SUB-ADVISORY AGREEMENT
FMI FUNDS
THIS SUB-ADVISORY AGREEMENT, made this 1st day of May, 2001, by and
among FMI FUNDS, INC., a Maryland corporation (the "Company"), FIDUCIARY
MANAGEMENT, INC., a Wisconsin corporation (the "Adviser"), and BROADVIEW
ADVISORS, LLC, a Wisconsin limited liability company (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 Articles of Incorporation permit its authorized shares of Common
Stock to be divided into 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. One such series or fund of the Company
is the FMI Focus Fund (the "Fund").
The Adviser acts as the "investment adviser" to the Fund (as defined
in Section 2(a)(20) of the Act) 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 identified 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 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 the discretionary portfolio manager for the
Fund 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 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 Portfolio Manager. Portfolio
Manager is hereby employed and authorized to select portfolio securities for
investment by the Fund, to purchase and sell securities for the Fund, 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 to from time to time by the
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Portfolio Manager and the Company or the Adviser (the "Operational Procedures").
In providing portfolio management services to the Fund, 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
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. Portfolio Manager is not authorized by the
Company to take any action, including the purchase or sale of securities for the
Fund, in contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. 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, Portfolio
Manager will consult with Company or with the Adviser with respect to any
decision made by it with respect to the investments of the Fund.
4. Investment Objectives, Policies and Restrictions. The Company will
provide 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. Company retains the right, on written notice to Portfolio Manager
from Company or 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 Firstar 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,
and Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect thereto. Portfolio Manager shall advise
Custodian and confirm in writing to Company and to the Fund's administrator,
Fiduciary Management, Inc., or any other designated agent of Company, all
transactions for the Fund executed by it with brokers and dealers at the time
and in the manner as set forth in the Operational Procedures. Portfolio Manager
shall issue to the Custodian such instructions as may be appropriate in
connection with the settlement of any transaction initiated by Portfolio
Manager. 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, 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 Portfolio
Manager to take appropriate action if the Custodian fails to confirm in writing
proper execution of the instructions.
6. Proxies. The Portfolio Manager will vote all proxies solicited by
or with respect to the issuers of securities in which assets of the Fund may be
invested from time to time.
7. Compensation of the Portfolio Manager. The compensation of
Portfolio Manager for its services under this Agreement shall be calculated and
paid by Adviser in
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accordance with the attached Schedule B. Pursuant to the provisions of the
Investment Advisory Agreement between Company and Adviser, Adviser is solely
responsible for the payment of fees to Portfolio Manager, and Portfolio Manager
agrees to seek payment of its fees solely from Adviser.
8. Other Investment Activities of Portfolio Manager. Company
acknowledges that 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
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 3 hereof, Company agrees that 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, provided that
Portfolio Manager acts in good faith, and provided further, that it is Portfolio
Manager's policy to allocate, within its reasonable discretion, investment
opportunities to the Fund 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. 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 may have an
interest from time to time, whether in transactions which involve the Fund or
otherwise. Portfolio Manager shall have no
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obligation to acquire for the Fund a position in any investment which any
Affiliated Account may acquire, and Company shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund or otherwise.
9. Certificate of Authority. Company, Adviser and 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 Company, the Fund, the Portfolio Manager and/or 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 Portfolio Manager, 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.
11. Brokerage Commissions. The Portfolio Manager, subject to the
control and direction of the Board of Directors of the Company, 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
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 Portfolio
Manager a commission for effecting a securities transaction in excess of the
amount another broker-dealer would have
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charged for effecting such transaction, if 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 Portfolio Manager and
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 and the actions of Portfolio
Manager and Company in respect thereto.
13. Representations, Warranties and Agreements of Company. Company
represents, warrants and agrees that:
A. Portfolio Manager has been duly appointed by the Board of Directors
of Company to provide investment services to the Fund as contemplated hereby.
B. Company will deliver to 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 and such other information as is necessary for
Portfolio Manager to carry out its obligations under this Agreement.
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14. Representations, Warranties and Agreements of Portfolio Manager.
Portfolio Manager represents, warrants and agrees that:
A. 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. Portfolio Manager will maintain, keep current and preserve on
behalf of Company, in the manner required or permitted by the Act, the records
identified in Schedule A. Portfolio Manager agrees that such records (unless
otherwise indicated on Schedule A) are the property of Company, and will be
surrendered to the Company promptly upon request.
C. Portfolio Manager will complete such reports concerning purchases
or sales of securities on behalf of the Fund as the Adviser or Company may from
time to time require to ensure compliance with the Act, the Internal Revenue
Code and applicable state securities laws.
D. Portfolio Manager will adopt a written code of ethics complying
with the requirements of Rule 17j-1 under the Act and will provide Company with
a copy of the code of ethics and evidence of its adoption. Upon the written
request of Company, Portfolio Manager shall permit Company, its employees or its
agents to examine the reports required to be made to Portfolio Manager by Rule
17j-1(c)(1).
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E. 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. Portfolio Manager will immediately notify the Company and the
Adviser of the occurrence of any event which would disqualify Portfolio Manager
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the Act or otherwise.
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 by the
Company or the Portfolio Manager, without the payment of any penalty,
immediately upon written notice to the other in the event of a breach of any
provision hereof by the party so notified, or otherwise, upon giving sixty (60)
days' written notice to the other, and this Agreement shall be terminated
immediately if the Adviser or its successors shall cease to be the investment
adviser to the Fund, 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 April 30, 2003 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day first above written.
FMI FUNDS, INC.
(the "Company")
By:
-------------------------------------
Xxx X. Xxxxxxx, President
FIDUCIARY MANAGEMENT, INC.
(the "Adviser")
By:
------------------------------------
Xxxxxxx X. English, President
BROADVIEW ADVISORS, LLC
(the "Portfolio Manager")
By:
------------------------------------
Xxxxxxx X. Xxxx, President
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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.
(iii) Any other consideration other than the technical qualifications
of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. 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.
D. 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.
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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
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FEE SCHEDULE
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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 0.95% 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.
