BMC FUND, INC.
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD MARCH 19, 1999
NOTICE IS HEREBY GIVEN THAT a special
meeting of shareholders of BMC Fund, Inc. (the "Cor-
poration") will be held on Friday, March 19, 1999, at
9:30 a.m. at the offices of the Corporation, 800
Golfview Park, Lenoir, North Carolina 28645, for the
following purposes:
1. To approve an amendment to the Corporation's
investment objectives to permit investments in
obligations rated BBB or better.
2. To approve an amendment to the Corporation's
investment objectives to permit current income
investments in preferred stocks.
3. To approve an Investment Advisory Agreement
between the Corporation and Northern Trust
Bank of Florida dated as of April 1, 1999.
4 To approve an Investment Advisory Agreement
between the Corporation and Wellington
Management Company, LLP dated as of April
1, 1999.
5. To transact such other business as may properly
come before the meeting.
Only shareholders of record as of the close of business
on February 5, 1999 are entitled to notice of, and to
vote at, the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED FORM OF PROXY
AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED ENVELOPE. IF YOU ATTEND THE
MEETING, YOU MAY WITHDRAW YOUR
PROXY AT THAT TIME AND VOTE IN
PERSON.
March 3, 1999 By Order of the Board of Directors
Paul H. Broyhill
Chairman of the Board
<PAGE>
BMC FUND, INC.
Golfview Park
Lenoir, North Carolina 28645
(Tel.: (828) 758-6102)
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 19, 1999
This proxy statement is furnished in connection with
the solicitation by BMC Fund, Inc. (the "Corporation")
of proxies for use at the special meeting of shareholders
to be held at the offices of the Corporation, 800
Golfview Park, Lenoir, North Carolina 28645 on
Friday, March 19, 1999 at 9:30 a.m., and at any and
all adjournments thereof, for the purpose of considering
and acting upon the matters specified in the
accompanying notice of the meeting and detailed
below. The Corporation is soliciting such proxies by
mail on behalf of its Board of Directors and is bearing
the expenses of the solicitation. This proxy statement
and the enclosed proxy form are first being sent to
shareholders on or about March 3, 1999.
The Board of Directors has fixed the close of business
on February 5, 1999 as the record date for the
determination of shareholders entitled to notice of and
to vote at the meeting. On the record date, 4,933,281
shares of Common Stock of the Corporation were
issued and outstanding, each share being entitled to one
vote. Information concerning beneficial ownership of
Common Stock by principal shareholders and by the
management of the Corporation is set forth below. See
"Principal Shareholders."
Shares represented by proxies will be voted by the
proxy agents named therein unless such proxies are
revoked. The proxy agents will vote the proxies that
they hold in accordance with the choices specified by
the person giving the proxy. If the enclosed proxy
reflects no specification but is properly signed, the
proxy agents will vote the shares represented thereby
for the approval of the proposed amendment to the
Corporation's investment objectives and for each of the
Investment Advisory Agreements which are the subject
of the proposals described below.
Any shareholder who submits the accompanying proxy
has the right to revoke it by notifying the Secretary of
the Corporation in writing at any time prior to the
voting of the proxy. A proxy is suspended if the
person giving the proxy attends the meeting and elects
to vote in person.
A majority of votes entitled to be cast on a particular
matter, represented in person or by proxy, constitutes
a quorum for purposes of matters to be considered at
the annual meeting. Once a share is represented for
any purpose at a meeting, it is considered present for
quorum purposes for the remainder of the meeting and
any adjournment thereof (unless a new record date is
set for the adjourned meeting). Shares which are
withheld as to voting with respect to one or more
Investment Advisory Agreements are counted in
determining the existence of a quorum.
The Board of Directors is not aware of any business to
come before the meeting other than the matters
described in the accompanying notice of the meeting.
If any other matters of business are properly presented
at the meeting, however, the proxy agents will vote
upon such matters in accordance with their best
judgment.
ADMINISTRATION OF THE CORPORATION
Administration of the Corporation is primarily the
responsibility of the Corporation's Chairman and
Chief Executive Officer, Paul H. Broyhill, and its
President, E. D. Beach. The Corporation's securities
portfolio, which was valued at approximately $122.1
million at September 30, 1998, is managed primarily
by such officers, under the supervision of the Board of
Directors. The Corporation currently has investment
advisory agreements with two investment advisers, IBJ
Whitehall Bank & Trust Company ("Whitehall"),
formerly IBJ Schroder Bank & Trust Company, and W.
H. Reaves & Co., Inc. ("Reaves"). At September 30,
1998, Whitehall and Reaves were responsible for
managing approximately $16.2 million and $7.5 million
of the Corporation's assets, respectively. Whitehall is
principally responsible for investing the Corporation's
assets in equity securities of domestic issuers. Reaves
is principally responsible for investing the Corporation's
assets in equity securities of public utilities and energy
companies. The shareholders of the Corporation
approved the agreements with Whitehall and Reaves in
1986 and 1990, respectively, and the Board of
Directors, including a majority of the directors who are
not interested persons of the Corporation, has approved
such agreements annually since such shareholder
approval was obtained. Whitehall is located at One
State Street, New York, New York 10004. Reaves is
located at 10 Exchange Place, Jersey City, New Jersey
07032.
