurer and a director of Fiduciary Capital Growth Fund, Inc.
THOMAS W. MOUNT Age 65
401 Pine Terrace
Oconomowoc, Wisconsin
(A DIRECTOR OF THE FUND)
Mr. Mount is retired Chairman and a director of Stokely USA, Inc., a
canned and frozen food processor and was employed by such firm in various
capacities since 1957. Mr. Mount is also a director of Fiduciary Capital
Growth Fund, Inc.
DONALD S. WILSON* Age 53
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT, SECRETARY AND A DIRECTOR OF THE FUND)
Mr. Wilson is President and Treasurer of Fiduciary Management, Inc.
Mr. Wilson is also Vice President, Secretary and a director of Fiduciary
Capital Growth Fund, Inc.
GARY G. WAGNER Age 53
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT AND ASSISTANT SECRETARY OF THE FUND)
Mr. Wagner has been Executive Vice President of Fiduciary Management,
Inc. since July 1, 1987. Mr. Wagner is also Vice President and Assistant
Secretary of Fiduciary Capital Growth Fund, Inc.
PATRICK ENGLISH Age 35
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT OF THE FUND)
Mr. English is Senior Vice President of Fiduciary Management, Inc.
and has been employed by such firm in various capacities since December,
1986. Mr. English is also Vice President of Fiduciary Capital Growth
Fund, Inc.
The Fund plans to pay each director who is not an officer of the Fund
a fee of $150 for each meeting of the Board of Directors attended.
____________________
* Messrs. Kellner and Wilson are directors who are "interested persons"
of the Fund as that term is defined in the Investment Company Act of 1940.
The Corporation was organized on September 5, 1996. The table below
sets forth the compensation anticipated to be paid by the Corporation to
each of the directors of the Corporation during the fiscal year ending
September 30, 1997:
COMPENSATION TABLE
Total
Compensa-
Pension or tion from
Retirement Estimated Corporation
Aggregate Benefits Annual and Fund
Compensation Accrued as Benefits Complex
from Part of Fund Upon Paid to
Name of Person Corporation Expenses Retirement Directors(1)
Barry K. Allen $600 0 0 $3,000
Ted D. Kellner 0 0 0 0
Thomas W. Mount $600 0 0 $3,000
Donald S. Wilson 0 0 0 0
____________________
(1) Fiduciary Capital Growth Fund, Inc. and the Corporation are the only
investment companies in the Fund Complex.
PRINCIPAL STOCKHOLDERS
As of the date hereof, Fiduciary Management, Inc. owns 100% of the
Fund's outstanding shares. As of such date it controls the Fund and the
Corporation and owns sufficient shares of the Fund to approve or
disapprove all matters brought before stockholders of the Corporation,
including the election of directors of the Corporation and the approval of
auditors. The Corporation does not control any person.
INVESTMENT ADVISER AND ADMINISTRATOR
As set forth in the Prospectus under the caption "Management of the
Fund" the investment adviser and administrator to the Fund is Fiduciary
Management, Inc. (the "Adviser"). The Adviser is wholly-owned by Ted D.
Kellner and Donald S. Wilson. The Adviser's executive officers include
Messrs. Kellner, Wilson, Mr. Gary G. Wagner, Executive Vice President,
Ms. Maria Blanco, Senior Vice President and Secretary, Mr. Patrick
English, Senior Vice President, Mr. John Brandser, Vice President - Fixed
Income, Ms. Camille Wildes, Vice President and Ms. Jody Reckard, Vice
President. The directors of the Adviser are Messrs. Kellner and Wilson.
The Adviser has undertaken to reimburse the Fund to the extent that
the aggregate annual operating expenses, including the investment advisory
fee and the administration fee but excluding interest, taxes, brokerage
commissions and extraordinary items, exceed that percentage of the daily
net assets of the Fund for such year, as determined by valuations made as
of the close of each business day of the year, which is the most
restrictive percentage provided by the state laws of the various states in
which it shares are qualified for sale or, if the states in which its
shares are qualified for sale impose no such restrictions, 2.75%. As of
the date of this Statement of Additional Information the percentage
applicable to the Fund is 2-1/2% on the first $30,000,000 of its daily net
assets, 2% on the next $70,000,000 of its daily net assets and 1-1/2% on
daily net assets in excess of $100,000,000. The Fund monitors its expense
ratio on a monthly basis. If the accrued amount of the expenses of the
Fund exceeds the expense limitation, the Fund creates an account
receivable from the Adviser for the amount of such excess. In such a
situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the
balance of the Fund's fiscal year if accrued expenses thereafter fall
below this limit.
As set forth in the Prospectus under the caption "Management of the
Fund" the Adviser is also the administrator to the Fund. Pursuant to an
administration agreement (the "Administration Agreement") between the Fund
and the Adviser, the Adviser supervises all aspects of the Fund's
operations except those performed by it as investment adviser. In
connection with such supervision the Adviser prepares and maintains the
books, accounts and other documents required by the Investment Company Act
of 1940 (the "Act"), calculates the Fund's net asset value, responds to
shareholder inquiries, prepares the Fund's financial statements and tax
returns, prepares reports and filings with the Securities and Exchange
Commission and with state Blue Sky authorities, furnishes statistical and
research data, clerical, accounting and bookkeeping services and
stationery and office supplies, keeps and maintains the Fund's financial
accounts and records and generally assists in all respects of the Fund's
operations.
The Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually, by (i) the Board
of Directors of the Corporation, or by the vote of a majority (as defined
in the Act) of the outstanding shares of the Fund, and (ii) by the vote of
a majority of the directors of the Corporation who are not parties to the
Advisory Agreement or interested persons of the Adviser, cast in person at
a meeting called for the purpose of voting on such approval. The
Administration Agreement will remain in effect as long as its continuance
is specifically approved at least annually by the Board of Directors of
the Corporation. Both the Advisory Agreement and the Administration
Agreement provide that they may be terminated at any time without the
payment of any penalty, by the Board of Directors of the Corporation or by
vote of a majority of the Fund's stockholders, on sixty days' written
notice to the Adviser, and by the Adviser on the same notice to the
Corporation and that they shall be automatically terminated if they are
assigned.
The Advisory Agreement and the Administration Agreement provide that
the Adviser shall not be liable to the Fund or its stockholders for
anything other than willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties. The Advisory Agreement
and the Administration Agreement also provide that the Adviser and its
officers, directors and employees may engage in other businesses, devote
time and attention to any other business whether or a similar or
dissimilar nature, and render services to others.
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "Determination of
Net Asset Value" the net asset value of the Fund will be determined as of
the close of regular trading (4:00 P.M. Eastern Time) on each day the New
York Stock Exchange is open for trading. The New York Stock Exchange is
open for trading Monday through Friday except New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the New York Stock Exchange
will not be open for trading on the preceding Friday and when any such
holiday falls on a Sunday, the New York Stock Exchange will not be open
for trading on the succeeding Monday, unless unusual business conditions
exist, such as the ending of a monthly or the yearly accounting period.
Any total rate of return quotation for the Fund will be for a period of
three or more months and will assume the reinvestment of all dividends and
capital gains distributions which were made by the Fund during that
period. Any period total rate of return quotation of the Fund will be
calculated by dividing the net change in value of a hypothetical
shareholder account established by an initial payment is $1,000 at the
beginning of the period by 1,000. The net change in the value of a
shareholder account is determined by subtracting $1,000 from the product
obtained by multiplying the net asset value per share at the end of the
period by the sum obtained by adding (A) the number of shares purchased at
the beginning of the period plus (B) the number of shares purchased during
the period with reinvested dividends and distributions. Any average
annual compounded total rate of return quotation of the Fund will be
calculated by dividing the redeemable value at the end of the period
(i.e., the product referred to in the preceding sentence) by $1,000. A
root equal to the period, measured in years, in question is then
determined and 1 is subtracted from such root to determine the average
annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
n
P(1 + T) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
stated periods at the end of the stated
periods
DISTRIBUTION OF SHARES
The Fund has adopted a Service and Distribution Plan (the "Plan") in
anticipation that the Fund will benefit from the Plan through increased
sales of shares, thereby reducing the Fund's expense ratio and providing
the Adviser with greater flexibility in management. The Plan may be
terminated by the Fund at any time by a vote of the directors of the
Corporation who are not interested persons of the Corporation and who have
no direct or indirect financial interest in the Plan or any agreement
related thereto (the "Rule 12b-1 Directors") or by a vote of a majority of
the outstanding shares of the Fund. Messrs. Allen and Mount are currently
the Rule 12b-1 Directors. Any change in the Plan that would materially
increase the distribution expenses of the Fund provided for in the Plan
requires approval of the stockholders of the Fund and the Board of
Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Corporation will be
committed to the discretion of the directors of the Corporation who are
not interested persons of the Corporation. The Board of Directors of the
Corporation must review the amount and purposes of expenditures pursuant
to the Plan quarterly as reported to it by a Distributor, if any, or
officers of the Corporation. The Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors, including the Rule 12b-1 Directors. The Fund did not begin
operations until October __, 1996, and thus, the Fund had not incurred any
distribution costs as of that date.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by the
Adviser subject to review by the Corporation's Board of Directors. In
placing purchase and sale orders for portfolio securities 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, as described in this and the following
paragraph. In selecting brokers to effect portfolio transactions, the
determination of what is expected to result in best execution at the most
favorable price involves a number of largely judgmental considerations.
Among these are the Adviser's evaluation of the broker's efficiency in
executing and clearing transactions, block trading capability (including
the broker's willingness to position securities and the broker's financial
strength and stability). The most favorable price to the Fund means the
best net price without regard to the mix between purchase or sale price
and commission, if any. Over-the-counter securities are generally
purchased and sold directly with principal market makers who retain the
difference in their cost in the security and its selling price. In some
instances, the Adviser feels that better prices are available from
non-principal market makers who are paid commissions directly. The Fund
may place portfolio orders with broker-dealers who recommend the purchase
of Fund shares to clients if the Adviser believes the commissions and
transaction quality are comparable to that available from other brokers
and may allocate portfolio brokerage on that basis.
In allocating brokerage business for the Fund, the Adviser also takes
into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the Adviser,
and the Fund may indirectly benefit from services available to the Adviser
as a result of transactions for other clients. The Advisory Agreement
provides that the Adviser may cause the Fund to pay a broker which
provides brokerage and research services to the Adviser a commission for
effecting a securities transaction in excess of the amount another broker
would have charged for effecting the transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the Fund and the
other accounts as to which it exercises investment discretion. The Fund
did not commence operations until October ___, 1996.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Fund. As such, Firstar Trust
Company holds all securities and cash of the Fund, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Fund. Firstar Trust Company does not exercise
any supervisory function over the management of the Fund, the purchase and
sale of securities or the payment of distributions to shareholders.
Firstar Trust Company also acts as the Fund's transfer agent and dividend
disbursing agent.
TAXES
As set forth in the Prospectus under the caption "Dividends,
Distributions and Taxes" the Fund will endeavor to qualify annually for
and elect tax treatment applicable to a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").
Under the Code, the Fund will not qualify as a regulated investment
company for any taxable year if more than 30% of the Fund's gross income
for that year is derived from gains on the sale of securities held less
than three months (the "30% Test"). These requirements may also restrict
the extent of the Fund's activities in option and other portfolio
transactions. Specifically, the 30% Test will limit the extent to which a
Fund may: (i) sell securities held for less than three months; (ii) write
options with expire in less than three months; (iii) effect closing
transactions with respect to call or put options that have been written or
purchased within the preceding three months; and (iv) effect short sales.
If a call option written by the Fund expires, the amount of the
premium received by the Fund for the option will be short-term or long-
term capital gain to the Fund depending on the Fund's holding period for
the underlying security or underlying futures contract. If such an option
is closed by the Fund, any gain or loss realized by the Fund as a result
of the closing purchase transaction will be short-term or long-term
capital gain or loss depending on the Fund's holding period for the
underlying security or underlying futures contract. If the holder of a
call option exercises the holder's right under the option, any gain or
loss realized by the Fund upon the sale of the underlying security or
underlying futures contract pursuant to such exercise will be short-term
or long-term capital gain or loss to the Fund depending on the Fund's
holding period for the underlying security or underlying futures contract.
