INVESTMENT ADVISORY AGREEMENT
Agreement made this 1st day of January, 1998 between FMI Funds,
Inc., a Maryland corporation (the "Company"), and Fiduciary Management,
Inc., a Wisconsin corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act")
as an open-end management investment company consisting initially of one
series FMI Focus Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in this Agreement. The Adviser hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the directors of the Company may determine, direct the purchase and
sale of investment securities in the day-to-day management of the Fund.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized,
have no authority to act for or represent the Company or the Fund in any
way or otherwise be deemed an agent of the Company or the Fund. However,
one or more shareholders, officers, directors or employees of the Adviser
may serve as directors and/or officers of the Company, but without
compensation or reimbursement of expenses for such services from the
Company. Nothing herein contained shall be deemed to require the Company
to take any action contrary to its Articles of Incorporation or By-Laws or
any applicable statute or regulation, or to relieve or deprive the
directors of the Company of their responsibility for, and control of, the
affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company or the Fund, shall furnish office space,
and all necessary office facilities, equipment and executive personnel for
managing the investments of the Fund. The Fund shall bear all expenses
initially incurred by it, provided that the total expenses borne by the
Fund, including the Adviser's fee but excluding all federal, state and
local taxes, interest, reimbursement payments to securities lenders for
dividend and interest payments on securities sold short, brokerage
commissions and extraordinary items, shall not in any year exceed that
percentage of the average net assets of the Fund for such year, as
determined by valuations made as of the close of each business day, which
is the most restrictive percentage provided by the state laws of the
various states in which the Fund's shares are qualified for sale or, if
the states in which the Fund's shares are qualified for sale impose no
such restrictions, 2.75%. The expenses of the Fund's operations borne by
the Fund include by way of illustration and not limitation, director's
fees paid to those directors who are not officers of the Company, the
costs of preparing and printing its registration statements required under
the Securities Act of 1933 and the Act (and amendments thereto), the
expense of registering its shares with the Securities and Exchange
Commission and in the various states, payments made pursuant to the
Service and Distribution Plan, the printing and distribution cost of
prospectuses mailed to existing shareholders, the cost of share
certificates (if any), director and officer liability insurance, reports
to shareholders, reports to government authorities and proxy statements,
interest charges, reimbursement payments to securities lenders for
dividend and interest payments on securities sold short, taxes, legal
expenses, salaries of administrative and clerical personnel, association
membership dues, auditing and accounting services, insurance premiums,
brokerage and other expenses connected with the execution of portfolio
securities transactions, fees and expenses of the custodian of the Fund's
assets, expenses of calculating the net asset value and repurchasing and
redeeming shares, charges and expenses of dividend disbursing agents,
registrars and stock transfer agents and the cost of keeping all necessary
shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser for the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced
by the amount of such excess, subject to adjustment month by month during
the balance of the Company's fiscal year if accrued expenses thereafter
fall below the expense limitation.
4. Compensation of the Adviser. For the services and
facilities to be rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Company, through and on behalf of the Fund
shall pay to the Adviser an advisory fee, paid monthly, based on the
average net assets of the Fund, as determined by valuations made as of the
close of each business day of the month. The advisory fee shall be 1/12
of 1.25% (1.25% per annum) of such average net assets. For any month in
which this Agreement is not in effect for the entire month, such fee shall
be reduced proportionately on the basis of the number of calendar days
during which it is in effect and the fee computed upon the average net
assets of the business days during which it is so in effect.
5. Ownership of Shares of the Fund. Except in connection with
the initial capitalization of the Fund, the Adviser shall not take, and
shall not permit any of its shareholders, officers, directors or employees
to take, a long or short position in the shares of the Fund, except for
the purchase of shares of the Fund for investment purposes at the same
price as that available to the public at the time of purchase.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has permitted and is
permitting the Fund and the Company to use the name "FMI," it is
understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund and the Company will not
use such name if the Adviser ceases to be the Fund's sole investment
adviser. During the period that this Agreement is in effect, the Adviser
shall be the Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the directors of the Company in the manner
required by the Act, and, if required by the Act, by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the directors of the Company or by
a vote of the majority of the outstanding voting securities of the Fund,
as defined in the Act, upon giving sixty (60) days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any time upon
the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for two (2)
years from the date hereof and indefinitely thereafter, but only so long
as the continuance after such two (2) year period is specifically approved
annually by (i) the directors of the Company or by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act, and (ii) the directors of the Company in the manner required by
the Act, provided that any such approval may be made effective not more
than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC. FMI FUNDS, INC.
(the "Adviser") (the "Company")
By:/s/ Xxxxxx X. Xxxxxx By:/s/ Xxx X. Xxxxxxx
President President
