Securities Act Registration No. 2-73468
Investment Company Act Registration No. 811-03235
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 20 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 21 |X|
(Check appropriate box or boxes.)
FIDUCIARY CAPITAL GROWTH FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
225 East Mason Street
Milwaukee, Wisconsin 53202
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(Address of Principal Executive Offices) (Zip Code)
(414) 226-4555
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(Registrant's Telephone Number, including Area Code)
Copy to:
Ted D. Kellner W. David Knox, II
225 East Mason Street Foley & Lardner
Milwaukee, Wisconsin 53202 777 East Wisconsin Avenue
(Name and Address of Agent for Service) Milwaukee, Wisconsin 53202
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Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box):
[ ] 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)
|X| on January 31, 2000 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>
P R O S P E C T U S
January 31, 2000
Fiduciary Capital Growth Fund
Fiduciary Capital Growth Fund is a no load mutual fund seeking
long-term capital appreciation by investing in small to mid-cap value stocks.
Please read this Prospectus and keep it for future reference. It
contains important information, including information on how Fiduciary Capital
Growth Fund invests and the services it offers to shareholders.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Questions Every Investor Should Ask Before
Investing in the Fiduciary Capital Growth Fund.... _
Fiduciary Capital Growth Fees and Expenses................................. _
Fund, Inc. Investment Objective and Strategies............... _
225 East Mason Street Management of the Fund............................ _
Milwaukee, Wisconsin 53202 The Fund's Share Price ........................... _
(414) 226-4555 Purchasing Shares................................. _
Redeeming Shares.................................. _
Exchanging Shares................................. _
Dividends, Distributions and Taxes................ _
Financial Highlights.............................. _
Share Purchase Application........................ _
<PAGE>
QUESTIONS EVERY INVESTOR SHOULD ASK BEFORE
INVESTING IN FIDUCIARY CAPITAL GROWTH FUND
1. What are the Fund's Goals?
Fiduciary Capital Growth Fund seeks long-term capital appreciation.
2. What are the Fund's Principal Investment Strategies?
The Fund invests mainly in small to mid-cap (i.e., less than $3.0 billion
market capitalization) value stocks. We look for stocks of good businesses
that are selling at value prices in an effort to achieve above average
performance with below average risk. We believe good businesses have some
or all of the following characteristics:
o A strong, defensible niche that is difficult to replicate
o A high degree of recurring revenue
o Modestly priced products or services
o Attractive return-on-investment economics
o Above-average growth or improving profitability prospects
We consider valuation
o On both an absolute and relative to the market basis
o Utilizing both historical and prospective analysis
3. What are the Principal Risks in Investing in the Fund?
Investors in the Fund may lose money. There are risks associated with the
types of securities in which the Fund invests. These risks include:
o Market Risk: The prices of the securities in which the Fund invests
may decline for a number of reasons. The price declines of common
stocks, in particular, may be steep, sudden and/or prolonged.
o Smaller Capitalization Companies Risk: Smaller capitalization
companies typically have relatively lower revenues, limited product
lines and lack of management depth, and may have a smaller share of
the market for their products or services, than larger capitalization
companies. The stocks of smaller capitalization companies tend to have
less trading volume than stocks of
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<PAGE>
larger capitalization companies. Less trading volume may make it more
difficult for our portfolio managers to sell securities of smaller
capitalization companies at quoted market prices. Finally there are
periods when investing in smaller capitalization company stocks falls
out of favor with investors and the stocks of smaller companies
underperform.
o Value Investing Risk: Our portfolio managers may be wrong in their
assessment of a company's value and the stocks the Fund holds may not
reach what the portfolio managers believe are their full values. From
time to time "value" investing falls out of favor with investors.
During these periods, the Fund's relative performance may suffer.
Because of these risks the Fund is a suitable investment only for those
investors who have long-term investment goals. Prospective investors who
are uncomfortable with an investment that will increase and decrease in
value should not invest in the Fund.
4. How has the Fund Performed?
The bar chart and table that follow provide some indication of the risks of
investing in the Fund by showing changes in the Fund's performance from
year to year and how its average annual returns over various periods
compare to those of the Nasdaq Composite Index and the Russell 2000 Index.
Please remember that the Fund's past performance is not necessarily an
indication of its future performance. It may perform better or worse in the
future.
[GRAPHIC OMITTED]
40% 36.25%
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30% 26.50% 29.21%
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20% 14.45% 14.69% 17.12%
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10%
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0.38% ___%
0%
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-10% -5.04%
-11.69%
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-20%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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Note:During the ten year period shown on the bar chart, the Fund's highest total
return for a quarter was 20.24% (quarter ended March 31, 1991) and the
lowest total return for a quarter was -22.11% (quarter ended September 30,
1990).
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<PAGE>
Average Annual Total
Returns
(for the periods ending Past Past Past
December 31, 1999) Year 5 Years 10 Years
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Fiduciary Capital Growth Fund ______% _____% _____%
Nasdaq Composite Index* ______% _____% _____%
Russell 2000 Index** ______% _____% _____%
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* The Nasdaq Composite Index covers 4,500 stocks traded over the counter.
It represents many small company stocks but is heavily influenced by
about 25 of the largest Nasdaq stocks. It is a value-weighted index
calculated on price change only and does not include income.
** The Russell 2000 Index is an index comprised of 2000 publicly traded
small capitalization common stocks that are ranked in terms of
capitalization below the large and mid-range capitalization sectors of
the United States equity market.
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<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)................... No Sales Charge
Maximum Deferred Sales Charge (Load).............. No Deferred Sales Charge
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and Distributions............................... No Sales Charge
Redemption Fee.................................... None*
Exchange Fee...................................... None
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees................................... 0.93%
Distribution and/or Service (12b-1) Fees.......... None
Other Expenses.................................... 0.33%
Total Annual Fund Operating Expenses.............. 1.26%
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* Our transfer agent charges a fee of $12.00 for each wire redemption.
EXAMPLE
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of these
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
1 Year 3 Years 5 Years 10 Years
$128 $400 $692 $1,523
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<PAGE>
INVESTMENT OBJECTIVE AND STRATEGIES
The Fund seeks long-term capital appreciation. Although we have no
intention of doing so, the Fund may change its investment objective without
obtaining shareholder approval. Please remember that an investment objective is
not a guarantee. An investment in the Fund might not appreciate and investors
could lose money.
The Fund may, in response to adverse market, economic, political or
other conditions, take temporary defensive positions. In such circumstances the
Fund may invest in money market instruments (like U.S. Treasury Bills,
commercial paper or repurchase agreements). The Fund will not be able to achieve
its investment objective of long-term capital appreciation to the extent that it
invests in money market instruments since these securities do not appreciate in
value. When the Fund is not taking a temporary defensive position, it still will
hold some cash and money market instruments so that it can pay its expenses,
satisfy redemption requests or take advantage of investment opportunities.
Our portfolio managers are patient investors. The Fund does not
attempt to achieve its investment objective by active and frequent trading of
common stocks.
MANAGEMENT OF THE FUND
Fiduciary Management, Inc. manages the Fund's investments.
Fiduciary Management, Inc. (the "Adviser") is the Fund's investment
adviser. The Adviser's address is:
225 East Mason Street
Milwaukee, WI 53202
The Adviser has been in business since 1980 and has been the Fund's
only investment adviser. As the investment adviser to the Fund, the Adviser
manages the investment portfolio for the Fund. It makes the decisions as to
which securities to buy and which securities to sell. During the fiscal year
ended September 30, 1999, the Fund paid the Adviser an annual investment
advisory fee equal to 0.93% of its average net assets. The investment advisory
fee the Fund pays the Adviser ranges from 1.00% to 0.75% depending on the asset
levels of the Fund.
Ted D. Kellner, Donald S. Wilson and Patrick J. English are primarily
responsible for the day-to-day management of the Fund's portfolio. They are our
portfolio managers. Mr. Kellner and Mr. Wilson have held this responsibility
since the Fund commenced operation on December 18, 1981 and Mr. English has held
this responsibility since October 1, 1997. Mr. Kellner and Mr. Wilson have been
employed by the Adviser in various capacities since 1980, and Mr. English has
been employed by the Adviser in various capacities since 1986. Their current
positions with the Adviser are:
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<PAGE>
Ted D. Kellner Chairman of the Board and Chief Executive Officer
Donald S. Wilson President and Treasurer
Patrick J. English Senior Vice President
Year 2000
The Fund is aware of the "Year 2000" issue. The "Year 2000" issue
stems from the use of a two-digit format to define the year in certain
date-sensitive computer application systems rather than the use of a four digit
format. As a result, date-sensitive software programs could recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
major systems or process failures or the generation of erroneous data, which
would lead to disruptions in the Fund's business operations.
The Fund has no application systems of its own and is entirely
dependent on its service providers' systems and software. The Fund is working
with its service providers (including the Adviser and its transfer agent and
custodian) to identify and remedy any Year 2000 issues. However, the Fund cannot
guarantee that all Year 2000 issues will be identified and remedied, and the
failure to successfully identify and remedy all Year 2000 issues could result in
an adverse impact on the Fund. The Year 2000 issue could also have a negative
impact on the companies in which the Fund invests, which could hurt the Fund's
investment returns.
THE FUND'S SHARE PRICE
The price at which investors purchase shares of the Fund and at which
shareholders redeem shares of the Fund is called its net asset value. The Fund
calculates its net asset value as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m. Eastern Time) on each day the New York
Stock Exchange is open for trading. The Fund calculates its net asset value
based on the market prices of the securities (other than money market
instruments) it holds. It values most money market instruments it holds at their
amortized cost. The Fund will process purchase orders that it receives and
accepts and redemption orders that it receives prior to the close of regular
trading on a day in which the New York Stock Exchange is open at the net asset
value determined later that day. It will process purchase orders that it
receives and accepts and redemption orders that it receives after the close of
regular trading at the net asset value determined at the close of regular
trading on the next day the New York Stock Exchange is open.
PURCHASING SHARES
How to Purchase Shares from the Fund
1. Read this Prospectus carefully
2. Determine how much you want to invest keeping in mind the following
minimums:
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<PAGE>
a. New accounts
o All Accounts $ 1,000
b. Existing accounts
o Dividend reinvestment No Minimum
o Automatic Investment Plan $ 50
o All other accounts $100
3. Complete the Purchase Application included in this Prospectus,
carefully following the instructions. For additional investments,
complete the remittance form attached to your individual account
statements. (The Fund has additional Purchase Applications and
remittance forms if you need them.) If you have any questions, please
call 1-800-811-5311.
