SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
BUILDERS FIXED INCOME FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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BUILDERS FIXED INCOME FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on May 25, 2000
TO THE SHAREHOLDERS:
Builders Fixed Income Fund, Inc. (the "Fund") is holding a special meeting
of shareholders on Thursday, May 25, 2000 at 3:00 p.m. Central time. The place
of the meeting is the Carpenters' District Council of Greater St. Louis, 1401
Hampton Avenue, St. Louis, MO 63139.
The purpose of the meeting is as follows:
(1) To elect seven (7) directors, each of whom will serve until his successors
are elected or qualified.
(2) To approve a New Subadvisory Agreement with Principal Capital Management,
LLC.
(3) To ratify the selection of Deloitte & Touche LLP as independent accountants
for the Fund for the fiscal year ending December 31, 2000.
You may vote at the meeting if you are the record owner of shares of the Fund as
of the close of business on _____________. If you attend the meeting, you may
vote your share in person. If you expect to attend the meeting in person, please
notify the Fund by calling (314) 822-1644. If you do not expect to attend the
meeting, please fill in, sign and return the proxy card in the enclosed
envelope.
Thank you for your cooperation and continued support.
By order of the Board of Directors,
John W. Stewart
Chairman, President and Secretary
May __, 2000
<PAGE>
BUILDERS FIXED INCOME FUND, INC.
2190 S. Mason Road, Suite 208
St. Louis, MO 63131
(314) 822-1644
PROXY STATEMENT
Dated May ____, 2000
SPECIAL MEETING OF SHAREHOLDERS
To be held on May 25, 2000
The Board of Directors ("Board") of Builders Fixed Income Fund, Inc. (the
"Fund") is sending you this proxy statement and the enclosed proxy card on
behalf of the Fund. The Board is soliciting your proxy to vote at the special
meeting of shareholders of the Fund ("Meeting").
PROPOSALS
The following proposals will be presented at the Meeting:
(1) To elect 7 directors, each of whom will serve until his successors are
elected or qualified.
(2) To approve a New Subadvisory Agreement with Principal Capital Management,
LLC.
(3) To ratify the selection of Deloitte & Touche LLP as independent accountants
for the Fund for the fiscal year ending December 31, 2000.
WHO IS ELIGIBLE TO VOTE?
The Board is sending this proxy statement on or about May ____, 2000 to all
shareholders entitled to vote. Shareholders who owned shares of the Fund at the
close of business on March 1, 2000 ("Record Date") are entitled to vote. The
number of shares of the Fund outstanding on the Record Date was ______. Each
share of the Fund entitles you to one vote on each proposal set forth above, and
each fractional share entitles you to a fractional vote.
HOW TO VOTE
VOTING BY PROXY
Whether you plan to attend the meeting or not, the Board urges you to complete,
sign and date the enclosed proxy card and to return it promptly. Returning the
proxy card will not affect your right to attend the meeting and vote.
The Board has named John W. Stewart and Stephen W. Talbott as proxies. If you
properly complete your proxy card and send it to the Fund, your proxy will vote
your shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares with respect to Proposals 1
through 3 as recommended by the Board.
2
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If any other matter is presented, your proxy will vote in accordance with his
best judgment. At the time this proxy statement was printed, the Board knows of
no matter that needs to be acted on at the meeting other than those discussed in
this proxy statement. If you appoint a proxy, you may revoke it any time before
it is exercised. You can do this by sending in another proxy with a later date
or by notify the Fund's Secretary in writing before the meeting.
VOTING IN PERSON
If you do attend the meeting and wish to vote in person, you will be given a
ballot when you arrive. If shares are held in the name of a pension plan, you
must bring a letter from the plan authorizing you to vote the shares on the
plan's behalf.
BOARD RECOMMENDATION
The Board recommends that shareholders vote FOR each of the proposals.
