INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT ( this "Agreement") is made this 15th
day of October, 2001, between FMI MUTUAL FUNDS, INC., a Wisconsin 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 currently registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act") as an
open-end management investment company consisting of multiple series; 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 each series that approves the adoption of this Agreement (each an
"Approving Fund", and, collectively, the "Approving Funds"). The Approving Funds
are set forth on Schedule A.
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 each of the Approving Funds and to
administer each of their business and administrative operations, subject to the
direction of the Board of Directors of the Company (the "Board of Directors")
and the officers of the Company, 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 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
any of the Approving Funds in any way or otherwise be deemed an agent of the
Company or any of the Approving Funds. 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, as amended, restated or supplemented, or any applicable statute
or regulation, or to relieve or deprive the Board of Directors of its
responsibility for and control of the affairs of each of the Approving Funds.
3. Obligations of and Services to be Provided by the Adviser. The Adviser
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
a. Management and Administrative Services.
(i) The Adviser shall furnish to the Company adequate office
space, which may be space within the offices of the Adviser or in
such other place as may be agreed upon from time to time, and all
office furnishings, facilities and equipment as may be reasonably
required for performing services relating to advisory, research,
asset allocation, portfolio manager selection and evaluation
activities and otherwise managing and administering the business and
operations of each Approving Fund.
(ii) The Adviser shall employ or provide and compensate the
executive, administrative, secretarial and clerical personnel
necessary to supervise the provision of the services set forth in
sub-paragraph 3(a)(i) and shall bear the expense of providing such
services, except as provided in Section 4 of this Agreement. The
Adviser shall also compensate all officers and employees of the
Company who are officers or employees of the Adviser or its
affiliated companies.
b. Investment Management Services.
(i) The Adviser shall, subject to and in accordance with the
investment objective and policies of each Approving Fund and any
directions which the Board of Directors may issue to the Adviser,
have overall responsibility for the general management and
investment of the assets and securities portfolios of each Approving
Fund.
(ii) The Adviser may delegate its investment responsibilities
under sub-paragraph 3(b)(i) with respect to any Approving Fund or
segments thereof to one or more persons or companies ("Portfolio
Manager[s]") pursuant to an agreement between the Adviser, the
Company and any such Portfolio Manager ("Sub-Advisory Agreement").
Each Sub-Advisory Agreement may provide that the applicable
Portfolio Manager, subject to the control and supervision of the
Board of Directors and the Adviser, shall have full investment
discretion for the Approving Fund in question, shall make all
determinations with respect to the investment of such Approving
Fund's assets assigned to it and the purchase and sale of portfolio
securities with those assets, and shall take such steps as may be
necessary to implement its investment decisions. Any delegation of
duties pursuant to this paragraph shall comply with any applicable
provisions of Section 15 of the Act, except to the extent permitted
by any exemptive order of the Securities and Exchange Commission or
similar relief. The Adviser shall not be
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responsible or liable for the investment merits of any decision by a
Portfolio Manager to purchase, hold or sell a security for any
Approving Fund's portfolio.
(iii) The Adviser shall develop overall investment programs
and strategies for each of the Approving Funds, or segments thereof,
shall revise such programs as necessary, and shall monitor and
report periodically to the Board of Directors concerning the
implementation of the programs.
(iv) The Adviser shall research and evaluate each potential
Portfolio Manager and shall advise the Board of Directors of the
potential Portfolio Managers that the Adviser believes are
best-suited to invest the assets of each Approving Fund; shall
monitor and evaluate the investment performance of each Portfolio
Manager; shall determine the portion of each Approving Fund's assets
to be managed by a Portfolio Manager; shall recommend changes or
additions of Portfolio Managers when appropriate; and shall
coordinate the investment activities of all of the Portfolio
Managers.
(v) The Adviser shall be solely responsible for paying the
fees of any Portfolio Manager.
(vi) The Adviser shall render to the Board of Directors such
periodic reports concerning the business and investments of each of
the Approving Funds as the Board of Directors shall reasonably
request.
c. Information for Preparation of Filings.
The Adviser will make available and provide financial, accounting
and statistical information required by each Approving Fund for the
preparation of registration statements, reports and other documents
required by federal and state securities laws, and such other information
as any Approving Fund may reasonably request for use in the preparation of
such documents or of other materials necessary or helpful for the
underwriting and distribution of such Approving Fund's shares.
d. Provision of Personnel.
The Adviser shall make available its officers and employees to
the Board of Directors and officers of the Company for consultation and
discussions regarding the administration and management of the Company and
its investment activities.
