Securities Act Registration No. 333-12745
Investment Company Act Reg. No. 811-7831
__________________________________________________________________________
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. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3 [X]
(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.
Registrant has registered an indefinite number of shares of its common
stock, $0.0001 par value, under the Securities Act of 1933 and will file
its required Rule 24f-2 Notice for Registrant's fiscal year ending
September 30, 1997 prior to November 29, 1997.
It is proposed that this filing will become effective (check appropriate
box)
[X] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<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;
Financial Highlights
4. General Description of Introduction, Investment
Registrant Objective 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 and
Securities Taxes; Capital Structure;
Shareholder Reports
7. Purchase of Securities Being Purchase of Shares; Dividend
Offered Reinvestment; Automatic
Investment Plan; Retirement
Plans; Determination of Net
Asset Value
8. Redemption of Repurchase Redemption of Shares, Systematic
Withdrawal Plan, Exchange
Privilege; Determination of Net
Asset Value
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;
Description of Securities
Ratings
14. Management of the Fund Directors and Officers of the
Corporation
15. Control Persons and Principal Principal Stockholders
Holders of Securities
16. Investment Advisory and Other Investment Adviser and
Services Administrator; Distribution of
Shares; Custodian; Independent
Accountants
17. Brokerage Allocation Allocation of Portfolio
Brokerage
18. Capital Stock and Other Included in Prospectus under
Securities "CAPITAL STRUCTURE"; Stockholder
Meetings
19. Purchase, Redemption and Pricing Included in Prospectus under
of Securities Being Offered "DETERMINATION OF NET ASSET
VALUE"; "PURCHASE OF SHARES";
"DIVIDEND REINVESTMENT";
"AUTOMATIC INVESTMENT PLAN";
"SYSTEMATIC WITHDRAWAL PLAN";
"EXCHANGE PRIVILEGE";
"RETIREMENT PLANS";
Determination of Net Asset Value
and Performance; Distribution of
Shares
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Data Determination of Net Asset Value
and Performance
23. Financial Statements Financial Statements
_______________________
* Answer negative or inapplicable
<PAGE>
P R O S P E C T U S
FMI
FOCUS FUND
A NO-LOAD
MUTUAL FUND
P R O S P E C T U S JUNE 16, 1997
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 June 16, 1997, 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
FMI FOCUS FUND
TABLE OF CONTENTS
PAGE NO.
--------
Expense Information 1
Financial Highlights 2
Introduction 2
Investment Objective and Policies 2
Management of the Fund 9
Determination of Net Asset Value 10
Purchase of Shares 11
Redemption of Shares 12
Dividend Reinvestment 13
Automatic Investment Plan 13
Systematic Withdrawal Plan 14
Exchange Privilege 14
Retirement Plans 15
Dividends, Distributions and Taxes 16
Brokerage Transactions 16
Capital Structure 16
Shareholder Reports 17
Performance Information 17
Share Purchase Application 19
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases or Reinvested Dividends NONE
Deferred Sales Load NONE
Redemption Fee NONE(1)
<F1>
Exchange Fee NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00%
12b-1 Fees 0.25%(2)
<F2>
Other Expenses (net of reimbursements) .1.50%(3)
<F3>
------
TOTAL FUND OPERATING EXPENSES 2.75%(3)
<F3>
======
(1)<F1>A fee of $10.00 is charged for each wire redemption.
(2)<F2>The maximum level of distribution expenses is 0.25% per annum of the
Fund's average net assets. See "Purchase of Shares" for further information.
The distribution expenses for long-term shareholders may total more than the
maximum sales charge that would have been permissible if imposed entirely as an
initial sales charge.
(3)<F3>Other expenses are estimated and reflect the fact that the Fund's
investment adviser, Fiduciary Management, Inc., has agreed to reimburse the Fund
to ensure that Total Fund Operating Expenses do not exceed 2.75% for the fiscal
year ending September 30, 1997. Absent reimbursement, Other Expenses and Total
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.
See "MANAGEMENT OF THE FUND" for a more complete discussion of applicable
management fees. 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.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIOD)
The financial information of a share of the Fund outstanding during the
period from December 16, 1996 (commencement of operations) to March 31, 1997
included in the table below has been derived from the financial records of the
Fund without examination by the Fund's independent accountants, who do not
express an opinion thereon. The table should be read in conjunction with the
financial statements and related notes contained in the Fund's Semiannual Report
to Shareholders, copies of which may be obtained, without charge, upon request.
(UNAUDITED)
FOR THE PERIOD FROM
DECEMBER 16, 1996+<F4>TO
MARCH 31, 1997
--------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment loss (0.01)
Net realized and unrealized gains on investments 0.74
------
Total from investment operations 0.73
Less distributions:
Dividend from net investment income (0.01)
Distribution from net realized gains --
------
Total from distributions (0.01)
------
Net asset value, end of period $10.72
======
TOTAL INVESTMENT RETURN 7.4%*<F5>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 687
Ratio of expenses (after reimbursement) to
average net assets (a)<F7> 2.75%**<F6>
Ratio of net investment income to average
net assets (b)<F8> (0.37%)**<F6>
Portfolio turnover rate 62.4%
Average commission rate paid $0.0910
+<F4>Commencement of operations.
*<F5>Not Annualized.
**<F6>Annualized.
(a)<F7>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
8.67%**<F6>.
(b)<F8>If the Fund had paid all of its expenses, the ratio would have been
(6.29%)**<F6>.
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
obtains its assets by continuously selling shares to the public. Proceeds from
such sales are invested by the Fund in securities of other companies and certain
other instruments. In this manner, the resources of many investors are combined
and each individual investor has an interest in every one of the securities and
instruments owned by the Fund. The Fund furnishes experienced management to
select and watch over its investments. As an open-end investment company, the
Fund will redeem any of its outstanding shares on demand of the owner at their
net asset value.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital appreciation. In seeking its
investment objective of capital appreciation, the Fund will invest primarily in
common stocks and warrants, engage in short sales, invest in foreign securities
which are publicly traded in the United States, and effect transactions in stock
index futures contracts, options on stock index futures contracts, and options
on securities and stock indexes. Dividend income and other income are not
factors considered in selecting these investments. The Fund may leverage its
investments. Warrants, stock index futures contracts, options on stock index
future contracts and options on securities and stock indexes are derivatives.
In managing the investment portfolio for the Fund, the Fund's investment
adviser, Fiduciary Management, Inc. (the "Adviser") may focus on a relatively
limited number of securities (i.e., generally 25 or less, other than money
market instruments). The Adviser believes this focused investment strategy has
the potential for higher total returns than an investment strategy calling for
investment in a large number of securities. However, the use of this focused
investment strategy may increase the volatility of the Fund's investment
performance. Additionally, the Fund could incur greater losses than it would
have had it invested in a greater number of securities if the securities in
which the Fund invests perform poorly.
The Adviser will invest in securities which it believes will appreciate
significantly over a one to two-year period. In doing so, it will employ a
diverse investment approach. For example, it may purchase stocks of any size
market capitalization or in any industry sector. As a consequence, the
performance of the Fund will be more dependent on the Adviser's ability to make
good investment decisions than on whether a particular sector of the market is
performing well or "in favor" with investors.
The Fund may invest in the following portfolio securities and may engage in
the following investment techniques.
COMMON STOCKS
The Fund's common stock investments primarily will be made in companies in
which the Adviser believes to be underpriced relative to the issuing
corporation's future growth prospects. The Adviser will also purchase common
stocks where the price is significantly below the estimated market value of the
issuing corporation's assets less its liabilities on a per share basis.
The Fund may invest in companies with modest capitalization, as well as
start-up companies. Such companies often involve greater risks than larger
companies because they lack the management experience, financial resources,
product diversification, markets, distribution channels and competitive
strengths of larger companies. Additionally, in many instances, the frequency
and volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies as well as start-up
companies may be subject to wider price fluctuations. The spreads between the
bid and asked prices of the securities of these companies in the U.S. over-the-
counter market typically are larger than the spreads for more actively traded
securities. As a result, the Fund could incur a loss if it determined to sell
such a security shortly after its acquisition. When making large sales, the
Fund may have to sell portfolio holdings at discounts from quoted prices or may
have to make a series of small sales over an extended period of time due to the
trading volume of smaller company securities.
FOREIGN SECURITIES
The Fund may invest without limitation in common stocks of foreign issuers
which are publicly traded on U.S. exchanges or in the U.S. over-the-counter
market either directly or in the form of American Depository Receipts ("ADRs").
The Fund will only invest in ADRs that are issuer sponsored. Sponsored ADRs
typically are issued by a U.S. bank or trust company and evidence ownership of
underlying securities issued by a foreign corporation. Investments in foreign
securities involve risks which are in addition to the risks inherent in domestic
investments. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available information
about issuers than is available in the reports and ratings published about
companies in the United States. Additionally, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards. Dividends
and interest on foreign securities may be subject to foreign withholding taxes.
To the extent such taxes are not offset by credits or deductions allowed to
investors under U.S. federal income tax laws, such taxes may reduce the net
return to shareholders. Although the Fund intends to invest in securities of
foreign issuers domiciled in nations which the Adviser considers as having
stable and friendly governments, there is the possibility of expropriation,
confiscation, taxation, currency blockage or political or social instability
which could affect investments of foreign issuers domiciled in such nations.
SHORT SALES
The Fund may engage in short sales transactions, including short sales
transactions in which the Fund sells a security the Fund does not own. To
complete such a transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund then is obligated to replace the security borrowed by
purchasing the security at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund. Until the security is replaced, the Fund is required to pay
to the lender amounts equal to any dividends or interest which accrue during the
period of the loan. To borrow the security, the Fund also may be required to
pay a premium, which would increase the cost of the security sold. The proceeds
of the short sale will be retained by the broker, to the extent necessary to
meet the margin requirements, until the short position is closed out.
Until the Fund closes its short position or replaces the borrowed security,
the Fund will: (a) maintain a segregated account containing cash or liquid
securities at such a level that the amount deposited in the account plus the
amount deposited with the broker as collateral will equal the current value of
the security sold short; or (b) otherwise cover the Fund's short position. Up
to 100% of the Fund's assets may be used to cover the Fund's short positions.
The Fund may also engage in short sales when, at the time of the short sale,
the Fund owns or has the right to acquire an equal amount of the security being
sold at no additional cost ("selling short against the box"). The Fund may make
a short sale against the box when the Fund wants to sell the security the Fund
owns at a current attractive price, but also wishes to defer recognition of a
gain or loss for Federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code.
FUTURES CONTRACTS AND OPTIONS THEREON
The Fund may purchase and write (sell) stock index futures contracts as a
substitute for a comparable market position in the underlying securities. A
futures contract obligates the seller to deliver (and the purchaser to take
delivery of) the specified commodity on the expiration date of the contract. A
stock index futures contract obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. It is the
practice of holders of futures contracts to close out their positions on or
before the expiration date by use of offsetting contract positions and physical
delivery is thereby avoided.
The Fund may purchase put and call options and write call options on stock
index futures contracts. When the Fund purchases a put or call option on a
futures contract, the Fund pays a premium for the right to sell or purchase the
underlying futures contract for a specified price upon exercise at any time
during the options period. By writing a call option on a futures contract, the
Fund receives a premium in return for granting to the purchaser of the option
the right to buy from the Fund the underlying futures contract for a specified
price upon exercise at any time during the option period.
Some futures and options strategies tend to hedge the Fund's equity positions
against price fluctuations, while other strategies tend to increase market
exposure. Whether the Fund realizes a gain or loss from futures activities
depends generally upon movements in the underlying stock index. The extent of
the Fund's loss from an unhedged short position in futures contracts or call
options on futures contracts is potentially unlimited. The Fund may engage in
related closing transactions with respect to options on futures contracts. The
Funds will purchase or write options only on futures contracts that are traded
on a United States exchange or board of trade. In addition to the uses set
forth hereunder, the Fund may also engage in futures and futures options
transactions in order to hedge or limit the exposure of its position and for
satisfying certain tests applicable to regulated investment companies under the
Internal Revenue Code.
Although the Fund intends to sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
day. Futures contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting the Fund to substantial losses. If
trading is not possible, or the Fund determines not to close a futures position
in anticipation of adverse price movements, the Fund will be required to make
daily cash payments of variation margin. The risk that the Fund will be unable
to close out a futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary market.
INDEX OPTIONS TRANSACTIONS
The Fund may purchase put and call options and write call options on stock
indexes. A stock index fluctuates with changes in the market values of the
stock included in the index. Options on stock indexes give the holder the right
to receive an amount of cash upon exercise of the options. Receipt of this cash
amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received,
if any, will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple. The
writer (seller) of the option is obligated, in return for the premiums received
from the purchaser of the option, to make delivery of this amount to the
purchaser. Unlike the options on securities discussed below, all settlements of
index options transactions are in cash.
Some stock index options are based on a broad market index such as the S&P
500 Index, the NYSE Composite Index or the AMEX Major Market Index, or on a
narrower index such as the Philadelphia Stock Exchange Over-the-Counter Index.
Options currently are traded on the Chicago Board of Options Exchange, the AMEX
and other exchanges. Over-the-counter index options, purchased over-the-counter
options and the cover for any written over-the-counter options would be subject
to the Fund's 15% limitation on investment in illiquid securities. See
"Illiquid Securities."
The Adviser may utilize index options as a technique to leverage the
portfolio of the Fund. If the Adviser is correct in its assessment of the
future direction of stock prices, the share price of the Fund will be enhanced.