With respect to call options purchased by the Fund, the Fund will
realize short-term or long-term capital gain or loss if such option is
sold and will realize short-term or long-term capital loss if the option
is allowed to expire depending on the Fund's holding period for the call
option. If such a call option is exercised, the amount paid by the Fund
for the option will be added to the basis of the stock or futures contract
so acquired.
The Fund has available to it a number of elections under the Code
concerning the treatment of option transactions for tax purposes. The
Fund will utilize the tax treatment that, in the Fund's judgment, will be
most favorable to a majority of investors in the Fund. Taxation of these
transactions will vary according to the elections made by the Fund. These
tax considerations may have an impact on investment decisions made by the
Fund.
The Fund will utilize options on stock indexes. Options on
"broadbased" stock indexes are classified as "nonequity options" under the
Code. Gains and losses resulting from the expiration, exercise or closing
of such nonequity options, as well as gains and losses resulting from
futures contract transactions, will be treated as long-term capital gain
or loss to the extent of 60% thereof and short-term capital gain or loss
to the extent of 40% thereof (hereinafter "blended gain or loss"). In
addition, any nonequity option held by the Fund on the last day of a
fiscal year will be treated as sold for market value on that date, and
gain or loss recognized as a result of such deemed sale will be blended
gain or loss. These tax considerations may have an impact on investment
decisions made by the Fund.
The trading strategies of the Fund involving nonequity options on
stock indexes may constitute "straddle" transactions. "Straddles" may
affect the taxation of such instruments and may cause the postponement of
recognition of losses incurred in certain closing transactions.
Dividends from the Fund's net investment income and distributions
from the Fund's net realized capital gains are taxable to stockholders as
ordinary income, whether received in cash or in additional shares. The
70% dividends-received deduction for corporations will apply to such
dividends and distributions, subject to proportionate reductions if the
aggregate dividends received by the Fund from domestic corporations in any
year are less than 100% of the net investment company income taxable
distributions made by the Fund.
Any dividend or capital gain distribution paid shortly after a
purchase of shares of the Fund, will have the effect of reducing the per
share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, if the net asset value of the shares of the
Fund immediately after a dividend or distribution is less than the cost of
such shares to the stockholder, the dividend or distribution will be
taxable to the stockholder even though it results in a return of capital
to him.
Redemption of shares will generally result in a capital gain or loss
for income tax purposes. Such capital gain or loss will be long term or
short term, depending upon the holding period. However, if a loss is
realized on shares held for six months or less, and the investor received
a capital gain distribution during that period, then such loss is treated
as a long-term capital loss to the extent of the capital gain distribution
received.
The Fund may be required to withhold Federal income tax at a rate of
31% ("backup withholding") from dividend payments and redemption proceeds
if a shareholder fails to furnish the Fund with his social security or
other tax identification number and certify under penalty of perjury that
such number is correct and that he is not subject to backup withholding
due to the under reporting of income. The certification form is included
as part of the share purchase application and should be completed when the
account is opened.
This section is not intended to be a full discussion of present or
proposed federal income tax laws and the effect of such laws on an
investor. Investors are urged to consult with their respective tax
advisers for a complete review of the tax ramifications of an investment
in the Fund.
STOCKHOLDER MEETINGS
The Maryland Business Corporation Law permits registered investment
companies, such as the Fund, to operate without an annual meeting of
stockholders under specified circumstances if an annual meeting is not
required by the Act. The Corporation has adopted the appropriate
provisions in its bylaws and may, at its discretion, not hold an annual
meeting in any year in which the election of directors is not required to
be acted upon by the stockholders under the Act.
The Corporation's bylaws also contain procedures for the removal of
directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting, the Secretary of the Corporation shall promptly call a special
meeting of stockholders for the purpose of voting upon the question of
removal of any director. Whenever ten or more stockholders or record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the Corporation's Secretary in
writing, stating that they wish to communicate with other stockholders
with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request
which they wish to transmit, the Secretary shall within five business days
after such application either: (1) afford to such applicants access to a
list of the names and addresses of all stockholders as recorded on the
books of the Corporation; or (2) inform such applicants as to the
approximate number of stockholders of record and the approximate cost of
ailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause (2)
of the last sentence of the preceding paragraph, the Secretary, upon the
written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all stockholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of factor omits to
state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so file, the Securities and Exchange Commission may, and
if demanded by the Board of Directors or by such applicants shall, enter
an order either sustaining one or more of such objections or refusing to
sustain any of them. If the Securities and Exchange Commission shall
enter an order refusing to sustain any of such objections, or if, after
the entry of an order sustaining one or more of such objections, the
Securities and Exchange Commission shall find, after notice and
opportunity for hearing, that all objections so sustained have been met,
and shall enter an order so declaring, the Secretary shall mail copies of
such material to all stockholders with reasonable promptness after the
entry of such order and the renewal of such tender.
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Corporation's Prospectus, the Fund may invest in
commercial paper and commercial paper master notes assigned ratings of
either Standard & Poor's Corporation ("Standard & Poor's") or Moody's
Investors Service, Inc. ("Moody's"). A brief description of the ratings
symbols and their meanings follows:
Standard & Poor's Commercial Paper Ratings. A Standard & Poor's
commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. The categories rated A-3
or higher are as follows:
A-1. This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers 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
issuers designed "A-1."
A-3. Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designation.
Moody's Short-Term Debt Ratings. Moody's short-term debt ratings are
opinions of the ability of issuers to repay punctually senior debt
obligations which have an original maturity not exceeding one year.
Obligations relying upon support mechanisms such as letters-of-credit and
bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
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 the following
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 subjection variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Prime-3. Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 100 East Wisconsin Avenue, Suite 1500,
Milwaukee, Wisconsin 53202 has been selected as the independent
accountants for the Fund. As such Price Waterhouse LLP performs an audit
of the Fund's financial statement and considers the Fund's internal
control structure.
FINANCIAL STATEMENTS
The following financial statements for the Fund are attached hereto:
- Report of Independent Accountants
- Statement of Assets and Liabilities
- Notes to the Financial Statement
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANT
To the Stockholders and Board of
Directors of FMI Funds, Inc.:
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of FMI
Focus Fund (the "Fund"), a series of FMI Funds, Inc. at ____________,
1996, in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based
on our audit. We conducted our audit of this financial statement in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion express above.
Price Waterhouse LLP
Milwaukee, Wisconsin
________, 1996
<PAGE>
FMI FUNDS, INC.
FMI FOCUS FUND
Statement of Assets and Liabilities
__________, 1996
FMI Focus Fund
ASSETS
Cash $100,000
Unamortized organizational costs
Prepaid initial registration expenses
--------
Total Assets
--------
LIABILITIES
Payable to Adviser
--------
Total Liabilities $100,000
========
NET ASSETS
Capital Stock, $0.0001 par value; 500,000,000 shares
authorized; 10,000 shares outstanding $100,000
========
Offering and redemption price/net asset value per
share (based on 10,000 shares of capital stock
issued and outstanding) $10.00
======
The accompanying notes to the financial statement are an integral part of
this statement.
<PAGE>
FMI FUNDS, INC.
FMI FOCUS FUND
NOTES TO FINANCIAL STATEMENT
1. FMI Funds, Inc. (the "Company") was incorporated under the laws of
the state of Maryland on September 5, 1996 and has had no operations
to date other than those relating to organizational matters and the
sale of 10,000 shares of its common stock to its original
stockholder, Fiduciary Management, Inc. The Company is an open-end
diversified management investment company registered under the
Investment Company Act of 1940 (the "1940 Act").
2. FMI Funds, Inc., which consists solely of the FMI Focus Fund (the
"Fund"), has an agreement with Fiduciary Management, Inc. (the
"Adviser"), with whom certain officers and directors of FMI Funds,
Inc. are affiliated, to furnish investment advisory services to the
Fund. Under the terms of this agreement, the Fund will pay the
Adviser a monthly fee based on the Fund's average daily net assets at
the annual rate of 1.00%.
Under the investment advisory agreement, if the aggregate annual
operating expenses (including the investment advisory fee and the
administration fee but excluding interest, taxes, brokerage
commissions and other costs incurred in connection with the purchase
or sale of portfolio securities and extraordinary items) exceed the
lowest limitations imposed by state securities administrators, the
Advisor will reimburse the Fund for the amount of such excess.
3. Organizational costs and initial registration expenses are being
deferred and amortized over the period of benefit, but not to exceed
sixty months from the Fund's commencement of operations. These costs
were advanced by the Adviser and will be reimbursed by the Fund. The
proceeds of any redemption of the initial shares by the original
stockholder or any transferee will be reduced by a pro-rata portion
of any then unamortized organizational expenses in the same
proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of such
redemption.
4. Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Fund has adopted a Service and Distribution Plan (the "Plan"). Under
the Plan, the Fund is authorized to pay expenses incurred for the
purpose of financing activities intended to result in the sale of
shares of the Fund at an annual rate of up to 0.25% of the Fund's
average daily net assets.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Financial Statement (included in Part B)
Report of Independent Accountants
Statement of Assets and Liabilities
Notes to Financial Statement
(b.) Exhibits
(1) Registrant's Articles of Incorporation.
(2) Registrant's Bylaws.
(3) None
(4) None
(5) Investment Advisory Agreement with Fiduciary Management,
Inc. relating to FMI Focus Fund (submitted in draft
form).
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company
(submitted in draft form).
(9.1) Fund Administration Servicing Agreement with Fiduciary
Management, Inc. relating to FMI Focus Fund (submitted
in draft form).
(9.2) Transfer Agent Agreement with Firstar Trust Company
relating to FMI Focus Fund (submitted in draft form).
(10) Opinion of Foley & Lardner, counsel for Registrant
(submitted in draft form).
(11) Consent of Price Waterhouse LLP (to be filed by
amendment).
(12) None
(13) Subscription Agreement (submitted in draft form).
(14) Individual Retirement Custodial Account.
(15) Service and Distribution Plan.
(16) None
(17) Financial Data Schedule (to be filed by amendment).
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is controlled by Fiduciary Management, Inc. which
owns 100% of Registrant's voting securities as of __________, 1996.
Registrant neither controls any person nor is under common control with
any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of , 1996
Class A Common Stock, $0.0001 1
par value (FMI Focus Fund)
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or cancelled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
A. The Corporation shall indemnify all of its corporate
representatives against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 4 through 6 of the Statement
of Additional Information pursuant to Rule 411 under the Securities Act of
1933.
Item 29. Principal Underwriters
Not Applicable.
Item 30. 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
physical possession of Registrant's Treasurer, Ted D. Kellner, at
Registrant's corporate offices, 225 East Mason Street, Milwaukee,
Wisconsin 53202.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to file a post-effective amendment to this
Registration Statement within four to six months of the effective date of
this Registration Statement which will contain financial statements (which
need not be certified) as of and for the time period reasonably close or
as soon as practicable to the date of such post-effective amendment.
With respect to stockholder meetings, Registrant undertakes to
call stockholder meetings in accordance with the provisions of Article I
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Milwaukee and State of Wisconsin
on the 5th day of September, 1996.
FMI FUNDS, INC.
(Registrant)
By: /s/ Ted D. Kellner
Ted D. Kellner, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated.
Name Title Date
/s/ Ted D. Kellner (Principal Executive, September 5, 1996
Ted D. Kellner Financial and Accounting
Officer) and a Director
/s/ Barry K. Allen Director September 9, 1996
Barry K. Allen
/s/ Thomas W. Mount Director September 11, 1996
Thomas W. Mount
Director September 5, 1996
/s/ Donald S. Wilson
Donald S. Wilson
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Articles of
Incorporation
(2) Registrant's Bylaws
(3) None
(4) None
(5) Investment Advisory Agreement with
Fiduciary Management, Inc.
relating to FMI Focus Fund*
(6) None
(7) None
(8) Custodian Agreement with Firstar
Trust Company*
(9.1) Fund Administration Servicing
Agreement with Fiduciary
Management, Inc. relating to FMI
Focus Fund*
(9.2) Transfer Agent Agreement with
Firstar Trust Company*
(10) Opinion of Foley & Lardner,
counsel for Registrant*
(11) Consent of Price Waterhouse LLP**
(12) None
(13) Subscription Agreement*
(14) Individual Retirement Custodial
Account
(15) Service and Distribution Plan
(16) None
(17) Financial Data Schedule**
(18) None
__________________________________
* Submitted in draft form.