QUORUM AND REQUIRED VOTE
A quorum of shareholders is necessary to hold a valid meeting. The presence in
person or by proxy of shareholders entitled to cast a majority of all votes
entitled to be cast at the meeting constitutes a quorum.
The affirmative vote of a plurality of votes cast is necessary to elect the
directors, meaning that the nominees receiving the most votes will be elected
(Proposal 1). In an uncontested election of directors, the plurality requirement
is not a factor. The affirmative vote of a majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940
("Investment Company Act") is required to approve the Fund's new Subadvisory
Agreement (Proposal 2). The affirmative vote of a majority of votes cast is
required to ratify the Fund's independent accountants (Proposal 3). Abstentions
will not count as votes cast and will have the effect of votes against Proposals
1 and 2, and will have no effect on Proposal 3.
INFORMATION ABOUT THE FUND
UPON YOUR REQUEST, THE FUND WILL FURNISH YOU WITH A FREE COPY OF ITS MOST RECENT
ANNUAL REPORT AND THE MOST RECENT SEMI-ANNUAL REPORT. YOU SHOULD DIRECT YOUR
REQUEST TO UNIFIED FUND SERVICES, AT 431 N. PENNSYLVANIA STREET, INDIANAPOLIS,
IN 46204 OR BY CALLING (800) 862-7283, EXT. 7022.
3
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board has approved the nomination of Terry Nelson, John W. Stewart, Leonard
Terbrock, Joseph A. Montanaro, Dan Mulligan, James Slebiska and Douglas J.
McCarron, each to serve as director until his successor is elected and
qualified.
The proxies will vote for the election of these nominees unless you withhold
authority to vote for any or all of them in the proxy. Each of the nominees has
indicated that he is willing to serve as a director. All of the nominees
presently are directors of the Fund.
The following table sets forth information concerning the nominees:
<TABLE>
<CAPTION>
Name, Address and Principal Occupation
Date of Birth Director Since During Past 5 Years
------------- -------------- -------------------
<S> <C> <C>
John W. Stewart* October 1997 Chairman, President and Secretary of the Fund
2190 Mason Road, Ste. 208 (Oct. 1997-Present); President, Capital
St. Louis, MO 63131 Mortgage Management, Inc. (July
(11/21/58) 1997-Present); Controller/System
Administrator, Carpenters' District Council
of Greater St. Louis (August 1988-July 1997)
Terry Nelson* October 1997 Executive Secretary and Treasurer,
1401 Hampton Avenue Carpenters' District Council of Greater St.
St. Louis, MO 63139 Louis (Aug. 1993-present); Managing Trustee,
(12/01/40) Carpenters' District Council of Greater St.
Louis pension fund, health and welfare fund
and vacation fund (Aug. 1993-present);
Business Representative, Carpenters' District
Council of Greater St. Louis (1981-Aug.
1993); Director, United Way (Aug.
1993-present).
Dan Mulligan February 2000 United Brotherhood of Carpenters and Joiners
215 East South 5th St. of America (Member 1975-Present); Director of
Red Bud, IL 62278 Organizing, Southern Illinois District
(12/03/49) Council ("SIDC") (1987-Present); 3rd Vice
President, 12th Congressional District
AFL-CIO (1995-Present); Trustee, SIDC Health
and Welfare Fund (1998-Present); Committee
Member, 3rd District United Brotherhood of
Carpenters (1998-Present); President, SIDC
Local 1997, (1985-present); Trustee, SIDC
Pension Fund (1993-1998); Business
Representative, SIDC Local 1997 (1994-1998).
James D. Slebiska July 1999 Director, Fifth District General Executive
4281 NE 38th Street Board of the United Brotherhood of Carpenters
Des Moines, IA 50317 (Oct. 1969-present).