If the Adviser has the Fund take a position in options and stock prices move in
a direction contrary to the Adviser's forecast however, the Fund would incur
losses greater than the Fund would have incurred without the options position.
OPTIONS ON SECURITIES
The Fund may buy put and call options and write (sell) call options on
securities. By writing a call option and receiving a premium, the Fund may
become obligated during the term of the option to deliver the securities
underlying the option at the exercise price if the option is exercised. By
buying a put option, the Fund has the right, in return for a premium paid during
the term of the option, to sell the securities underlying the option at the
exercise price. By buying a call option, the Fund has the right, in return for
a premium paid during the term of the option, to purchase the securities
underlying the option at the exercise price. Options on securities written by
the Fund will be traded on recognized securities exchanges.
The Fund will realize a gain (or a loss) on a closing purchase transaction
with respect to a call option previously written by the Fund if the premium,
plus commission costs, paid by the Fund to purchase the put option is less (or
greater) than the premium, less commission costs, received by the Fund on the
sale of the call option. The Fund also will realize a gain if a call option
which the Fund has written lapses unexercised, because the Fund would retain the
premium.
The Fund will realize a gain (or a loss) on a closing sale transaction with
respect to a call or a put option previously purchased by the Fund if the
premium, less commission costs, received by the Fund on the sale of the call or
the put option is greater (or less) than the premium, plus commission costs,
paid by the Fund to purchase the call or the put option. If a put or a call
option which the Fund has purchased expires out-of-the-money, the option will
become worthless on the expiration date, and the Fund will realize a loss in the
amount of the premium paid, plus commission costs.
Although certain securities exchanges attempt to provide continuously liquid
markets in which holders and writers of options can close out their positions at
any time prior to the expiration of the option, no assurance can be given that a
market will exist at all times for all outstanding options purchased or sold by
the Fund. In such event, the Fund would be unable to realize its profits or
limit its losses until the Fund would exercise options it holds and the Fund
would remain obligated until options it wrote were exercised or expired.
Because option premiums paid or received by the Fund are small in relation to
the market value of the investments underlying the options, buying and selling
put and call options can be more speculative than investing directly in common
stocks.
U.S. TREASURY SECURITIES
The Fund may invest in U.S. Treasury Securities as "cover" for the investment
techniques the Fund employs. The Fund may also invest in U.S. Treasury
Securities as part of a cash reserve or for liquidity purposes. U.S. Treasury
Securities are backed by the full faith and credit of the U.S. Treasury. U.S.
Treasury Securities differ only in their interest rates, maturities and dates of
issuance. Treasury Bills have maturities of one year or less. Treasury Notes
have maturities of one to ten years and Treasury Bonds generally have maturities
of greater than ten years at the date of issuance. Yields on short-,
intermediate- and long-term U.S. Treasury Securities are dependent on a variety
of factors, including the general conditions of the money and bond markets, the
size of a particular offering and the maturity of the obligation. Debt
securities with longer maturities tend to produce higher yields and are
generally subject to potentially greater capital appreciation and depreciation
than obligations with shorter maturities and lower yields. The market value of
U.S. Treasury Securities generally varies inversely with changes in market
interest rates. An increase in interest rates, therefore, would generally
reduce the market value of the Fund's portfolio investments in U.S. Treasury
Securities, while a decline in interest rates would generally increase the
market value of a Fund's portfolio in investments in these securities.
U.S. Treasury Securities may be purchased at a discount. Such securities,
when retired, may include an element of capital gain. Capital losses may be
realized when such securities purchased at a premium are called or redeemed at a
price lower than their purchase price. Capital gains or losses also may be
realized upon the sale of U.S. Treasury Securities.
REPURCHASE AGREEMENTS
The Fund, as part of a cash reserve or to "cover" investment strategies, may
purchase repurchase agreements secured by U.S. Government Securities. Under a
repurchase agreement, the Fund purchases a debt security and simultaneously
agrees to sell the security back to the seller at a mutually agreed-upon future
price and date, normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon market interest rate
during the purchaser's holding period. While the maturities of the underlying
securities in repurchase transactions may be more than one year, the term of
each repurchase agreement will always be less than one year. The Fund will
enter into repurchase agreements only with member banks of the Federal Reserve
system or primary dealers of U.S. Government Securities. The Adviser will
monitor the creditworthiness of each of the firms which is a party to a
repurchase agreement with the Fund. In the event of a default or bankruptcy by
the seller, the Fund will liquidate those securities (whose market value,
including accrued interest, must be at least equal to 100% of the dollar amount
invested by the Fund in each repurchase agreement) held under the applicable
repurchase agreement, which securities constitute collateral for the seller's
obligation to pay. However, liquidation could involve costs or delays and, to
the extent proceeds from the sale of these securities were less than the agreed-
upon repurchase price the Fund would suffer a loss. The Fund also may
experience difficulties and incur certain costs in exercising its rights to the
collateral and may lose the interest the Fund expected to receive under the
repurchase agreement. Repurchase agreements usually are for short periods, such
as one week or less, but may be longer. It is the current policy of the Fund to
treat repurchase agreements that do not mature within seven days as illiquid for
the purposes of its investment policies.
BORROWING
The Fund may borrow money, including borrowing for investment purposes.
Borrowing for investment is known as leveraging. Leveraging investments, by
purchasing securities with borrowed money, is a speculative technique which
increases investment risk, but also increases investment opportunity. Since
substantially all of the Fund's assets will fluctuate in value, whereas the
interest obligations on borrowings may be fixed, the net asset value per share
of the Fund when it leverages its investments will increase more when the Fund's
portfolio assets increase in value and decrease more when the Fund's portfolio
assets decrease in value than would otherwise be the case. Moreover, interest
costs on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the returns on the borrowed funds. Under adverse
conditions, the Fund might have to sell portfolio securities to meet interest or
principal payments at a time investment considerations would not favor such
sales. The Fund intends to use leverage during periods when the Advisor
believes that the Fund's investment objective would be furthered by increasing
the Fund's investments in common stocks.
The Fund may borrow money to facilitate management of the Fund's portfolio by
enabling the Fund to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous. Such borrowing is not for
investment purposes and will be repaid by the Fund promptly.
As required by the Act, the Fund must maintain continuous asset coverage
(total assets, including assets acquired with borrowed funds, less liabilities
exclusive of borrowings) of 300% of all amounts borrowed. If, at any time, the
value of the Fund's assets should fail to meet this 300% coverage test, the
Fund, within three days (not including Sundays and holidays), will reduce the
amount of the Fund's borrowings to the extent necessary to meet this 300%
coverage. Maintenance of this percentage limitation may result in the sale of
portfolio securities at a time when investment considerations otherwise indicate
that it would be disadvantageous to do so.
In addition to the foregoing, the Fund is authorized to borrow money from a
bank as a temporary measure for extraordinary or emergency purposes in amounts
not in excess of 5% of the value of the Fund's total assets. This borrowing is
not subject to the foregoing 300% asset coverage requirement. The Fund is
authorized to pledge portfolio securities as the Adviser deems appropriate in
connection with any borrowings.
WARRANTS
The Fund may invest in warrants and similar rights, which are privileges
issued by corporations enabling the owners to subscribe to and purchase a
specified number of shares of the corporation at a specified price during a
specified period of time. The purchase of warrants involves the risks that the
Fund could lose the purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrants expiration. Also the
purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.
MONEY MARKET INSTRUMENTS
The Fund, as part of a cash reserve or to "cover" investment strategies, may
invest in short-term, high quality money market instruments in addition to
repurchase agreements and U.S. Treasury Securities with a remaining maturity of
397 days or less. The Fund may invest in commercial paper and other cash
equivalents rated A-1 or A-2 by Standard & Poor's Corporation ("S&P") or Prime-1
or Prime-2 by Moody's Investors Service, Inc. ("Moody's"), including commercial
paper master notes (which are demand instruments bearing interest at rates which
are fixed to known lending rates and automatically adjusted when such lending
rates change) of issuers whose commercial paper is rated A-1 or A-2 by S&P or
Prime-1 or Prime-2 by Moody's.
The Fund may also invest in securities issued by other investment companies
that invest in high quality, short-term debt securities (i.e., money market
instruments). In addition to the advisory fees and other expenses the Fund
bears directly in connection with its own operations, as a shareholder of
another investment company, the Fund would bear its pro rata portion of the
other investment company's advisory fees and other expenses, and such fees and
other expenses will be borne indirectly by the Fund's shareholders.
ILLIQUID SECURITIES
While the Fund does not anticipate doing so, it may purchase illiquid
securities, including restricted securities. The Fund will not invest more than
15% of its net assets in illiquid securities. Securities eligible to be resold
pursuant to Rule 144A under the Securities Act of 1933 may be considered liquid.
The Board of Directors of the Company has delegated to the Adviser the day-to-
day determination of the liquidity of a security although it has retained
oversight and ultimate responsibility for such determinations. Although no
definite quality criteria are used, the Board of Directors has directed the
Adviser to consider such factors as (i) the nature of the market for a security
(including the institutional private resale markets); (ii) the terms of these
securities or other instruments allowing for the disposition to a third party or
the issuer thereof (e.g. certain repurchase obligations and demand instruments);
(iii) the availability of market quotations; and (iv) other permissible factors.
Investing in Rule 144A securities could have the effect of decreasing the
liquidity of the Fund to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing these securities.
PORTFOLIO TURNOVER
The Fund will generally purchase and sell securities and effect transactions
in futures contracts without regard to the length of time the security has been
held or the futures contract open and, accordingly, it can be expected that the
rate of portfolio turnover may be substantial. In selling a security or closing
a futures contract, the Adviser will consider that profits from sales of
securities held less than three months must be limited in order to meet the
requirements of Subchapter M of the Internal Revenue Code. Subject to the
foregoing, the Fund may sell a given security or close a futures contract, no
matter for how long or short a period it has been held in the portfolio, and no
matter whether the sale is at a gain or loss, if the Adviser believes that it is
not fulfilling its purpose. Since investment decisions are based on the
anticipated contribution of the security in question to the Fund's investment
objective, the rate of portfolio turnover is irrelevant when the Adviser
believes a change is in order to achieve those objectives, and the Fund's annual
portfolio turnover rate may vary from year to year. The Fund's portfolio
turnover rate will generally not exceed 200%. Pursuant to Securities and
Exchange Commission requirements, the portfolio turnover rate of the Fund is
calculated without regard to securities, including short sales, options and
futures contracts, having a maturity of less than one year. The Fund may have a
significant portion of its assets in short-term options and futures contracts
which are excluded for purposes of calculating portfolio turnover.
High portfolio turnover in any year will result in the payment by the Fund of
above-average transaction costs and could result in the payment by shareholders
of above-average amounts of taxes on realized investment gains. Distributions
to shareholders of such investment gains, to the extent they consist of net
short-term capital gains, will be considered ordinary income for federal income
tax purposes.
ADDITIONAL RISKS
In addition to the risks discussed above, investors should understand that
there can be no assurance that the Fund will achieve its investment objective.
Many of the investments made by the Fund are subject to significant volatility.
The Fund is intended for investors who can accept this risk. An investment in
the Fund does not constitute a complete investment program. Investors may wish
to complement an investment in the Fund with other types of investments. The
fact that the Fund has no operating history should be considered a risk factor.
As a result of the investment techniques used by the Fund, the Fund may have
a significant portion (up to 100%) of its assets held in a segregated account as
"cover" for the investment techniques the Fund employs. The securities
maintained in the segregated account of the Fund will be liquid securities.
These assets may not be sold while the position in the corresponding instrument
or transaction (e.g. short sale, option or futures contract) is open unless they
are replaced by similar assets. As a result, the commitment of a large portion
of the Fund's assets to "cover" investment techniques could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
Participation in the options or futures markets by the Fund involves
investment risks and transaction costs to which the Fund would not be subject
absent the use of these strategies. In particular, the loss from investing in
futures contracts is potentially unlimited. Risks inherent in the use of
options, futures contracts and options on futures contracts include: (1)
adverse changes in the value of such instruments; (2) imperfect correlation
between the price of options and futures contracts and options thereon and
movements in the price of the underlying securities, index or futures contracts;
(3) the fact that the skills needed to use these strategies are different from
those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; and (5) the
possible need to defer closing out certain positions to avoid adverse tax
consequences.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may be
changed only with the approval of a majority of the Fund's outstanding shares.
These restrictions include the Fund's limitations on borrowing described under
the caption "INVESTMENT OBJECTIVE AND POLICIES" and the following restrictions:
(1) The Fund will not purchase the securities of any issuer if the purchase
would cause more than 5% of the value of the Fund's total assets to be invested
in securities of such issuer (except securities of the U.S. government or any
agency or instrumentality thereof), or purchase more than 10% of the outstanding
voting securities of any one issuer, except that up to 50% of the Fund's total
assets may be invested without regard to these limitations. As such the Fund is
classified as a non-diversified investment company under the Act. A non-
diversified portfolio may be more volatile than a diversified portfolio.
(2) The Fund will not invest 25% or more of its total assets at the time of
purchase in securities of issuers whose principal business activities are in the
same industry.
A list of the Fund's policies and restrictions, both fundamental and
nonfundamental, is set forth in the Statement of Additional Information. In
order to provide a degree of flexibility, the Fund's investment objective, as
well as other policies which are not deemed fundamental, may be modified by the
Board of Directors without shareholder approval. Any change in the Fund's
investment objective may result in the Fund having an investment objective
different from the investment objective which the shareholder considered
appropriate at the time of investment in the Fund.