** To be filed by amendment.
ARTICLES OF INCORPORATION
OF
FMI FUNDS, INC.
The undersigned sole incorporator, being at least eighteen years
of age, hereby adopts the following Articles of Incorporation for the
purpose of forming a Maryland corporation under the general laws of the
State of Maryland:
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
FMI FUNDS, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is formed are to engage
in any lawful business for which corporations may be organized under the
Maryland General Corporation Law.
ARTICLE IV
A. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is Five Hundred Million
(500,000,000) shares, all with a par value of One Hundredth of a Cent
($0.0001) per share, to be known and designated as "Common Stock." The
aggregate par value of the authorized shares of the Corporation is Fifty
Thousand Dollars ($50,000). The Board of Directors of the Corporation may
increase or decrease the aggregate number of authorized shares of Common
Stock pursuant to Section 2-105 of the Maryland General Corporation Law or
any successor provision thereto. The Board of Directors of the
Corporation may classify or reclassify any unissued shares of Common Stock
and may designate or redesignate the name of any class of outstanding
Common Stock. The Board of Directors may fix the number of shares of
Common Stock in any such class and, except as specifically set forth in
these Articles of Incorporation, may set or change the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption of any
class of unissued shares of Common Stock. A total of One Hundred Million
(100,000,000) shares of Common Stock shall initially be classified as
"Class A Common Stock" (the "FMI Focus Fund" or such other name designated
by the Corporation's Board of Directors).
B. Notwithstanding the authority granted to the Board of
Directors of the Corporation with respect to the designation,
classification and reclassification of the unissued shares of Common Stock
of the Corporation, each class of Common Stock shall have the following
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption:
1. Each holder of shares of Common Stock of the
Corporation, irrespective of the class, shall be entitled to one
(1) vote for each full share (and a fractional vote for each
fractional share) then standing in his or her name on the books
of the Corporation; provided, however, that shares of any class
of Common Stock owned, other than in a fiduciary capacity, by
the Corporation or by another corporation in which the
Corporation owns shares entitled to cast a majority of all the
votes entitled to be cast by all shares outstanding and entitled
to vote of such corporation, shall not be voted at any meeting
of stockholders. On any matter submitted to a vote of
stockholders all shares of the Corporation's Common Stock then
issued and outstanding and entitled to vote, irrespective of the
class, shall be voted in the aggregate and not by class, except
that: (a) when otherwise expressly provided by the Maryland
General Corporation Law, the Investment Company Act of 1940 and
the regulations thereunder, or other applicable law, shares
shall be voted by individual class; and (b) when the matter to
be acted upon does not affect any interest of a particular class
of the Corporation's Common Stock, then only shares of the
affected class shall be entitled to vote thereon. At all
elections of directors of the Corporation, each stockholder
shall be entitled to vote the shares owned of record by him for
as many persons as there are directors to be elected, but shall
not be entitled to exercise any right of cumulative voting.
2. All consideration received by the Corporation for the
issue or sale of shares of any class of the Corporation's Common
Stock, together with all assets in which such consideration is
invested and reinvested, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any such funds or payments derived
from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to the class of the
Corporation's Common Stock with respect to which such assets,
payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein
referred to as "assets belonging to" such class. Any assets,
income, earnings, profits and proceeds thereof, funds or
payments which are not readily attributable to any particular
class of the Corporation's Common Stock shall be allocable among
any one or more of the classes of the Corporation's Common Stock
in such manner and on such basis as the Board of Directors, in
its sole discretion, shall deem fair and equitable. The power
to make such allocations may be delegated by the Board of
Directors from time to time to one or more of the officers of
the Corporation.
3. The assets belonging to any class of the Corporation's
Common Stock shall be charged with the liabilities in respect of
such class of the Corporation's Common Stock, and shall also be
charged with the share of the general liabilities of the
Corporation allocated to such class determined as hereinafter
provided. The determination of the Board of Directors shall be
conclusive as to: (a) the amount of such liabilities, including
the amount of accrued expenses and reserves; (b) any allocation
of the same to a given class; and (c) whether the same are
allocable to one or more classes. The liabilities so allocated
to a class are herein referred to as "liabilities belonging to"
such class. Any liabilities which are not readily attributable
to any particular class of the Corporation's Common Stock shall
be allocable among any one or more of the classes of the
Corporation's Common Stock in such manner and on such basis as
the Board of Directors, in its sole discretion, shall deem fair
and equitable. The power to make such allocations may be
delegated by the Board of Directors from time to time to one or
more of the officers of the Corporation.
4. Shares of a class of the Corporation's Common Stock
shall be entitled to such dividends and distributions, in stock
or in cash or both, as may be declared from time to time by the
Board of Directors, acting in its sole discretion, with respect
to such class; provided, however, that dividends and
distributions on shares of a class of the Corporation's Common
Stock shall be paid only out of the lawfully available "assets
belonging to" such class as such phrase is defined in this
Article IV.
5. In the event of the liquidation or dissolution of the
Corporation, stockholders of a class of the Corporation's Common
Stock shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to
stockholders, but other than general assets not belonging to any
particular class, the assets belonging to such class, and the
assets so distributable to the holders of any class of the
Corporation's Common Stock shall be distributed among such
holders in proportion to the number of shares of such class of
the Corporation's Common Stock held by them and recorded on the
books of the Corporation. In the event that there are any
general assets not belonging to any particular class of the
Corporation's Common Stock and available for distribution, such
distribution shall be made to the holders of all classes of the
Corporation's Common Stock in proportion to the net asset values
of the respective classes of the Corporation's Common Stock
determined as set forth in the Bylaws of the Corporation.
6. Each share of each class of Common Stock of the
Corporation now or hereafter issued shall be subject to
redemption by the stockholders of the Corporation and, subject
to the suspension of such right of redemption as provided in the
Bylaws, each holder of shares of any class of Common Stock of
the Corporation, upon request to the Corporation accompanied by
surrender of the appropriate stock certificate or certificates,
if any, in proper form for transfer and after complying with any
other redemption procedures established by the Board of
Directors, shall be entitled to require the Corporation to
redeem all or any part of the shares of such class of Common
Stock standing in the name of such holder on the books of the
Corporation at the net asset value of such shares. In the event
that no certificates have been issued to the holder, the Board
of Directors may require the submission of a stock power with an
appropriate signature guarantee. All shares of any class of its
Common Stock redeemed by the Corporation shall be deemed to be
cancelled and restored to the status of authorized but unissued
shares. The method of computing the net asset value of shares
of each class of Common Stock of the Corporation for purposes of
the issuance and sale, or redemption, thereof, as well as the
time as of which such net asset value shall be computed, shall
be as set forth in the Bylaws. Payment of the net asset value
of each share of each class of Common Stock of the Corporation
surrendered to it for redemption shall be made by the
Corporation within seven (7) days after surrender of such stock
to the Corporation for such purpose, or within such other
reasonable period as may be determined from time to time by the
Board of Directors. The Board of Directors of the Corporation
may, upon reasonable notice to the stockholders of the
Corporation, impose a fee for the privilege of redeeming shares,
such fee to be not in excess of two percent (2.0%) of the
proceeds of any such redemption. The Board shall have
discretionary authority to rescind the imposition of any such
fee and to reimpose the redemption fee from time to time upon
reasonable notice. Any fee so imposed shall be uniform as to
all stockholders to the extent required by the Investment
Company Act of 1940.
7. If, at any time when a request for transfer or
redemption of the shares of any class of Common Stock is
received by the Corporation or its agent, the value (computed as
set forth in the Bylaws) of the shares of such class in a
stockholder's account is less than One Thousand Dollars
($1,000.00), after giving effect to such transfer or redemption,
the Corporation may cause the remaining shares of such class in
such stockholder's account to be redeemed in accordance with
such procedures as the Board of Directors shall adopt.
8. Each holder of shares of the Corporation's Common
Stock, irrespective of the class, may, upon request to the
Corporation accompanied by surrender of the appropriate stock
certificate or certificates, if any, in proper form for transfer
and after complying with any other conversion procedures
established by the Board of Directors, convert such shares into
shares of any other class of the Corporation's Common Stock on
the basis of their relative net asset values (determined in
accordance with the Bylaws of the Corporation) less a conversion
charge or discount determined by the Board of Directors. Any
fee so imposed shall be uniform as to all stockholders to the
extent required by the Investment Company Act of 1940.
9. No holder of shares of any class of Common Stock of
the Corporation shall, as such holder, have any right to
purchase or subscribe for any shares of any class of the Common
Stock of the Corporation which it may issue or sell (whether out
of the number of shares authorized by these Articles of
Incorporation, or out of any shares of any class of Common Stock
of the Corporation acquired by it after the issue thereof, or
otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
ARTICLE V
The number of directors constituting the Board of Directors
shall initially be three (3), and the names of the initial directors are
Ted D. Kellner, Thomas W. Mount and Donald S. Wilson. Thereafter, the
number of directors shall be such number as is fixed from time to time by
the Bylaws.
ARTICLE VI
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration agreements providing for the
management and supervision of the investments of the Corporation, the
furnishing of advice to the Corporation with respect to the desirability
of investing in, purchasing or selling securities or other property and
the furnishing of clerical and administrative services to the Corporation.
Such agreements shall contain such other terms, provisions and conditions
as the Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate custodians, transfer agents,
registrars and/or disbursing agents for the stock and assets of the
Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such custodian, transfer agent,
registrar and/or disbursing agent.
ARTICLE VII
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the stockholders:
A. The Corporation may issue and sell shares of any class of
its own Common Stock in such amounts and on such terms and conditions, for
such purposes and for such amount or kind of consideration now or
hereafter permitted by the laws of the State of Maryland, the Bylaws and
these Articles of Incorporation, as its Board of Directors may determine;
provided, however, that the consideration per share to be received by the
Corporation upon the sale of any shares of any class of its Common Stock
shall not be less than the net asset value per share of such class of
Common Stock outstanding at the time as of which the computation of said
net asset value shall be made.
B. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders for the purchase of shares
of any class of Common Stock and may, in addition, require such orders to
be in such minimum amounts as it shall determine.
C. The holders of any fractional shares of any class Common
Stock shall be entitled to the payment of dividends on such fractional
shares, to receive the net asset value thereof upon redemption, to share
in the assets of the Corporation upon liquidation and to exercise voting
rights with respect thereto.
D. The Board of Directors shall have full power in accordance
with good accounting practice: (a) to determine what receipts of the
Corporation shall constitute income available for payment of dividends and
what receipts shall constitute principal and to make such allocation of
any particular receipt between principal and income as it may deem proper;
and (b) from time to time, in its discretion (i) to determine whether any
and all expenses and other outlays paid or incurred (including any and all
taxes, assessments or governmental charges which the Corporation may be
required to pay or hold under any present or future law of the United
States of America or of any other taxing authority therein) shall be
charged to or paid from principal or income or both, and (ii) to apportion
any and all of said expenses and outlays, including taxes, between
principal and income.
E. The Board of Directors shall have the power to determine
from time to time whether and to what extent and at what time and places
and under what conditions and regulations the books, accounts and
documents of the Corporation or any of them, shall be open to the
inspection of stockholders, except as otherwise provided by applicable
law; and except as so provided, no stockholder shall have any right to
inspect any book, account or document of the Corporation unless authorized
to do so by resolution of the Board of Directors.
ARTICLE VIII
The address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
ARTICLE IX
The address of the initial registered office is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202.
ARTICLE X
The name of the initial registered agent at such address is The
Corporation Trust Incorporated, a Maryland corporation.