4. Make your check payable to "Fiduciary Capital Growth Fund, Inc." All
checks must be drawn on U.S. banks. The Fund will not accept cash or
third party checks. Firstar Mutual Fund Services, LLC, the Fund's
transfer agent, will charge a $25 fee against a shareholder's account
for any payment check returned for insufficient funds. The shareholder
will also be responsible for any losses suffered by the Fund as a
result.
5. Send the application and check to:
BY FIRST CLASS MAIL
Fiduciary Capital Growth Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR REGISTERED MAIL
Fiduciary Capital Growth Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
Please do not mail letters by overnight delivery service or registered
mail to the Post Office Box address.
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<PAGE>
6. If you wish to open an account by wire, please call 1-800-811-5311
prior to wiring funds in order to obtain a confirmation number and to
ensure prompt and accurate handling of funds. You should wire funds
to:
Firstar Bank, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
ABA #075000022
Credit:
Firstar Mutual Fund Services, LLC
Account #112-952-137
Further Credit:
Fiduciary Capital Growth Fund, Inc.
(shareholder registration)
(shareholder account number)
You should then send a properly signed Purchase Application marked
"FOLLOW-UP" to either of the addresses listed above. Please remember that
Firstar Bank, N.A. must receive your wired funds prior to the close of regular
trading on the New York Stock Exchange for you to receive same day pricing. The
Fund and Firstar Bank, N.A. are not responsible for the consequences of delays
resulting from the banking or Federal Reserve Wire system, or from incomplete
wiring instructions.
Purchasing Shares from Broker-dealers, Financial Institutions and Others
Some broker-dealers may sell shares of the Fund. These broker-dealers
may charge investors 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. Some broker-dealers may purchase and redeem shares on a
three-day settlement basis.
The Fund may enter into agreements with broker-dealers, financial
institutions or other service providers ("Servicing Agents") that may include
the Fund as an investment alternative in the programs they offer or administer.
Servicing agents may:
o Become shareholders of record of the Fund. This means all
requests to purchase additional shares and all redemption
requests must be sent through the Servicing Agent. This also
means that purchases made through Servicing Agents are not
subject to the Fund's minimum purchase requirement.
o Use procedures and impose restrictions that may be in addition
to, or different from, those applicable to investors purchasing
shares directly from the Fund.
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<PAGE>
o Charge fees to their customers for the services they provide
them. Also, the Fund and/or the Adviser may pay fees to Servicing
Agents to compensate them for the services they provide their
customers.
o Be allowed to purchase shares by telephone with payment to follow
the next day. If the telephone purchase is made prior to the
close of regular trading on the New York Stock Exchange, it will
receive same day pricing.
o Be authorized to accept purchase orders on the Fund's behalf.
This means that the Fund will process the purchase order at the
net asset value which is determined following the Servicing
Agent's acceptance of the customer's order.
If you decide to purchase shares through Servicing Agents, please
carefully review the program materials provided to you by the Servicing Agent.
When you purchase shares of the Fund through a Servicing Agent, it is the
responsibility of the Servicing Agent to place your order with the Fund on a
timely basis. If the Servicing Agent does not, or if it does not pay the
purchase price to the Fund within the period specified in its agreement with the
Fund, it may be held liable for any resulting fees or losses.
Other Information about Purchasing Shares of the Fund
The Fund may reject any Purchase Applications for any reason. The Fund
will not accept purchase orders made by telephone, unless they are from a
Servicing Agent which has an agreement with the Fund.
The Fund will issue certificates evidencing shares purchased only upon
request. The Fund will send investors a written confirmation for all purchases
of shares.
The Fund offers an automatic investment plan allowing shareholders to
make purchases on a regular and convenient basis. The Fund also offers the
following retirement plans:
o Traditional IRA
o Roth IRA
o Education IRA
o SEP-IRA
o Simple IRA
o 401(k) Plan
o Defined Contribution Retirement Plan
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o 403(b)(7) Custodial Accounts
Investors can obtain further information about the automatic
investment plan and the retirement plans by calling the Fund at 1-800-811-5311.
The Fund recommends that investors consult with a competent financial and tax
advisor regarding the retirement plans before investing through them.
REDEEMING SHARES
How to Redeem (Sell) Shares by Mail
1. Prepare a letter of instruction containing:
o account number(s)
o the amount of money or number of shares being redeemed
o the name(s) on the account
o daytime phone number
o additional information that the Fund may require for redemptions
by corporations, executors, administrators, trustees, guardians,
or others who hold shares in a fiduciary or representative
capacity. Please contact the Fund's transfer agent, Firstar
Mutual Fund Services, LLC, in advance, at 1-800-811-5311 if you
have any questions.
2. Sign the letter of instruction exactly as the shares are registered.
Joint ownership accounts must be signed by all owners.
3. If there are certificates representing your shares, enclose the
certificates and execute a stock power exactly as your shares are
registered.
4. Have the signatures 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 in the following situations:
o The redemption proceeds are to be sent to a person other than the
person in whose name the shares are registered
o The redemption proceeds are to be sent to an address other than
the address of record
A notarized signature is not an acceptable substitute for a signature
guarantee.
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<PAGE>
5. Send the letter of instruction and certificates, if any, to:
BY FIRST CLASS MAIL
Fiduciary Capital Growth Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR REGISTERED MAIL
Fiduciary Capital Growth Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
Please do not mail letters by overnight delivery service or registered
mail to the Post Office Box address.
How to Redeem (Sell) Shares through Servicing Agents
If your shares are held by a Servicing Agent, you must redeem your
shares through the Servicing Agent. Contact the Servicing Agent for instructions
on how to do so.
Payment of Redemption Proceeds
The redemption price per share you receive for redemption requests is
the next determined net asset value after:
o Firstar Mutual Fund Services, LLC receives your written request
in proper form with all required information.
o A Servicing Agent that has been authorized to accept redemption
requests on behalf of the Fund receives your request in
accordance with its procedures.
Firstar Mutual Fund Services, LLC will mail a check in the amount of
the redemption proceeds no later than the seventh day after it receives the
written request in proper form with all required information. If you request in
the letter of instruction, Firstar Mutual Fund Services, LLC will transfer the
redemption proceeds to your designated bank account by either Electronic Funds
Transfer or wire. An Electronic Funds Transfer generally takes up to 3 business
days to reach the shareholder's account whereas Firstar Mutual Fund Services,
LLC generally wires redemption proceeds on the business day following the
calculation of the redemption price. Firstar Mutual Fund Services, LLC currently
charges $12 for each wire redemption but does not charge a fee for Electronic
Funds Transfers. Those shareholders who
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<PAGE>
redeem shares through Servicing Agents will receive their redemption proceeds in
accordance with the procedures established by the Servicing Agent.
Other Redemption Considerations
When redeeming shares of the Fund, shareholders should consider the
following:
o The redemption may result in a taxable gain.
o Shareholders who redeem shares held in an IRA must indicate on their
redemption request whether or not to withhold federal income taxes. If
not, 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.
o The Fund may delay the payment of redemption proceeds for up to seven
days in all cases.
o If you purchased shares by check, the Fund may delay the payment of
redemption proceeds until it is reasonably satisfied the check has
cleared (which may take up to 15 days from the date of purchase).
o Firstar Mutual Fund Services, LLC will transfer the redemption
proceeds by Electronic Funds Transfer or by wire only if the
shareholder has sent in a written request with signatures guaranteed.
o The Fund reserves the right to refuse a telephone redemption request
(which may be made only through Servicing Agents) if it believes it is
advisable to do so. Both the Fund and Firstar Mutual Fund Services,
LLC may modify or terminate its procedures for telephone redemptions
at any time. Neither the Fund nor Firstar Mutual Fund Services, LLC
will be liable for following instructions for telephone redemption
transactions that they reasonably believe to be genuine, provided they
use reasonable procedures to confirm the genuineness of the telephone
instructions. They may be liable for unauthorized transactions if they
fail to follow such procedures. These procedures include requiring
some form of personal identification prior to acting upon the
telephone instructions and recording all telephone calls. During
periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If a Servicing Agent cannot
contact Firstar Mutual Fund Services, LLC by telephone, it should make
a redemption request in writing in the manner described earlier.
o If your account balance falls below $1,000 because you redeem shares,
you will be given 60 days to make additional investments so that your
account balance is
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<PAGE>
$1,000 or more. If you do not, the Fund may close your account and
mail the redemption proceeds to you.
o The Fund may pay redemption requests "in kind." This means that the
Fund may pay redemption requests entirely or partially with securities
rather than cash.
EXCHANGING SHARES
Shares of the Fund may be exchanged for shares of:
o FMI Focus Fund
o Firstar Money Market Fund
at the relative net asset values. (FMI Focus Fund is another mutual fund managed
by the Adviser. An affiliate of Firstar Mutual Fund Services, LLC advises
Firstar Money Market Fund, which is not affiliated with the Fund or the
Adviser.) You may have a taxable gain or loss as a result of an exchange because
the Internal Revenue Code treats an exchange as a sale of shares. The
registration of both the account from which the exchange is being made and the
account to which the exchange is being made must be identical.
How to Exchange Shares
1. Read this Prospectus carefully.
2. Determine the number of shares you want to exchange keeping in mind
that exchanges are subject to a $1,000 minimum.
3. Write to Fiduciary Capital Growth Fund, Inc., c/o Firstar Mutual Fund
Services, LLC, 3rd Floor, P.O. Box 701, Milwaukee, Wisconsin
53201-0701.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund distributes substantially all of its net investment income
quarterly and substantially all of its capital gains annually. You have four
distribution options:
o All Reinvestment Option - Both dividend and capital gains
distributions will be reinvested in additional Fund shares.
o Partial Reinvestment Option - Dividends will be paid in cash and
capital gains distributions will be reinvested in additional Fund
shares.
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o Partial Reinvestment Option - Dividends will be reinvested in
additional Fund shares and capital gains distributions will be
paid in cash.
o All Cash Option - Both dividend and capital gains distributions
will be paid in cash.
You may make this election on the Purchase Application. You may change your
election by writing to Firstar Mutual Fund Services, LLC or by calling
1-800-811-5311.
The Fund's distributions, whether received in cash or additional
shares of the Fund, may be subject to federal and state income tax. These
distributions may be taxed as ordinary income and capital gains (which may be
taxed at different rates depending on the length of time the Fund holds the
assets generating the capital gains). The Fund expects that its distributions
generally will consist primarily of long-term capital gains.
