Exhibit (d)(iv)
SUB-ADVISORY AGREEMENT
FMI WOODLAND SMALL CAPITALIZATION VALUE FUND
THIS SUB-ADVISORY AGREEMENT (this "Agreement") is made this 20th day of
December, 2002, by and among FMI MUTUAL FUNDS, INC., a Wisconsin corporation
(the "Company"), FIDUCIARY MANAGEMENT, INC., a Wisconsin corporation (the
"Adviser"), and GAMCO INVESTORS, INC. (the "Portfolio Manager").
W I T N E S S E T H :
The Company is a diversified open-end management investment company
registered as an investment company under the Investment Company Act of 1940
(the "Act"), and subject to the rules and regulations promulgated thereunder.
The Company's authorized shares of Common Stock are divided into five series,
each of which constitutes a separate investment portfolio or fund with different
investment objectives and policies. Each share of a fund represents an undivided
interest in the assets, subject to the liabilities, allocated to that portfolio.
The Adviser acts as the "investment adviser" (as defined in Section
2(a)(20) of the Act) to the FMI Woodland Small Capitalization Value Fund (the
"Fund"), a series of the Company's common stock, pursuant to the terms of an
Investment Advisory Agreement. The Adviser is responsible for the day-to-day
management and overall administration of the Fund and the coordination of
investment of the Fund's assets in portfolio securities. However, specific
portfolio purchases and sales for the Fund's investment portfolio, or a portion
thereof, are to be made by advisory organizations recommended and selected by
the Adviser, subject to the approval of the Board of Directors of the Company.
WHEREAS, the Adviser and the Company desire to retain the Portfolio Manager
as the investment adviser and the portfolio manager for the Fund.
NOW, THEREFORE, the Company, the Adviser and the Portfolio Manager do
mutually promise and agree as follows:
1. Employment. The Adviser being duly authorized hereby appoints and
employs the Portfolio Manager as a discretionary portfolio manager to the Fund
for those assets of the Fund which the Adviser determines to assign to the
Portfolio Manager (those assets being referred to as the "Fund Account"), for
the period and on the terms set forth in this Agreement. The Portfolio Manager
hereby accepts the appointment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Fund with respect to the investments of the Fund Account in accordance with
the provisions of this Agreement.
2. Authority of the Portfolio Manager. The Portfolio Manager 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.
3. Portfolio Management Services of the Portfolio Manager. The Portfolio
Manager is hereby employed and authorized to select portfolio securities for
investment by the Fund, to purchase and sell securities of the Fund Account, and
upon making any purchase or sale decision, to place orders for the execution of
such portfolio transactions in accordance with paragraphs 5 and 6 hereof and
such operational procedures as may be agreed
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to from time to time by the Portfolio Manager and the Company or the Adviser
(the "Operational Procedures"). In providing portfolio management services to
the Fund Account, the Portfolio Manager shall be subject to such investment
restrictions as are set forth in the Act and the rules thereunder, the Internal
Revenue Code, applicable state securities laws, the supervision and control of
the Board of Directors of the Company, such specific instructions as the Board
of Directors may adopt and communicate to the Portfolio Manager, the investment
objectives, policies and restrictions of the Fund furnished pursuant to
paragraph 4, the provisions of Schedule A hereto and instructions from the
Adviser. The Portfolio Manager is not authorized by the Company to take any
action, including the purchase or sale of securities for the Fund Account, in
contravention of any restriction, limitation, objective, policy or instruction
described in the previous sentence. The Portfolio Manager shall maintain on
behalf of the Fund the records listed in Schedule A hereto (as amended from time
to time). At the Company's or the Adviser's reasonable request, the Portfolio
Manager will consult with the Company or with the Adviser with respect to any
decision made by it with respect to the investments of the Fund Account.
4. Investment Objectives, Policies and Restrictions. The Company will
provide the Portfolio Manager with a statement of the investment objectives,
policies and restrictions applicable to the Fund and any specific investment
restrictions applicable to the Fund as established by the Company, including
those set forth in its registration statement under the Act and the Securities
Act of 1933, as amended. The Company retains the right, on written notice to the
Portfolio Manager from the Company or the Adviser, to modify any such
objectives, policies or restrictions in any manner at any time.