MANAGEMENT OF THE FUND
As a Maryland corporation, the business and affairs of the Fund are managed
by its Board of Directors. Under an investment advisory agreement (the
"Advisory Agreement") with the Fund, Fiduciary Management, Inc. (the "Adviser"),
225 East Mason Street, Milwaukee, Wisconsin 53202, furnishes continuous
investment advisory services and management to the Fund. The Adviser is the
investment adviser to individuals and institutional clients (including
investment companies) with substantial investment portfolios. The Adviser was
organized in 1980 and is wholly owned by Ted D. Kellner and Donald S. Wilson.
Since that time, Mr. Kellner has served as Chairman of the Board and Chief
Executive Officer and Mr. Wilson has served as President and Treasurer of the
Adviser. Messrs. Kellner and Wilson are primarily responsible for the day-to-
day management of the Fund's portfolio. They have held this responsibility
since the Fund commenced operations. Mr. Kellner has been President, Treasurer
and a Director of the Fund and Mr. Wilson has been Vice President, Secretary and
a Director of the Fund during the same period.
The Adviser supervises and manages the investment portfolio of the Fund and
subject to such policies as the Board of Directors of the Fund may determine,
directs the purchase or sale of investment securities in the day to day
management of the Fund's investment portfolio. Under the Advisory Agreement,
the Adviser, at its own expense and without reimbursement from the Fund,
furnishes office space, and all necessary office facilities, equipment and
executive personnel for managing the Fund's investments, and bears all sales and
promotional expenses of the Fund, other than distribution expenses paid by the
Fund pursuant to the Service and Distribution Plan and expenses incurred in
complying with laws regulating the issue or sale of securities. For the
foregoing, the Adviser receives a monthly fee of 1/12th of 1% (1% per annum) of
the daily net assets of the Fund.
Under an Administration Agreement (the "Administration Agreement") with the
Fund, the Adviser supervises all aspects of the Fund's operations except those
performed by it pursuant to the Advisory Agreement. Under the Administration
Agreement, the Adviser, at its own expense and without reimbursement from the
Fund, furnishes office space, and all necessary office facilities, equipment and
executive personnel for supervising the Fund's operations. For the foregoing,
the Adviser receives a monthly fee of 1/12 of .2% (.2% per annum) of the first
$30,000,000 of daily net assets of the Fund, 1/12 of .1% (.1% per annum) on the
next $70,000,000 of daily net assets of the Fund and 1/12 of .05% (0.05% per
annum) of the daily net assets of the Fund over $100,000,000.
The Fund pays all of its expenses not assumed by the Adviser pursuant to the
Advisory Agreement or the Administration Agreement described below including,
but not limited to, the professional costs of preparing and the cost of printing
its registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto, the expense of
registering its shares with the Securities and Exchange Commission and in the
various states, the printing and distribution cost of prospectuses mailed to
existing shareholders, director and officer liability insurance, reports to
shareholders, reports to government authorities and proxy statements, interest
charges, brokerage commissions and expenses in connection with portfolio
transactions. The Fund also pays the fees of directors who are not interested
persons of the Adviser or officers or employees of the Fund, salaries of
administrative and clerical personnel, association membership dues, auditing and
accounting services, fees and expenses of any custodian or trustees having
custody of Fund assets, expenses of repurchasing and redeeming shares, printing
and mailing expenses, charges and expenses of dividend disbursing agents,
registrars and stock transfer agents, including the cost of keeping all
necessary shareholder records and accounts and handling any problems related
thereto.
DETERMINATION OF NET ASSET VALUE
The per share net asset value of the Fund is determined by dividing the total
value of its net assets (meaning its assets less its liabilities excluding
capital and surplus) by the total number of its shares outstanding at that time.
The net asset value is determined as of the close of regular trading (currently
4:00 p.m. Eastern time) on the New York Stock Exchange on each day the New York
Stock Exchange is open for trading. This determination is applicable to all
transactions in shares of the Fund prior to that time and after the previous
time as of which net asset value was determined. Accordingly, purchase orders
accepted or shares tendered for redemption prior to the close of regular trading
on a day the New York Stock Exchange is open for trading will be valued as of
the close of trading, and purchase orders accepted or shares tendered for
redemption after that time will be valued as of the close of the next trading
day.
Common stocks and securities sold short that are listed on any national stock
exchange or quoted on the Nasdaq Stock Market will be valued at the last sale
price on the date valuation is made. Price information on listed securities is
taken from the exchange where the security is primarily traded. Common stocks
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 most recent bid
price. 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 most recent asked price. Unlisted equity securities for which
market quotations are readily available will be valued at the most recent bid
price. Options purchased or written by the Fund are valued at the average of
the current bid and asked prices. The value of a futures contract equals the
unrealized gain or loss on the contract that is determined by marking the
contract to the current settlement price for a like contract acquired on the day
on which the futures contract is being valued. A settlement price may not be
moved if the market makes a limit move in which event the futures contract will
be valued at its fair value as determined by the Adviser in accordance with
procedures approved by the Board of Directors. Debt securities are valued at
the latest bid prices furnished by independent pricing services. Any securities
for which there are no readily available market quotations and other assets will
be valued at their fair value as determined in good faith by the Board of
Directors. Short-term instruments (those with remaining maturities of 60 days
or less) are valued at amortized cost, which approximates market.
PURCHASE OF SHARES
Shares of the Fund may be purchased directly from the Fund. Share purchase
application forms are included at the back of the Prospectus. The price per
share is the next determined per share net asset value after receipt of an
application. Additional purchase applications may be obtained from the Fund.
Purchase applications should be mailed directly to: FMI Focus Fund, c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal
Service and other independent delivery services are not agents of the Fund.
Therefore, deposit of purchase applications in the mail or with such services
does not constitute receipt by Firstar Trust Company or the Fund. PLEASE DO NOT
mail letters by overnight courier to the Post Office Box address. To purchase
shares by overnight or express mail, please use the following street address:
FMI Focus Fund, c/o Firstar Trust Company, Mutual Fund Services, 615 East
Michigan Street, Milwaukee, Wisconsin 53202. All applications must be
accompanied by payment in the form of a check made payable to FMI Focus Fund, or
by direct wire transfer. All purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks. No cash will be accepted. Firstar Trust Company
will charge a $20 fee against a shareholder's account for any payment check
returned by the custodian. THE SHAREHOLDER WILL ALSO BE RESPONSIBLE FOR ANY
LOSSES SUFFERED BY THE FUND AS A RESULT. When a purchase is made by check
(other than a cashiers or certified check), the Fund may delay the mailing of a
redemption check until it is satisfied that the check has cleared. (It will
normally take up to 3 days to clear local personal or corporate checks and up to
7 days to clear other personal and corporate checks.) To avoid redemption
delays, purchases may be made by cashiers or certified check or by direct wire
transfers. Funds should be wired to: Firstar Bank Milwaukee, NA, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin, ABA #75000022, Firstar Trust Company,
Account #112-952137, for further credit to: FMI Focus Fund, "name of
shareholder and existing account number" if any. The establishment of a new
account by wire transfer should be preceded by a phone call to Firstar Trust
Company 1-800-811-5311, to provide information for the setting up of the
account. A follow up application should be sent for all new accounts opened by
wire transfer. Applications are subject to acceptance by the Fund, and are not
binding until so accepted. The Fund does not accept telephone orders for
purchase of shares and reserves the right to reject applications in whole or in
part. The Board of Directors of the Fund has established $1,000 as the minimum
initial purchase price and $100 as the minimum for any subsequent purchase
(except through dividend reinvestment and the automatic investment plan), which
minimum amounts are subject to change at any time. Shareholders will be advised
at least thirty days in advance of any increases in such minimum amounts. Stock
certificates for shares are not issued.
Shares may be purchased through registered broker-dealers who may charge a
fee, either at the time of purchase or redemption. The fee, if charged, is
retained by the broker-dealer and not remitted to the Fund or the Adviser.
The Fund had adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the Act. The Plan authorizes payments by the Fund in
connection with the distribution of its shares at an annual rate, as determined
from time to time by the Board of Directors, of up to 0.25% of the Fund's
average daily net assets. Payments made pursuant to the Plan may only be used
to pay distribution expenses in the year incurred. Amounts paid under the Plan
by the Fund may be spent by the Fund on any activities or expenses primarily
intended to result in the sale of shares of the Fund, including but not limited
to, advertising, compensation for sales and marketing activities of financial
institutions and others such as dealers and distributors, shareholder account
servicing, the printing and mailing of prospectuses to other than current
shareholders and the printing and mailing of sales literature. The Plan permits
the Fund to employ a distributor of its shares, in which event payments under
the Plan will be made to the distributor and may be spent by the distributor on
any activities or expenses primarily intended to result in the sale of shares of
the Fund, including but not limited to, compensation to, and expenses (including
overhead and telephone expenses) of, employees of the distributor who engage in
or support distribution of the Fund's shares, printing of prospectuses and
reports for other than existing shareholders, advertising and preparation and
distribution of sales literature. Allocation of overhead (rent, utilities,
etc.) and salaries will be based on the percentage of utilization in, and time
devoted to, distribution activities. If a distributor is employed by the Fund,
the distributor will directly bear all sales and promotional expenses of the
Fund, other than expenses incurred in complying with laws regulating the issue
or sale of securities. (In such event, the Fund will indirectly bear sales and
promotional expenses to the extent it makes payments under the Plan.) The Fund
has no present plans to employ a distributor. Pending the employment of a
distributor, the Fund's distribution expenses will be authorized by the officers
of the Company. To the extent any activity is one which the Fund may finance
without a plan pursuant to Rule 12b-1, the Fund may also make payments to
finance such activity outside of the Plan and not subject to its limitations.
REDEMPTION OF SHARES
A shareholder may require the Fund to redeem his shares in whole or part at
any time during normal business hours. Redemption requests must be made in
writing and directed to: FMI Focus Fund, c/o Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service and other
independent delivery services are not agents of the Fund. Therefore, deposit of
redemption requests in the mail or with such services does not constitute
receipt by Firstar Trust Company or the Fund. PLEASE DO NOT mail letters by
overnight courier to the Post Office Box address. Redemption requests sent by
overnight or express mail should be directed to: FMI Focus Fund, c/o Firstar
Trust Company, Mutual Fund Services, 3rd Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202. If a redemption request is inadvertently sent to
the Fund, it will be forwarded to Firstar Trust Company, but the effective date
of redemption will be delayed until the request is received by Firstar Trust
Company. Requests for redemption by telephone or telegram and requests which
are subject to any special conditions or which specify an effective date other
than as provided herein cannot be honored.
Redemption requests should specify the name of the Fund, the number of shares
or dollar amount to be redeemed, shareholder's name, account number and the
additional requirements listed below that apply to the particular account.
TYPE OF REGISTRATION REQUIREMENTS
-------------------- ------------
Individual, Joint Tenants Redemption request signed by all
Sole Proprietor, Custodial person(s) required to sign for the
(Uniform Gift to Minors Act), account, exactly as it is
General Partnership registered.
Corporations, Associations Redemption request and a corporate
resolution, signed by person(s)
required to sign for the
account, accompanied by signature
guarantee(s).
Trusts Redemption request signed by the
trustee(s) with a signature
guarantee. (If the trustee's name
is not registered on the account, a
copy of the trust
document certified within the last
60 days is also required.)
Redemption requests from shareholders in an Individual Retirement Account
must include instructions regarding federal income tax withholding. Unless
otherwise indicated, these redemptions, as well as redemptions of other
retirement plans not involving a direct rollover to an eligible plan, will be
subject to federal income tax withholding. If a shareholder is not included in
any of the above registration categories (e.g., executors, administrators,
conservators or guardians), the shareholder should call the transfer agent,
Firstar Trust Company (1-800-811-5311), for further instructions.
Signatures need not be guaranteed unless the proceeds of redemption are
requested to be sent by wire transfer, to a person other than the registered
holder or holders of the shares to be redeemed, or to be mailed to other than
the address of record, in which case each signature on the redemption request
must be guaranteed by a commercial bank or trust company in the United States, a
member firm of the New York Stock Exchange or other eligible guarantor
institution. Redemptions will not be effective or complete until all of the
foregoing conditions, including receipt of all required documentation by Firstar
Trust Company in its capacity as transfer agent, have been satisfied.
The redemption price is the net asset value next determined after receipt by
Firstar Trust Company in its capacity as transfer agent of the written request
in proper form with all required documentation. The amount received will depend
on the market value of the investments in the Fund's portfolio at the time of
determination of net asset value, and may be more or less than the cost of the
shares redeemed. A check in payment for shares redeemed will be mailed to the
holder no later than the seventh day after receipt of the redemption request in
proper form and all required documentation except as indicated in "Purchase of
Shares" for certain redemptions of shares purchased by check.
The right to redeem shares of the Fund will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension, or
(c) an emergency, as defined by rules and regulations of the Securities and
Exchange Commission, exists as a result of which it is not reasonably
practicable for the Fund to dispose of its securities or fairly to determine the
value of its net assets.