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<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five fiscal years of operations.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Annual Report which is available upon request.
<TABLE>
<CAPTION>
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Years Ended September 30
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $18.49 $26.53 $21.76 $21.58 $19.52
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
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Net investment (loss) income (0.03) (0.02) 0.03 0.13 0.11
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) on investments 2.57 (4.15) 7.39 2.24 3.87
---- ------ ---- ---- ----
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.54 (4.17) 7.42 2.37 3.98
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
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Dividends from net investment income --- (0.01) (0.15) (0.12) (0.04)
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (4.71) (3.86) (2.50) (2.07) (1.88)
------ ------ ------ ------ ------
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Total from distributions (4.71) (3.87) (2.65) (2.19) (1.92)
------ ------ ------ ------ ------
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Net asset value, end of year $16.32 18.49 26.53 21.76 21.58
====== ===== ===== ===== =====
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Total investment return 16.4% (17.6%) 38.4% 12.7% 22.7%
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Ratios/Supplemental Data:
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Net assets, end of year (in 000s $) 39,115 39,047 52,678 45,835 42,197
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.3% 1.2% 1.2% 1.2% 1.2%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment (loss) income
to average net assets (0.2%) (0.1%) 0.1% 0.6% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 75.9% 54.3% 60.7% 43.7% 28.6%
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</TABLE>
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To learn more about Fiduciary Capital Growth Fund, you may want to
read Fiduciary Capital Growth Fund's Statement of Additional Information (or
"SAI") which contains additional information about the Fund. Fiduciary Capital
Growth Fund has incorporated by reference the SAI into the Prospectus. This
means that you should consider the contents of the SAI to be part of the
Prospectus.
You also may learn more about Fiduciary Capital Growth Fund's
investments by reading the Fund's annual and semi-annual reports to
shareholders. The annual report includes a discussion of the market conditions
and investment strategies that significantly affected the performance of
Fiduciary Capital Growth Fund during its last fiscal year.
The SAI and the annual and semi-annual reports are all available to
shareholders and prospective investors without charge, simply by calling Firstar
Mutual Fund Services, LLC at 1-800-811-5311.
Prospective investors and shareholders who have questions about
Fiduciary Capital Growth Fund may also call the following number or write to the
following address.
Fiduciary Capital Growth Fund
225 East Mason Street
Milwaukee, Wisconsin 53202
1-800-811-5311
www.fiduciarymgt.com
The general public can review and copy information about Fiduciary
Capital Growth Fund (including the SAI) at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. (Please call
1-800-SEC-0330 for information on the operations of the Public Reference Room.)
Reports and other information about Fiduciary Capital Growth Fund are also
available at the Securities and Exchange Commission's Internet site at
http://www.sec.gov and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing to:
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
Please refer to Fiduciary Capital Growth Fund's Investment Company Act
File No. 811-03235 when seeking information about the Fund from the Securities
and Exchange Commission.
-17-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION January 31, 2000
- -----------------------------------
FIDUCIARY CAPITAL GROWTH FUND, 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 Fiduciary Capital Growth
Fund, Inc. dated January 31, 2000. Requests for copies of the prospectus should
be made by writing to Fiduciary Capital Growth Fund, Inc., 225 East Mason
Street, Milwaukee, Wisconsin 53202, Attention: Corporate Secretary or by calling
(414) 226-4555.
The following financial statements are incorporated by reference to
the Annual Report, dated September 30, 1999, of Fiduciary Capital Growth Fund,
Inc. (File No. 811-03235) as filed with the Securities and Exchange Commission
on November 8, 1999:
Report of Independent Accountants
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Shareholders may obtain a copy of the Annual Report, without charge, by calling
1-800-811-5311.
<PAGE>
FIDUCIARY CAPITAL GROWTH FUND, INC.
Table of Contents
-----------------
Page No.
--------
FUND HISTORY AND CLASSIFICATION.............................................1
INVESTMENT RESTRICTIONS.....................................................1
INVESTMENT CONSIDERATIONS...................................................2
DIRECTORS AND OFFICERS OF THE FUND..........................................4
PRINCIPAL SHAREHOLDERS......................................................7
INVESTMENT ADVISER AND ADMINISTRATOR........................................8
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE...........................10
RETIREMENT PLANS...........................................................13
AUTOMATIC INVESTMENT PLAN..................................................16
REDEMPTION OF SHARES.......................................................16
SYSTEMATIC WITHDRAWAL PLAN.................................................16
ALLOCATION OF PORTFOLIO BROKERAGE..........................................17
CUSTODIAN..................................................................18
TAXES......................................................................18
SHAREHOLDER MEETINGS.......................................................19
CAPITAL STRUCTURE..........................................................21
INDEPENDENT ACCOUNTANTS....................................................21
DESCRIPTION OF SECURITIES RATINGS..........................................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 January 31, 2000 and, if given or made,
such information or representations may not be relied upon as having been
authorized by Fiduciary Capital Growth Fund, Inc.
This Statement of Additional Information does not constitute an offer
to sell securities.
-i-
<PAGE>
FUND HISTORY AND CLASSIFICATION
Fiduciary Capital Growth Fund, Inc. (the "Fund"), a Wisconsin
corporation incorporated on July 29, 1981, is a diversified, open-end management
investment company registered under the Investment Company Act of 1940 (the
"Act").
INVESTMENT RESTRICTIONS
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 shareholders 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, participate in a
joint-trading account, sell securities short, or write or invest in put or call
options. The Fund's investments in warrants, valued at the lower of cost or
market, will not exceed 5% of the value of the Fund's net assets. Included
within such amount, but not to exceed 2% of the value of the Fund's net assets,
may be warrants which are not listed on the New York or American Stock Exchange.
2. The Fund will not borrow money or issue senior securities, except
for temporary bank borrowings (not in excess of 5% of the value of its assets)
for emergency or extraordinary purposes, and will not pledge any of its assets
except to secure borrowings and only to an extent not greater than 10% of the
value of the Fund's net assets.
3. The Fund will not lend money (except by purchasing publicly
distributed debt securities or entering into repurchase agreements provided that
repurchase agreements maturing in more than seven days plus all other illiquid
or not readily marketable securities will not exceed 10% of the Fund's total
assets) and will not lend its portfolio securities.
4. The Fund will not purchase securities of other investment companies
except (a) as part of a plan of merger, consolidation or reorganization approved
by the shareholders of the Fund or (b) securities of registered closed-end
investment companies on the open market where no commission or profit results,
other than the usual and customary broker's commission and where as a result of
such purchase the Fund would hold less than 3% of any class of securities,
including voting securities, of any registered closed-end investment company and
less than 5% of the Fund's assets, taken at current value, would be invested in
securities of registered closed-end investment companies.
5. The Fund will not make investments for the purpose of exercising
control or management of any company.
6. 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
<PAGE>
than 5% of the Fund's total assets, taken at current value, would be invested in
securities of such issuer, except that up to 25% of the Fund's total assets may
be invested without regard to these limitations.
7. The Fund will not concentrate more than 25% of the value of its
assets, determined at the time an investment is made, exclusive of government
securities, in securities issued by companies primarily engaged in the same
industry.
8. 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.
9. The Fund will not acquire or retain any security issued by a
company if any of the directors or officers of the Fund, or directors, officers
or other affiliated persons of its investment adviser beneficially own more than
1/2% of such company's securities and all of the above persons owning more than
1/2% own together more than 5% of its securities.
10. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund and will not purchase any securities
which are restricted from sale to the public without registration under the
Securities Act of 1933, as amended.
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 commodities
contracts or engage in arbitrage transactions.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is made.
If these restrictions are adhered to at the time an investment is made, and such
percentage subsequently changes as a result of changing market values or some
similar event, no violation of the Fund's fundamental restrictions will be
deemed to have occurred.
INVESTMENT CONSIDERATIONS
The Fund invests mainly in common stocks of U.S. companies. However
when the Fund's investment adviser, Fiduciary Management, Inc. (the "Adviser")
believes that securities other than common stocks offer opportunity for
long-term capital appreciation, the Fund may invest in publicly distributed debt
securities, preferred stocks, particularly those which are convertible into or
carry rights to acquire common stocks, and warrants. Investments in publicly
distributed debt securities and nonconvertible preferred stocks offer an
opportunity for growth of capital during periods of declining interest rates,
when the market value of such securities in general increases. The Fund will
limit its investments in publicly distributed debt securities to those which
have been assigned one of the three highest ratings of
2
<PAGE>
either Standard & Poor's Corporation (AAA, AA and A) or Moody's Investors
Service, Inc. (Aaa, Aa and A). A description of the foregoing ratings is set
forth in "Description of Securities Ratings."
The Fund may invest in securities of foreign issuers or in American
Depository Receipts of such issuers, but will limit its investments in such
securities to 10% of its net assets. Such investments may involve risks which
are in addition to the usual risks inherent in domestic investments. The value
of the Fund's foreign investments may be significantly affected by changes in
currency exchange rates and the Fund may incur costs in converting securities
denominated in foreign currencies to U.S. dollars. In many countries, there is
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, which would reduce the Fund's
income without providing a tax credit for the Fund's shareholders. Although the
Fund intends to invest in securities of foreign issuers domiciled in nations
which the Fund's investment adviser considers as having stable and friendly
governments, there is the possibility of expropriation, confiscatory taxation,
currency blockage or political or social instability which would affect
investments in those nations.
The money market instruments in which the Fund invests include
conservative fixed-income securities, such as United States Treasury Bills,
certificates of deposit of U.S. banks (provided that the bank has capital,
surplus and undivided profits, as of the date of its most recently published
annual financial statements, with a value in excess of $100,000,000 at the date
of investment), commercial paper rated A-1 by Standard & Poor's Corporation,
commercial paper master notes and repurchase agreements. Commercial paper master
notes are unsecured promissory notes issued by corporations to finance
short-term credit needs. They permit a series of short-term borrowings under a
single note. Borrowings under commercial paper master notes are payable in whole
or in part at any time upon demand, may be prepaid in whole or in part at any
time, and bear interest at rates which are fixed to known lending rates and
automatically adjusted when such known lending rates change. There is no
secondary market for commercial paper master notes. The Adviser will monitor the
creditworthiness of the issuer of the commercial paper master notes while any
borrowings are outstanding.