ARTICLE XI
The name and address of the sole incorporator is:
Name Address
Richard L. Teigen c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
IN WITNESS WHEREOF, the undersigned incorporator who executed
the foregoing Articles of Incorporation hereby acknowledges the same to be
his act and further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material respects
under the penalties of perjury.
Dated this 3rd day of September, 1996.
Richard L. Teigen
Sole Incorporator
BYLAWS
OF
FMI FUNDS, INC.
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of stockholders shall be
held at such location as the Board of Directors shall direct.
Section 2. Annual Meeting.
(a) The annual meeting of stockholders for the election of
directors and the transaction of such other business as may properly come
before it, if the annual meeting shall be held, shall be held during the
month of December of each year (or during such other month as the Board of
Directors shall determine), commencing in 1997, at such date and time as
shall be fixed by the Board of Directors and stated in the notice of such
meeting, but in no event more than one hundred twenty (120) days after the
occurrence of the event requiring the meeting to elect directors. Any
business of the corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business
as is specifically required by statute to be stated in the notice.
(b) The corporation shall not be required to hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Investment Company Act of 1940.
Section 3. Special Meeting. Special meetings of the stockholders may
be called by the board of directors, the president, any vice president, or
the secretary, and shall be called by the secretary upon the written
request of the holders of shares entitled to not less than ten percent
(10%) of all the votes entitled to be cast at such meeting; provided that
such holders prepay the costs to the corporation of preparing and mailing
the notice of the meeting. The business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10) days nor more
than ninety (90) days before the date of every stockholders' meeting, the
secretary shall give to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of such meeting under
applicable law, written or printed notice stating the time and place of
the meeting, and in the case of a special meeting (or where required by
applicable law) the purpose or purposes for which the meeting is called,
either by mail, by presenting it to him personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to
the stockholder at his post office address as it appears on the records of
the corporation, with postage thereon prepaid.
Section 5. Quorum. At any meeting of stockholders the presence in
person or by proxy of stockholders entitled to cast a majority of the
votes thereat shall constitute a quorum; but this section shall not affect
any requirement under statute or under the charter for the vote necessary
for the adoption of any measure. If at any meeting a quorum is not
present or represented, the chairman of the meeting or the holders of a
majority of the stock present or represented may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
Section 6. Stock Entitled to Vote. Each issued share of each class of
stock shall be entitled to vote at any meeting of stockholders except
shares owned, other than in a fiduciary capacity, by the corporation or by
another corporation in which the corporation owns shares entitled to cast
a majority of all the votes entitled to be cast by all shares outstanding
and entitled to vote of such corporation.
Section 7. Voting. Each outstanding share of each class of stock
entitled to vote at a meeting of stockholders shall be entitled to one
vote on each matter submitted to a vote. In all elections for directors
every stockholder shall have the right to vote the shares of each class
owned of record by him for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of cumulative
voting. A stockholder may vote the shares owned of record by him either
in person or by proxy executed in writing by the stockholder or by his
authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from its date unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize any action which may properly come before
the meeting, unless a greater number is required by statute or by the
charter.
Section 8. Informal Action. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and such
consent is filed with the records of the corporation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the corporation shall
be three (3). By vote of a majority of the entire board of directors, the
number of directors fixed by the charter or by these bylaws may be
increased or decreased from time to time to not more than fifteen nor less
than three, but the tenure of office of a director shall not be affected
by any decrease in the number of directors so made by the board.
Section 2. Election and Qualification. Until the first annual meeting
of stockholders and until successors are duly elected and qualify, the
board of directors shall consist of the persons named as such in the
charter. At the first annual meeting of stockholders, the stockholders
shall elect directors to hold office until their successors are elected
and qualify. A director need not be a stockholder of the corporation, but
must be eligible to serve as a director of a registered investment company
under the Investment Company Act of 1940.
Section 3. Vacancies. Any vacancy on the board of directors occurring
between stockholders' meetings called for the purpose of electing
directors may be filled, if immediately after filling any such vacancy at
least two-thirds of the directors then holding office shall have been
elected to such office at an annual or special meeting of stockholders, in
the following manner: (i) for a vacancy occurring other than by reason of
an increase in directors, by a majority of the remaining members of the
board, although such majority is less than a quorum; and (ii) for a
vacancy occurring by reason of an increase in the number of directors, by
action of a majority of the entire board. A director elected by the board
to fill a vacancy shall be elected to hold office until the next annual
meeting of stockholders or until his successor is elected and qualified.
If by reason of the death, disqualification or bona fide resignation of
any director or directors, more than sixty percent (60%) of the members of
the board of directors are interested persons of the corporation, as
defined in the Investment Company Act of 1940, such vacancy shall be
filled within thirty (30) days if it may be filled by the board, or within
sixty (60) days if a vote of stockholders is required to fill such
vacancy; provided that such vacancy may be filled within such longer
period as the Securities and Exchange Commission may prescribe by rules
and regulations, upon its own motion or by order upon application. In the
event that at any time less than a majority of the directors were elected
by the stockholders, the board or proper officer shall forthwith cause to
be held as promptly as possible, and in any event within sixty (60) days,
a meeting of the stockholders for the purpose of electing directors to
fill any existing vacancies in the board, unless the Securities and
Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the corporation shall
be managed under the direction of the board of directors, which may
exercise all of the powers of the corporation, except such as are by law
or by the charter or by these bylaws conferred upon or reserved to the
stockholders.
Section 5. Removal.
(a) At any meeting of stockholders, duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors
to fill any resulting vacancies for the unexpired terms of removed
directors.
(b) Notwithstanding any other provisions of these bylaws, the
secretary of the corporation shall promptly call a special meeting of
stockholders for the purpose of voting upon the question of removal of any
director upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting.
(c) Whenever ten or more stockholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the corporation's secretary in writing,
stating that they wish to communicate with other stockholders with a view
to obtaining signatures to a request for a meeting pursuant to subsection
(b) above and accompanied by a form of communication and request which
they wish to transmit, the secretary shall within five business days after
such application either: (1) afford to such applicants access to a list
of the names and addresses of all stockholders as recorded on the books of
the corporation; or (2) inform such applicants as to the approximate
number of stockholders of record and the approximate cost of mailing to
them the proposed communication and form of request.
(d) If the secretary elects to follow the course specified in
clause (2) of subsection (c) above, the secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all stockholders of record at their
addresses as recorded on the books, unless within five (5) business days
after such tender the secretary shall mail to such applicants and file
with the Securities and Exchange Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority
of the board of directors to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or
would be in violation of applicable law, and specifying the basis of such
opinion.
(e) After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the board of directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
Section 6. Place of Meetings. Meetings of the board of directors,
regular or special, may be held at any place in or out of the State of
Maryland as the board may from time to time determine or as may be
specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The first meeting of
each newly elected board of directors shall be held without notice
immediately after and at the same general place as the annual meeting of
the stockholders, for the purpose of organizing the board, electing
officers and transacting any other business that may properly come before
the meeting.
Section 8. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and place as shall from
time to time be determined by the board.
Section 9. Special Meetings. Special meetings of the board of
directors may be called at any time either by the board, the president, a
vice president or a majority of the directors in writing with or without a
meeting. Notice of special meetings shall either be mailed by the
secretary to each director at least three (3) days before the meeting or
shall be given personally or telegraphed to each director at least one (1)
day before the meeting. Such notice shall set forth the time and place of
such meeting but need not, unless otherwise required by law, state the
purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At all meetings of
the board of directors a majority of the entire board shall constitute a
quorum for the transaction of business, and the action of a majority of
the directors present at any meetings at which a quorum is present shall
be the action of the board of directors unless the concurrence of a
greater proportion is required for such action by statute, the articles of
incorporation or these bylaws. If at any meeting a quorum is not present,
a majority of the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a
quorum is present. Members of the board of directors or a committee of
the board may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time; provided, however, that a
director may not participate in a meeting by means of a conference
telephone or similar communications equipment if the purpose of the
meeting is to approve the corporation's investment advisory agreement
and/or to approve the selection of the corporation's auditors, or if
participation in such a manner would otherwise violate the Investment
Company Act of 1940 or other applicable laws. Except as set forth in the
preceding sentence, participation in a meeting by these means constitutes
presence in person at the meeting.
Section 11. Executive and Other Committees. The board of directors may
appoint from among its members an executive and other committees composed
of two (2) or more directors. The board may delegate to such committees in
the intervals between meetings of the board any of the powers of the board
to manage the business and affairs of the corporation, except the power
to: (i) declare dividends or distributions upon the stock of the
corporation; (ii) issue stock of the corporation; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend
the bylaws; (v) approve any merger or share exchange which does not
require stockholder approval; or (vi) take any action required by the
Investment Company Act of 1940 to be taken by the independent directors of
the corporation or by the full board of directors.
Section 12. Informal Action. Except as set forth in the following
sentence, any action required or permitted to be taken at any meeting of
the board of directors or of a committee of the board may be taken without
a meeting, if a written consent to such action is signed by all members of
the board or the committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the board or committee.
Notwithstanding the preceding sentence, no action may be taken by the
board of directors pursuant to a written consent with respect to the
approval of the corporation's investment advisory agreement, the approval
of the selection of the corporation's auditors, or any action required by
the Investment Company Act of 1940 or other applicable law to be taken at
a meeting of the board of directors to be held in person.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first meeting of each
newly elected board of directors there shall be elected a president, one
or more vice presidents, a secretary and a treasurer. The board may also
elect one or more assistant secretaries and assistant treasurers. No
officer need be a director. Any two or more offices, except the offices
of president and vice president, may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law, charter or these
bylaws to be executed, acknowledged or verified by two or more officers.
Each officer must be eligible to serve as an officer of a registered
investment company under the Investment Company Act of 1940. Nothing
herein shall preclude the employment of other employees or agents by the
corporation from time to time without action by the board.
Section 2. Term, Removal and Vacancies. The officers shall be elected
to serve until the next first meeting of a newly elected board of
directors and until their successors are elected and qualified. Any
officer may be removed by the board, with or without cause, whenever in
its judgment the best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the contractual rights, if
any, of the person so removed. A vacancy in any office shall be filled by
the board for the unexpired term.
Section 3. Bonding. Each officer and employee of the corporation who
singly or jointly with others has access to securities or funds of the
corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities shall be bonded
against larceny and embezzlement by a reputable fidelity insurance
company. Each such bond, which may be in the form of an individual bond,
a schedule or blanket bond covering the corporation's officers and
employees and the officers and employees of the investment adviser to the
corporation and other corporations to which said investment adviser also
acts as investment adviser, shall be in such form and for such amount
(determined at least annually) as the board of directors shall determine
in compliance with the requirements of Section 17(g) of the Investment
Company Act of 1940, as amended from time to time, and the rules,
regulations or orders of the Securities and Exchange Commission
thereunder.
Section 4. President. The president shall be the principal executive
officer of the corporation. He shall preside at all meetings of the
stockholders and directors, have general and active management of the
business of the corporation, see that all orders and resolutions of the
board of directors are carried into effect, and execute in the name of the
corporation all authorized instruments of the corporation, except where
the signing shall be expressly delegated by the board to some other
officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if there be more
than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall have such
other duties and powers as the board may from time to time prescribe or
the president delegate.
Section 6. Secretary and Assistant Secretaries. The secretary shall
give notice of, attend and record the minutes of meetings of stockholders
and directors, keep the corporate seal and, when authorized by the board,
affix the same to any instrument requiring it, attesting to the same by
his signature, and shall have such further duties and powers as are
incident to his office or as the board may from time to time prescribe.
The assistant secretary, if any, or, if there be more than one, the
assistant secretaries in the order determined by the board, shall in the
absence or disability of the secretary, perform the duties and exercise
the powers of the secretary, and shall have such other duties and powers
as the board may from time to time prescribe or the secretary delegate.