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5. Transaction Procedures. All transactions will be consummated by payment
to or delivery by U.S. Bank, N.A. (the "Custodian"), or such depositories or
agents as may be designated by the Custodian in writing, as custodian for the
Fund, of all cash and/or securities due to or from the Fund Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect thereto. The Portfolio Manager shall
advise the Custodian and confirm in writing to the Company and to the Fund's
administrator, Fiduciary Management, Inc., or any other designated agent of the
Company, all transactions for the Fund Account executed by it with brokers and
dealers at the time and in the manner as set forth in the Operational
Procedures. The Portfolio Manager shall issue to the Custodian such instructions
as may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Company shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian, except that it shall be
the responsibility of the Adviser to take appropriate action if the Custodian
fails to confirm in writing proper execution of the instructions.
6. Proxies. The Company or the Adviser will vote all proxies solicited by
or with respect to the issuers of securities in which assets of the Fund Account
may be invested from time to time. At the request of the Company, the Portfolio
Manager shall provide the Company with its recommendations as to the voting of
such proxies.
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7. Compensation of the Portfolio Manager. The compensation of the
Portfolio Manager for its services under this Agreement shall be calculated and
paid by the Adviser in accordance with the attached Schedule B. Pursuant to the
provisions of the Investment Advisory Agreement between the Company and the
Adviser, the Adviser is solely responsible for the payment of fees to the
Portfolio Manager, and the Portfolio Manager agrees to seek payment of its fees
solely from the Adviser. As to the Fund, if, in any fiscal year, the Adviser is
obligated pursuant to the Investment Advisory Agreement to waive fees payable to
it by the Fund or reimburse expenses to the Fund, the Portfolio Manager shall
pay to the Adviser an amount equal to 75% of such fee waiver or expense
reimbursement and the Adviser shall remain liable to the Company for the full
amount of such fee waiver or expense reimbursement.
8. Other Investment Activities of the Portfolio Manager. The Company
acknowledges that the Portfolio Manager or one or more of its affiliates may
have investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that the
Portfolio Manager, its affiliates or any of its or their directors, officers,
agents or employees may buy, sell or trade in any securities for its or their
respective accounts ("Affiliated Accounts"). Subject to the provisions of
paragraph 2 hereof, the Company agrees that the Portfolio Manager or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to other Affiliated Accounts which may differ from the
advice given or the timing or nature of action taken with respect to the Fund
Account, provided that the Portfolio Manager acts in good faith, and provided
further, that it is the Portfolio Manager's policy to allocate, within its
reasonable
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discretion, investment opportunities to the Fund Account over a period of time
on a fair and equitable basis relative to the Affiliated Accounts, taking into
account the investment objectives and policies of the Fund and any specific
investment restrictions applicable thereto. The Company acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Fund Account may have an interest from time to time, whether in transactions
which involve the Fund Account or otherwise. The Portfolio Manager shall have no
obligation to acquire for the Fund Account a position in any investment which
any Affiliated Account may acquire, and the Company shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund Account or otherwise.
9. Certificate of Authority. The Company, the Adviser and the Portfolio
Manager shall furnish to each other from time to time certified copies of the
resolutions of their Boards of Directors or executive committees, as the case
may be, evidencing the authority of officers and employees who are authorized to
act on behalf of the Company, the Fund Account, the Portfolio Manager and/or the
Adviser.
10. Liability. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Portfolio Manager, the Portfolio Manager shall not be liable 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.
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11. Brokerage Commissions. The Adviser, subject to the control and
direction of the Board of Directors of the Company, and the Portfolio Manager,
subject to the control and direction of the Board of Directors of the Company
and the Adviser, shall have authority and discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the Fund and for the selection of the markets on or in which the transactions
will be executed. The Adviser or the Portfolio Manager 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 or the Portfolio Manager 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 or the
Portfolio Manager 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). The Portfolio Manager shall provide such reports as the Board of
Directors of the Company or the Adviser may reasonably request with respect to
the Fund's total brokerage and the manner in which that brokerage was allocated.
12. Confidentiality. Subject to the duty of the Portfolio Manager and the
Company to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Fund Account and the actions of
the Portfolio Manager and the Company in respect thereto.
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13. Representations, Warranties and Agreements of the Company. The Company
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed by the Board of
Directors of the Company to provide investment services to the Fund Account
as contemplated hereby.
B. The Company will deliver to the Portfolio Manager a true and
complete copy of its then current prospectus and statement of additional
information as effective from time to time and such other documents or
instruments governing the investment of the Fund Account and such other
information as is necessary for the Portfolio Manager to carry out its
obligations under this Agreement.