DIVIDEND REINVESTMENT
Shareholders may elect to have all income dividends and capital gains
distributions reinvested or paid in cash, or elect to have income dividends
reinvested and capital gains distributions paid in cash or capital gains
distributions reinvested and income dividends paid in cash. See the Share
Purchase Application included at the back of this Prospectus for further
information. If the shareholder does not specify an election, all income
dividends and capital gains distributions will automatically be reinvested in
full and fractional shares of the Fund, calculated to the nearest 1,000th of a
share. Shares are purchased at the net asset value in effect on the business
day after the dividend record date and are credited to the shareholder's account
on the dividend payment date. As in the case of normal purchases, stock
certificates are not issued. Shareholders will be advised of the number of
shares purchased and the price following each reinvestment. An election to
reinvest or receive dividends and distributions in cash will apply to all shares
of the Fund registered in the same name, including those previously purchased.
A shareholder may change an election at any time by notifying the Fund in
writing or by calling Firstar Trust Company at 1-800-811-5311. If such a notice
is received between a dividend declaration date and payment date, it will become
effective on the day following the payment date. The Fund may modify or
terminate its dividend reinvestment program at any time on thirty days' notice
to participants.
AUTOMATIC INVESTMENT PLAN
Shareholders wishing to invest fixed dollar amounts in the Fund on a regular
basis can make automatic purchases in amounts of $50 or more, on any date
specified by the shareholder each month or calendar quarter by using the Fund's
Automatic Investment Plan. If such date is a weekend or holiday, such purchase
shall be made on the next business day. There is no service fee for
participating in this Plan. A $20 fee will be charged by Firstar Trust Company
if sufficient funds are not available in the shareholder's account at the time
of the automatic transaction. To use this service, the shareholder must
authorize the transfer of funds from his checking or NOW account by completing
the Automatic Investment Plan application included as part of the Share Purchase
Application located at the back of the Prospectus or by calling the Fund's
office at (414) 226-4555. The Automatic Investment Plan must be implemented
with a financial institution that is a member of the Automated Clearing House.
Shareholders may change the date or amount of investments at any time by writing
to or calling Firstar Trust Company at 1-800-811-5311. The Fund reserves the
right to suspend, modify or terminate the Automatic Investment Plan without
notice.
The Automatic Investment Plan is designed to be a method to implement dollar
cost averaging. Dollar cost averaging is an investment approach providing for
the investment of a specific dollar amount on a regular basis thereby precluding
emotions dictating investment decisions. Dollar cost averaging does not insure
a profit nor protect against a loss.
SYSTEMATIC WITHDRAWAL PLAN
The Fund has available to shareholders a Systematic Withdrawal Plan, pursuant
to which a shareholder who owns Fund shares worth at least $10,000 at current
net asset value may provide that a fixed sum will be distributed to him at
regular intervals. To participate in the Systematic Withdrawal Plan, a
shareholder deposits his Fund shares with the Fund and appoints it as his agent
to effect redemptions of Fund shares held in his account for the purpose of
making monthly or quarterly withdrawal payments of a fixed amount to him out of
his account. The Systematic Withdrawal Plan does not apply to Fund shares held
in Individual Retirement Accounts or defined contribution retirement plans. An
application for participation in the Systematic Withdrawal Plan is included as
part of the Share Purchase Application located at the back of this Prospectus or
may be obtained by calling the Fund at (414) 226-4555.
The minimum amount of a withdrawal payment is $100. These payments will be
made from the proceeds of periodic redemption of shares in the account at net
asset value. Redemptions will be made at periodic intervals no more frequent
than monthly on the date specified by the shareholder or, if that day is a
weekend or holiday, on the next business day. See the Share Purchase
Application located in the back of this Prospectus for further information.
Participation in the Systematic Withdrawal Plan constitutes an election by the
shareholder to reinvest in additional Fund shares, at net asset value all income
dividends and capital gains distributions payable by the Fund on shares held in
such account, and shares so acquired will be added to such account. The
shareholder may deposit additional Fund shares in his account at any time.
Withdrawal payments cannot be considered as yield or income on the
shareholder's investment, since portions of each payment will normally consist
of a return of capital. Depending on the size or the frequency of the
disbursements requested, and the fluctuation in the value of the Fund's
portfolio, redemptions for the purpose of making such disbursements may reduce
or even exhaust the shareholder's account.
The shareholder may vary the amount or frequency of withdrawal payments or
temporarily discontinue them by notifying Firstar Trust Company in writing or by
telephone at 1-800-811-5311. To change the designated payee or payee's address,
you must notify Firstar Trust Company in writing.
EXCHANGE PRIVILEGE
A shareholder may redeem all or any portion of his Fund shares and use the
proceeds to purchase shares of Fiduciary Capital Growth Fund, Inc., another
mutual fund managed by the Adviser, or Portico Money Market Fund, a money market
mutual fund not affiliated with the Fund or the Adviser, if such shares are
offered in his state of residence. The redemption of shares of the Fund and the
purchase of shares of Fiduciary Capital Growth Fund, Inc. and/or Portico Money
Market Fund will be effected at the respective net asset values of such funds.
An exchange transaction is a sale and purchase of shares for federal income tax
purposes and may result in the realization of a capital gain or loss. Prior to
exercising the Exchange Privilege a shareholder should obtain and carefully read
the prospectus for Fiduciary Capital Growth Fund, Inc. and/or Portico Money
Market Fund. The Exchange Privilege does not in any way constitute an offering
of, or recommendation on the part of the Adviser or the Fund or Fiduciary
Capital Growth Fund, Inc. of, an investment in Portico Money Market Fund. The
registration of both the account from which the exchange is being made and the
account to which the exchange is made must be identical.
Exchange requests must be made in writing. Exchange request forms may be
obtained by writing the Fund or by calling (414) 226-4555. Written requests
should include the account numbers for both the Fund and Fiduciary Capital
Growth Fund, Inc. or Portico Money Market Fund, if an account is already opened,
and the amount of the exchange. If a new account is to be opened by the
exchange, the registration must be identical to that of the original account.
The Fund reserves the right upon prior notice (except as provided below) to
suspend, limit, modify or terminate the Exchange Privilege or its use in any
manner by any person or class. In particular, since an excessive number of
exchanges may be disadvantageous to the Fund, the Fund reserves the right to
terminate the Exchange Privilege of any shareholder who makes more than five
exchanges of shares in a year or three in a calendar quarter. The Fund will not
notify any such shareholder in advance of terminating its Exchange Privilege.
RETIREMENT PLANS
INDIVIDUAL RETIREMENT ACCOUNT
Individual shareholders may establish their own tax-sheltered Individual
Retirement Account ("IRA"). The Fund has a prototype IRA plan using IRS Form
5305-A. An individual may contribute to the IRA an annual amount equal to the
lesser of 100% of annual earned income or $2,000 ($2,250 maximum ($4,000 in 1997
and later tax years) in the case of a married couple where one spouse is not
working and certain other conditions are met).
Earnings on amounts held under the IRA accumulate free of federal income
taxes. Distributions from the IRA may begin at age 59-1/2, and must begin by
April 1 following the calendar year end in which a person reaches age 70-1/2.
Excess contributions, certain distributions prior to age 59-1/2 and failure to
begin distribution after age 70-1/2 may result in adverse tax consequences.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
has the right to revoke his account within seven days after receiving the
disclosure statement in accordance with IRS regulations and obtain a full refund
of his contribution should he so elect. The custodian may, in its discretion,
hold the initial contribution uninvested until the expiration of the seven-day
revocation period. It anticipates that it will not so exercise its discretion
but reserves the right to do so.
Firstar Trust Company, Milwaukee, Wisconsin, serves as custodian and
furnishes the services provided for in the IRA plan as required by the Employee
Retirement Income Security Act of 1974 ("ERISA"). The custodian invests all
cash contributions, dividends and capital gains distributions in shares of the
Fund. For such services, the following fees are charged against the accounts of
the participants: $12.50 annual maintenance fee; $15 for transferring to a
successor trustee; $15 for distribution(s) to a participant; and $15 for
refunding any contribution in excess of the deductible limit.
SIMPLIFIED EMPLOYEE PENSION PLAN
The Fund's prototype IRA plan may also be used to establish a Simplified
Employee Pension Plan ("SEP/IRA"). The SEP/IRA is available to employers and
employees, including self-employed individuals, who wish to purchase shares with
tax deductible contributions not exceeding annually for any one participant the
lesser of $30,000 or 15% of earned income. Under this plan, employer
contributions are made directly to the IRA accounts of eligible participants.
MODEL 403(B)(7) PLAN
A Model 403(b)(7) Plan is available for employees of certain charitable,
educational and governmental entities.
MODEL 401(K) 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 (the
"IRS") 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 plans should be
directed to the Fund. The IRA documents contain a disclosure statement which
the IRS requires to be furnished to individuals who are considering adopting an
IRA. Because a retirement program involves commitments covering future years,
it is important that the investment objective of the Fund be consistent with the
participant's retirement objectives. Premature withdrawals from a retirement
plan will result in adverse tax consequences. Consultation with a competent
financial and tax adviser regarding the retirement plans 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 sales of the Fund's portfolio
securities. In placing purchase and sale orders for the Fund, it is the policy
of the Adviser to seek the best execution of orders at the most favorable price
in light of the overall quality of brokerage and research services provided.
The Advisory Agreement permits the Adviser to cause the Fund to pay a broker
which provides brokerage and research services to the Adviser a commission for
effecting securities transactions in excess of the amount another broker would
have charged for executing the transaction, provided the Adviser believes this
to be in the best interests of the Fund. The Fund may place portfolio orders
with broker-dealers who recommend the purchase of Fund shares to clients if the
Adviser believes the commission and transaction quality are comparable to that
available from other brokers and allocate portfolio brokerage on that basis.
CAPITAL STRUCTURE
The Company's Articles of Incorporation permit the Board of Directors to
issue 500,000,000 shares of common stock. The Board of Directors has the power
to designate one or more classes ("series") of shares of common stock and to
classify or reclassify any unissued shares with respect to such series.
Currently the shares of the Fund are the only class of shares being offered by
the Company. Shareholders are entitled: (I) to one vote per full share; (ii)
to such distributions as may be declared by the Company's Board of Directors out
of funds legally available; and (iii) upon liquidation, to participate ratably
in the assets available for distribution. There are no conversion or sinking
fund provisions applicable to the shares, and the holders have no preemptive
rights and may not cumulate their votes in the election of directors.
Consequently the holders of more than 50% of the shares of the Fund voting for
the election of directors can elect the entire Board of Directors and in such
event the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the Board of Directors. The
shares are redeemable and are transferable. All shares issued and sold by the
Fund will be fully paid and nonassessable. Fractional shares entitle the holder
to the same rights as whole shares. The Fund will not issue certificates
evidencing shares. Instead the shareholder's account will be credited with the
number of shares purchased, relieving shareholders of responsibility for
safekeeping of certificates and the need to deliver them upon redemption.
Written confirmations are issued for all purchases of shares. Firstar Trust
Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202 acts as the Fund's
transfer agent and dividend disbursing agent.
The Maryland Business Corporation Law permits registered investment
companies, such as the Fund, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the Act. The Fund has adopted the appropriate provisions in its Bylaws and
does not anticipate holding an annual meeting of shareholders to elect directors
unless otherwise required by the Act. The Fund has also adopted provisions in
its Bylaws for the removal of directors by its shareholders.
SHAREHOLDER REPORTS
Shareholders will be provided at least semi-annually with a report showing
the Fund's portfolio and other information and annually after the close of the
Fund's fiscal year, which ends September 30, with an annual report containing
audited financial statements. Shareholders who have questions about the Fund
should call Firstar Trust Company, 1-800-811-5311 or (414) 765-4124 or write to:
FMI Focus Fund, 225 East Mason Street, Milwaukee, Wisconsin 53202, Attention:
Secretary.
PERFORMANCE INFORMATION
The Fund may provide from time to time in advertisements, reports to
shareholders and other communications with shareholders its average annual total
return. An average annual total return refers to the rate of return which, if
applied to an initial investment in the Fund at the beginning of a stated period
and compounded over the period, would result in the redeemable value of the
investment in the Fund at the end of the stated period assuming reinvestment of
all dividends and distributions and reflecting the effect of all recurring fees.
The Fund may also provide "aggregate" total return information for various
periods, representing the cumulative change in value of an investment in the
Fund for a specific period (again reflecting changes in share price and assuming
reinvestment of dividends and distributions).
Any reported performance results will be based on historical earnings and
should not be considered as representative of the performance of the Fund in the
future. An investment in the Fund will fluctuate in value and at redemption its
value may be more or less than the initial investment. The Fund may compare its
performance to other mutual funds with similar investment objectives and to the
industry as a whole, as reported by Lipper Analytical Services, Inc., Money,
Forbes, Business Week and Barron's magazines and The Wall Street Journal.
(Lipper Analytical Services, Inc. is an independent service that ranks over
1,000 mutual funds based upon total return performance.) The Fund may also
compare its performance to the Dow Jones Industrial Average, Nasdaq Composite
Index, Nasdaq Industrials Index, Value Line Composite Index, the Standard &
Poor's 500 Stock Index and the Consumer Price Index. Such comparisons may be
made in advertisements, shareholder reports or other communications to
shareholders.
FMI FOCUS FUND
- --- This is a follow-up application
(Investment by wire transfer. See page 11 of the Prospectus.)