4. Expenses. The Adviser shall not be required to pay any expenses of any
of the Approving Funds except as provided herein; provided, however, that if the
aggregate annual operating expenses, including the Adviser's fee and the fees
paid to any such Approving Fund's Administrator but excluding all federal, state
and local taxes, interest, brokerage commissions and other costs incurred in
connection with the purchase or sale of portfolio securities and
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extraordinary items, in any year exceed that percentage of the average net
assets of such Approving 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 such
Approving Fund's shares are qualified for sale or, if the states in which such
Approving Fund's shares are qualified for sale impose no such restrictions, 2%
(1.3% for periods prior to the second anniversary of this Agreement), then the
Adviser's fee shall be reduced as hereinafter provided. The expenses of each
Approving Fund's operations borne by such Approving Fund include by way of
illustration and not limitation, directors fees paid to those directors who are
not officers of the Company, the costs of preparing and printing 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, the printing and distribution cost of
prospectuses mailed to existing shareholders, the cost of stock certificates (if
any), director and officer liability insurance, reports to shareholders, reports
to government authorities and proxy statements, interest charges, 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 such Approving Fund's
assets, expenses of calculating the net asset value and repurchasing and
redeeming shares, printing and mailing expenses, 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 each Approving Fund on a
monthly basis. If the accrued amount of the expenses of any Approving Fund
exceeds the expense limitation established herein, the Company shall create an
account receivable from the Adviser in 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.
5. Compensation of the Adviser. For the services to be rendered by the
Adviser hereunder, the Company, through and on behalf of each Approving Fund,
shall pay to the Adviser an advisory fee, paid monthly, based on the average net
assets of such Approving Fund, as determined by valuations made as of the close
of each business day of the month. The advisory fee for each Approving Fund
shall be set forth on Schedule A, provided that after the second anniversary of
this Agreement, if the Board of Directors (including a majority of the directors
who are not "interested persons", as defined in the Act, of the Adviser or the
Company) determines it is in the best interests of the FMI AAM Palm Beach Total
Return Fund, then the Board of Directors may eliminate the asset breakpoint,
making the advisory fee for the FMI Palm Beach Total Return Fund 1.00% in all
instances. For any month in which this Agreement is not in effect for the entire
month with respect to an Approving Fund, such fee shall be reduced
proportionately on the basis of the number of calendar days during which it is
in effect and the
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fee computed upon the average net assets of such Approving Fund on the business
days during which it is so in effect.
6. Ownership of Shares of the Approving Funds. The Adviser shall not take
an ownership position in any of the Approving Funds, and shall not permit any of
its shareholders, officers, directors or employees to take a long or short
position in the shares of any of the Approving Funds, except for the purchase of
shares of any such Approving Fund for investment purposes at the same price as
that available to the public at the time of purchase or in connection with the
initial capitalization of any such Approving Fund.
7. Exclusivity. The services of the Adviser to the Approving Funds
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. During the period that this Agreement is in effect, and except
as herein provided, the Adviser shall be the sole investment adviser of each
Approving Fund.
8. 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 any of the
Approving Funds or to any shareholder of any of the Approving Funds 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.
9. Brokerage Commissions. The Adviser, subject to the control and
direction of the Board of Directors, and any applicable Portfolio Manager(s),
subject to the control and direction of the Board of Directors and the Adviser,
shall have authority and discretion to select brokers and dealers to execute
portfolio transactions for each Approving Fund and for the selection of the
markets on or in which the transactions will be executed. The Adviser or the
applicable Portfolio Manager(s) may cause the Approving Fund in question 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(s) 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 Adviser shall provide such reports as the Board of Directors
may reasonably request with respect to each Approving Fund's total brokerage and
the manner in which that brokerage was allocated.
10. Code of Ethics. The Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and has provided the
Company with a copy of
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the code of ethics and evidence of its adoption. Upon the written request of the
Company, the Adviser shall permit the Company to examine the reports required to
be made by the Adviser pursuant to Rule 17j-1(d)(1).
11. 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, and, if
required by the Act, by the vote of the majority of the outstanding voting
securities of each Approving Fund, as defined in the Act.
12. Termination. This Agreement may be terminated with respect to any
Approving Fund at any time, without the payment of any penalty, by the Board of
Directors or by a vote of the "majority" of the outstanding voting securities of
such Approving Fund, as defined in the Act, upon giving sixty (60) days' written
notice to the Adviser. This Agreement may be terminated by the Adviser with
respect to all of the Approving Funds or any one or more of the Approving Funds
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 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 (i) the Board of
Directors or by the vote of the "majority" of the outstanding voting securities
of the Company, as defined in the Act, and (ii) the Board of Directors 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.
FIDUCIARY MANAGEMENT, INC.
(the "Adviser")
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
FMI MUTUAL FUNDS, INC.
(the "Company")
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
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SCHEDULE A
Name of the Fund Compensation (as a % of average daily net assets)
---------------- -------------------------------------------------
FMI AAM PALM BEACH TOTAL RETURN FUND 1.00% of the first $30,000,000 of average daily net
assets and 0.75% of average daily net assets in excess
of $30,000,000
FMI XXXXXXX GROWTH FUND 1.00%
FMI WOODLAND SMALL CAPITALIZATION VALUE FUND 1.00%
FMI SASCO CONTRARIAN VALUE FUND 1.00%
FMI XXXXXXXXXXXXX BAYER EMERGING GROWTH FUND 1.00%