Section 7. Treasurer and Assistant Treasurers. The treasurer shall be
the principal financial and accounting officer of the corporation. He
shall be responsible for the custody and supervision of the corporation's
books of account and subsidiary accounting records, and shall have such
further duties and powers as are incident to his office or as the board of
directors may from time to time prescribe. The assistant treasurer, if
any, or, if there be more than one, the assistant treasurers in the order
determined by the board, shall in the absence or disability of the
treasurer, perform all duties and exercise the powers of the treasurer,
and shall have such other duties and powers as the board may from time to
time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION
TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and executive officers as
such shall not receive any salary for their services or reimbursement for
expenses from the corporation; provided that the corporation may pay fees
in such amounts and at such times as the board of directors shall
determine to directors who are not interested persons of the corporation
for attendance at meetings of the board of directors. Clerical employees
shall receive compensation for their services from the corporation in such
amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and Sales. No
affiliated person of the corporation, as defined in the Investment Company
Act of 1940, or affiliated person of such person, shall, except as
permitted by Section 17(e) of the Act, or the rules, regulations or orders
of the Securities and Exchange Commission thereunder, (i) acting as agent,
accept from any source any compensation for the purchase or sale of any
property or securities to or for the corporation or any controlled company
of the corporation, as defined in such Act, or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction.
Section 3. Transactions with Affiliated Person. No affiliated person
of the corporation, as defined in the Investment Company Act of 1940, or
affiliated person of such person shall knowingly (i) sell any security or
other property to the corporation or to any company controlled by the
corporation, as defined in the Act, except shares of stock of the
corporation or securities of which such person is the issuer and which are
part of a general offering to the holders of a class of its securities,
(ii) purchase from the corporation or any such controlled company any
security or property except shares of stock of the corporation or
securities of which such person is the issuer, (iii) borrow money or other
property from the corporation or any such controlled company, or (iv)
acting as a principal effect any transaction in which the corporation or
controlled company is a joint or joint and several participant with such
person; provided, however, that this section shall not apply to any
transaction permitted by Sections 17(a), (b), (c), (d) or 21(b) of the
Investment Company Act of 1940 or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, and shall not prohibit the
joint participation by the corporation and an affiliate in a fidelity bond
arrangement.
Section 4. Investment Adviser. The corporation shall employ one or
more investment advisers, the employment of which shall be pursuant to
written agreements in accordance with Section 15 of the Investment Company
Act of 1940, as amended from time to time.
ARTICLE V
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Certificates. Each holder of shares of any class of stock
of the corporation shall be entitled to a certificate or certificates, in
such form as the board of directors shall from time to time approve,
representing and certifying the number of shares of such class of stock
owned by him in the corporation. Each certificate shall be signed,
manually or by facsimile signature, by the president or a vice president,
countersigned, manually or by facsimile signature, by the secretary, an
assistant secretary, the treasurer or an assistant treasurer and sealed
with the corporate seal or facsimile thereof. In case any officer who has
signed any certificate, or whose facsimile signature appears thereon,
ceases to be an officer of the corporation before the certificate is
issued, the certificate may nevertheless be issued with the same effect as
if the officer had not ceased to be such officer as of the date of its
issue. Each certificate shall contain on its face or back a full
statement or summary of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms of each class of stock of the
corporation or shall state that the corporation will furnish such
information to the stockholder on request and without charge. Any
certificate representing stock which is restricted or limited as to
transferability also shall have a full statement of such restriction or
limitation plainly stated thereon or shall state that the corporation will
furnish such information to the stockholder on request and without charge.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been
lost, stolen, destroyed or mutilated (or may delegate such authority to
one or more officers of the corporation) upon the making of an affidavit
of that fact by the person claiming the certificate to be lost, stolen,
destroyed or mutilated. The board or such officer may, in its or his
discretion, require the owner of such certificate or his legal
representative to give bond with sufficient surety to the corporation to
indemnify it against any loss or claim which may arise or expense which
may be incurred by reason of the issuance of a new certificate.
Section 3. Stock Ledger. The corporation shall maintain at its office
or at the office of its principal transfer agent, if any, an original or
duplicate stock ledger containing the names and addresses of all
stockholders and the number of shares of each class of stock held by each
stockholder.
Section 4. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as
such, as the owner of shares for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
Maryland.
Section 5. Transfer Agent and Registrar. The corporation may maintain
one or more transfer offices or agencies, each in charge of a transfer
agent designated by the board of directors, where the shares of each class
of stock of the corporation shall be transferable. The corporation may
also maintain one or more registry offices, each in charge of a registrar
designated by the board, where the shares of such classes of stock shall
be registered.
Section 6. Transfers of Stock. Upon surrender to the corporation or a
transfer agent of a certificate for shares of any class duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 7. Fixing of Record Dates and Closing of Transfer Books. The
board of directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment
of any dividend or the allotment of any rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in
any case, shall be not more than ninety (90) days, and in case of a
meeting of stockholders not less than ten (10) days, prior to the date on
which the particular action requiring such determination of stockholders
is to be taken. In lieu of fixing a record date, the board may provide
that the stock transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the stock transfer books are
closed or a record date is fixed for the purpose of determining
stockholders entitled to vote at a meeting of stockholders, such books
shall be closed for at least ten (10) days immediately preceding such
action.
ARTICLE VI
ACCOUNTS, REPORTS, CUSTODIAN AND INVESTMENT ADVISER
Section 1. Inspection of Books. The board of directors shall
determine from time to time whether, and, if allowed, when and under what
conditions and regulations the accounts and books of the corporation
(except such as may by statute be specifically open to inspection) or any
of them, shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be limited accordingly.
Section 2. Reliance on Records. Each director and officer shall, in
the performance of his duties, be fully protected in relying in good faith
on the books of account or reports made to the corporation by any of its
officials or by an independent public accountant.
Section 3. Preparation and Maintenance of Accounts, Records and
Statements. The president, a vice president or the treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the stockholders and filed within twenty (20) days thereafter at the
principal office of the corporation. If the corporation is not required
to hold an annual meeting of stockholders, the statement of affairs shall
be placed on file at the corporation's principal office within one hundred
twenty (120) days after the end of the fiscal year. The proper officers
of the corporation shall also prepare, maintain and preserve or cause to
be prepared, maintained and preserved the accounts, books and other
documents required by Section 2-111 of the Maryland General Corporation
Law and Section 31 of the Investment Company Act of 1940 and shall prepare
and file or cause to be prepared and filed the reports required by Section
30 of such Act. No financial statement shall be filed with the Securities
and Exchange Commission unless the officers or employees who prepared or
participated in the preparation of such financial statement have been
specifically designated for such purpose by the board of directors.
Section 4. Auditors. No independent public accountant shall be
retained or employed by the corporation to examine, certify or report on
its financial statements for any fiscal year unless such selection: (i)
shall have been approved by a majority of the entire board of directors
within thirty (30) days before or after the beginning of such fiscal year
or before the annual ratification by the stockholders; (ii) shall have
been ratified by the stockholders, provided that any vacancy occurring
between such annual ratification due to the death or resignation of such
accountant may be filled by the board of directors; and (iii) shall
otherwise meet the requirements of Section 32 of the Investment Company
Act of 1940.
Section 5. Custodianship. All securities owned by the corporation and
all cash, including, without limiting the generality of the foregoing, the
proceeds from sales of securities owned by the corporation and from the
issuance of shares of the capital stock of the corporation, payments of
principal upon securities owned by the corporation, and distributions in
respect of securities owned by the corporation which at the time of
payment are represented by the distributing corporation to be capital
distributions, shall be held by a custodian or custodians which shall be a
bank, as that term is defined in the Investment Company Act of 1940,
having capital, surplus and undivided profits aggregating not less than
$2,000,000. The terms of custody of such securities and cash shall
include provisions to the effect that the custodian shall deliver
securities owned by the corporation only (a) upon sales of such securities
for the account of the corporation and receipt by the custodian of payment
therefor, (b) when such securities are called, redeemed or retired or
otherwise become payable, (c) for examination by any broker selling any
such securities in accordance with "street delivery" custom, (d) in
exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other
securities, (f) upon exercise of subscription, purchase or other similar
rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, (h)
for the purpose of redeeming in kind shares of the capital stock of the
corporation, or (i) for other proper corporate purposes. Such terms of
custody shall also include provisions to the effect that the custodian
shall hold the securities and funds of the corporation in a separate
account or accounts and shall have sole power to release and deliver any
such securities and draw upon any such account, any of the securities or
funds of the corporation only on receipt by such custodian of written
instruction from one or more persons authorized by the board of directors
to give such instructions on behalf of the corporation, and that the
custodian shall deliver cash of the corporation required by this Section 5
to be deposited with the custodian only upon the purchase of securities
for the portfolio of the corporation and the delivery of such securities
to the custodian, for the purchase or redemption of shares of the capital
stock of the corporation, for the payment of interest, dividends, taxes,
management or supervisory fees or operating expenses, for payments in
connection with the conversion, exchange or surrender of securities owned
by the corporation, or for other proper corporate purposes. Upon the
resignation or inability to serve of any such custodian the corporation
shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the corporation held by the custodian
to be delivered directly to the successor custodian, and (c) in the event
that no successor custodian can be found, submit to the stockholders of
the corporation, before permitting delivery of such cash and securities to
anyone other than a successor custodian, the question whether the
corporation shall be dissolved or shall function without a custodian;
provided, however, that nothing herein contained shall prevent the
termination of any agreement between the corporation and any such
custodian by the affirmative vote of the holders of a majority of all the
shares of the capital stock of the corporation at the time outstanding and
entitled to vote. Upon its resignation or inability to serve, the
custodian may deliver any assets of the corporation held by it to a
qualified bank or trust company selected by it, such assets to be held
subject to the terms of custody which governed such retiring custodian,
pending action by the corporation as set forth in this Section 5.
Section 6. Termination of Custodian Agreement. Any employment
agreement with a custodian shall be terminable on not more than sixty (60)
days' notice in writing by the board of directors or the custodian and
upon any such termination the custodian shall turn over only to the
succeeding custodian designated by the board of directors all funds,
securities and property and documents of the corporation in its
possession.
Section 7. Checks and Requisitions. Except as otherwise authorized by
the board of directors, all checks and drafts for the payment of money
shall be signed in the name of the corporation by a custodian, and all
requisitions or orders for the payment of money by a custodian or for the
issue of checks and drafts therefore, all promissory notes, all
assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board
of directors) at least one of which shall be an officer. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to
the order of a custodian or its nominee by the treasurer or president or
by such other person or persons as shall be thereto authorized by the
board of directors.
Section 8. Investment Advisory Contract. Any investment advisory
contract in effect after the first annual meeting of stockholders of the
corporation, to which the corporation is or shall become a party, whereby,
subject to the control of the board of directors of the corporation, the
investment portfolio with respect to any class of Common Stock of the
corporation shall be managed or supervised by the other party to such
contract, shall be effective and binding only upon the affirmative vote of
a majority of the outstanding voting securities of such class of Common
Stock of the corporation (as defined in the Investment Company Act of
1940), and the investment advisory contract currently in effect with
respect to any class of Common Stock shall be submitted to the holders of
shares of such class of Common Stock for ratification by the affirmative
vote of such majority. Any investment advisory contract to which the
corporation shall be a party whereby, subject to the control of the board
of directors of the corporation, the investment portfolio with respect to
any class of Common Stock of the corporation shall be managed or
supervised by the other party to such contract, shall provide, among other
things, that such contract cannot be assigned. Such investment advisory
contract shall prohibit the other party thereto from making short sales of
shares of capital stock of the corporation; and such investment advisory
contract shall prohibit such other party from purchasing shares otherwise
than for investment, and shall require such other party to advise the
corporation of any sales of shares of the capital stock of the corporation
made by such person or organization less than two months after the date of
any purchase by him or it of shares of the capital stock of the
corporation. Unless any such contract shall expressly otherwise provide,
any provisions therein for the termination thereof by action of the board
of directors of the corporation shall be construed to require that such
termination can be accomplished only upon the vote of a majority of the
entire board.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The registered office of the corporation in the
State of Maryland shall be in the City of Baltimore. The corporation may
also have offices at such other places within and without the State of
Maryland as the board of directors may from time to time determine. Except
as otherwise required by statute, the books and records of the corporation
may be kept outside the State of Maryland.