SHARE PURCHASE APPLICATION
Minimum Initial Investment $1,000
Minimum Subsequent Investment $100
Mail Completed Application to:
FMI Focus Fund
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Overnight Express Mail to:
FMI Focus Fund
c/o Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 E. Michigan Street
Milwaukee, Wisconsin 53202
Use this form for individual, custodial, trust, profit-sharing or pension plan
accounts, including self-directed IRA, SEP/IRA and 401(k) plans. DO NOT USE
THIS FORM FOR FMI FOCUS FUND-SPONSORED 401(K), 403(B)(7), SEP/IRA, IRA OR
DEFINED CONTRIBUTION PLANS (KEOGH OR CORPORATE PROFIT-SHARING AND MONEY-
PURCHASE) WHICH REQUIRE FORMS AVAILABLE FROM THE FUND.
For information please call 1-800-811-5311 or 1-414-765-4124.
- ------------------------------------------------------------------------------
o ACCOUNT REGISTRATION
Individual ---
Name
----------------------------------------------------------------------------
Social Security Number Citizen of --- U.S. --- Other
-----------------------------------------------------------------------------
Joint Owner*<F4> ---
Name
-----------------------------------------------------------------------------
Social Security Number Citizen of --- U.S. --- Other
-----------------------------------------------------------------------------
Gift to Minor ---
Custodian
-----------------------------------------------------------------------------
Minor Minor's Birthdate
-----------------------------------------------------------------------------
Minor's Social Security Number Citizen of --- U.S. --- Other
----------------------------------------------------------------------------
Corporation, Partnership or Other Entity ---
Name of Entity
-----------------------------------------------------------------------------
Taxpayer Identification Number
-----------------------------------------------------------------------------
o A corporate resolution form or certificate is required for corporate
accounts.
-----------------------------------------------------------------------------
Trust, Estate or Guardianship ---
*<F4>(Registration will be Joint Tenants with Rights of Survivorship
(JTWROS) unless otherwise specified)
Name
-----------------------------------------------------------------------------
* Name of Fiduciary(s)
-----------------------------------------------------------------------------
Taxpayer Identification Number Date of Trust
-----------------------------------------------------------------------------
o Additional documentation and certification may be requested.
- ------------------------------------------------------------------------------
o MAILING ADDRESS
--- Send Duplicate Confirmations To:
- ------------------------------------------------------------------------------
Street, Apt. Name
- ------------------------------------------------------------------------------
City, State, Zip Code Street, Apt.
- ------------------------------------------------------------------------------
Daytime Phone Number City, State, Zip Code
- ------------------------------------------------------------------------------
o INVESTMENT, PAYMENT FOR INITIAL PURCHASE AND DISTRIBUTIONS
By --- check
or --- wire**<F5>
The minimum initial Investment is $1,000 for shares of FMI Focus Fund.
Minimum additions to the Fund are $100.
DISTRIBUTION OPTIONS
Capital Gains Capital Gains
Capital Gains Reinvested in Cash Capital Gains
& Dividends & Dividends & Dividends & Dividends
Amount Reinvested in Cash Reinvested In Cash
$ ---- ---- ---- ----
- ------------------------------------------------------------------------------
(If no dividend option is checked, dividends and capital gains will be
reinvested.)
- ---- If you would like your cash payments automatically deposited to your
checking or savings account, please check the box at left and attach
a voided check.
**<F5>Indicate date and total amount of wire:
Date------------------------------ Amount $--------------------------
WIRING INSTRUCTIONS: The establishment of a new account by wire transfer
should be preceded by a telephone call to Firstar Trust Company at 1-800-811-
5311 or 1-414-765-4124 to provide information for the setting up of the
account. A completed share purchase application also must be sent to FMI Focus
Fund at the above address immediately following the investment. A purchase
request for the Fund should be wired through the Federal Reserve System as
follows:
Firstar Bank of Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 0750-00022
For credit to Firstar Trust Company
Account Number 112-952-137
For further credit to: FMI Focus Fund
Shareholder name:-------------------------------------------
Shareholder account number (if known): ---------------------
- ------------------------------------------------------------------------------
o EXCHANGE PRIVILEGE
If investment is by exchange, such exchange should be made from:
- --- Fiduciary Capital Growth Fund --- Portico Money Market Fund
Account# ------------------------ Account# ----------------------
(I understand that exchanges between the Funds are taxable transactions.)
Amount of Exchange $ --------------or Number of Shares --------------------
- ------------------------------------------------------------------------------
o AUTOMATIC INVESTMENT PLAN
Important: Attach an unsigned, voided check (for checking accounts) or a savings
account deposit slip here, and complete this form.
I would like to establish an Automatic Investment Plan for FMI Focus Fund as
described in the Prospectus. Based on these instructions, Firstar Trust
Company, the Transfer Agent for FMI Focus Fund, will automatically transfer
money directly from my checking or NOW account on the --- day of the month, or
the first business day thereafter, to purchase shares in FMI Focus Fund. If the
automatic purchase cannot be made due to insufficient funds or stop payment, a
$20 fee will be assessed.
Please start the Automatic Investment Plan on this month, day and year: --------
- -----------------------
Please debit my bank account $------------- ($50 minimum) on a --- monthly ---
quarterly basis, to be invested in my FMI Focus Fund account (account number,
if known----------------------------------).
I (we) authorize you via the ACH Network to honor all debit entries initiated
- --- monthly OR --- quarterly through Firstar Bank of Milwaukee, N.A. on behalf
of the Firstar Trust Company. All such debits are subject to sufficient
collected funds in my account to pay the debit when presented.
- -------------------------------------------------------------------------------
Name(s) on your Bank Account Signature of Bank Account Owner
- -------------------------------------------------------------------------------
Signature of Joint Owner (if
any)
- -----------------------------------------
Account Number
- ------------------------------------------------------------------------------
o SYSTEMATIC WITHDRAWALS
A balance of at least $10,000 is required for this option.
I would like to withdraw from FMI Focus Fund -------------- (exact dollars
per payment - $100 minimum)
- --- I would like to have payments made to me on or about the --- day of each
month
OR
- --- I would like to have payments made to me on or about the --- day of these
months:
- --- Jan. --- Feb. --- Mar. --- Apr. --- May --- June
- --- July --- Aug. --- Sept. --- Oct. --- Nov. --- Dec.
- --- I would like my payments automatically deposited to my checking or savings
account. I have attached a voided check.
- ------------------------------------------------------------------------------
o SIGNATURES AND CERTIFICATION
Under the penalty of perjury, I certify that (1) the Social Security Number or
Taxpayer Identification Number shown on this form is my correct Taxpayer
Identification Number, and (2) I am not subject to backup withholding either
because I have not been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure to report all
interest or dividends, or the IRS has notified me that I am no longer subject
to backup withholding. The IRS does not require your consent to any provision
of this document other than the certifications required to avoid backup
withholding.
- ------------------------------------------------------------------------------
Signature*<F6> Signature of Co-Owner, if any
- ------------------------------------
Date
*<F6>If shares are to be registered in (1) joint names, both persons should
sign, (2) a custodian for a minor, the custodian should sign, (3) a trust, the
trustee(s) should sign, or (4) a corporation or other entity, an officer should
sign and print name and title on space provided below.
- ------------------------------------------------------------------------------
Print name and title of officer signing for a corporation or other entity.
FMI FOCUS FUND
225 East Mason Street
Milwaukee, Wisconsin 53202
414-226-4555
BOARD OF DIRECTORS
BARRY K. ALLEN
TED D. KELLNER
THOMAS W. MOUNT
DONALD S. WILSON
INVESTMENT ADVISER AND ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-811-5311
or
414-765-4124
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
STATEMENT OF ADDITIONAL INFORMATION June 16, 1997
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 June 16, 1997. 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 . . . . . . . . . . . . . . 8
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 10
INVESTMENT ADVISER AND ADMINISTRATOR . . . . . . . . . . . . . . . . 12
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . 13
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . 14
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . 14
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF SECURITIES RATINGS . . . . . . . . . . . . . . . . . . 19
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . 20
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 21
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated June 16, 1997 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.
INVESTMENT RESTRICTIONS
As set forth in the Prospectus dated June 16, 1997 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 invest 25% or more of the value of its
total assets, determined at the time an investment is made, exclusive of
U.S. government securities, in securities issued by companies primarily
engaged in the same industry. In determining industry classifications the
Fund will use the current Directory of Companies Filing Annual Reports
with the Securities and Exchange Commission except to the extent permitted
by the Act.
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 invest more than 15% of the value of its
net assets in illiquid 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 (other than those relating to borrowing of
money or issuing senior securities) 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.
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 liquid 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. 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 or liquid 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 losses greater than the Fund would have
incurred without the options position.
Options on Securities
The Fund may buy put and call options and write (sell) call
options on securities. By writing a call option and receiving a premium,
the Fund may become obligated during the term of the option to deliver the
securities underlying the option at the exercise price if the option is
exercised. By buying a put option, the Fund has the right, in return for
a premium paid during the term of the option, to sell the securities
underlying the option at the exercise price. By buying a call option, the
Fund has the right, in return for a premium paid during the term of the
option, to purchase the securities underlying the option at the exercise
price. Options on securities written by the Fund will be traded on
recognized securities exchanges.
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 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
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.
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, Consumer & Business
Services, 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, 1993 to September, 1993, Mr. Allen was President
and Chief Executive Officer of Ameritech Illinois and from July, 1989 to
July, 1993, Mr. Allen was President and Chief Executive Officer of
Wisconsin Bell. 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 51
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 66
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 54
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 54
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 36
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:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement Benefits Estimated Annual from Corporation
Name of Compensation Accrued as Part of Benefits Upon and Fund Complex
Person from Corporation Fund Expenses Retirement Paid to Directors(1)
<S> <C> <C> <C> <C>
Barry K. Allen $300 0 0 $1,500
Ted D. Kellner 0 0 0 0
Thomas W. Mount $300 0 0 $1,500
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.
</TABLE>
PRINCIPAL STOCKHOLDERS
Set forth below are the names and addresses of all holders of
the Fund's Common Stock who as of May 31, 1997 beneficially owned more
than 5% of the then outstanding shares of the Fund's Common Stock as well
as the number of shares of the Fund's Common Stock beneficially owned by
Ted D. Kellner, Donald S. Wilson and all officers and directors of the
Fund as a group, indicating in each case whether the person has sole or
shared power to vote or dispose of such shares.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
Sole Power Shared Power Aggregate
<S> <C> <C> <C> <C>
Ted D. Kellner
225 East Mason Street
Milwaukee, WI 53202 15,022(1) 30,045(2)(3) 45,067 60.71%
Donald S. Wilson
225 East Mason Street
Milwaukee, WI 53202 2,504 30,045(2)(3) 32,549 43.85%
Dennis J. Kuester
770 North Water Street
Milwaukee, WI 53202 4,865 0 4,865 6.55%
John J. Oros
280 Highland Avenue
Ridgewood, NJ 07450 4,630 0 4,630 6.24%
John P. Debbink &
Joan C. Debbink Jt. Ten.
1990 4th Street S.
Naples, FL 34102 0 3,975 3,975 5.35%
Officers & Directors as
a group (6 persons) -- -- 49,574(1)(2)(3) 66.78%
_______________
(1) Represents shares held by an investment partnership over which Mr. Kellner has voting and investment authority.
(2) Includes 10,015 shares owned by the Adviser's profit sharing plan and 10,015 shares owned by the Adviser's pension
plan, for which Messrs. Kellner and Wilson are co-trustees, and 10,015 shares owned by the Adviser.
(3) Messrs. Kellner and Wilson share the power to vote and dispose of the same 30,045 shares.
</TABLE>
As of May 31, 1997, Mr. Kellner owned 45,067 shares (60.71% of
the outstanding) of the Fund, of which 30,045 shares (40.47%) were owned
as trustee and 15,022 shares (20.24%) were beneficially owned; and Mr.
Wilson owned 32,549 shares (43.85% of the outstanding) of the Fund, of
which 30,045 shares (40.47%) were owned as trustee and 2,504 (3.37%) were
beneficially owned. By virtue of their stock ownership, Messrs. Kellner
and Wilson are deemed to "control," as that term is defined in the Act,
the Fund and the Corporation and own 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, Wagner, English, Ms. Maria Blanco, Senior
Vice President and Secretary, 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.
Pursuant to an investment advisory agreement between the Fund
and the Adviser (the "Advisory Agreement"), the Adviser furnishes
continuous investment advisory services to the Fund.
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 its 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
shares of the Fund are not qualified for sale in any state which imposes
an expense limitation. Accordingly, the percentage applicable to the Fund
is 2.75%. 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 excise
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 of 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 of $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:
P(1 + T)n = 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 has not
incurred any distribution costs as of the date of this Statement of
Additional Information.
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 December 16, 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 30% or more 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
the Fund may: (i) sell securities held for less than three months; (ii)
write options which 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 capital
gain to the Fund. If such an option is closed by the Fund, any gain or
loss realized by the Fund as a result of the closing transaction will be
short-term capital gain or loss. 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 will utilize options on stock indexes. Options on
"broadbased" stock indexes are generally 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 regulated 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") for determining the character of the distributions. In
addition, nonequity options 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. The marked to market gain will not be considered a gain on the sale
of options held less than three months. The realized gain or loss on the
ultimate disposition of the option will be increased or decreased to take
into consideration the prior marked to market gains and losses. 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 short-term or long-term holding period of such instruments for
distributions characterization, but not for purposes of the 30% test and
may cause the postponement of recognition of losses incurred in certain
closing transactions.