Repurchase agreements are agreements under which the seller of a
security agrees at the time of sale to repurchase the security at an agreed time
and price. The Fund will not enter into repurchase agreements with entities
other than banks or invest over 5% of its net assets in repurchase agreements
with maturities of more than seven days. If a seller of a repurchase agreement
defaults and does not repurchase the security subject to the agreement, the Fund
will look to the collateral security underlying the seller's repurchase
agreement, including the securities subject to the repurchase agreement, for
satisfaction of the seller's obligation to the Fund. In such event, the Fund
might incur disposition costs in liquidating the collateral and might suffer a
loss if the value of the collateral declines. In addition, if bankruptcy
proceedings are instituted against a seller of a repurchase agreement,
realization upon the collateral may be delayed or limited.
3
<PAGE>
The percentage limitations set forth in this section are not
fundamental policies and may be changed without shareholder approval.
The Fund does not trade actively for short-term profits. However, if
the objectives of the Fund would be better served, short-term profits or losses
may be realized from time to time. The annual portfolio turnover rate indicates
changes in the Fund's portfolio and is calculated by dividing the lesser of
purchases or sales of portfolio securities (excluding securities having
maturities at acquisition of one year or less) for the fiscal year by the
monthly average of the value of the portfolio securities (excluding securities
having maturities at acquisition of one year or less) owned by the Fund during
the fiscal year. The annual portfolio turnover rate may vary widely from year to
year depending upon market conditions and prospects. Increased portfolio
turnover necessarily results in correspondingly heavier transaction costs (such
as brokerage commissions or mark-ups or mark-downs) which the Fund must pay and
increased realized gains (or losses) to investors. Distributions to shareholders
of realized gains, to the extent that they consist of net short-term capital
gains, will be considered ordinary income for federal income tax purposes.
DIRECTORS AND OFFICERS OF THE FUND
As a Wisconsin corporation, the business and affairs of the Fund are
managed by its officers under the direction of its Board of Directors. The name,
age, address, principal occupations during the past five years and other
information with respect to each of the directors and officers of the Fund are
as follows:
BARRY K. ALLEN, 51
- --------------
30 South Wacker Drive
Suite 3800
Chicago, Illinois 60606
(A DIRECTOR OF THE FUND)
Mr. Allen is President of Ameritech, Chicago, Illinois and has been an
officer of Ameritech since August, 1995. From September, 1993 until August,
1995, Mr. Allen was President and Chief Operating Officer of Marquette Medical
Systems, Inc., a manufacturer of medical electronic equipment and systems,
Milwaukee, Wisconsin. Mr. Allen is a director of Harley-Davidson, Inc. and First
Business Bank - Milwaukee. Mr. Allen is also a director of FMI Funds, Inc., an
investment company for which the Adviser serves as an investment adviser.
4
<PAGE>
GEORGE D. DALTON, 71
- ----------------
255 Fiserv Drive
Brookfield, WI 53045
(A DIRECTOR OF THE FUND)
Mr. Dalton is Chairman of the Board and a director of Fiserv, Inc., a
provider of financial data processing services to financial institutions, and
has served in that capacity since 1984. Mr. Dalton is also a member of the Board
of Directors of ARI, Inc., a provider of standard-based Internet-enabled
electronic commerce services, APAC TeleServices, Inc., a provider of out-sourced
telephone-based marketing, sales and customer management solutions, Clark/Bardes
Inc., a distributor of life insurance/compensation programs, and Wisconsin
Wireless, Inc. Mr. Dalton is also a director of FMI Funds, Inc.
PATRICK J. ENGLISH*, 39
- -------------------
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT AND A DIRECTOR 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 and a director of FMI Funds, Inc.
TED D. KELLNER*, 53
- ---------------
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. which he co-founded with Mr. Donald S. Wilson in
1980. Mr. Kellner is also a director of FMI Funds, Inc.
- --------------------
* Messrs. English, Kellner and Wilson are directors who are "interested persons"
of the Fund as that term is defined in the Investment Company Act of 1940.
5
<PAGE>
THOMAS W. MOUNT, 68
- ---------------
401 Pine Terrace
Oconomowoc, Wisconsin
(A DIRECTOR OF THE FUND)
Mr. Mount is retired Chairman of Stokely USA, Inc., a canned and
frozen food processor, and was employed by such firm in various capacities from
1957 to 1993. Mr. Mount is also a director of FMI Funds, Inc.
DONALD S. WILSON*, 56
- ----------------
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 a director of FMI Funds, Inc.
GARY G. WAGNER, 56
- --------------
225 East Mason Street
Milwaukee, Wisconsin
(VICE PRESIDENT AND ASSISTANT SECRETARY OF THE FUND)
Mr. Wagner is Executive Vice President of Fiduciary Management, Inc.
- --------------------
* Messrs. English, Kellner and Wilson are directors who are "interested persons"
of the Fund as that term is defined in the Investment Company Act of 1940.
6
<PAGE>
During the fiscal year ended September 30, 1999 the Fund paid $1,800
in director's fees. For the fiscal year ending September 30, 2000 the Fund's
standard method of compensating directors is to pay each director who is not an
officer of the Fund a fee of $400 for each meeting of the Board of Directors
attended.
<TABLE>
COMPENSATION TABLE
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Estimated Annual from Fund and Fund
Compensation as Part of Benefits Upon Complex Paid to
Name of Person from Fund Fund Expenses Retirement Director(1)
-------------- -------------- -------------- ---------------- -----------
<S> <C> <C> <C> <C>
Barry K. Allen $600 $0 $0 $750
George D. Dalton 600 0 0 750
Patrick J. English 0 0 0 0
Ted D. Kellner 0 0 0 0
Thomas W. Mount 600 0 0 750
Donald S. Wilson 0 0 0 0
- ---------------
(1) FMI Funds, Inc. and the Fund are the only investment companies in the Fund Complex.
</TABLE>
The Fund and the Adviser have adopted separate codes of ethics
pursuant to Rule 17j-1 under the Act. Each code of ethics permits personnel
subject thereto to invest in securities, including securities that may be
purchased or held by the Fund. Each code of ethics prohibits, among other
things, persons subject thereto from purchasing or selling securities if they
know at the time of such purchase or sale that the security is being considered
for purchase or sale by the Fund or is being purchased or sold by the Fund.
PRINCIPAL SHAREHOLDERS
Set forth below are the names and addresses of all holder's of the
Fund's Common Stock who as of October 31, 1999 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 Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------------------------------------------- --------
Sole Power Shared Power Aggregate
---------- ------------ ---------
<S> <C> <C> <C> <C>
Ted D. Kellner 102,123(1) 586,653(2)(3)(4) 688,766 28.02%
225 E. Mason Street
Milwaukee, WI 53202
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------------------------------------------- --------
Sole Power Shared Power Aggregate
---------- ------------ ---------
<S> <C> <C> <C> <C>
Donald S. Wilson 1006 541,296(3)(4) 542,302 22.06%
225 E. Mason Street
Milwaukee, WI 53202
Clark & Co. -0- 127,446 127,446 5.19%
FAO Western Industries, Inc.
P.O. Box 39
Westerville, OH 43086
Officers & Directors 711,940(1)(2)(3)(4) 28.96%
as a group (7 persons)
- ----------------------
(1) Includes 16,626 shares held under several custodial accounts for Mr. Kellner's children and 13,552 shares held by
an investment partnership over which Mr. Kellner has voting and investment authority.
(2) Includes 42,542 shares held in a trust for which Mr. Kellner is a co-trustee and co-beneficiary and 2,815 shares
held in a partnership of which Mr. Kellner is a partner.
(3) Includes 541,296 shares owned by the Adviser, retirement plans of the Adviser and clients of the Adviser for whom
the Adviser exercises investment discretion.
(4) Messrs. Kellner and Wilson share the power to vote and dispose of the same 541,296 shares.
</TABLE>
Mr. Ted D. Kellner is deemed to "control," as that term is defined in
the Act, the Fund. Mr. Kellner and shareholders owning 21.99% of the outstanding
shares of the Fund have the ability to elect the entire Board of Directors. The
Fund does not control any person.
INVESTMENT ADVISER AND ADMINISTRATOR
The investment adviser and administrator to the Fund is Fiduciary
Management, Inc. (the "Adviser"). The Adviser is controlled 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, Ms. Jody Reckard, Vice President and Richard E. Lane, 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 supervises and manages the investment
portfolio of the
8
<PAGE>
Fund and subject to such policies as the Board of Directors 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 expenses incurred in complying with
laws regulating the issue or role of securities. For the foregoing, the Adviser
receives an annual fee of 1% on the first $30,000,000 of the average daily net
assets of the Fund and an annual fee of .75% on the average daily net assets of
the Fund in excess of $30,000,000. During the fiscal years ended September 30,
1999, 1998 and 1997, respectively, the Fund paid the Adviser fees of $384,046,
$447,738 and $416,417.
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 costs
of printing its registration statements required under the Securities Act of
1933 and the Act and any amendments thereto, the expense of registering its
shares with the Securities and Exchange Commission and in the various states,
the printing and distribution cost of prospectuses mailed to existing
shareholders, the cost of stock certificates, director and officer liability
insurance, reports to shareholders, reports to government authorities and proxy
statements, interest charges, and 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.
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%. As of the date of this Statement of Additional Information, no
such state law provision was applicable to the Fund. 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. No expense
reimbursement was required during the fiscal years ended September 30, 1999,
1998 and 1997.
9
<PAGE>
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 Act, calculates the Fund's net asset value, responds to
shareholder inquiries, prepares the Fund's financial statements, 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 aspects of the Fund's operations. For the foregoing, the Adviser receives an
annual fee of 0.1% on the first $30,000,000 of the average daily net assets of
the Fund and an annual fee of 0.05% on the average daily net assets of the Fund
in excess of $30,000,000. During the fiscal years ended September 30, 1999, 1998
and 1997 the Fund paid the Adviser fees of $35,603, $39,849 and $42,531,
respectively, pursuant to the Administration Agreement.
The Advisory Agreement and the Administration Agreement will remain in
effect as long as their continuance is specifically approved at least annually,
by (i) the Board of Directors of the Fund, 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 Fund who are not parties to the Advisory
Agreement or the Administration Agreement or interested persons of the Adviser,
cast in person at a meeting called for the purpose of voting on such approval.