(10/24/44)
</TABLE>
4
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<TABLE>
<CAPTION>
<S> <C> <C>
Joseph A. Montanaro October 1997 Executive Director, TWA Pilots Directed
3221 McKelvey Account Plan 401k (July 1993 - present) and
Suite 105 Chairman of Investment Committee (Oct. 1991 -
Bridgeton, MO 63044 July 1993); Co-Trustee, TWA Flight Engineers
(12/14/38) Trust Plan (1976 - Oct. 1991).
Retired (1993-present); Former Executive
Secretary and Treasurer, Carpenters' District
Leonard Terbrock October 1997 Council of Greater St. Louis (1986-1993) and
5 Mary Rose Assistant Executive Secretary and Treasurer
Hazelwood, MO 63042 (1981-1986); Director, Catholic Charities
(07/27/33) (1992-present); Director, St. Louis Regional
Commerce and Growth Association (1990-1993);
Director, Sold on St. Louis (1988-1993);
Committee Chairman, United Way (1970-1993).
Douglas J. McCarron October 1997 General President, United Brotherhood of
101 Constitution Avenue, N.W. Carpenters and Joiners of America (Nov.
Washington, D.C. 20001 1995-present) and General Second Vice
(9/23/50) President (1992-1995); President, Southern
California Conference of Carpenters
(1995-present) and Secretary Treasurer
(1987-1995); President and Chairman, 999
Office Builder Corporation; Chairman,
Carpenters Health and Welfare Trust for
Southern California; Chairman, 13 County
Carpenters Vacation, Savings and Holiday
plan; Co-Chairman, Carpenters' Trusts for
Southern California; President and Chairman,
Inland Empire Hotel Corporation, President,
RPS Resort Corporation; President and
Chairman, Santa Nella Hotel Corporation;
President, THMI Motel Corporation; Chairman,
Carpenters Southern California Administrative
Corporation; Co-Chairman, Carpenters Joint
Apprenticeship and Training Committee Fund
for Southern California; Chairman, Carpenters
Pension Trust for Southern California;
Chairman, Carpenters National Health and
Welfare Fund; Chairman, Carpenter Canadian
Local Unions and Councils Pension Fund and
the General Officers and Representatives
Pension Fund; Chairman, UBC Pension Fund,
General Office Employees Retirement Plan,
Retirees Health and Welfare Fund and
Apprenticeship and Training Fund; Director,
Works Partnership.
</TABLE>
* Messrs. Stewart and Nelson are deemed to be "interested persons" of the Fund
as defined by the Investment Company Act of 1940, as amended ("Investment
Company Act").
5
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RESPONSIBILITIES OF THE BOARD
The Board is responsible for the general oversight of the Fund's business and
ensuring that the Fund is managed in the best interests of its shareholders. The
Board periodically reviews the Fund's investment performance and the quality of
other services provided to the Fund by its services providers. At least
annually, the Board reviews the fees paid by the Fund for these services and the
overall level of the Fund's Operating Expenses
WHY ARE DIRECTORS BEING ELECTED?
Under the Investment Company Act, the Board may fill vacancies on the Board or
appoint new directors only if, immediately thereafter, at least two-thirds of
the directors have been elected by shareholders. Currently, only 5 of the Fund's
7 directors have been elected by shareholders. To provide the Board flexibility
to fill vacancies created as directors retire or resign, the Board believes it
is appropriate for shareholders to elect directors at this time.
BOARD COMMITTEES
The standing committees of the Fund are the Audit Committee, the Valuation
Committee and the Code of Ethics Review Committee. The members of the Audit
Committee are Messrs. Slebiska, Terbrock and Montanaro. The Audit Committee is
responsible for evaluating the performance of the Fund's independent
accountants, and reviewing financial statements contained in the Fund's reports
to shareholders with the Fund's accountants and management. The Valuation
Committee consists of Messrs. Stewart, Nelson and Terbrock. The Valuation
Committee is responsible for consulting with the Fund's subadviser and custodian
to determine the value of any assets for which reliable market quotations are
not available, or for which the pricing service does not provide a valuation, or
provides a valuation that, in the judgment of the subadviser, does not represent
fair market value. The members of the Code of Ethics Review Committee are
Messrs. Stewart, Terbrock and Montanaro. If the President of the Fund determines
that a reviewable transaction under the Fund's Code of Ethics may have occurred,
the Code of Ethics Review Committee is responsible for investigating any
suspected violation of the Code and imposing sanctions.