The Fund may acquire put options. Put options on stock are
generally viewed as short sales. If the Fund exercises or fails to
exercise a put option the Fund will be considered to have closed a short
sale. If the Fund owns the underlying stock or acquires the underlying
stock before closing the short sale, the Straddle Rules may apply and the
option positions may be subject to certain modified short sale rules. The
Fund will generally have a short-term gain or loss on the closing of a
short sale. The determination of the length of the holding period is
dependent on the holding period of the stock used to exercise the put
option. If the Fund sells the put option without exercising it, the
holding period will be determined by looking at the holding period of the
option.
The Fund intends to distribute substantially all of its net
investment income and net capital gain each fiscal year. Dividends from
net investment income (including any excess of net short-term capital gain
over net long-term capital loss) are taxable to investors as ordinary
income, while distributions of net capital gain (the excess of net long-
term capital gain over net short-term capital loss) are taxable as long-
term capital gain regardless of the shareholder's holding period for the
shares. Distributions from the Fund are taxable to investors, whether
received in cash or in additional shares of the Fund. A portion of the
Fund's income distributions may be eligible for the 70% dividends-received
deduction for domestic corporate shareholders.
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 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 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 mailing 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 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.
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 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 subject to 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 statements and considers the Fund's internal
control structure.
FINANCIAL STATEMENTS
The following unaudited financial statements are incorporated by
reference to the Semi-Annual Report, dated March 31, 1997, of the Fund
(File No. 811-7831), as filed with the Securities and Exchange Commission
on May 1, 1997:
- Statement of Assets and Liabilities as of March 31, 1997
(unaudited)
- Statement of Operations for the period from December 16,
1996 (commencement of operations) to March 31, 1997
(unaudited)
- Statement of Changes in Net Assets for the period from
December 16, 1996 (commencement of operations) to March 31,
1997 (unaudited)
- Financial Highlights for the period from December 16, 1996
(commencement of operations) to March 31, 1997 (unaudited)
- Schedule of Investments as of March 31, 1997 (unaudited)
- Notes to Financial Statements (unaudited)
The following audited 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 December 9, 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
December 9, 1996
<PAGE>
FMI FUNDS, INC.
FMI FOCUS FUND
Statement of Assets and Liabilities
December 9, 1996
FMI Focus
Fund
ASSETS
Cash $100,000
Unamortized organizational costs 29,741
----------
Total Assets 129,741
----------
LIABILITIES
Accounts payable 29,741
----------
Total Liabilities 29,741
----------
NET ASSETS $ 100,000
==========
Capital Shares, $0.0001 par value, 500,000,000
shares authorized; 10,000 shares outstanding
Net asset value, offering and redemption price per
share (net assets/shares outstanding) $ 10.00
=========
The accompanying notes to the financial statement
are an integral part of this statement.
<PAGE>
FMI FUNDS, INC.
NOTES TO FINANCIAL STATEMENT
DECEMBER 9, 1996
1. Organization
FMI Funds, Inc. (the "Company") was incorporated under the laws of
the state of Maryland on September 5, 1996 and is in the process of
registering under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end, non-diversified management investment
company. The FMI Focus Fund (the "Fund") is the single portfolio of
the series of the Company. The Company has had no operations 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 "Adviser") for cash in the amount of $100,000.
2. Significant Accounting Policies
(a) Organization costs
Organizational costs and initial registration expenses incurred
by the Fund 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.
(b) Federal Income Taxes
The Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment
company and to make the requisite distributions of income and
capital gains to its shareholders sufficient to relieve it from
all or substantially all Federal income taxes.
3. Investment Adviser
FMI Funds, Inc. has an agreement with 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 of 1/12 of
1.00% (1.00% per annum) on the average daily net assets of the Fund.
The Adviser has committed to reimburse expenses of the Fund to the
extent necessary to ensure that the total operating expenses of the
Fund during the period ending September 30, 1997 do not exceed 2.75%
of such Fund's average net assets.
4. Distribution Plan
Pursuant to Rule 12b-1 under the 1940 Act, 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.
<PAGE>
PART C
OTHER INFORMATION
Item24. Financial Statements and Exhibits
(a.) Unaudited Financial Statements (Financial Highlights included
in Part A and all incorporated by reference to the Semi-Annual
Report of the Fund dated March 31, 1997 (File No. 811-7831)
(as filed with the Securities and Exchange Commission on May
1, 1997) in Part B)
Statement of Assets and Liabilities (unaudited)
Statement of Operations (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Schedule of Investments (unaudited)
Notes to Financial Statements (unaudited)
Audited 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 (Exhibit 1 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(2) Registrant's Bylaws (Exhibit 2 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933).
(3) None
(4) None
(5) Investment Advisory Agreement with Fiduciary Management,
Inc. relating to FMI Focus Fund (Exhibit 5 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company (Exhibit
8 to Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(9.1) Fund Administration Servicing Agreement with Fiduciary
Management, Inc. relating to FMI Focus Fund (Exhibit 9.1
to Amendment No. 1 to Registrant's Registration
Statement on Form N-1A is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933).
(9.2) Transfer Agent Agreement with Firstar Trust Company
relating to FMI Focus Fund (Exhibit 9.2 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933).
(10) Opinion of Foley & Lardner, counsel for Registrant
(Exhibit 10 to Registrant's Registration Statement on
Form N-1A is incorporated by reference pursuant to Rule
411 under the Securities Act of 1933).
(11) Consent of Price Waterhouse LLP.
(12) None
(13) Subscription Agreement (Exhibit 13 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933).
(14.1) Individual Retirement Custodial Account (Exhibit 14 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(14.2) Model 403(b)(7) plan
(15) Service and Distribution Plan (Exhibit 15 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933).
(16) None
(17) Financial Data Schedule.
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
As of May 31, 1997, 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 May 31, 1997
Class A Common Stock, $0.0001 33
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 12 through 13 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
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this amended 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 13th day of June, 1997.
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, June 13, 1997
Ted D. Kellner Financial and Accounting
Officer) and a Director
/s/ Barry K. Allen Director June 13, 1997
Barry K. Allen
Director June __, 1997
Thomas W. Mount
/s/ Donald S. Wilson Director June 13, 1997
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*
(14.1) Individual Retirement Custodial Account*
(14.2) Model 403(b)(7) Plan
(15) Service and Distribution Plan*
(16) None
(17) Financial Data Schedule
(18) None
_______________
* Incorporated by reference.
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> FMI FOCUS FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> DEC-16-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 651
<INVESTMENTS-AT-VALUE> 668
<RECEIVABLES> 21
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 717
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 30
<TOTAL-LIABILITIES> 30
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 645
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15
<AVERAGE-NET-ASSETS> 614
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 0.74
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.72
<EXPENSE-RATIO> 2.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the
registration statement on Form N-1A (the "Registration Statement") of our
report dated December 9, 1996, relating to the statement of assets and
liabilities of FMI Focus Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our
report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the reference to us under the heading
"Independent Accountants" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Milwaukee, Wisconsin
June 16, 1997
Exhibit 14.2
FIDUCIARY FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
<PAGE>
FIDUCIARY FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
Table of Contents
Page
ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 7
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THE INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . 17
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . 18
PROHIBITED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 19
LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ERISA RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ADMINISTRATIVE INFORMATION . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
FIDUCIARY FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
PLAN DOCUMENT
Employees of certain exempt organizations and schools may have a
portion of their compensation set aside for their retirement years in a
mutual fund custodial account plan. The employee is not taxed on the
amount set aside or the earnings thereon until the accumulated funds are
withdrawn, normally at retirement.
Under the Fiduciary Funds Section 403(b)(7) Retirement Plan,
contributions are held by the authorized custodian (the "Custodian") and
are invested in the shares of one or more regulated investment companies
managed by Fiduciary Management, Inc. (the "Investment Advisor") or
otherwise designated by the Investment Advisor as being eligible for
investment under the Fiduciary Funds Section 403(b)(7) Retirement Plan
(the "Plan"). The Plan is designed to allow eligible employers described
in Article I to make employer contributions to the Plan and to allow
eligible employees to elect to have their employer make contributions to
the Plan on their behalf pursuant to a salary reduction agreement. This
Plan is intended to comply with the provisions of the Employee Retirement
Income Security Act of 1974 (the "Act"), where such Act is applicable, and
the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE I
ELIGIBILITY
A. Any person who performs services as an employee for an
employer which is an organization described in Section 501(c)(3) of the
Code and is exempt from tax under Section 501(a) of the Code, or who
performs services for an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or political subdivision of a State or an agency or
instrumentality of either, and who obtains the consent of such employer to
participate herein, is eligible to adopt this Plan.
B. Any employer which is an organization described in Section
501(c)(3) of the Code and is exempt from tax under Section 501(a) of the
Code, or is an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or a political subdivision of a State or an agency
or instrumentality of either (the "Employer") may, but is not required to,
adopt this Plan for some or all of its eligible employees. It is,
however, necessary for the Employer if it does not adopt this Plan to
cooperate to the extent of executing the proper documents allowing the
employee to establish a custodial account and to reduce the employee's
salary and apply the amount of the reduction to contributions for the
employee under this Plan.
C. An eligible individual shall not be entitled to elect to
have his Employer make contributions to the Plan pursuant to a salary
reduction agreement unless the Employer has established a plan or program
which allows all employees of the Employer (except as otherwise permitted
by the Code) the opportunity to have contributions made pursuant to such
an agreement. An Employer may exclude from participation employees who
are participants in an eligible deferred compensation plan under Section
457 of the Code, a qualified cash or deferred arrangement under Section
401(k) of the Code or another Section 403(b) annuity contract, and
nonresident aliens and certain students.
D. In lieu of or in addition to a salary reduction
arrangement, an Employer may make contributions on behalf of its
employees, but an Employer is not obligated to do so. If an Employer
makes contributions (other than contributions made pursuant to a salary
reduction agreement), this Plan as adopted by such Employer must satisfy
the nondiscrimination requirements as set forth in Section 403(b)(12) of
the Code, including the limitation under Section 401(a)(17) of the Code on
the amount of compensation that may be taken into account.
E. An eligible individual is not disqualified from
participation by reason of the fact that his Employer provides any other
retirement plan for its employees. However, the contributions under this
Plan or any other Section 403(b) plan will be affected by the Employer's
contributions to such other retirement plan.
ARTICLE II
PARTICIPATION
An eligible employee who wishes to establish this Plan (the
"Individual") may do so by completing the Section 403(b)(7) Application
and Salary Reduction Agreement or Transfer Form (as applicable), obtaining
the Employer's signature and returning all necessary forms to Fiduciary
Funds. An eligible Employer may adopt this Plan by either having the
Individual follow the procedure described in the preceding sentence or by
obtaining the Individual's signature on the Application and following the
procedure itself thereafter.
The Application and the Salary Reduction Agreement, if
applicable, are incorporated herein by reference as part of the Plan. The
Plan will be effective upon written acceptance by or on behalf of the
Custodian of the Application. If the Employer maintains a written Section
403(b) plan for which this Plan serves as a funding vehicle, the terms and
conditions of such plan shall take precedence over the provisions of this
Plan to the extent such provisions are inconsistent.
ARTICLE III
CONTRIBUTIONS
A. An Employer may contribute cash to the Plan in any taxable
year in any amount which (a) is not an "excess contribution" as defined in
Section 4973(c) of the Code and (b) if such contribution is made pursuant
to a Salary Reduction Agreement between the Employer and the Individual,
does not exceed the limitation on "elective deferrals" contained in
Section 402(g) of the Code. Neither the Investment Advisor nor the
Custodian shall be responsible for determining the amount an Employer may
contribute on behalf of the Individual, nor shall either be responsible to
recommend or compel Employer contributions under the Plan.
If during any taxable year the Employer contributes an amount
which is an "excess contribution", such excess contribution (plus any
income attributable thereto) shall, upon written request, be paid to the
Individual by the Custodian or applied towards a contribution for the next
subsequent year. In the event that an amount contributed during a
calendar year exceeds the limitation on "elective deferrals" contained in
Section 402(g) of the Code and the Individual notifies the Custodian, in
writing, of such excess amount no later than March 1 of the following
calendar year, the Custodian will distribute such excess amount (plus any
income attributable thereto) to the Individual not later than the
following April 15. Neither the Investment Advisor nor the Custodian
shall have any responsibility for determining that an excess contribution
or excess elective deferral has been made or for distributing such excess
amount except in accordance with the specific written instructions of the
Individual.
B. In addition, the Individual or the Employer may (a)
transfer or cause to be transferred to the Plan the cash surrender or
redemption value of a Section 403(b) annuity or variable annuity or the
assets of another Section 403(b)(7) custodial account for which
contributions were previously made on the Individual's behalf or (b)
contribute to the Plan any amount distributed from a Section 403(b)
annuity or custodial account which qualifies as a "rollover contribution"
within the meaning of Section 403(b)(8) of the Code. Neither the
Investment Advisor nor the Custodian shall be responsible for the tax
treatment to the Individual of any transfer or rollover contribution or
for losses resulting from any acts, omissions or delays of any party
transferring or rolling over assets to the Individual's account.
C. Employer contributions to the Plan (including permissible
salary reduction contributions) are not taxable income in the taxable year
contributed. The maximum amount which may be contributed to the Plan on
an Individual's behalf may not exceed the lesser of:
(1) 25% of compensation (as defined in Section 415(c) of the
Code) or $30,000 whichever is less. For this purpose, "compensation"
generally means amounts included in your taxable income, but does not
include Section 403(b) contributions.