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 Fund or by vote of a majority of the Fund's shareholders, on
sixty days' written notice to the Adviser, and by the Adviser on the same notice
to the Fund 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 shareholders 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
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, Dr. Martin Luther King, Jr. Day,
President's Day, 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
10
<PAGE>
unusual business conditions exist, such as the ending of a monthly or the yearly
accounting period.
The Fund's net asset value per share is determined by dividing the
total value of its investments and other assets, less any liabilities, by the
number of its outstanding shares. Securities traded on any national stock
exchange or the Nasdaq Stock Market are valued on the basis of the last sale
price on the date of valuation or, in the absence of any sales on that date, the
most recent bid price. Other equity securities are valued at the most recent bid
price, if market quotations are readily available. Debt securities are valued at
the latest bid prices furnished by an independent pricing service. Any
securities for which there are no readily available market quotations and other
assets are valued at their fair value as determined by the Adviser in accordance
with procedures approved by the Board of Directors.
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 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 $10,000 at the beginning of the period by 10,000. The net
change in the value of a shareholder account is determined by subtracting
$10,000 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 $10,000. 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.
11
<PAGE>
The foregoing computation may also be expressed by the following
formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $10,000 payment
made at the beginning of the stated periods at the end of
the stated periods.
The Fund's average annual compounded returns for the one-year,
five-year and ten-year periods ended September 30, 1999 and for the period from
the Fund's commencement of operations (December 18, 1981) through September 30,
1999 were 16.38%, 12.91%, 10.52%, and 12.85%, respectively.
The results below show the value of an assumed initial investment of
$10,000 made on December 18, 1981 through December 31, 1999, assuming
reinvestment of all dividends and distributions.
<TABLE>
<CAPTION>
Value of $10,000 Cumulative Value of $10,000 Cumulative
December 31 Investment % Change December 31 Investment % Change
----------- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1981 $10,010 +.1% 1991 $35,831 +258.3%
1982 14,532 +45.3 1992 41,008 +310.1
1983 18,731 +87.3 1993 47,032 +370.3
1984 17,942 +79.4 1994 47,213 +372.1
1985 23,312 +133.1 1995 59,726 +497.3
1986 23,325 +133.3 1996 69,948 +599.5
1987 21,261 +112.6 1997 90,377 +803.8
1988 25,254 +152.5 1998 85,824 +758.2
1989 29,777 +197.8 1999 ______ +_____
1990 26,297 +163.0
</TABLE>
The foregoing performance results are 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 also 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,
12
<PAGE>
Russell 2000 Index and the Consumer Price Index. Such comparisons may be made in
advertisements, shareholder reports or other communications to shareholders.
RETIREMENT PLANS
The Fund offers the following retirement plans that may be funded with
purchases of shares of the Fund and may allow investors to reduce their income
taxes:
Individual Retirement Accounts
Individual shareholders may establish their own Individual Retirement
Account ("IRA"). The Fund currently offers a Traditional IRA, a Roth IRA and an
Education IRA, that can be adopted by executing the appropriate Internal Revenue
Service ("IRS") Form.
Traditional IRA. In a Traditional IRA, amounts contributed to the IRA
may be tax deductible at the time of contribution depending on whether the
shareholder is an "active participant" in an employer-sponsored retirement plan
and the shareholder's income. Distributions from a Traditional IRA will be taxed
at distribution except to the extent that the distribution represents a return
of the shareholder's own contributions for which the shareholder did not claim
(or was not eligible to claim) a deduction. Distributions prior to age 59-1/2
may be subject to an additional 10% tax applicable to certain premature
distributions. Distributions must commence by April 1 following the calendar
year in which the shareholder attains age 70-l/2. Failure to begin distributions
by this date (or distributions that do not equal certain minimum thresholds) may
result in adverse tax consequences.
Roth IRA. In a Roth IRA, amounts contributed to the IRA are taxed at
the time of contribution, but distributions from the IRA are not subject to tax
if the shareholder has held the IRA for certain minimum periods of time
(generally, until age 59-1/2). Shareholders whose incomes exceed certain limits
are ineligible to contribute to a Roth IRA. Distributions that do not satisfy
the requirements for tax-free withdrawal are subject to income taxes (and
possibly penalty taxes) to the extent that the distribution exceeds the
shareholder's contributions to the IRA. The minimum distribution rules
applicable to Traditional IRAs do not apply during the lifetime of the
shareholder. Following the death of the shareholder, certain minimum
distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution
generally is equal to the lesser of $2,000 or 100% of the shareholder's
compensation (earned income). An individual may also contribute to a Traditional
IRA or Roth IRA on behalf of his or her spouse provided that the individual has
sufficient compensation (earned income). Contributions to a Traditional IRA
reduce the allowable contribution under a Roth IRA, and contributions to a Roth
IRA reduce the allowable contribution to a Traditional IRA.
Education IRA. In an Education IRA, contributions are made to an IRA
maintained on behalf of a beneficiary under age 18. The maximum annual
contribution is $500 per beneficiary. The contributions are not tax deductible
when made. However, if amounts are used for certain educational purposes,
neither the contributor nor the beneficiary
13
<PAGE>
of the IRA are taxed upon distribution. The beneficiary is subject to income
(and possibly penalty taxes) on amounts withdrawn from an Education IRA that are
not used for qualified educational purposes. Shareholders whose income exceeds
certain limits are ineligible to contribute to an Education IRA.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
generally has the right to revoke his account within seven days after receiving
the disclosure statement and obtain a full refund of his contributions. The
custodian may, in its discretion, hold the initial contribution uninvested until
the expiration of the seven-day revocation period. The custodian does not
anticipate that it will exercise its discretion but reserves the right to do so.
Simplified Employee Pension Plan
A Traditional IRA may also be used in conjunction with a Simplified
Employee Pension Plan ("SEP-IRA"). A SEP-IRA is established through execution of
Form 5305-SEP together with a Traditional IRA established for each eligible
employee. Generally, a SEP-IRA allows an employer (including a self-employed
individual) to purchase shares with tax deductible contributions, not exceeding
annually for any one participant, 15% of compensation (disregarding for this
purpose compensation in excess of $170,000 per year). The $170,000 compensation
limit applies for 2000 and is adjusted periodically for cost of living
increases. A number of special rules apply to SEP Plans, including a requirement
that contributions generally be made on behalf of all employees of the employer
(including for this purpose a sole proprietorship or partnership) who satisfy
certain minimum participation requirements.
SIMPLE IRA
An IRA may also be used in connection with a SIMPLE Plan established
by the shareholder's employer (or by a self-employed individual). When this is
done, the IRA is known as a SIMPLE IRA, although it is similar to a Traditional
IRA with the exceptions described below. Under a SIMPLE Plan, the shareholder
may elect to have his or her employer make salary reduction contributions of up
to $6,000 per year to the SIMPLE IRA. The $6,000 limit applies for 2000 and is
adjusted periodically for cost of living increases. In addition, the employer
will contribute certain amounts to the shareholder's SIMPLE IRA, either as a
matching contribution to those participants who make salary reduction
contributions or as a non-elective contribution to all eligible participants
whether or not making salary reduction contributions. A number of special rules
apply to SIMPLE Plans, including (1) a SIMPLE Plan generally is available only
to employers with fewer than 100 employees; (2) contributions must be made on
behalf of all employees of the employer (other than bargaining unit employees)
who satisfy certain minimum participation requirements; (3) contributions are
made to a special SIMPLE IRA that is separate and apart from the other IRAs of
employees; (4) the distribution excise tax (if otherwise applicable) is
increased to 25% on withdrawals during the first two years of participation in a
SIMPLE IRA; and (5) amounts withdrawn during the first two years of
participation may be rolled over tax-free only into another SIMPLE IRA (and not
to a Traditional IRA or to a Roth IRA). A SIMPLE IRA is established
14
<PAGE>
by executing Form 5304-SIMPLE together with an IRA established for each eligible
employee.
403(b)(7) Custodial Account
A 403(b)(7) Custodial Account is available for use in conjunction with
the 403(b)(7) program established by certain educational organizations and other
organizations that are exempt from tax under 501(c)(3) of the Internal Revenue
Code, as amended (the "Code"). Amounts contributed to the custodial account in
accordance with the employer's 403(b)(7) program will be invested on a
tax-deductible basis in shares of the Fund. Various contribution limits apply
with respect to 403(b)(7) arrangements.
Defined Contribution Retirement Plan (401(k))
A prototype defined contribution plan is available for employers who
wish to purchase shares of any Fund with tax deductible contributions. The plan
consists of both profit sharing and money purchase pension components. The
profit sharing component includes a Section 401(k) cash or deferred arrangement
for employers who wish to allow eligible employees to elect to reduce their
compensation and have such amounts contributed to the plan. The limit on
employee salary reduction contributions is $10,500 annually (as adjusted for
cost-of-living increases) although lower limits may apply as a result of
non-discrimination requirements incorporated into the plan. The Fund has
received an opinion letter from the IRS holding that the form of the prototype
defined contribution retirement plan is acceptable under Section 401 of the
Code. The maximum annual contribution that may be allocated to the account of
any participant is generally the lesser of $30,000 or 25% of compensation
(earned income). Compensation in excess of $170,000 (as periodically indexed for
cost-of-living increases) is disregarded for this purpose. The maximum amount
that is deductible by the employer depends upon whether the employer adopts both
the profit sharing and money purchase components of the plan, or only one
component.
Retirement Plan Fees
Firstar Bank Milwaukee, N.A., Milwaukee, Wisconsin, serves as trustee
or custodian of the retirement plans. Firstar Bank Milwaukee, N.A. 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
participants; $12.50 annual maintenance fee per participant account; $15 for
transferring to a successor trustee or custodian; $15 for distribution(s) to a
participant; and $15 for refunding any contribution in excess of the deductible
limit. The fee schedule of Firstar Bank Milwaukee, N.A. may be changed upon
written notice.
Requests for information and forms concerning the retirement plans
should be directed to the Fund. Because a retirement program may involve
commitments covering future years, it is important that the investment objective
of the Fund be consistent with the participant's retirement objectives.
Premature withdrawal from a retirement plan will result in
15
<PAGE>
adverse tax consequences. Consultation with a competent financial and tax
adviser regarding the retirement plans is recommended.
AUTOMATIC INVESTMENT PLAN
Shareholders wishing to invest fixed dollar amounts in the Fund
monthly or quarterly can make automatic purchases in amounts of $50 or more on
any day they choose by using the Fund's Automatic Investment Plan. If such day
is a weekend or holiday, such purchase shall be made on the next business day.