14. Representations, Warranties and Agreements of the Portfolio Manager.
The Portfolio Manager represents, warrants and agrees that:
A. The Portfolio Manager is registered as an "investment adviser"
under the Investment Advisers Act of 1940 ("Advisers Act"); or is a "bank"
as defined in Section 202(a)(2) of the Advisers Act or an "insurance
company" as defined in Section 202(a)(2) of the Advisers Act.
B. The Portfolio Manager will maintain, keep current and preserve on
behalf of the Company, in the manner required or permitted by the Act, the
records identified in Schedule A. The Portfolio Manager agrees that such
records
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(unless otherwise indicated on Schedule A) are the property of the Company,
and will be surrendered to the Company promptly upon request.
C. The Portfolio Manager will complete such reports concerning
purchases or sales of securities on behalf of the Fund Account as the
Adviser or the Company may from time to time require to ensure compliance
with the Act, the Internal Revenue Code and applicable state securities
laws.
D. The Portfolio Manager will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and will
provide the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Portfolio Manager
shall permit the Company, its employees or its agents to examine the
reports required to be made to the Portfolio Manager by Rule 17j-1(c)(1).
E. The Portfolio Manager will promptly after filing with the
Securities and Exchange Commission an amendment to its Form ADV furnish a
copy of such amendment to the Company and the Adviser.
F. The Portfolio Manager will immediately notify the Company and the
Adviser of the occurrence of any event which would disqualify the Portfolio
Manager from serving as an investment adviser of an investment company
pursuant to Section 9(a) of the Act or otherwise.
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15. Amendments. This Agreement may be amended by the mutual consent of the
parties; provided, however, that in no event may it be amended without the
approval of the Board of Directors in the manner required by the Act.
16. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by any party hereto immediately upon written notice to
the others in the event of a breach of any provision hereof by the party so
notified, or otherwise, upon giving thirty (30) days' written notice to the
others, but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others. 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 an initial period beginning as of the date hereof
and ending on the second anniversary of this Agreement and indefinitely
thereafter, but only so long as the continuance after such initial period is
specifically approved annually by the Board of Directors of the Company in the
manner required by the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day first above written.
FMI MUTUAL FUNDS, INC.
(the "Company")
By: /s/ Xxxxxx X. Xxxxxx
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FIDUCIARY MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
GAMCO INVESTORS, INC.
(the "Portfolio Manager")
By: /s/ Xxxxxxx X. Xxxxxx
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SCHEDULE A
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (1940 Act Rule 31a-1(b)(5) and (6)). A record of each brokerage order, and
all other portfolio purchases and sales, given by the Portfolio Manager on
behalf of the Fund for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (1940 Act Rule 31a-1(b)(9)). A record for each fiscal quarter, completed
within ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected, and
the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Fund,
(b) The Adviser,
(c) The Portfolio Manager, and
(d) Any person other than the foregoing.
B. Any other consideration other than the technical qualifications of the
brokers and dealers as such.
C. Shall show the nature of the services or benefits made available.
D. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions or
other compensation.
E. The name of the person responsible for making the determination of
such allocation and such division of brokerage commissions or other
compensation.
3. (1940 Act Rule 31a-1(b)(10)). A record in the form of an appropriate
memorandum identifying the person or persons, committees or groups
authorizing the purchase or sale of portfolio securities. Where an
authorization is made by a committee or group, a record shall be kept of
the names of its members who participate in the authorization. There shall
be retained as part of this record: any memorandum, recommendation or
instruction supporting or authorizing the purchase or sale of portfolio
securities and such other information as is appropriate to support the
authorization.1
4. (1940 Act Rule 31a-1(f)). Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule adopted
under Section 204 of the Investment Advisers Act of 1940, to the extent
such records are necessary or appropriate to record the Portfolio Manager's
transactions with respect to the Fund Account.
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(1) Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation, i.e., buy, sell, hold) or any internal reports
or portfolio adviser reviews).
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SCHEDULE B
FEE SCHEDULE
For its services to the Fund, the Adviser shall pay the Portfolio Manager a
fee, paid monthly, based on the average net asset value of the Fund, as
determined by valuations made as of the close of each business day of the month.
The fee shall be 1/12 of 0.75% of the average daily net assets of the Fund.
The fee shall be pro-rated for any month during which the Agreement is in
effect for only a portion of the month.