Section 2. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, and the words "Corporate Seal" and "Maryland".
The seal may be used by causing it or a facsimile thereof to be impressed,
affixed, reproduced or otherwise.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any notice of the
time, place or purpose of any meeting of stockholders or directors is
required to be given under the statute, the charter or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to
such notice and filed with the records of the meeting, either before or
after the holding thereof, or actual attendance at the meeting of
stockholders in person or by proxy or at the meeting of directors in
person, shall be deemed equivalent to the giving of such notice to such
person. No notice need be given to any person with whom communication is
made unlawful by any law of the United States or any rule, regulation,
proclamation or executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered by the board of
directors, the president shall have full power and authority, in the name
and on behalf of the corporation, (i) to attend, act and vote at any
meeting of stockholders of any company in which the corporation may own
shares of stock of record, beneficially (as the proxy or attorney-in-fact
of the record holder) or of record and beneficially, and (ii) to give
voting directions to the record stockholder of any such stock beneficially
owned. At any such meeting, he shall possess and may exercise any and all
rights and powers incident to the ownership of such shares which, as the
holder or beneficial owner and proxy of the holder thereof, the
corporation might possess and exercise if personally present, and may
delegate such power and authority to any officer, agent or employee of the
corporation.
Section 6. Dividends. Dividends upon any class of stock of the
corporation, subject to the provisions of the charter, if any, may be
declared by the board of directors in any lawful manner. The source of
each dividend payment shall be disclosed to the stockholders receiving
such dividend, to the extent required by the laws of the State of Maryland
and by Section 19 of the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Section 8. Amendments.
A. These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the stockholders by affirmative vote of not less
than a majority of the shares of all classes of stock present or
represented at any annual or special meeting of the stockholders at which
a quorum is in attendance.
B. These bylaws may also be altered, amended or repealed and
new bylaws may be adopted by the Board of Directors by affirmative vote of
a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the stockholders shall be
amended or repealed by the Board of Directors if the bylaws so adopted so
provides.
C. Any action taken or authorized by the stockholders or by
the Board of Directors, which would be inconsistent with the bylaws then
in effect but is taken or authorized by affirmative vote of not less than
the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be
given the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as was necessary to permit the specific
action so taken or authorized.
Section 9. Reports to Stockholders. The books of account of the
corporation shall be examined by an independent firm of public accountants
at the close of each annual fiscal period of the corporation and at such
other times, if any, as may be directed by the Board of Directors of the
corporation. A report to the stockholders based upon each such
examination shall be mailed to each stockholder of the corporation of
record on such date with respect to each report as may be determined by
the Board of Directors at his address as the same appears on the books of
the corporation. Each such report shall include the financial information
required to be transmitted to stockholders by rules or regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940 and shall be in such form as the Board of Directors shall determine
pursuant to rules and regulations of the Securities and Exchange
Commission.
Section 10. Information to Accompany Dividends. At the time of the
payment by the corporation of any dividend to the holders of any class of
stock of the corporation, each stockholder to whom such dividend is paid
shall be notified of the account or accounts from which it is paid and the
amount thereof paid from each such account.
ARTICLE VIII
SALES, REDEMPTION AND
NET ASSET VALUE OF SHARES
Section 1. Sales of Shares. Shares of any class of Common Stock of
the corporation shall be sold by it for the net asset value per share of
such class of Common Stock outstanding at the time as of which the
computation of said net asset value shall be made as hereinafter provided
in these bylaws.
Section 2. Periodic Investment and Dividend Reinvestment Plans. The
corporation acting by and through the Board of Directors shall have the
right to adopt and to offer to the holders of each class of stock and to
the public a periodic investment plan and an automatic reinvestment of
dividend plan subject to the limitations and restrictions imposed thereon
and as set forth in the Investment Company Act of 1940 and any rule or
regulation adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of shares of any
class of stock of the corporation issued in whole or in part in exchange
for securities, there may, at the discretion of the board of directors of
the corporation, be included in the value of said securities, for the
purpose of determining the number of shares of such class stock of the
corporation issuable in exchange therefor, the amount, if any, of
brokerage commissions (not exceeding an amount equal to the rates payable
in connection with the purchase of comparable securities on the New York
Stock Exchange) or other similar costs of acquisition of such securities
paid by the holder of said securities in acquiring the same.
Section 4. Redemption of Shares. Each share of each class of Common
Stock of the corporation now or hereafter issued shall be subject to
redemption, as provided in the Articles of Incorporation of the
corporation.
Section 5. Suspension of Right of Redemption. The Board of Directors
of the corporation may suspend the right of the holders of any class of
Common Stock of the corporation to require the corporation to redeem
shares of such class:
(1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings, or (b) during which trading on the New York Stock
Exchange is restricted;
(2) for any period during which an emergency, as defined
by rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (a) disposal by
the corporation of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for the
corporation fairly to determine the value of its net assets; or
(3) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the corporation.
Section 6. Computation of Net Asset Value. For purposes of these
bylaws, the following rules shall apply:
A. The net asset value of each share of each class of
Common Stock of the corporation shall be determined at such time
or times as may be disclosed in the then currently effective
Prospectus relating to such class of Common Stock of this
corporation. The Board of Directors may also, from time to time
by resolution, designate a time or times intermediate of the
opening and closing of trading on the New York Stock Exchange on
each day that said Exchange is open for trading as of which the
net asset value of each share of each class of Common Stock of
the corporation shall be determined or estimated.
Any determination or estimation of net asset value as
provided in this subparagraph A shall be effective at the time
as of which such determination or estimation is made.
The net asset value of each share of each class of Common
Stock of the corporation for purposes of the issue of such class
of Common Stock shall be the net asset value which becomes
effective as provided in this Subparagraph A, next succeeding
receipt of the subscription to such share of such class Common
Stock. The net asset value of each share of each class of
Common Stock of the corporation tendered for redemption shall be
the net asset value which becomes effective as provided in this
Subparagraph A, next succeeding the tender of such share of such
class of Common Stock for redemption.
B. The net asset value of each share of each class of
Common Stock of the corporation, as of the close of business on
any day, shall be the quotient obtained by dividing the value at
such close of the net assets belonging to such class (meaning
the assets belonging to such class and any other assets
allocated to such class less the liabilities belonging to such
class and any other liabilities allocated to such class
excluding capital and surplus) of the corporation by the total
number of shares of such class outstanding at such close.
(i) The assets belonging to any class of Common
Stock shall be that portion of the total assets of the
corporation as determined in accordance with the
provisions of Article IV of the Articles of
Incorporation of the corporation. The assets of the
corporation shall be deemed to include (a) all cash on
hand, on deposit, or on call, (b) all bills and notes
and accounts receivable, (c) all shares of stock and
subscription rights and other securities owned or
contracted for by the corporation, other than its own
common stock, (d) all stock and cash dividends and
cash distributions, to be received by the corporation,
and not yet received by it but declared to
stockholders of record on a date on or before the date
as of which the net asset value is being determined,
(e) all interest accrued on any interest-bearing
securities owned by the corporation, and (f) all other
property of every kind and nature including prepaid
expenses; the value of such assets to be determined in
accordance with the corporation's registration
statement filed with the Securities and Exchange
Commission.
(ii) The liabilities belonging to any class of
Common Stock shall be that portion of the total
liabilities of the corporation as determined in
accordance with the provisions of Article IV of the
Articles of Incorporation of the corporation. The
liabilities of the corporation shall be deemed to
include (a) all bills and notes and accounts payable,
(b) all administration expenses payable and/or accrued
(including investment advisory fees), (c) all
contractual obligations for the payment of money or
property including the amount of any unpaid dividend
declared upon the corporation's stock and payable to
stockholders of record on or before the day as of
which the value of the corporation's stock is being
determined, (d) all reserves, if any, authorized or
approved by the Board of Directors for taxes,
including reserves for taxes at current rates based on
any unrealized appreciation in the value of the assets
of the corporation, and (e) all other liabilities of
the corporation of whatever kind and nature except
liabilities represented by outstanding capital stock
and surplus of the corporation.
(iii) For the purposes hereof: (a) shares of
each class of Common Stock subscribed for shall be
deemed to be outstanding as of the time of acceptance
of any subscription and the entry thereof on the books
of the corporation and the net price thereof shall be
deemed to be an asset belonging to such class; and (b)
shares of each class of Common Stock surrendered for
redemption by the corporation shall be deemed to be
outstanding until the time as of which the net asset
value for purposes of such redemption is determined or
estimated.
C. The net asset value of each share of each class of
Common Stock of the corporation, as of any time other than the
close of business on any day, may be determined by applying to
the net asset value as of the close of business on the preceding
business day, computed as provided in Paragraph B of this
Section of these bylaws, such adjustments as are authorized by
or pursuant to the direction of the Board of Directors and
designed reasonably to reflect any material changes in the
market value of securities and other assets held and any other
material changes in the assets or liabilities of the corporation
and in the number of its outstanding shares which shall have
taken place since the close of business on such preceding
business day.
D. In addition to the foregoing, the Board of Directors
is empowered, in its absolute discretion, to establish other
bases or times, or both, for determining the net asset value of
each share of each class of the Common Stock of the corporation.
INVESTMENT ADVISORY AGREEMENT
Agreement made this day of , 1996 between
FMI Funds, Inc., a Maryland corporation (the "Company"), and Fiduciary
Management, Inc., a Wisconsin corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is in the process of registering with the
Securities and Exchange Commission under the Investment Company Act of
1940 (the "Act") as an open-end management investment company consisting
initially of one series FMI Focus Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in this Agreement. The Adviser hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the directors of the Company may determine, direct the purchase and
sale of investment securities in the day-to-day management of the Fund.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized,
have no authority to act for or represent the Company or the Fund in any
way or otherwise be deemed an agent of the Company or the Fund. However,
one or more shareholders, officers, directors or employees of the Adviser
may serve as directors and/or officers of the Company, but without
compensation or reimbursement of expenses for such services from the
Company. Nothing herein contained shall be deemed to require the Company
to take any action contrary to its Articles of Incorporation or By-Laws or
any applicable statute or regulation, or to relieve or deprive the
directors of the Company of their responsibility for, and control of, the
affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company or the Fund, shall furnish office space,
and all necessary office facilities, equipment and executive personnel for
managing the investments of the Fund. The Fund shall bear all expenses
initially incurred by it, provided that the total expenses borne by the
Fund, including the Adviser's fee but excluding all federal, state and
local taxes, interest, brokerage commissions and extraordinary items,
shall not in any year exceed that percentage of the average net assets of
the Fund for such year, as determined by valuations made as of the close
of each business day, which is the most restrictive percentage provided by
the state laws of the various states in which the Fund's shares are
qualified for sale or, if the states in which the Fund's shares are
qualified for sale impose no such restrictions, 2.75%. The expenses of
the Fund's operations borne by the Fund include by way of illustration and
not limitation, director's fees paid to those directors who are not
officers of the Company, the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Act (and amendments thereto), the expense of registering its shares with
the Securities and Exchange Commission and in the various states, payments
made pursuant to the Service and Distribution Plan, the printing and
distribution cost of prospectuses mailed to existing shareholders, the
cost of share certificates (if any), director and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, charges and expenses of dividend disbursing agents, registrars and
stock transfer agents and the cost of keeping all necessary shareholder
records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser for the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced
by the amount of such excess, subject to adjustment month by month during
the balance of the Company's fiscal year if accrued expenses thereafter
fall below the expense limitation.
4. Compensation of the Adviser. For the services and
facilities to be rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Company, through and on behalf of the Fund
shall pay to the Adviser an advisory fee, paid monthly, based on the
average net assets of the Fund, as determined by valuations made as of the
close of each business day of the month. The advisory fee shall be 1/12
of 1% (1% per annum) of such average net assets. For any month in which
this Agreement is not in effect for the entire month, such fee shall be
reduced proportionately on the basis of the number of calendar days during
which it is in effect and the fee computed upon the average net assets of
the business days during which it is so in effect.