There is no service fee for participating in this Plan. To use this service, the
shareholder must authorize the transfer of funds from their checking account or
savings account by completing the Automatic Investment Plan application included
as part of the share purchase application. Additional application forms may be
obtained 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. 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.
REDEMPTION OF SHARES
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.
SYSTEMATIC WITHDRAWAL PLAN
The Fund has available to shareholders a Systematic Withdrawal Plan,
pursuant to which a shareholder who owns shares of the Fund worth at least
$10,000 at current net asset value may provide that a fixed sum will be
distributed to him or her at regular intervals. To participate in the Systematic
Withdrawal Plan, a shareholder deposits his or her Fund shares with the Fund and
appoints it as his agent to effect redemptions of shares held in his or her
account for the purpose of making monthly or quarterly withdrawal payments of a
fixed amount to him or her out of the account. To utilize the Systematic
Withdrawal Plan, the shares cannot be held in certificate form. The Systematic
Withdrawal Plan does not apply to shares of the Fund held in Individual
Retirement Accounts or retirement plans. An application for participation in the
Systematic Withdrawal Plan is included as part of the share purchase
16
<PAGE>
application. Additional application forms 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 Fund shares in the
account at net asset value. Redemptions will be made on such day (no more than
monthly) as a shareholder chooses or, if that day is a weekend or holiday, on
the next business day. 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 shares in his
or her 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, temporarily discontinue them, or change the designated payee or
payee's address, by notifying Firstar Mutual Fund Services, LLC, the Funds'
transfer agent.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by the
Adviser subject to review by the Fund'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 (i.e., "markups" when the market maker sells
a security and "markdowns" when the market maker purchases a security). In some
instances, the Adviser feels that better prices are available from non-principal
market makers who are paid commissions directly. Although the Fund does not
intend to market its shares through intermediary broker-dealers, 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.
17
<PAGE>
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.
Brokerage commissions paid by the Fund during the fiscal years ended September
30, 1999, 1998 and 1997 totaled $126,622 on total transactions of $47,172,157,
$86,020 on total transactions of $37,386,002, and $87,353 on total transactions
of $38,072,430, respectively. All of the brokers to whom commissions were paid
provided research services to the Adviser.
CUSTODIAN
Firstar Bank, N.A., 615 East Michigan Street, Milwaukee, Wisconsin
53202, acts as custodian for the Fund. As such, Firstar Bank, N.A. 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 Bank, N.A. 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 Mutual Fund Services, LLC, an affiliate
of Firstar Bank, N.A. acts as the Fund's transfer agent and dividend disbursing
agent.
TAXES
The Fund intends to qualify annually for and elect tax treatment
applicable to a regulated investment company under Subchapter M of the Code. The
Fund has so qualified in each of its fiscal years. If the Fund fails to qualify
as a regulated investment company under Subchapter M in any fiscal year, it will
be treated as a corporation for federal income tax purposes. As such the Fund
would be required to pay income taxes on its net investment income and net
realized capital gains, if any, at the rates generally applicable to
corporations. Shareholders of the Fund would not be liable for income tax on the
Fund's net investment income or net realized capital gains in their individual
capacities. Distributions to shareholders, whether from the Fund's net
investment income or net realized capital gains,
18
<PAGE>
would be treated as taxable dividends to the extent of current or accumulated
earnings and profits of the Fund.
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 short-term capital gains, are taxable to investors as ordinary
income, while distributions of net long-term capital gains 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
shareholder, the dividend or distribution will be taxable to the shareholder
even though it results in a return of capital to him.
The 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 on 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 complete discussion of present or
proposed federal income tax laws and the effects of such laws on an investor.
Investors are urged to consult their own tax advisers for a complete review of
the tax ramifications of an investment in the Fund.
SHAREHOLDER MEETINGS
The Wisconsin 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
may, at its discretion, not hold an annual meeting in any year in which none of
the following matters is required to be acted upon by the shareholders under the
Act: (i) election of directors; (ii) approval of an investment advisory
agreement; (iii) ratification of the selection of auditors; and (iv) approval of
a distribution agreement.
19
<PAGE>
The Fund's bylaws also contain procedures for the removal of directors
by its shareholders. At any meeting of shareholders, duly called and at which a
quorum is present, the shareholders 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 Fund shall promptly call a special meeting of shareholders for
the purpose of voting upon the question of removal of any director. Whenever ten
or more shareholders 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 Fund's Secretary
in writing, stating that they wish to communicate with other shareholders 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
shareholders as recorded on the books of the Fund; or (2) inform such applicants
as to the approximate number of shareholders 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 shareholders 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 shareholders with reasonable promptness after the
entry of such order and the renewal of such tender.
20
<PAGE>
CAPITAL STRUCTURE
The Fund's authorized capital consists of 10,000,000 shares of Common
Stock. Shareholders are entitled: (i) to one vote per full share of Common
Stock; (ii) to such distributions as may be declared by the Fund'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 Common
Stock 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 except as provided in
Section 180.0622(2)(b) of the Wisconsin Business Corporation Law. Fractional
shares of Common Stock entitle the holder to the same rights as whole shares of
Common Stock.
The Fund will not issue certificates evidencing shares of Common Stock
purchased unless so requested in writing. Where certificates are not issued, 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 Common Stock. Any shareholder may deliver certificates to Firstar
Mutual Fund Services, LLC and direct that his account be credited with the
shares. A shareholder may direct Firstar Mutual Fund Services, LLC at any time
to issue a certificate for his shares of Common Stock without charge.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Suite 1500,
Milwaukee, Wisconsin 53202 currently serves as the independent accountants for
the Fund and has so served since the fiscal year ended September 30, 1989. As
such PricewaterhouseCoopers LLP performs an audit of the Fund's financial
statements and considers the Fund's internal controls.
DESCRIPTION OF SECURITIES RATINGS
The Fund may invest in publicly distributed debt securities assigned
one of the three highest 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 Debt Ratings. A Standard & Poor's corporate debt
rating is a current assessment of the creditworthiness of an obligor with
respect to a specific obligation. This assessment may take into consideration
obligors such as guarantors, insurers or lessees.
21
<PAGE>
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer
or obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform any audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights;
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in the higher rated
categories.
Moody's Bond Ratings.
--------------------
Aaa - Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
22
<PAGE>
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Moody's applies numerical modifiers 1, 2 and 3 in each of the
foregoing generic rating classifications. The modifier 1 indicates that the
company ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the company
ranks in the lower end of its generic rating category.
23
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
--------
(a) Registrant's Articles of Incorporation, as amended. (2)
(b) Registrant's By-Laws, as amended. (1)
(c) None.
(d) Investment Advisory Agreement. (2)
(e) None.
(f) None.
(g) Custodian Agreement with Firstar Trust Company (predecessor to Firstar
Bank, N.A.). (2)
(h) Administration Agreement. (2)
(i) Opinion of Foley & Lardner, counsel for Registrant.
(j) Consent of PricewaterhouseCoopers LLP.
(k) None.
(l) Subscription Agreement. (2)
(m) None.
(n) None.
(p)(i) Code of Ethics of Registrant
(p)(ii) Code of Ethics of Fiduciary Management, Inc.
- ---------------
(1) Previously filed as an exhibit to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A and incorporated by
reference thereto. Post-Effective Amendment No. 17 was filed on
January 29, 1997 and its accession number is 0000897069-97-000029.
(2) Previously filed as an exhibit to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A and incorporated by
reference thereto. Post-Effective Amendment No. 18 was filed on
January 28, 1998 and its accession number is 0000897069-98-000016.
S-1
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Registrant is controlled by Ted D. Kellner. Registrant neither
controls any person nor is any person under common control with Registrant.
Item 25. Indemnification
---------------
Pursuant to the authority of the Wisconsin Business Corporation Law,
Registrant's Board of Directors has adopted the following By-Law which is in
full force and effect and has not been modified or cancelled:
Article VII
INDEMNIFICATION
7.01 Provision of Indemnification. The corporation shall
indemnify all of its corporate representatives against expenses,
including attorney's 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, 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 Wisconsin Business
Corporation Law.
7.02 Determination of Right to Indemnification. 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 a determination that indemnification
of the corporate representative is proper because he has met the
applicable standard of conduct set forth in Section 7.01. 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 (ii) if the required
quorum is not obtainable or if a quorum of disinterested directors so
direct, by independent legal counsel in a written opinion. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a 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
S-2
<PAGE>
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.
7.03 Allowance of Expenses. 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 Sections
180.0853 or 180.0856 of the Wisconsin Business Corporation Law upon
receipt of an undertaking by or on behalf of the corporate
representative, secured by a surety bond or other similar insurance
paid for by such 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 by-law.
7.04 Additional Rights to Indemnification. The indemnification
provided by this by-law shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under these by-laws,
any agreement, vote of shareholders 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.
7.05 Insurance. 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 by-law, 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.
7.06 Definitions. "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.
In reference to Article VII, Section 7.01 of the By-laws, Section
180.0851 of the Wisconsin Business Corporation Law provides for mandatory
indemnification (a) if a corporate representative was successful on the merits
or otherwise in the defense of a proceeding, and (b) if the corporate
representative was not successful on the merits or otherwise but the liability
incurred was not the result of a breach or failure to perform a duty which
constituted any of the following: (1) a willful failure to deal fairly with the
corporation or its shareholders in connection with a matter in which the
corporate representative has a material conflict of interest; (2) a violation of
criminal law, unless the corporate representative
S-3
<PAGE>
had reasonable cause to believe his or her conduct was lawful or no reasonable
cause to believe his or her conduct was unlawful; (3) a transaction from which
the corporate representative derived an improper personal profit; or (4) willful
misconduct.
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 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Incorporated by reference to pages 4 through 6 of the Statement of
Additional Information pursuant to Rule 411 under the Securities Act of 1933.
Item 27. Principal Underwriters
----------------------
Registrant has no principal underwriters.
Item 28. Location of Accounts and Records
--------------------------------
All accounts, books, or other documents required to be maintained by
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 29. Management Services
-------------------
All management-related service contracts entered into by Registrant
are discussed in Parts A and B of this Registration Statement.
Item 30. Undertakings
------------
Registrant undertakes to provide its Annual Report to
Shareholders upon request without charge to any recipient of a Prospectus.
S-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this 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 20th day
of October, 1999.
FIDUCIARY CAPITAL GROWTH FUND, INC.