BOARD MEETINGS
The Board typically conducts in-person meetings four times each year to review
the operations of the Fund. In addition, the Board may hold special meetings by
telephone or in person to discuss specific matters that may require action prior
to the next regular board meeting. During the year ended December 31, 1999, the
Board held four meetings, the Audit Committee and Code of Ethics Committee each
met once and the Valuation Committee did not meet. All of the current directors
attended at least 75% of the Board and committee meetings, except Mr. Mulligan,
who was not elected to the Board until February 2000, and Mr. McCarron.
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DIRECTOR COMPENSATION
The Fund compensates each independent Director by an annual fee of $2,000.
Directors also are reimbursed for any expenses incurred in attending meetings.
For its fiscal year ended December 31, 1999, the Fund paid the following
compensation to its directors:
<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL
RETIREMENT ANNUAL COMPENSATION FROM
AGGREGATE BENEFITS BENEFITS FUND AND FUND
COMPENSATION FROM ACCRUED AS PART UPON COMPLEX PAID TO
NAME OF PERSON AND POSITION FUND OF FUND EXPENSES RETIREMENT DIRECTORS
- --------------------------- ---- ---------------- ---------- ---------
<S> <C> <C> <C> <C>
John W. Stewart, Chairman,
President and Secretary $ 0 $ 0 $ 0 $ 0
Terry Nelson, Director $ 0 $ 0 $ 0 $ 0
Dan Mulligan, Director $ 0 $ 0 $ 0 $ 0
James A. Slebiska $ 0 $ 0 $ 0 $ 0
Joseph A. Montanaro, Director $2,000 $ 0 $ 0 $2,000
Leonard Terbrock, Director $2,000 $ 0 $ 0 $2,000
Douglas J. McCarron, Director $ 0 $ 0 $ 0 $ 0
</TABLE>
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1.
7
<PAGE>
PROPOSAL 2: APPROVAL OF A NEW SUBADVISORY AGREEMENT
At a meeting held on April 24, 2000, the Board voted to recommend that you
approve a proposal to adopt a new subadvisory agreement between Capital Mortgage
Management, Inc. ("CMM"), the Fund's Manager, and Principal Capital Management,
LLC ("Principal"). The Board is asking you to vote on this new agreement because
CMM may enter into a new subadvisory agreement only with shareholder approval.
Principal would replace the Fund's current subadviser, Commerce Bank, N.A.
Commerce Bank has announced its intention to resign as the Fund's subadviser
effective June 1, 2000. This was an amicable resignation and Commerce Bank has
agreed that it will assist the Fund in every possible way to ensure an orderly
transition to a successor subadviser. There are no material changes to the new
subadvisory agreement and NO FEE INCREASE is proposed.
TERMS OF THE SUBADVISORY AGREEMENT
The Subadvisory Agreement with Commerce Bank was approved by the Board and the
Fund's initial shareholders on September 24, 1997. The terms of the proposed
Subadvisory Agreement with Principal are substantially the same. Under the terms
of each subadvisory agreement, the subadviser agrees to provide investment
advisory services to the Fund, with discretion to purchase and sell securities
on behalf of the Fund in accordance with its investment objective, policies and
restrictions. The subadviser is responsible for periodically determining the
interest rates and discount points for ProLoans originated by mortgage lenders
who participate in the ProLoan program, and for determining whether to grant
extensions of interest rate protection to ProLoan borrowers. The subadviser also
meets with the Fund's manager and the Board at least quarterly and provides them
on a regular basis with economic and investment analyses and reports and makes
available to them upon request any economic, statistical and investment services
normally available to institutional or other customers of the subadviser. The
subadviser is not liable for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the matters to which the
subadvisory agreement relate except a loss resulting from the willful
misfeasance, bad faith or negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under the
agreement.