5. Ownership of Shares of the Fund. Except in connection with
the initial capitalization of the Fund, the Adviser shall not take, and
shall not permit any of its shareholders, officers, directors or employees
to take, a long or short position in the shares of the Fund, except for
the purchase of shares of the Fund for investment purposes at the same
price as that available to the public at the time of purchase.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has permitted and is
permitting the Fund and the Company to use the name "FMI," it is
understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund and the Company will not
use such name if the Adviser ceases to be the Fund's sole investment
adviser. During the period that this Agreement is in effect, the Adviser
shall be the Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the directors of the Company in the manner
required by the Act, and, if required by the Act, by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the directors of the Company or by
a vote of the majority of the outstanding voting securities of the Fund,
as defined in the Act, upon giving sixty (60) days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any time upon
the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for two (2)
years from the date hereof and indefinitely thereafter, but only so long
as the continuance after such two (2) year period is specifically approved
annually by (i) the directors of the Company or by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act, and (ii) the directors of the Company in the manner required by
the Act, provided that any such approval may be made effective not more
than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC. FMI FUNDS, INC.
(the "Adviser") (the "Company")
By: By:
President President
CUSTODIAN AGREEMENT
THIS AGREEMENT made on __________________, 1996, between FMI
Funds,Inc., a Maryland corporation currently consisting of the FMI Focus
Fund (hereinafter called the ("Fund"), and FIRSTAR TRUST COMPANY, a
corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian"),
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of FMI Funds
Inc.
2. Names, Titles, and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
Additional Series. FMI Funds, Inc. is authorized to issue
separate series of shares of beneficial interest representing interests in
separate investment portfolios. The parties intend that each portfolio
established by the trust, now or in the future, be covered by the terms
and conditions of this agreement.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Fund. Custodian
shall make payments of cash to, or for the account of, the Fund from such
cash only:
(a) for the purchase of securities for the portfolio of the
Fund upon the delivery of such securities to Custodian, registered in the
name of the Fund or of the nominee of Custodian referred to in Section 7
or in proper form for transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon proper
instructions from the Fiduciary Focus Fund, Inc.;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without limitation
thereto, fees for legal, accounting, auditing and custodian services and
expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by or to
be delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution
of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c),
or (d) of this Subsection A, and also, in respect of item(e), upon receipt
of an officers' certificate specifying the amount of such payment, setting
forth the purpose for which such payment is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons
to whom such payment is to be made, provided, however, that an officers'
certificate need not precede the disbursement of cash for the purpose of
purchasing a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the Fund
upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities
alone or other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their terms
into other securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock
of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g), or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items.
In the event of any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Fund, or in the event that
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefore.
Custodian agrees to indemnify and hold harmless Fund from all charges,
expenses, assessments, and claims/liabilities (including counsel fees)
incurred or assessed against it in connection with the performance of this
agreement, except such as may arise from the Fund's own negligent action,
negligent failure to act, or willful misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 225 East Mason Street, Milwaukee, Wisconsin53202, as the case may be.
Upon any termination of this Agreement, pending appointment of a successor
to Custodian or a vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund
to the Fund, but may deliver them to a bank or trust company of its own
selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report of not less than Two Million Dollars
($2,000,000) as a Custodian for the Fund to be held under terms similar to
those of this Agreement, provided, however, that Custodian shall not be
required to make any such delivery or payment until full payment shall
have been made by the Fund of all liabilities constituting a charge on or
against the properties then held by Custodian or on or against Custodian,
and until full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository, provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above-written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRSTAR TRUST COMPANY
_________________________ By ____________________________
Assistant Secretary Vice President
Attest: FMI FUNDS, INC.
________________________________ By ____________________________
ADMINISTRATION AGREEMENT
Agreement made this ____ day of _________, 1996, between FMI
Funds, Inc., a Maryland corporation (the "Company"), and Fiduciary
Management, Inc., a Wisconsin corporation (the "Administrator").
W I T N E S S E T H:
WHEREAS, the Company is in the process of registering with the
Securities and Exchange Commission under the Investment Company Act of
1940 (the "Act") as an open-end management investment company consisting
initially of one series FMI Focus Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Administrator to be
the Administrator for the Fund and as such to perform the services set
forth in this Agreement.
NOW, THEREFORE, the Company and the Administrator do mutually
promise and agree as follows:
1. Employment. The Company hereby employs the Administrator
to be the Administrator for the Fund for the period and on the terms set
forth in this Agreement. The Administrator hereby accepts such employment
for the compensation herein provided and agrees during such period to
render the services and to assume the obligations herein set forth.
2. Authority and Duties of the Administrator. The
Administrator shall supervise all aspects of the operations of the Fund
except those performed by the Fund's investment adviser under the Fund's
investment advisory agreement, subject to such policies as the board of
directors of the Company may determine. The Administrator shall for all
purposes herein be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to
act for or represent the Company or the Fund in any way or otherwise be
deemed to be an agent of the Company or the Fund. However, one or more
shareholders, officers, directors or employees of the Administrator may
serve as directors and/or officers of the Company, but without
compensation or reimbursement of expenses for such services from the
Company. Nothing herein contained shall be deemed to require the Company
to take any action contrary to its Articles of Incorporation or any
applicable statute or regulation, or to relieve or deprive the board of
directors of the Company of its responsibility for and control of the
affairs of the Fund.
In connection with its supervision of the operations of the
Fund, the Administrator shall perform the following services for the Fund:
(a) Prepare and maintain the books, accounts and other
documents specified in Rule 31a-1, under the Act in accordance with
the requirements of Rule 31a-1 and Rule 31a-2 under the Act;
(b) Calculate the Fund's net asset value in accordance with the
provisions of the Company's Articles of Incorporation and By-Laws and
its Registration Statement;
(c) Respond to stockholder inquiries forwarded to it by the
Fund:
(d) Prepare the financial statements contained in reports to
stockholders of the Fund:
(e) Prepare for execution by the Company and file all of the
Fund's federal and state tax returns;
(f) Prepare reports to and filings with the Securities and
Exchange Commission;
(g) Prepare reports to and filings with state Blue Sky
authorities;
(h) Furnish statistical and research data, clerical, accounting
and bookkeeping services and stationery and office supplies; and
(i) Keep and maintain the Fund's financial accounts and
records, and generally assist in all aspects of the Fund's operations
to the extent agreed to by the Administrator and the Company.
3. Expenses. The Administrator, at its own expense and
without reimbursement from the Company or the Fund, shall furnish office
space, and all necessary office facilities, equipment and executive
personnel for performing the services required to be performed by it under
the Agreement. The Administrator shall not be required to pay any
expenses of the Fund. The expenses of the Fund's operations borne by the
Fund include by way of illustration and not limitation, directors fees
paid to those directors who are not officers of the Company, the
professional costs of preparing and the costs of printing its registration
statements required under the Securities Act of 1933 and the Act (and
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, the
cost of stock certificates (if any), director and officer liability
insurance, the printing and distribution and distribution costs of reports
to stockholders, reports to government authorities and proxy statements,
interest charges, taxes, legal expenses, association membership dues,
auditing services, insurance premiums, brokerage and other expenses
connected with the execution of portfolio securities transactions, fees
and expenses of the custodian of the Fund's assets, printing and mailing
expenses and charges and expenses of dividend disbursing agents,
registrars and stock transfer agents.
4. Compensation of the Administrator. For the services to be
rendered by the Administrator hereunder, the Company, through and on
behalf of, the Fund shall pay to the Administrator an administration fee,
paid monthly, based on the average net assets of the Fund, as determined
by valuations made as of the close of each business day of the month. The
administration fee shall be 1/12 of 0.1% of such average net assets up to
and including $30,000,000, and 1/12 of 0.05% of such average net assets of
the Company in excess of $30,000,000; provided, however, that for any
month in which this Agreement is not in effect for the entire month, such
fee shall be reduced proportionately on the basis of the number of
calendar days during which it is in effect and the fee computed upon the
daily net assets of the business days during which it is so in effect.
5. Ownership of Shares of the Company. Except in connection
with the initial capitalization of the Fund, the Administrator shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, officers, directors or employees to take a long or short
position in the shares of the Fund, except for the purchase of shares of
the Fund for investment purposes at the same price as that available to
the public at the time of purchase.
6. Exclusivity. The services of the Administrator to the Fund
hereunder are not to be deemed exclusive and the Administrator shall be
free to furnish similar services to others as long as the services
hereunder are not impaired thereby. During the period that this Agreement
is in effect, the Administrator shall be the Fund's sole administrator.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Administrator, the Administrator shall not be
subject to liability to the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Company in
the manner required by the Act.
9. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the
Company or by a vote of the majority of the outstanding voting securities
of the Company as defined in the Act, upon the giving of sixty (60) days'
written notice to the Administrator. This Agreement may be terminated by
the Administrator at any time upon the giving of sixty (60) days' written
notice to the Company. This Agreement shall terminate automatically in
the event of its assignment (as defined in Section 2(a)(4) of the Act).
Subject to prior termination as hereinbefore provided, the Agreement shall
continue in effect for two (2) years from the date hereof and indefinitely
thereafter, but only so long as the continuance after such two (2) year
period is specifically approved annually by (i) the board of directors of
the Company. Upon termination of the Agreement the Administrator shall
deliver to the Company all books, accounts and other documents then
maintained by it pursuant to Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC.
(the "Administrator")
By:
President
FMI FUNDS, INC.
(the "Fund")
By:
President
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this ________________ day
of _________________________, 1996, by and between FMI Funds, Inc.
currently consisting of the FMI Focus Fund (hereinafter referred to as the
"Fund") and Firstar Trust Company, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as the "Agent").
WHEREAS, the Fund is an open-ended management investment company
which is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in
the business of administering transfer and dividend disbursing agent
functions for the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree
as follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection
with accumulation, open account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program),
including but not limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order;
D. Pay monies;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Fund;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant
to Securities Exchange Act of 1934 Rule 17ad-10(e), a record of the total
number of shares of the Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed upon
with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor
the total number of shares sold in each state. In addition, the Fund
shall identify to the Agent in writing those transactions and assets to be
treated as exempt from the Blue Sky reporting to the Fund for each state.
The responsibility of the Agent for the Fund's Blue Sky state registration
status is solely limited to the initial compliance by the Fund and the
reporting of such transactions to the Fund.
2. Compensation
The Fund agrees to pay the Agent for performance of the duties listed
in this Agreement; the fees and out-of-pocket expenses include, but are
not limited to the following: printing, postage, forms, stationery,
record retention, mailing, insertion, programming, labels, shareholder
lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
3. Representations of Agent
The Agent represents and warrants to the Fund that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Securities Exchange
Act of 1934 as amended.
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement; and
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
G. It will comply with all applicable requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, and any laws,
rules, and regulations of governmental authorities having jurisdiction.
4. Representations of the Fund
The Fund represents and warrants to the Agent that:
A. The Fund is an open-ended diversified investment company under
the Investment Company Act of 1940;
B. The Fund is a corporation or business trust organized, existing,
and in good standing under the laws of Maryland;
C. The Fund is empowered under applicable laws and by its Corporate
Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter have
been taken to authorize it to enter into and perform this Agreement;
E. The Fund will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the Investment
Company Act of 1940, as amended, and any laws, rules and regulations of
governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all shares of the Fund being offered for sale.
5. Covenants of Fund and Agent
The Fund shall furnish the Agent a certified copy of the resolution
of the Board of Directors of the Fund authorizing the appointment of the
Agent and the execution of this Agreement. The Fund shall provide to the
Agent a copy of the Corporate Charter, bylaws of the Corporation, and all
amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules thereunder, the Agent agrees that all such records prepared
or maintained by the Agent relating to the services to be performed by the
Agent hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such section and rules
and will be surrendered to the Fund on and in accordance with its request.