(Registrant)
By:/s/ Ted D. Kellner
-----------------------------------
Ted D. Kellner, President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Name Title Date
---- ----- ----
/s/ Ted D. Kellner Principal Executive, October 20, 1999
- ------------------------- Financial and Accounting
Ted D. Kellner Officer and Director
- -------------------------
Barry K. Allen Director October 20, 1999
- -------------------------
George D. Dalton Director October 20, 1999
/s/ Patrick J. English
- -------------------------
Patrick J. English Director October 20, 1999
/s/ Thomas W. Mount
- -------------------------
Thomas W. Mount Director October 20, 1999
/s/ Donald S. Wilson
- ------------------------
Donald S. Wilson Director October 20, 1999
S-5
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Exhibit
----------- -------
(a) Registrant's Articles of Incorporation, as amended.*
(b) Registrant's By-Laws, as amended.*
(c) None.
(d) Investment Advisory Agreement.*
(e) None.
(f) None.
(g) Custodian Agreement with Firstar Trust Company (predecessor
to Firstar Bank, N.A.).*
(h) Administration Agreement.*
(i) Opinion of Foley & Lardner, counsel for Registrant.
(j) Consent of PricewaterhouseCoopers LLP.
(k) None.
(l) Subscription Agreement.*.
(m) None.
(n) None.
(p)(i) Code of Ethics of Registrant.
(p)(ii) Code of Ethics of Fiduciary Management, Inc.
- -----------------
* Incorporated by reference.
FOLEY & LARDNER
ATTORNEYS AT LAW
CHICAGO FIRSTAR CENTER SACRAMENTO
DENVER 777 EAST WISCONSIN AVENUE SAN DIEGO
JACKSONVILLE MILWAUKEE, WISCONSIN 53202-5367 SAN FRANCISCO
LOS ANGELES TELEPHONE (414) 271-2400 TALLAHASSEE
MADISON FACSIMILE (414) 297-4900 TAMPA
MILWAUKEE WASHINGTON, D.C.
ORLANDO WEST PALM BEACH
WRITER'S DIRECT LINE
EMAIL ADDRESS CLIENT/MATTER NUMBER
030825/0101
November 24, 1999
Fiduciary Capital Growth Fund, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
Gentlemen:
We have acted as counsel for you in connection with the preparation of
an Amended Registration Statement on Form N-1A relating to the sale by you of an
indefinite amount of Fiduciary Capital Growth Fund, Inc. Common Stock, $.01 par
value (such Common Stock being hereinafter referred to as the "Stock") in the
manner set forth in the Registration Statement to which reference is made. In
this connection we have examined: (a) the Amended Registration Statement on Form
N-1A; (b) your Articles of Incorporation and By-Laws, as amended to date; (c)
corporate proceedings relative to the authorization for issuance of the Stock;
and (d) such other proceedings, documents and records as we have deemed
necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares of
Stock when sold as contemplated in the Amended Registration Statement will be
legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an Exhibit to the
Amended Registration Statement on Form N-1A. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons whose consent is required
by Section 7 of said Act.
Very truly yours,
/s/ FOLEY & LARDNER
FOLEY & LARDNER
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 20 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 28, 1999, relating to the financial
statements and financial highlights appearing in the September 30, 1999 Annual
Report to Shareholders of Fiduciary Capital Growth Fund, portions of which are
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Independent Accountants" in the Statement
of Additional Information and to the reference to us under the heading
"Financial Highlights" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
November 19, 1999
FIDUCIARY CAPITAL GROWTH FUND, INC.
and
FMI FUNDS, INC.
Code of Ethics
Amended effective as of October 20, 1999
I. DEFINITIONS
A. "Access person" means any director, officer or advisory person of the
Fund.
B. "Act" means the Investment Company Act of 1940, as amended.
C. "Advisory person" means: (i) any employee of the Fund or of any
company in a control relationship to the Fund, who, in connection with
his or her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of Covered
Securities by the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and (ii) any
natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to
the purchase or sale of Covered Securities by the Fund.
D. A Covered Security is "being considered for purchase or sale" when a
recommendation to purchase or sell the Covered Security has been made
and communicated and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
E. "Beneficial ownership" shall be interpreted in the same manner as it
would be under Rule 16a-1(a)(2) under the Securities Exchange Act of
1934 in determining whether a person is the beneficial owner of a
security for purposes as such Act and the rules and regulations
promulgated thereunder.
F. "Control" has the same meaning as that set forth in Section 2(a)(9) of
the Act.
G. "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, except that it does not include:
(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
<PAGE>
(iii) Shares issued by open-end registered investment companies.
H. "Disinterested director" means a director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19)
of the Act.
I. "Fund" means Fiduciary Capital Growth Fund, Inc., FMI Funds, Inc. or
any series of FMI Funds, Inc.
J. "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately
before the registration, was not subject to the reporting requirements
of Section 13 or Section 15(d) of the Securities Exchange Act of 1934.
K. "Investment personnel" means: (i) any employee of the Fund or of any
company in a control relationship to the Fund who, in connection with
his or her regular functions or duties, makes or participates in
making recommendations regarding the purchase or sale of securities by
the Fund; and (ii) any natural person who controls the Fund and who
obtains information concerning recommendations made to the Fund
regarding the purchase or sale of securities by the Fund.
L. A "Limited Offering" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2)
or Section 4(6) thereof or pursuant to Rule 504, Rule 505 or Rule 506
thereunder.
M. "Purchase or sale of a Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security.
II. CODE OF ETHICS OF INVESTMENT ADVISER
------------------------------------
A. Prior to retaining the services of an investment adviser to the Fund,
the Board of Directors of the Fund, including a majority of the
Disinterested directors, shall approve the code of ethics adopted by
such investment adviser pursuant to Rule 17j-1 under the Act. The
Board of Directors of the Fund, including a majority of the
Disinterested directors, shall approve any material changes to any
such code of ethics within six months after the adoption of the
material change. Prior to approving any such code of ethics or
amendment thereto, the Board of Directors shall receive a
certification from such investment adviser that it has adopted such
procedures as are reasonably necessary to prevent access persons of
such investment adviser from violating such code. Prior to approving
this Code of Ethics and the code of ethics of an investment adviser,
and any material changes thereto, the Board of Directors must
determine that any such code of ethics contain provisions reasonably
necessary to prevent the applicable access persons from violating Rule
17j-1(b) of the Act.
2
<PAGE>
B. No less frequently than annually, the officers of the Fund and the
officers of the investment adviser to the Fund shall furnish a report
to the Board of Directors of the Fund:
1. Describing issues arising under the applicable code of ethics
since the last report to the Board of Directors, including, but
not limited to, information about material violations of the code
and sanctions imposed in response to such material violations.
Such report shall also include a list of access persons under the
code of ethics.
2. Certifying that the Fund or investment adviser as applicable has
adopted such procedures as are reasonably necessary to prevent
access persons from violating the code of ethics.
C. The officers of the investment adviser to the Fund shall furnish a
written report to the Board of Directors of the Fund describing any
material changes made to the code of ethics of such investment adviser
within ten (10) days after making any such material change.
D. This Code of Ethics, the code of ethics of the investment adviser, the
certifications required by Sections II.A. and II.B.(2), and the
reports required by Sections II.B.(1), II.C and V. shall be maintained
by the Fund's Administrator.
III. EXEMPTED TRANSACTIONS
---------------------
The prohibitions of Section IV of this Code of Ethics shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases or sales of Covered Securities which are not eligible
for purchase or sale by either Fund; provided, however, that the
prohibitions of Section IV.B of this Code of Ethics shall apply
to such purchases and sales.
(c) Purchases or sales which are non-volitional on the part of either
the access person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to
the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
(f) Purchases or sales which receive the prior approval of the Board
of Directors of the Fund because they are only remotely
potentially harmful
3
<PAGE>
to a Fund because they would be very unlikely to affect a highly
institutional market, or because they clearly are not related
economically to the securities to be purchased, sold or held by
the Funds.
IV. PROHIBITED ACTIVITIES
---------------------
A. Except in a transaction exempted by Section III of this Code, no
access person shall purchase or sell, directly or indirectly, any
Covered Security in which he has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership and which to his
actual knowledge at the time of such purchase or sale is being
considered for purchase or sale by a Fund or is being purchased or
sold by a Fund. The code of ethics of the investment adviser for the
Fund shall contain a similar prohibition.
B. Except in a transaction exempted by Section III of this Code of
Ethics, Investment Personnel of the Fund must obtain approval from the
Board of Directors before directly or indirectly acquiring beneficial
ownership in any securities in an Initial Public Offering or in a
Limited Offering. Prior approval shall not be given if the Board of
Directors believes that the investment opportunity should be reserved
for the Fund or is being offered to the individual by reason of his or
her position with the Fund. The code of ethics of the investment
adviser for the Fund shall contain a similar prohibition, but may
provide for prior approval of an officer of the investment adviser.
V. REPORTING
---------
A. Except as provided in Section V.B. of this Code of Ethics, every
access person shall report to the Fund the information described in
Section V.C., Section V.D. and Section V.E. of this Code of Ethics.
All reports shall be filed with the Fund's Administrator.
B. 1. A Disinterested director of the Fund need not make a report
pursuant to Section V.C. and V.E. of this Code of Ethics and need
only report a transaction in a Covered Security pursuant to
Section V.D. of this Code of Ethics if such Disinterested
director, at the time of such transaction, knew or, in the
ordinary course of fulfilling his official duties as a director
of the Fund, should have known that, during the 15-day period
immediately preceding the date of the transaction by the
director, such Covered Security was purchased or sold by the Fund
or was being considered by the Fund or its investment adviser for
purchase or sale by the Fund.
2. An access person need not make a report with respect to
transactions effected for, and Covered Securities held in, any
account over which the person has no direct or indirect influence
or control.
4
<PAGE>
3. An access person need not make a quarterly transaction report
pursuant to Section V.D. of this Code of Ethics if the report
would duplicate information contained in broker trade
confirmations or account statements received by the Fund with
respect to the access person in the time period required by
Section V.D., provided that all of the information required by
Section V.D. is contained in the broker trade confirmations or
account statements or in the records of the Fund.
4. An access person that is required to file reports pursuant to the
code of ethics of the investment adviser need not make any report
pursuant to Section V.C., Section V.D. and Section V.E. of this
Code of Ethics if such access person makes comparable reports
pursuant to the code of ethics of the investment adviser.