(2) The Individual's "exclusion allowance" under Section
403(b)(2) of the Code, which is calculated as 20% of Includible
Compensation times the number of years of service minus the aggregate
amount previously contributed by the Employer (including salary
reduction contributions), under a Section 403(b) plan and excluded
from the Individual's gross income for prior tax years. "Includible
Compensation" (as defined in Section 403(b)(3) of the Code) is
current taxable compensation from a school or other eligible
employer, but does not include amounts contributed by an eligible
employer to a qualified retirement plan which were not currently
taxed to the employee or Section 403(b) contributions. (A special
minimum exclusion allowance applies to certain church employees whose
adjusted gross income is $17,000 or less under Section 403(b)(2)(D)
of the Code.)
(3) For amounts contributed pursuant to a Salary Reduction
Agreement, $9,500, as adjusted for cost-of-living increases in
accordance with Sections 402(g)(5) and 415 of the Code, less any
salary reduction contributions made during the year under a qualified
cash or deferred arrangement under Section 401(k) of the Code, a
simplified employee pension under Section 408(k) of the Code or any
other Section 403(b) annuity or custodial account.
If employed by an educational institution, hospital, home health
service agency, health and welfare service agency or a church or
convention or association of churches, the Individual may elect to be
governed by one of three alternate limitations: (a) in lieu of the
limitation described in (1) above, an amount equal to the lesser of 25% of
Includible Compensation plus $4,000, or $15,000; (b) that the limitation
described in (2) above not apply; or (c) for the year in which the
Individual's employment terminates, replace the 25% of compensation (but
not the $30,000) limitation described in (1) above with an amount which is
equal to the contributions which could have been made, but were not, under
Code Section 403(b), during a ten-year period ending on the date of
termination. The final "catch-up" contribution in (c) cannot exceed
$30,000 and may only be used once. The alternate limitations available to
employees of educational institutions, hospitals, home health service
agencies, health and welfare service agencies or churches or conventions
or associations of churches are mutually exclusive and an election of one
of the alternatives is irrevocable.
In addition, any employee of such an employer who has completed
at least 15 years of service, may increase the amount described in (3)
above by the lesser of:
(a) $3,000;
(b) $15,000, less amounts excluded in prior
years under this special catch up election;
or
(c) the excess of $5,000 multiplied by the
number of years of service minus any salary
reduction contributions under a Section
403(b) annuity, a Section 401(k) plan or a
simplified employee pension made by the
employer on behalf of the employee for prior
taxable years.
D. The interest of the Individual in the Plan and the assets
in his custodial account shall be nonforfeitable at all times, may not be
assigned, and shall not be subject to alienation, assignment, trustee
process, garnishment, attachment, execution or levy of any kind, except
with regard to payment of the expenses of the Custodian as authorized by
the provisions of this Plan. Notwithstanding the foregoing or any other
provision herein to the contrary, the Custodian may recognize a qualified
domestic relations order with respect to child support, alimony payments
or marital property rights if such order contains sufficient information
for the Employer to determine that it meets the applicable requirements of
Section 414(p) of the Code. If any such order so directs, distribution of
benefits to the alternate payee may be made at any time even if the
Individual is not then entitled to a distribution.
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
All contributions made to the Plan shall be used by the
Custodian to purchase shares of one or more of the regulated investment
companies managed by the Investment Advisor or otherwise designated by the
Investment Advisor as being eligible for investment under the Plan. Each
such regulated investment company will be referred to as the "Investment
Company," and the shares of an Investment Company will be referred to as
"Investment Company Shares". Unless otherwise directed by the Employer,
contributions shall be allocated to a separate custodial account
("Custodial Account") established for the Individual. The Individual (or
the Individual's beneficiary) may direct the Custodian to invest his
Custodial Account in the shares of the Investment Company or other
regulated investment companies as may be made available by the Investment
Advisor in the future. The Individual (or the Individual's beneficiary)
may direct the Custodian to transfer all or any part of his Custodial
Account assets from one Investment Company to another at any time. In
directing the Custodian to invest contributions and/or Custodial Account
assets, the Individual (or the Individual's beneficiary) shall designate a
percentage allocation to any or all of the then available Investment
Companies. Any changes in the allocation of future contributions or
current Custodial Account assets will be effective only when the Custodian
receives written authorization from the Individual (or the Individual's
beneficiary). All dividends and capital gains shall be reinvested in
additional Investment Company Shares.
ARTICLE V
DISTRIBUTIONS
A. The Individual, or his beneficiary or estate in the event
of his death, shall be entitled to distribution of the assets in his
Custodial Account upon the occurrence of one of the following events:
(a) The Individual's attainment of age 59-1/2.
(b) The Individual terminates his employment.
(c) The Individual becomes disabled.
(d) The Individual's death.
Note that distributions prior to age 59-1/2 may be subject to a 10%
additional tax under the Code.
For purposes of the Plan, the Individual shall be considered
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long continued and
indefinite duration.
B. In addition, an Individual may request distribution of the
assets in his Custodial Account (to the extent attributable to
contributions made pursuant to a Salary Reduction Agreement, not including
any earnings thereon) upon incurring a substantial financial hardship. A
substantial financial hardship shall exist if the Individual incurs
immediate and heavy financial need and that need cannot be met by other
resources reasonably available to the Individual.
The Individual shall be eligible to receive a hardship
distribution from his Custodial Account after the Custodian's receipt of
written notification from the Employer indicating: (a) that the
Individual has incurred a substantial financial hardship and (b) the
specific amount needed to meet the substantial financial hardship. The
amount distributed from the Custodial Account shall not exceed the amount
specified in the notification.
For purposes of this Plan, a substantial financial hardship
shall mean medical expenses incurred by the Individual, his spouse or a
dependent, purchase (excluding mortgage payments) of a principal residence
for the Individual, payment of tuition and related educational expenses
for the next 12 months of post-secondary education for the Individual, his
spouse or a dependent, the need to prevent the eviction of the Individual
from his principal residence or foreclosure on the mortgage of the
Individual's principal residence, or such other events as may be approved
by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
In determining whether the need cannot be met by other resources
reasonably available to the Individual, the Employer may rely on the
Individual's certification, executed in a form and manner specified by the
Employer, that the need cannot be relieved:
(a) through reimbursement or compensation by
insurance or otherwise;
(b) by reasonable liquidation of the Individual's
assets, to the extent such liquidation would not
itself cause an immediate and heavy financial
need;
(c) by cessation of elective deferrals under the
Plan; and
(d) by other distributions or nontaxable [at the time
of the loan] loans from plans maintained by the
Employer or by any other employer, or by
borrowing from commercial sources on reasonable
commercial terms.
In the event the Individual is unwilling or unable to provide
the certification described above, or in the event the Employer determines
that it cannot reasonably rely on the certification provided by an
Individual, then the requirements of this Paragraph B shall be deemed
satisfied only if all of the following conditions are satisfied:
(a) the distribution is not in excess of the amount
of the immediate and heavy financial need of the
Individual;
(b) the Individual has obtained all distributions,
other than hardship distributions, and all
nontaxable (at the time of the loan) loans from
plans maintained by the Employer;
(c) the Individual's elective deferrals under this
Plan and all other plans maintained by the
Employer shall be suspended for at least 12
months after receipt of the hardship
distribution; and
(d) under this Plan and all other plans maintained by
the Employer, the Individual may not make
elective deferrals for the Individual's taxable
year immediately following the taxable year of
the hardship distribution in excess of the
limitation on elective deferrals in effect for
such next taxable year under Section 402(g) of
the Code less the amount of such Individual's
elective deferrals for the taxable year of the
hardship distribution.
The Employer shall be responsible for:
(a) determining that a substantial financial
hardship exists;
(b) designating the amount necessary to meet such a
substantial financial hardship; and
(c) notifying the Custodian in writing of its
decisions.
If the Employer does not process hardship distributions in
accordance with the standards set forth under this Plan and applicable
law, the hardship distribution provisions under this Paragraph B shall be
ineffective. Neither the Custodian nor the Investment Advisor shall be
responsible for determining that a substantial financial hardship exists
or the amount necessary to satisfy such hardship and may rely on any
written notification from the Employer certifying the existence and the
amount of a substantial financial hardship.
Any determination under this Paragraph B is to be made in
accordance with uniform and nondiscriminatory standards established by the
Employer. The Individual has the responsibility of providing the Employer
with any and all documents, financial data or other information which the
Employer deems necessary in order to make the determination.
C. The Individual may elect a form of distribution from among
the following alternatives:
(a) A single sum payment in cash;
(b) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the life expectancy of the Individual; or
(c) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the joint and last survivor life
expectancy of the Individual and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After the later to occur of the Individual's
retirement or attainment of age 70 1/2 (the "Required Beginning Date"),
certain restrictions may apply to Individual's ability to change the
period over which payments are made. In no event shall the Custodian or
the Investment Advisor have any responsibility for determining, or giving
advice with respect to, life expectancies or minimum distribution
requirements.
If the Individual fails to elect any of the methods of
distribution described above within the time specified for such election,
the Custodian may distribute the Individual's Custodial Account in the
form of a single sum cash payment by the April 1 following the calendar
year occurs the Required Beginning Date. If the Individual elects a mode
of distribution under subparagraphs (b) or (c) of this Paragraph C, except
as otherwise required by Section 403(b)(10) of the Code, the amount of the
monthly, quarterly or annual payments shall be determined by dividing the
entire interest of the Individual in the Custodial Account at the close of
the prior year by the number of years remaining in the period specified by
the Individual's election.
D. Unless the Individual (or his spouse) elects not to have
life expectancy recalculated, the Individual's life expectancy (and the
life expectancy of the Individual's spouse, if applicable) will be
recalculated annually using their attained ages as of their birthdays in
the year for which the minimum annual payment is being determined. The
life expectancy of the designated beneficiary (other than the spouse) will
not be recalculated. The minimum annual payment may be made in a series
of installments (e.g., monthly, quarterly, etc.) as long as the total
payments for the year made by the date required are not less than the
minimum amounts required.
E. The Individual must receive distributions from the Plan in
accordance with Regulations prescribed by the Secretary of the Treasury
pursuant to Section 403(b)(10) of the Code which are hereby incorporated
by reference, or in the absence of such regulations, in accordance with
Section 401(a)(9) of the Code. In general, these provisions require that
certain minimum distributions must commence not later than the April 1
following the calendar year in which the Individual retires or attains age
70-1/2.
F. If the Individual dies before his entire interest in the
Custodial Account is distributed to him, the remaining undistributed
balance of such interest shall be distributed to the beneficiary or
beneficiaries, if any, designated by the Individual. If no designation of
a beneficiary shall have been made, distribution shall be made to the
Individual's surviving spouse, or the Individual's estate, in that order.
If the Individual dies after installment payments have
commenced, the beneficiary shall continue to receive distributions in
accordance with the payment method specified by the Individual or may
elect, in writing, to receive a lump sum distribution.
If the Individual dies prior to the commencement of benefits,
the beneficiary may elect, in writing, to receive the distribution in one
of the following forms:
(a) A single sum payment in cash made by the
December 31 of the year containing the fifth
anniversary of the Individual's death; or
(b) Equal or substantially equal monthly,
quarterly, or annual payments commencing not
later than the December 31 following the
year of the Individual's death over a period
not to exceed the life expectancy of the
beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Individual's
spouse, distributions may be delayed until the December 31 of the year in
which the Individual would have attained age 70-1/2. A beneficiary must
receive distributions from the Plan in accordance with the regulations
prescribed by the Secretary of the Treasury pursuant to Section 403(b)(10)
of the Code, including the incidental death benefit requirements, which
are hereby incorporated by reference, or in the absence of such
Regulations, in accordance with Section 401(a)(9) of the Code.
G. The Individual may designate a beneficiary or
beneficiaries, and may, in addition, name a contingent beneficiary. Such
designation shall be made in writing in a form acceptable to the
Custodian. The Individual may, at any time, revoke his or her designation
of a beneficiary or change the beneficiary by filing notice of such
revocation or change with the Custodian. Notwithstanding the foregoing,
in the event that this program is adopted in connection with a plan that
constitutes a "pension benefit plan" for purposes of the Employee
Retirement Income Security Act of 1974 and the Individual is married at
the time of his death, the beneficiary shall be the Individual's surviving
spouse unless such spouse consented in writing to the designation of an
alternative beneficiary after notice of the spouse's rights and such
consent was witnessed by a notary public or representative of the
Employer. In the event no valid designation of beneficiary is on file
with the Employer or the Custodian at the date of death or no designated
beneficiary survives him, the Individual's spouse shall be deemed the
beneficiary; in the further event the Individual is unmarried or his
spouse does not survive him, the Individual's estate shall be deemed to be
his beneficiary.
H. In the case of any distribution constitutes an "eligible
rollover distribution" as defined in Section 402(c)(4) of the Code, the
Custodian shall provide the Individual or spousal beneficiary with the
option of (A) receiving the distribution directly, (B) having the
distribution transferred to an individual retirement account or eligible
403(b) program that accepts such "direct rollovers", or (C) to the extent
required under regulations issued by the Secretary of the Treasury, a
combination of (A) and (B).
If the Individual or spousal beneficiary timely elects the
transfer option and provides the Custodian with such information as the
Custodian may prescribe regarding the transferee plan or account,
including the name of the transferee plan or account and identity of the
trustee or custodian, the distribution amount shall be transferred to the
successor trustee or custodian in a "direct rollover" in accordance with
Sections 403(b)(10) and 401(a)(31) of the Code. The Custodian may elect
to accomplish the "direct rollover" by delivering to the Individual or
spousal beneficiary a check, for the full amount of the distribution, but
made payable to the trustee or custodian of the transferee plan or
account. The Individual or spousal beneficiary shall then be responsible
for delivering the check to the trustee or custodian or the transferee
plan.