The new Subadvisory Agreement will automatically terminate if assigned and may
be terminated without penalty at any time by the Manager, by a vote of a
majority of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on no less than thirty (30) days' nor more than sixty
(60) days' written notice to the subadviser, or by the subadviser upon one
hundred twenty (120) days' written notice to the Fund. The Subadvisory Agreement
will continue in effect initially for two years and annually thereafter,
provided that such continuance is specifically approved by a vote of the Board,
including the affirmative votes of a majority of the Directors who are not
parties to the Agreement or "interested persons" (as defined in the Investment
Company Act) of any such party, cast in person at a meeting called for the
purpose of considering such approval, or by the vote of shareholders.
NO EFFECT ON AGGREGATE FEES
Currently, the subadvisory fee paid to Commerce Bank is 0.25% of the first $50
million of the Fund's average daily net assets, 0.20% of the next $50 million,
and 0.165% of the average daily net assets in excess of $100 million. Commerce
Bank has agreed to waive its fees for the period ending December 31, 2000, to
8
<PAGE>
the extent such fees exceed 0.165%. For the fiscal year ended December 31, 1999,
the Fund paid Commerce Bank $228,234 in subadvisory fees (after Commerce waived
$55,610 in fees). The subadvisory fee is paid directly to the subadviser by the
Fund at the direction of the Manager. Under the proposed new Subadvisory
Agreement, Principal will receive an annual fee of 0.165% of the average daily
net assets of the Fund. THERE WILL BE NO INCREASE IN SUBADVISORY FEES OR
AGGREGATE FEES TO THE FUND AND ITS SHAREHOLDERS.
FACTORS THE BOARD CONSIDERED
The Board discussed the approval of the proposed Subadvisory Agreement at a
meeting held in person on April 24, 2000. In evaluating the new arrangement, the
Board reviewed materials furnished by Principal relevant to its decision. In
addition, the Board formed a Subadvisory Search Committee consisting of Messrs.
Stewart, Montanaro, Nelson and Slebiska to assist them. The Committee reviewed
with the Board materials including information regarding Principal and its
affiliates, personnel, operations, financial condition, investment philosophy,
method of managing portfolios and long-term experience and investment results in
the fixed income and mortgage markets. Upon careful review, the Board approved
Principal as the new subadviser for the Fund for these reasons:
1. Principal has substantial investment experience in both the fixed income
and mortgage areas, which combined expertise is difficult to find in an
investment subadviser;
2. Principal has displayed discipline and thoroughness in pursuit of stated
fixed income investment objectives;
3. Principal has consistently maintained above-average performance for its
other fixed income accounts;
4. Principal has demonstrated a high level of service and responsibility to
its clients;
5. Principal has agreed to contribute time and marketing assistance to attract
potential new investors to the Fund;
6. Principal is independent from the Fund, the Board of Directors, and the
Fund's manager, Capital Mortgage Management, Inc.;
7. Principal has agreed to act as subadviser to the Fund according to the
terms of the current subadvisory agreement and fee schedule, with no
increase in fees to the Fund; and
8. Principal is a company of the Principal Financial Group, a large,
well-established and financially stable company.
After reviewing these factors, the Board concluded that it is in the best
interests of the Fund and its shareholders to approve the new Subadvisory
Agreement with Principal. The Board reached its conclusion after careful discuss
and analysis. The Board believes that it has carefully and thoroughly examined
the pertinent issues and alternatives. In recommending that you approve the
proposed subadvisory agreement, the independent trustees have considered what
they believe to be in the shareholders' best interests.