C. Every access person shall, no later than ten (10) days after the
person becomes an access person, file an initial holdings report
containing the following information:
1. The title, number of shares and principal amount of each Covered
Security in which the access person had any direct or indirect
beneficial ownership when the person becomes an access person;
2. The name of any broker, dealer or bank with whom the access
person maintained an account in which any securities were held
for the direct or indirect benefit of the access person; and
3. The date that the report is submitted by the access person.
D. Every access person shall, no later than ten (10) days after the end
of a calendar quarter, file a quarterly transaction report containing
the following information:
1. With respect to any transaction during the quarter in a Covered
Security in which the access person had any direct or indirect
beneficial ownership:
(a) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(b) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(c) The price of the Covered Security at which the transaction
was effected;
(d) The name of the broker, dealer or bank with or through whom
the transaction was effected; and
5
<PAGE>
(e) The date that the report is submitted by the access person.
2. With respect to any account established by the access person in
which any securities were held during the quarter for the direct
or indirect benefit of the access person:
(a) The name of the broker, dealer or bank with whom the access
person established the account;
(b) The date the account was established; and
(c) The date that the report is submitted by the access person.
E. Every access person shall, no later than January 30 each year, file an
annual holdings report containing the following information as of the
preceding December 31:
1. The title, number of shares and principal amount of each Covered
Security in which the access person had any direct or indirect
beneficial ownership;
2. The name of any broker, dealer or bank with whom the access
person maintains an account in which any securities are held for
the direct or indirect benefit of the access person; and
3. The date that the report is submitted by the access person.
F. Any report filed pursuant to Section V.C., Section V.D. or Section
V.E. of this Code of Ethics may contain a statement that the report
shall not be construed as an admission by the person making such
report that he has any direct or indirect beneficial ownership in the
security to which the report relates.
G. The Fund's Administrator shall review all reports filed pursuant to
Section V.C., Section V.D. or Section V.E. of this Code of Ethics. The
Fund's Administrator shall identify all access persons who are
required to file reports pursuant to this Section V of this Code of
Ethics and must inform such access persons of their reporting
obligation.
VI. SANCTIONS
---------
Upon discovering a violation of this Code of Ethics, the Board of Directors of
the Fund may impose such sanctions as it deems appropriate.
6
FIDUCIARY MANAGEMENT, INC.
Code of Ethics
Amended effective as of October 20, 1999
I. DEFINITIONS
-----------
A. "Access person" means any director, officer or advisory person of the
Adviser.
B. "Act" means the Investment Company Act of 1940, as amended.
C. "Adviser" means Fiduciary Management, Inc.
D. "Advisory person" means: (i) any employee of the Adviser or of any
company in a control relationship to the Adviser, who, in connection
with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of Covered
Securities by Managed Accounts, or whose functions relate to the
making of any recommendations with respect to such purchases or sales;
and (ii) any natural person in a control relationship to the Adviser
who obtains information concerning recommendations made to Managed
Accounts with regard to the purchase or sale of Covered Securities by
Managed Accounts.
E. A Covered Security is "being considered for purchase or sale" when a
recommendation to purchase or sell the Covered Security has been made
and communicate and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
F. "Beneficial ownership" shall be interpreted in the same manner as it
would be under Rule 16a-1(a)(2) under the Securities Exchange Act of
1934 in determining whether a person is the beneficial owner of a
security for purposes as such Act and the rules and regulations
promulgated thereunder.
G. "Control" has the same meaning as that set forth in Section 2(a)(9) of
the Act.
H. "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, except that it does not include:
(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
<PAGE>
(iii) Shares issued by open-end registered investment companies.
I. "Disinterested director" means a director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19)
of the Act and the rules and regulations promulgated thereunder.
J. "Fund" means Fiduciary Capital Growth Fund, Inc., FMI Funds, Inc. or
any series of FMI Funds, Inc.
K. "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately
before the registration, was not subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934.
L. "Investment personnel" means: (i) any employee of the Adviser or of
any company in a control relationship to the Adviser who, in
connection with his or her regular functions or duties, makes or
participates in making recommendations regarding the purchase or sale
of securities by Managed Accounts; and (ii) any natural person who
controls the Adviser and who obtains information concerning
recommendations made to Managed Accounts regarding the purchase or
sale of securities by Managed Accounts.
M. A "Limited Offering" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2)
or Section 4(6) thereof or pursuant to Rule 504, Rule 505 or Rule 506
thereunder.
N. "Managed Accounts" include the Fund and any other client account for
which the Adviser provides investment management services.
O. "Purchase or sale of a Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security.
II. APPROVAL OF CODE OF ETHICS
--------------------------
A. The Board of Directors of the Fund, including a majority of the
Disinterested directors, shall approve this Code of Ethics and any
material changes thereto.
B. No less frequently than annually, the President of the Adviser shall
furnish a report to the Board of Directors of the Fund:
1. Describing issues arising under the Code of Ethics since the last
report to the Board of Directors, including, but not limited to,
information about material violations of the Code of Ethics and
sanctions imposed in response to such material violations. Such
report shall also include a list of access persons under the Code
of Ethics.
2
<PAGE>
2. Certifying that the Adviser has adopted such procedures as are
reasonably necessary to prevent access persons from violating the
Code of Ethics.
C. The President of the Adviser shall furnish a written report to the
Board of Directors of the Fund describing any material changes to this
Code of Ethics within ten (10) days after making any such material
change.
III. EXEMPTED TRANSACTIONS
---------------------
The prohibitions of Section IV of this Code of Ethics shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases or sales of Covered Securities which are not eligible
for purchase or sale by any Managed Account; provided, however,
that the prohibitions of Section IV.B of this Code of Ethics
shall apply to such purchases and sales.
(c) Purchases or sales which are non-volitional on the part of either
the access person or Managed Accounts.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to
the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
IV. PROHIBITED ACTIVITIES
---------------------
A. Except in a transaction exempted by Section III of this Code, no
access person shall purchase or sell, directly or indirectly, any
Covered Security in which he has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership and which to his
actual knowledge at the time of such purchase or sale is being
considered for purchase or sale by Managed Accounts or is being
purchased or sold by Managed Accounts. Before an access person so
purchases or sells a Covered Security, he or she shall report the
proposed purchase or sale to the Adviser's President. The Adviser's
President or designee shall review all Managed Accounts to determine
whether the Covered Security is then being considered for purchase or
sale or is then being purchased or sold for any Managed Accounts. The
access person shall delay so purchasing or selling a Covered Security
until such time as he or she has been informed by the Adviser's
President or designee that the proposed purchase or sale would not
violate this Section IV.A.
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B. Except in a transaction exempted by Section III of this Code of
Ethics, Investment Personnel (other than the Adviser's President) must
obtain approval from the Adviser's President before directly or
indirectly acquiring beneficial ownership in any securities in an
Initial Public Offering or in a Limited Offering. The Adviser's
President must obtain approval from a majority of the Disinterested
directors before directly or indirectly acquiring beneficial ownership
in any securities in an Initial Public Offering or in a Limited
Offering. Prior approval shall not be given if (i) the Initial Public
Offering involves common stock; or (ii) the Adviser's President or the
Disinterested directors, as applicable, believe(s) that the investment
opportunity should be reserved for Managed Accounts or is being
offered to the individual by reason of his or her position with the
Fund or the Adviser.
C. No access persons shall borrow money or securities from a client of
the Adviser.
D. No access person shall make any recommendation to any client of the
Adviser without reasonable grounds to believe that the recommendation
is suitable for such client based on information provided by the
client after reasonable inquiry by the access person.
V. REPORTING AND COMPLIANCE PROCEDURES
-----------------------------------
A. Except as provided in Section V.B. of this Code of Ethics, every
access person shall report the information described in Section V.C.,
Section V.D. and Section V.E. of this Code of Ethics. All reports
shall be filed with the Adviser's President.
B. 1. An access person need not make a report with respect to
transactions effected for, and Covered Securities held in, any
account over which the person has no direct or indirect influence
or control.
2. An access person need not make a quarterly transaction report
pursuant to Section V.D. of this Code of Ethics if the report
would duplicate information contained in broker trade
confirmations or account statements received by the Adviser's
President with respect to the access person in the time period
required by Section V.D., provided that all of the information
required by Section V.D. is contained in the broker trade
confirmations or account statements or in the records of the
Adviser.
C. Every access person shall, no later than ten (10) days after the
person becomes an access person, file an initial holdings report
containing the following information:
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1. The title, number of shares and principal amount of each Covered
Security in which the access person had any direct or indirect
beneficial ownership when the person becomes an access person;
2. The name of any broker, dealer or bank with whom the access
person maintained an account in which any securities were held
for the direct or indirect benefit of the access person; and
3. The date that the report is submitted by the access person.
D. Every access person shall, no later than ten (10) days after the end
of a calendar quarter, file a quarterly transaction report containing
the following information:
1. With respect to any transaction during the quarter in a Covered
Security in which the access person had any direct or indirect
beneficial ownership:
(a) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(b) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(c) The price of the Covered Security at which the transaction
was effected;
(d) The name of the broker, dealer or bank with or through whom
the transaction was effected; and
(e) The date that the report is submitted by the access person.
2. With respect to any account established by the access person in
which any securities were held during the quarter for the direct
or indirect benefit of the access person:
(a) The name of the broker, dealer or bank with whom the access
person established the account;
(b) The date the account was established; and
(c) The date that the report is submitted by the access person.
E. Every access person shall, no later than January 30 each year, file an
annual holdings report containing the following information as of the
preceding December 31:
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1. The title, number of shares and principal amount of each Covered
Security in which the access person had any direct or indirect
beneficial ownership;
2. The name of any broker, dealer or bank with whom the access
person maintains an account in which any securities are held for
the direct or indirect benefit of the access person; and
3. The date that the report is submitted by the access person.
F. Any report filed pursuant to Section V.C., Section V.D. or Section
V.E. of this Code of Ethics may contain a statement that the report
shall not be construed as an admission by the person making such
report that he has any direct or indirect beneficial ownership in the
security to which the report relates.
G. The Adviser's President shall review all reports filed pursuant to
Section V.C., Section V.D. or Section V.E. of this Code of Ethics. The
Adviser's President shall identify all access persons who are required
to file reports pursuant to this Section V of this Code of Ethics and
must inform such access persons of their reporting obligation.
VI. SANCTIONS
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Upon discovering a violation of this Code of Ethics, the Board of Directors of
the Adviser may impose such sanctions as it deems appropriate.
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