If the Individual or spousal beneficiary elects payments made
directly to the Individual or spousal beneficiary, distribution shall be
accomplished by delivering to the Individual or spousal beneficiary a
check, for the amount of the distribution less applicable required
withholding, made payable to the Individual or spousal beneficiary.
If the Individual or spousal beneficiary fails to make a timely
election, or if the Individual or spousal beneficiary elects the transfer
option but fails to provide the Custodian with appropriate information to
enable the Custodian to implement the transfer, the Custodian shall,
subject to applicable consent requirements, cause the Individual's or
spousal beneficiary's distribution to be paid directly to the Individual
or spousal beneficiary, less applicable required withholding.
The Custodian need not offer the "direct rollover" option in the
case of any distribution that has been exempted from the "direct rollover"
requirements under rules and regulations issued (whether in proposed,
temporary or final form) by the Secretary of the Treasury. In addition,
the Custodian may promulgate additional rules and regulations, including
rules and regulations governing the time by which elections must be made,
that it determines to be necessary or desirable to the administer this
provision.
The Custodian shall not be responsible for the tax consequences
resulting from an Individual's or spousal beneficiary's election between
receiving a distribution directly or having the distribution transferred
to an individual retirement account or eligible 403(b) program in a
"direct rollover."
I. In the event that an Individual transfers funds to this
Plan from another plan or arrangement under Section 403(b) of the Code,
then to the extent required in order to comply with Rev. Rul. 90-24 or any
successor ruling promulgated by the Internal Revenue Service, the
distribution restrictions set forth in such transferor plan or arrangement
shall be adopted as part of this Plan.
ARTICLE VI
ADMINISTRATION
Except as otherwise provided in this Plan, the Custodian shall
perform solely the duties assigned to the Custodian hereunder as agent on
behalf of the Individual and any beneficiary. The Custodian shall not be
deemed to be a fiduciary in carrying out the following duties:
(a) Receiving contributions pursuant to the
provisions of this Plan.
(b) Holding, investing and reinvesting the
contributions in Investment Company Shares.
(c) Registering any property held by the Custodian in
its own name, or in nominee or bearer form that
will pass delivery.
(d) Making distributions from the Custodial Account
in cash.
The Custodian shall mail to the Individual all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Individual shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Code, the Custodian shall file with
the Individual a written report of the Custodian's transactions relating
to the Custodial Account during the period from the last previous
accounting, and shall file such other reports with the Internal Revenue
Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Individual shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Individual.
All written notices or communications to the Individual or the
Employer shall be effective when sent by first class mail to the last
known address of the Individual or the Employer on the Custodian's
records. All written notices or communications to the Custodian shall be
mailed or delivered to the Custodian at its designated mailing address,
and no such written notice of communications shall be effective until the
Custodian's actual receipt thereof. The Custodian shall be entitled to
rely conclusively upon, and shall be fully protected in any action taken
by it in good faith in reliance upon the authenticity of signatures
contained in all written notices or other communications which it receives
and which appear to have been sent by the Individual, the Employer, or any
other person.
The Custodian shall make payments from the Custodial Account in
accordance with written directions received from the Individual, and it
need not make inquiry as to the rightfulness of such distribution. If the
Custodian has reason to believe that a distribution may be due, it may,
but shall not be required to make the distribution at the request of any
beneficiary who appears to be entitled thereto. The Custodian shall
properly withhold from any payment to the Individual or beneficiary such
amounts as may be required to satisfy any income or other tax withholding
requirements.
The Custodian shall use ordinary care and reasonable diligence
in the performance of its duties as Custodian. The Custodian shall have
no responsibilities other than those provided for herein or in the Act or
Code and shall not be liable for a mistake in judgment, for any action
taken in good faith, or for any loss that is not a result of its gross
negligence, except as provided for herein or in the Act or Code and shall
not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence,
except as provided by the Act or regulations promulgated thereunder.
The Individual and the Employer agree to indemnify and hold the
Custodian harmless from and against any liability that the Custodian may
incur in the administration of the Custodial Account, unless arising from
the Custodian's own negligence or willful misconduct or from a violation
of the provisions of the Act or Regulations promulgated thereunder.
The Custodian shall be under no duty to question any direction
of the Individual with respect to the investment of contributions, or to
make suggestions to the Individual with respect to the investment,
retention or disposition of any contributions or assets held in the
Custodial Account.
The Custodian shall be paid out of the Custodial Account for
expenses of administration, including the fees of counsel employed by the
Custodian, taxes, and its fees for maintaining the Custodial Account which
are set forth in the Application or in accordance with any schedule of
fees subsequently adopted by the Custodian. The Custodian may make
changes in the fee schedule at any time. The Custodian may sell
Investment Company Shares and use the proceeds of sale to pay the
foregoing expenses.
The Custodian will send account statements periodically, and
after all transactions. Statements will include any information as the
law may require, and in particular the amount of contributions, earnings,
distributions, and total account valuation at the end of the year. The
Custodian will also send a statement to the Internal Revenue Service as
required by law.
The Custodian may resign as Custodian of any Individual's
Custodial Account upon sixty (60) days' prior notice to the Investment
Advisor and thirty (30) days' prior notice to each Individual who will be
affected by such resignation.
To the extent required under Title I of ERISA, the Custodian
shall hold assets contributed to the Plan in trust (rather than under a
custodial account arrangement) and all references to the Custodian and the
custodial account hereunder shall be instead deemed to be references to
the Trustee and the trust fund, respectively.
ARTICLE VII
THE INVESTMENT ADVISOR
The Individual and the Employer delegate to the Investment
Advisor the following powers with respect to the Plan: to remove the
Custodian and select a successor Custodian; and to amend this Plan as
provided in Article VIII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time, and shall be exercised only when similarly exercised
with respect to all other Individuals adopting the Plan.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of the Plan except as provided in this
Article VII of the Plan, and none of them shall incur any liability of any
nature to the Individual or beneficiary or other person in connection with
any act done or omitted to be done in good faith in the exercise of any
power or authority herein delegated to the Investment Advisor.
The Individual and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against
any and all liabilities and expenses, including attorneys' and
accountants' fees, incurred in connection with the exercise of, or
omission to exercise, any of the powers delegated to it under this
Article, except such liabilities and expense as may arise from the
Investment Advisor's and/or Investment Company's willful misconduct.
If the Investment Advisor shall hereafter determine that it is
no longer desirable for it to continue to exercise any of the powers
hereby delegated to it, it may relieve itself of any further
responsibilities hereunder by notice in writing to the Individual at least
sixty (60) days prior to the date on which it proposes to discontinue the
exercise of the powers delegated to it.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Individual and the Employer delegate to the Investment
Advisor the power to amend this Plan (including retroactive amendments).
The Individual or the Employer may amend the Application
(including retroactive amendment) by submitting to the Custodian a copy of
such amended Application, and evidence satisfactory to the Custodian that
the Plan, as amended by such amended Application, will continue to qualify
under the provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit:
(a) any part of the Custodial Account to be diverted to any purpose that
is not for the exclusive benefit of the Individual and his beneficiaries;
(b) the Individual to be deprived of any portion of his interest in the
Custodial Account; or (c) the imposition of an additional duty on the
Custodian without its consent.
The Employer reserves the right to terminate further
contributions to this Plan. The Individual also reserve the right to
terminate his adoption of the Plan in the event that he shall be unable to
secure a favorable ruling from the Internal Revenue Service with respect
to this Plan. In the event of such termination, the Custodian shall
distribute the Custodial Account to the Individual. The Individual also
reserves the right to transfer the assets of his Custodial Account to such
other form of Section 403(b)(7) retirement plan as he may determine, upon
written instructions to the Custodian in such form as the Custodian may
reasonably require.
ARTICLE IX
PROHIBITED TRANSACTIONS
Except as provided in Section 408 of the Act or Section 4975 of
the Code, the Custodian:
A. Shall not cause the Plan to engage in a transaction if it
knows or should know that such transaction constitutes a direct or
indirect:
(a) Sale or exchange or leasing of any property
between the Plan and a party in interest;
(b) lending of money or other extension of
credit between the Plan and a party in
interest;
(c) furnishing of goods, services, or facilities
between the Plan and a party in interest;
(d) transfer to, or use by or for the benefit
of, a party in interest, of any assets of
the Plan;
(e) acquisition, on behalf of the Plan, of any
employer security or employer real property
in violation of Section 407(a) of the Act.
B. Shall not permit the Plan to hold any employer security or
employer real property if it knows or should know that holding such
security or real property violates Section 407(a) of the Act.
C. Shall not deal with the assets of the Plan in its own
interest or for its own account.
D. Shall not in any capacity act in any transaction involving
the Plan on behalf of a party (or represent a party) whose interests are
adverse to the interests of the Plan or the interests of its participants
or beneficiaries.
E. Shall not receive any consideration for its own account
from any party dealing with the Plan in connection with a transaction
involving the assets of the Plan; provided that nothing in this Article IX
0shall be construed to prohibit the payment to the Custodian of any fees
otherwise authorized under the terms of this Plan.
ARTICLE X
LEGAL COMPLIANCE
Section 403(b) of the Code requires that tax sheltered custodial
account arrangements (other than arrangements maintained by a church or
convention or association of churches) satisfy certain participation and
non-discrimination requirements.
In general, salary reduction contributions made pursuant to an
Individual's election are eligible for exclusion from income only if the
Employer has established a program that provides all employees the
opportunity to make salary reduction contributions of at least $200 per
year. For this purpose, the Employer may exclude from consideration (1)
employees who fail to satisfy minimum age and service requirements (to the
extent such requirements are adopted by the Employer in accordance with
Section 403(b)(12) and 410(b) of the Code for use in its plan); (2)
employees who are participants in an eligible deferred compensation plan
under Section 457 of the Code, qualified cash or deferred arrangement
under Section 401(k) of the Code (to the extent the Employer may maintain
such a plan) or another Section 403(b) plan or arrangement; (3) employees
normally working less than 20 hours per week; (4) employees who are non-
resident aliens; (5) certain student employees performing services
described in Section 3121(w)(3)(A) of the Code; and (6) any other
employees that may be excluded in accordance with rules and regulations
promulgated by the Secretary of the Treasury.
Non-elective contributions made by the Employer must satisfy the
and nondiscrimination requirements of Section 403(b)(12) of the Code.
It should be understood that neither the Investment Advisor nor
the Custodian is in a position to render legal or tax advice and that the
information contained in and the documents furnished with this description
merely represent the Investment Advisor's understanding of the statutes
and regulations affecting the establishment and qualification of a Section
403(b)(7) plan. Accordingly, an Individual is urged to consult his
attorney or tax advisor in connection with the adoption of the Plan
compliance with applicable legal requirements, and the submission of a
ruling request on his behalf.
ARTICLE XI
ERISA RIGHTS
If the program as adopted by the Employer constitutes an
"employee pension benefit plan" under the Employee Retirement Income
Security Act of 1974 ("ERISA"), as a participant in the Plan, you are
entitled to certain rights and protections. This law provides that all
Plan participants shall be entitled to:
Examine, without charge, at the office of the plan
administrator (and at other specified locations, if
appropriate), all Plan documents, including copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as detailed annual reports.
Obtain copies of all Plan documents and other Plan
information upon written request to the plan administrator. The
plan administrator may make a reasonable charge for the copies.
Receive a summary of the Plan's annual financial report. The
plan administrator is required by law to furnish each
Participant with a copy of this summary annual report.
Obtain a statement telling you whether you have a current
vested interest in your account and whether, under the terms of
the Plan, you will be entitled to receive a retirement benefit
if you stop working under the Plan now. If you do not have a
current vested interest or right to a benefit at normal
retirement age, the statement will tell you how many more years
you have to work to obtain these rights. This statement must be
requested in writing and is not required to be given more than
once a year. The Plan must provide the statement free of
charge.
In addition to creating rights for Plan participants, ERISA
imposes duties upon the people who are responsible for the operation of
the Plan. The people who operate your Plan, called "fiduciaries" of the
Plan, have a duty to do so prudently and in the interest of you and other
Plan participants and beneficiaries.
No one, including your employer or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining your benefits or exercising your rights under ERISA. If your
claim for your benefit is denied in whole or in part you must receive a
written explanation of the reason for the denial. You have the right to
have the plan administrator review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the plan
administrator and do not receive them within 30 days, you may file suit in
a federal court. In such a case, the court may require the plan
administrator to provide the materials and pay you up to $100 a day until
you receive the materials, unless the materials were not sent because of
reasons beyond the control of the plan administrator. If you have a claim
for benefits which is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that Plan
fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U.S.
Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these
costs and fees. If you lose, the court may order you to pay these costs
and fees, for example, if it finds your claim is frivolous.
If you have any questions about your Plan, you should contact
the plan administrator. If you have any questions about this statement or
about your rights under ERISA, you should contact the nearest Area Office
of the U.S. Labor-Management Services Administration, Department of Labor.
ADMINISTRATIVE INFORMATION
Plan Name: _______________________________________
Employer: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: __________________________________
Administrator: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: __________________________________
The Administrator shall be the agent for service of
legal process.
Plan Number: ____
Type of Plan: Defined Contribution, Section 403(b)(7) Plan
Funding Medium: Custodial Accounts
Plan Year: _______________________________________