ABOUT THE NEW SUBADVISER
Principal Capital Management, LLC, a Delaware limited liability company
affiliated with the Principal Financial Group, is located at 801 Grand Avenue,
Des Moines, Iowa 50392. Principal affiliates manage more than $106 billion in
assets worldwide, including approximately $30 billion in U.S. fixed income,
primarily for pension and institutional clients.
Principal Life Insurance Company, an Iowa stock life insurance company, is the
sole member of Principal Capital Management, LLC. Principal Life Insurance
Company is a wholly-owned subsidiary of Principal Financial Services, Inc., an
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<PAGE>
Iowa corporation, which is a wholly-owned subsidiary of Principal Financial
Group, Inc., an Iowa corporation. Principal Financial Group is wholly-owned by
Principal Mutual Holding Company, an Iowa mutual insurance holding company. The
address of these companies is 711 High Street, Des Moines, Iowa 50392.
INVESTMENT PHILOSOPHY
Three fundamental beliefs distinguish Principal's approach to fixed income asset
management. First, income dominates the total return of bond portfolios in the
long run. Second, market efficiency varies widely across fixed income market
sectors. Third, specialized fundamental research and a focus on long-term
economic trends are essential to superior results over time.
These beliefs lead us to focus our energies primarily on the less efficient
market sectors, with a particular emphasis on investment-grade corporate,
mortgage-backed and asset-backed securities. The investment process is research
driven, combining "top-down" and "bottom-up" portfolio construction techniques.
Economic research is an essential part of our process, but market timing and
aggressive duration bets are not. Value is added primarily through individual
security selection, sector allocation and broad portfolio diversification. Our
investment style reflects a deep-rooted commitment to research, and a focus on
long-term, risk-adjusted total returns. Our experienced staff of credit analysts
and industry specialists provides in-depth coverage of over 500 corporate debt
issuers. We also draw from sophisticated valuation tools for mortgage-backed and
asset-backed securities. The process also incorporates the analysis of economic
trends and credit market conditions in over 50 countries worldwide.
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS
Dennis P. Francis serves as Chief Executive Officer of Principal. The Directors
of Principal are as follows:
NAME TITLE
- ---- -----
David J. Drury Chairman, Principal Mutual Holding Company
J. Barry Griswell President and Chief Executive Officer,
Principal Mutual Holding Company
Dennis P. Francis Chief Executive Officer, Principal Capital
Management, LLC
Richard W. Hibbs Executive Vice President, Principal Capital
Management, LLC
Craig R. Barnes Executive Vice President, Principal Capital
Management, LLC
David Fallow Executive Vice President, Principal Capital
Management, LLC
Gregory C. Hauser Executive Vice President, Principal Capital
Management, LLC
Richard W. Waugh Vice President, Principal Capital Management, LLC
Timothy M. Howald Chief Operating Officer, Principal Capital
Management, LLC
William C. Scales Chief Technology Officer, Principal Capital
Management, LLC
10
<PAGE>
PORTFOLIO MANAGERS
Martin J. Schafer and William C. Armstrong of Principal will serve as portfolio
managers of the Fund.
Mr. Schafer has 23 years experience with an emphasis on mortgage-backed
securities. His experience includes over 16 years as a portfolio manager of
mutual funds and institutional portfolios, as well as direct experience in
residential mortgage origination and secondary marketing. Mr. Schafer joined
Principal in 1977.
Mr. Armstrong has 15 years experience in the securities industry with an
emphasis on corporate debt and asset-backed securities. He joined the Principal
as a securities analyst in 1992, and has managed institutional portfolios since
1997. Prior to joining Principal, Mr. Armstrong spent seven years as a bank
examiner with the Federal Deposit Insurance Corporation.
COMPARISON OF SUBADVISORY FEES
Principal serves as investment subadviser to several fixed income mutual funds
in the Principal family of proprietary mutual funds and insurance separate
accounts. The size and management fees for each Principal fixed income portfolio
are set forth below.