6. Indemnification; Remedies Upon Breach
The Agent shall exercise reasonable care in the performance of its
duties under this Agreement. The Agent shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or
power supplies beyond the Agent's control, except a loss resulting from
the Agent's refusal or failure to comply with the terms of this Agreement
or from bad faith, negligence, or willful misconduct on its part in the
performance of its duties under this Agreement. Notwithstanding any other
provision of this Agreement, the Fund shall indemnify and hold harmless
the Agent from and against any and all claims, demands, losses, expenses,
and liabilities (whether with or without basis in fact or law) of any and
every nature (including reasonable attorneys' fees) which the Agent may
sustain or incur or which may be asserted against the Agent by any person
arising out of any action taken or omitted to be taken by it in performing
the services hereunder (i) in accordance with the foregoing standards, or
(ii) in reliance upon any written or oral instruction provided to the
Agent by any duly authorized officer of the Fund, such duly authorized
officer to be included in a list of authorized officers furnished to the
Agent and as amended from time to time in writing by resolution of the
Board of Directors of the Fund.
Further, the Fund will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand,
action, or suit as a result of the negligence of the Fund or the principal
underwriter (unless contributed to by the Agent's breach of this Agreement
or other Agreements between the Fund and the Agent, or the Agent's own
negligence or bad faith); or as a result of the Agent acting upon
telephone instructions relating to the exchange or redemption of shares
received by the Agent and reasonably believed by the Agent under a
standard of care customarily used in the industry to have originated from
the record owner of the subject shares; or as a result of acting in
reliance upon any genuine instrument or stock certificate signed,
countersigned, or executed by any person or persons authorized to sign,
countersign, or execute the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable
steps to minimize service interruptions for any period that such
interruption continues beyond the Agent's control. The Agent will make
every reasonable effort to restore any lost or damaged data and correct
any errors resulting from such a breakdown at the expense of the Agent.
The Agent agrees that it shall, at all times, have reasonable contingency
plans with appropriate parties, making reasonable provision for emergency
use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Fund shall be entitled to
inspect the Agent's premises and operating capabilities at any time during
regular business hours of the Agent, upon reasonable notice to the Agent.
Regardless of the above, the Agent reserves the right to reprocess
and correct administrative errors at its own expense.
In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the Fund may be
asked to indemnify or hold the Agent harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Agent will use all
reasonable care to notify the Fund promptly concerning any situation which
presents or appears likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option to
defend the Agent against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so notify
the Agent and thereupon the Fund shall take over complete defense of the
claim, and the Agent shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this section.
The Agent shall in no case confess any claim or make any compromise in any
case in which the Fund will be asked to indemnify the Agent except with
the Fund's prior written consent.
The Agent shall indemnify and hold the Fund harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which may be asserted against the Fund by any
person arising out of any action taken or omitted to be taken by the Agent
as a result of the Agent's refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or willful misconduct.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and
its shareholders and shall not be disclosed to any other party, except
after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where
the Agent may be exposed to civil or criminal contempt proceedings for
failure to comply after being requested to divulge such information by
duly constituted authorities.
Additional Series. FMI Funds, Inc. is authorized to issue separate
series of shares of beneficial interest representing interests in separate
investment portfolios. The parties intend that each portfolio established
by the trust, now or in the future, be covered by the terms and conditions
of this agreement.
8. Records
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Fund but not inconsistent with the rules
and regulations of appropriate government authorities, in particular,
Section 31 of The Investment Company Act of 1940 as amended (the
"Investment Company Act"), and the rules thereunder. The Agent agrees
that all such records prepared or maintained by The Agent relating to the
services to be performed by The Agent hereunder are the property of the
Fund and will be preserved, maintained, and made available with such
section and rules of the Investment Company Act and will be promptly
surrendered to the Fund on and in accordance with its request.
9. Wisconsin Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of
Wisconsin.
10. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent of
the parties.
B. This Agreement may be terminated upon ninety (90) day's written
notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the other
party.
D. Any notice required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed and
delivered, or mailed to the principal place of business of the other
party. If to the agent, such notice should to be sent to _______________.
If to the Fund, such notice should be sent to ________________.
E. In the event that the Fund gives to the Agent its written
intention to terminate and appoint a successor transfer agent, the Agent
agrees to cooperate in the transfer of its duties and responsibilities to
the successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be paid by the Fund.
FMI Funds, Inc. Firstar Trust Company
By: ________________________ By: __________________________
Attest: ____________________ Attest: _____________________
Assistant Secretary
F O L E Y & L A R D N E R
A T T O R N E Y S A T L A W
CHICAGO FIRSTAR CENTER SAN DIEGO
JACKSONVILLE 777 EAST WISCONSIN AVENUE SAN FRANCISCO
LOS ANGELES MILWAUKEE, WISCONSIN 53202-5367 TALLAHASSEE
MADISON TELEPHONE (414) 271-2400 TAMPA
ORLANDO FACSIMILE (414) 297-4900 WASHINGTON, D.C.
SACRAMENTO WEST PALM BEACH
WRITER'S DIRECT LINE
October __, 1996
FMI Funds, Inc.
225 East Mason Street
Milwaukee, WI 53202
Gentlemen:
We have acted as counsel for you in connection with the
preparation of a Registration Statement on Form N-1A relating to the sale
by you of an indefinite amount of FMI Funds, Inc. Common Stock, $0.0001
par value (such Common Stock being hereinafter referred to as the "Stock")
in the manner set forth in the Registration Statement to which reference
is made. In this connection we have examined: (a) the Registration
Statement on Form N-1A; (b) your Articles of Incorporation and Bylaws, as
amended to date; (c) corporate proceedings relative to the authorization
for issuance of the Stock; and (d) such other proceedings, documents and
records as we have deemed necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares
of Stock when sold as contemplated in the Registration Statement will be
legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to
the Form N-1A Registration Statement. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the
Securities Act of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
FOLEY & LARDNER
EXHIBIT 13
SUBSCRIPTION AGREEMENT
FMI Funds, Inc.
225 East Mason Street
Milwaukee, WI 53202
Gentlemen:
The undersigned hereby subscribes to 10,000 shares of the Common
Stock, $0.0001 par value of FMI Funds, Inc., and agrees to pay to said
corporation the sum of $100,000 in cash.
It is understood that upon acceptance hereof by said corporation
the shares subscribed for shall be issued to the undersigned and that said
shares shall be deemed to be fully paid and nonassessable.
The undersigned agrees that the shares are being purchased for
investment with no present intention of reselling or redeeming said
shares.
Dated and effective as of this ____ day of October, 1996.
FIDUCIARY MANAGEMENT, INC.
By: ________________________________
Ted D. Kellner, Chairman
The foregoing subscription is hereby accepted. Dated and
effective as of this ____ day of October, 1996.
FMI FUNDS, INC.
By: ______________________________________
Ted D. Kellner, President
FIDUCIARY FUNDS
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an
Individual Retirement Account (under Section 408(a) of the Internal
Revenue Code) between the Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(c) (but
only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described
in Section 408(k). Rollover contributions before January 1, 1993, include
rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3) which provides an exception for certain
gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the Depositor's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with Section 408(a)(6) and Proposed Regulations
Section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, (April 1 following the calendar year end in which the Depositor
reaches age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's
death, or
(ii) Be distributed in equal or substantially equal
payments over the life or life expectancy of the
designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal
Revenue Service and the Depositor prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) and related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Fiduciary Management,
Inc. serves as investment advisor, or any other regulated investment
company designated by the investment advisor. Shares of stock of an
Investment Company shall be referred to as Investment Company Shares."
(b) Each contribution to the custodial account shall identify
the Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may return
to the Depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the Custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor. The Custodian
agrees to forward to the Depositor each prospectus, report, notice, proxy
and related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the Custodian.
(e) The Depositor may, at any time, by written notice to the
Custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination. (a) The Custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the Depositor written notice of such amendment setting forth the substance
and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendment not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the Depositor or his or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the Custodian
in the performance of its duties, including fees for legal services
rendered to the Custodian, and the Custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the Depositor or his
or her beneficiaries.
The Custodian's fees are set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
4. Reports and Notices. (a) The Custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the Custodian shall provide to the
Depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the Custodian at Post Office Box 701, Milwaukee, Wisconsin
53201-0701 or the Depositor at his most recent address shown in the
Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.
5. Designation of Beneficiary. The Depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the Depositor's death. In the event the Depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
6. Multiple Individual Retirement Accounts. In the event the
Depositor maintains more than one individual retirement account (as
defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a
distribution for another individual retirement account in accordance with
Paragraph 6 thereof, the Depositor shall be deemed to have elected to
calculate the amount of his or her minimum distribution under this
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
8. Rollover Contributions and Transfers. The Custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
9. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles IV, V
and/or VII, the provisions of this Article VIII shall govern.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
EXHIBIT 15
SERVICE AND DISTRIBUTION PLAN
OF
FMI FUNDS, INC.
WHEREAS, FMI Funds, Inc. (the "Fund") is registered with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Fund intends to act as a distributor of shares of
its Common Stock, $.0001 par value ("Common Stock"), as defined in Rule
12b-1 under the Act, and desires to adopt a distribution plan pursuant to
such Rule, and the Board of Directors has determined that there is a
reasonable likelihood that adoption of this Service and Distribution Plan
will benefit the Fund and its shareholders; and
WHEREAS, the Fund may enter into agreements with dealers and
other financial service organizations to obtain various distribution-
related and/or shareholder services for the Fund, all as permitted and
contemplated by Rule 12b-1 under the Act; it being under that to the
extent any activity is one in which the Fund may finance without a Rule
12b-1 plan, the Fund may also make payments to finance such activity
outside such a plan and not subject to its limitations.
NOW, THEREFORE, the Fund hereby adopts this Service and
Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. Distribution and Service Fee. The Fund may charge a
distribution expense and service fee on an annualized basis of 0.25% of
the Fund's average daily net assets. Such fee shall be calculated and
accrued daily and paid at such intervals as the Board of Directors of the
Fund shall determine, subject to any applicable restriction imposed by
rules of the National Association of Securities Dealers, Inc.
2. Permitted Expenditures. The amount set forth in paragraph
1 of this Plan shall be paid for services or expenses primarily intended
to result in the sale of the Fund's shares. The Fund may pay all or a
portion of this fee to any securities dealer, financial institution or any
other person (the "Shareholder Organization(s)") who renders personal
service to shareholders, assists in the maintenance of shareholder
accounts or who renders assistance in distributing or promoting the sale
of the Fund's shares pursuant to a written agreement approved by the
Board of Directors (the "Related Agreement"). To the extent such fee is
not paid to such persons, the Fund may use the fee to pay expenses of
distribution of its shares including, but not limited to, payment by the
Fund of the cost of preparing, printing and distributing Prospectuses and
Statements of Additional Information to prospective investors and of
implementing and operating the Plan as well as payment of capital or other
expenses of associated equipment, rent, salaries, bonuses, interest and
other overhead costs.
3. Effective Date of Plan. This Plan shall not take effect
until (a) it has been approved by a vote of at least a majority (as
defined in the Act) of the outstanding shares of Common Stock and (b)
(together with any related agreements) by votes of a majority of both (i)
the Board of Directors of the Fund and (ii) those Directors of the Fund
who are not "interested persons" of the Fund (as defined in the Act) and
have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in
person at a meeting (or meetings) called for the purpose of voting on this
Plan and such related agreements.
4. Continuance. Unless otherwise terminated pursuant to
paragraph 6 below, this Plan shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 3(b).
5. Reports. Any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to this Plan or any related
agreement shall provide to the Fund's Board of Directors and the Board
shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. Termination. This Plan may be terminated at any time by
vote of a majority of the Rule 12b-1 Directors, or by a vote of a majority
of the outstanding shares of Common Stock.
7. Amendments. This Plan may not be amended to increase
materially the amount of payments provided for in paragraph 1 hereof
unless such amendment is approved in the manner provided for initial
approval in paragraph 3 hereof. No other amendment to the Plan may be
made unless approved in the manner provided for approval of this Plan in
paragraph 3(b).
8. Selection of Directors. While this Plan is in effect, the
selection and nomination of Directors who are not interested persons (as
defined in the Act) of the Fund shall be committed to the discretion of
the Directors who are not interested persons.
9. Records. The Fund shall preserve copies of this Plan and
any related agreements and all reports made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of this
Plan, or the agreements or such report, as the case may be, the first two
years in an easily accessible place.