<TABLE>
<CAPTION>
FUND SIZE AS OF
3/31/00 FEES BASED ON NET ASSET VALUE OF FUND
FUND NAME (IN MILLIONS) (IN MILLIONS)
- --------- ------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc.(1) $176.74 .50% .45% .40% .35% .30%
Principal Government Securities
Income Fund, Inc.(2) $261.46 .50% .45% .40% .35% .30%
Principal High Yield Fund, Inc.(1) $ 35.09 .60% .55% .50% .45% .40%
Principal Limited Term Bond Fund, Inc.(2,4) $ 30.00 .50% .45% .40% .35% .30%
Principal Tax-Exempt Bond Fund, Inc.(1) $184.04 .50% .45% .40% .35% .30%
Principal Cash Management Fund, Inc.(1) $377.39 .50% .45% .40% .35% .30%
Principal Special Markets Fund, Inc.
- - Mortgage-Backed Securities Portfolio(3) $ 5.09 Entire portfolio .45%
Principal Variable Contracts Fund, Inc.
- - Bond Account(1) $113.55 .50% .45% .40% .35% .30%
- - Government Securities Account(2) $121.68 .50% .45% .40% .35% .30%
- - Money Market Account(1) $110.60 .50% .45% .40% .35% .30%
- - High Yield Account(1) $ 13.14 .60% .55% .50% .45% .40%
</TABLE>
- ----------
(1) Fees for these Funds indicate fees paid by each portfolio to the Fund's
manager, Principal Management Corporation ("PMC"). PMC in turn pays
Principal for the use of its investment personnel.
(2) Fees for these Funds indicate fees paid by each portfolio to the Fund's
manager, PMC, which in turn pays Invista Capital Management, LLC, an
affiliate of Principal, for its subadvisory services.
11
<PAGE>
(3) Fees for this Fund indicate fees paid by this portfolio to the Fund's
manager, PMC, which passes this entire fee through to Invista Capital
Management, LLC, an affiliate of Principal.
(4) PMC voluntarily waived a portion of its fee for the Limited Term Bond Fund
from the date operations commenced and intends to continue such waiver and,
if necessary, pay expenses normally payable by the Limited Term Bond Fund
through the period ending October 31, 2000 in an amount that will maintain
a total level of operating expenses which, as a percent of average net
assets attributable to a class on an annualized basis, will not exceed
1.00% for the Class A shares, 1.35% for the Class B shares, 1.35% for the
Class C shares and 1.60% for the Class R shares.
EFFECTIVE DATE
If approved, the new subadvisory agreement will become effective on June 1, 2000
or as soon thereafter as possible.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2.
12
<PAGE>
PROPOSAL 3: RATIFICATION OF DELOITTE & TOUCHE LLP
The Board has selected Deloitte & Touche LLP as the independent accountants for
the Fund for its fiscal year ending December 31, 2000. As the Fund's independent
accountants, Deloitte & Touche will examine and verify the accounts and
securities of the Fund and report on them to the Board and to the Fund's
shareholders. The Board's selection will be submitted for your ratification at
the Meeting.
Deloitte & Touche was selected primarily on the basis of its expertise as
auditors of investment companies, its independence from the Fund and its
affiliates, the quality of its audit services, and the competitiveness of the
fees charged for these services.
The Board expects that a representative of Deloitte & Touche will be present at
the meeting. The representative will have an opportunity to make a statement
should he desire to do so and will be available to respond to shareholders'
questions.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 3.
GENERAL INFORMATION
EXECUTIVE OFFICERS OF THE FUND
John W. Stewart has served as Chairman, President and Secretary of the Fund
since October 1997. Stephen W. Talbott, CPA, has served as Treasurer of the Fund
since October 1999. Mr. Talbott also has served as Treasurer of Capital Mortgage
Management, Inc. from June 1998 to the present. Prior to that, Mr. Talbott
served as Senior Accountant for Tyson Foods, Inc. from July 1997 to May 1998 and
as Staff Accountant for Hudson Foods, Inc. from September 1994 to June 1997.
PRINCIPAL SECURITY HOLDERS
As of the Record Date, the pension fund of the Carpenters' District Council of
Greater St. Louis, 1401 Hampton Avenue, St. Louis, MO 63139, owned ______% of
the Fund's shares and the Carpenters Pension Fund of Illinois, P.O. Box 791, 28
N. First Street, Geneva IL 60134, owned ___% of the Fund's shares.
MANAGER, ADMINISTRATOR AND DISTRIBUTOR OF THE FUND
Capital Mortgage Management, Inc., 2109 S. Mason Road, Suite 208, St. Louis, MO
63131 has served as Manager of the Fund since its inception in October 1997. The
Manager also serves as distribution coordinator for the Fund.
Investment Company Administration LLC, 2020 E. Financial Way, Suite 100,
Glendora CA 91741, provides administration services to the Fund.
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261-E, Phoenix, AZ
85018, serves as principal underwriter of the Fund.
13
<PAGE>
PROXY EXPENSES
The Fund has not hired a proxy solicitor. The Fund will bear the costs of this
proxy statement and proxy solicitation directly.
SHAREHOLDER PROPOSALS
As a general matter, the Fund does not hold annual meetings. If you would like
to submit a proposal for consideration at a shareholders' meeting, you should
send the proposal to the Fund at the address above. To be considered for
presentation at a meeting, the Fund must receive proposals a reasonable time
before proxy materials are prepared relating to that meeting. Your proposal also
must comply with applicable law.
OTHER MATTERS
The Board does not know of any other matters to be presented at the meeting
other than those set forth in this proxy statement. If any other business should
come before the Meeting, the persons named in the accompanying proxy will vote
thereon in their best judgment.
<PAGE>
FORM OF PROXY
[Shareholder Name]
[Title (if applicable)]
[Address]
[Address]
[Fund Name]
[Shares Held]
BUILDERS FIXED INCOME FUND, INC.
SPECIAL MEETING OF SHAREHOLDERS
May __, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
BUILDERS FIXED INCOME FUND, INC.
The undersigned hereby appoints John W. Stewart and Stephen W. Talbott, and
each of them, as proxies of the undersigned, each with the power to appoint his
substitute, for the Special Meeting of Shareholders of the Builders Fixed Income
Fund (the "Fund"), a series of Builders Fixed Income Fund, Inc., to be held on
May__, 2000, at the Carpenters' District Council of Greater St. Louis, 1401
Hampton Avenue, St. Louis, MO 63139, and at any and all adjournments thereof
(the "Meeting"), to vote, as designated below, all shares of the Fund, held by
the undersigned at the close of business on May__, 2000. Capitalized terms used
without definition have the meanings given to them in the accompanying Proxy
Statement.
A signed proxy will be voted in favor of the Proposals listed below unless
you have specified otherwise. Please sign, date and return this proxy promptly.
You may vote only if you held shares in the Fund at the close of business on May
__, 2000. Your signature authorizes the proxies to vote in their discretion on
such other business as may properly come before the Meeting including, without
limitation, all matters incident to the conduct of the Meeting.
PLEASE VOTE BY FILLING IN THE BOXES BELOW.
PROPOSAL 1: To elect 7 directors, each of whom will serve until his
successors are elected or qualified.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE>
PROPOSAL 2: To approve a New Subadvisory Agreement with Principal Capital
Management, a Company of the Principal Financial Group.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL 3: To ratify the selection of Deloitte & Touche LLP as independent
accountants for the Fund for the fiscal year ending December 31, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated:_________________________________________________________________, 2000
[Shareholder Name]
Dated:_________________________________________________________________, 2000
[Signature(s) (if held jointly)]
Please sign exactly as the name or names appear on your shareholder
account statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give your full title. If shares
are held jointly, each shareholder should sign.