The Custodian of the Corporation's portfolio securities
is First Union National Bank, Charlotte, North Carolina,
pursuant to an Amended and Restated Custodian
Agreement dated as of December 31, 1986 (the
"Custodian Agreement").
PROPOSALS RELATING TO AMENDMENTS
TO INVESTMENT OBJECTIVES
Subject to approval by the holders of the majority the
outstanding voting securities of the Corporation, the
Board of Directors has adopted two amendments to the
Corporation's investment objectives. The Corporation's
investment objectives and policies were last amended
by the shareholders of the Corporation at the annual
meeting of shareholders on July 30, 1994.
Background
The Corporation's primary investment objective is to
seek as high a level of current income which is
consistent with the preservation of capital. In
accordance with its current income objective, the
Corporation may invest its assets in, among other
securities, debt obligations that are exempt from federal
income tax under Section 103(a) of the Internal
Revenue Code ("Municipal Bonds") and in obligations
that generate taxable interest, such as corporate bonds
and debentures, Treasury Bills and other securities
issued by the federal government or its agencies,
securities of deposit issued by domestic banks and other
obligations that produce taxable interest ("Taxable
Obligations"). If the shareholders approve the proposed
amendment relating to investments in preferred stocks
as described below, the term "Taxable Obligations"
would also include preferred stocks. Prior to 1991, the
Corporation's investment objectives required that at
least 50% of the value of the Corporation's assets be
invested in Municipal Bonds. In 1991, the shareholders
approved an amendment to the Corporation's investment
objectives which deleted this requirement. This
amendment empowered the Board of Directors to
liquidate the Corporation's portfolio of Municipal
Bonds should the Board determine, in its discretion, that
such divestiture would be necessary or appropriate.
At a regularly scheduled meeting of the Board of
Directors of the Corporation held in July 1998, the
Board approved a change in the Corporation's
investment strategy to divest the Corporation of its
investments in Municipal Bonds after April 1, 1999.
The Board authorized management of the Corporation
to reinvest the proceeds of the Municipal Bonds in
Taxable Obligations in accordance with the
Corporation's current income investment objective, and
in other securities, including equity securities, in
accordance with the Corporation's secondary
investment objective of providing long term capital
appreciation. Under the Corporation's investment
objectives, the Board would be authorized to resume its
strategy of investing in Municipal Bonds at a later date.
Proposed Amendments
Following the Board's July 1998 action, the Board
determined that it would be in the best interests of the
Corporation and its shareholders to give management
and the Corporation's investment advisers greater
flexibility in the types of Taxable Obligations the
Corporation may purchase. Each of the proposed
amendments to the Corporation's investment objectives
described below would achieve this goal. A copy of
the Corporation's investment objectives and policies as
currently in effect and as proposed to be amended is
attached to this proxy statement as Exhibit A.
Amendment to Permit Investments in Obligations Rated
BBB or Better. Currently, the Corporation's
investment objectives permit the Corporation to invest
assets, without restriction, in obligations rated no lower
than A by Moody's and Standard and Poor's. The
Board of Directors has approved an amendment to the
Corporation's investment objectives, subject to
approval by the Corporation shareholders, that would
permit the Corporation to invest assets of the
Corporation, without restriction, in obligations rated no
lower than BBB by Moody's or Standard & Poor's.
The following paragraph sets forth the proposed
amendment:
The Corporation's assets invested
pursuant to its current income objective
will be invested in obligations rated no
lower than A BBB by Moody's or
Standard & Poor's, except that (i) the
Corporation may purchase Temporary
Investments having a Moody's rating of
no lower than MIG-3 and (ii) the
Corporation may invest up to 17.5% of
its assets in more speculative and
higher yielding Municipal Bonds that
are rated lower than A BBB (but no
lower than B) or are unrated. If
unrated, Municipal Bonds or
Temporary Investments purchased by
the Corporation must be issued by a
state or municipality with a rating of A
BBB or better and must have
characteristics that, in the judgment of
the Board of Directors, are consistent
with obligations having ratings that
meet the minimum acceptable ratings
set forth herein.
The Board of Directors believes the flexibility provided
by the foregoing amendment is appropriate in view of
the change in investment strategy, described above,
which will result in the Corporation's replacing its
Municipal Bond portfolio with investments in Taxable
Obligations pursuant to the Corporation's primary
investment objective and with investments in other
securities, including equity securities, pursuant to the
Corporation's secondary investment objective. In
approving the proposed amendment, the Board of
Directors took into account the recommendations of
new investment advisers the Corporation proposes to
engage (see "Proposal Relating to Investment Advisory
Agreements" below). The Board also acknowledged
that the Corporation's investment objectives, as
proposed to be amended, would continue to limit
investments in debt obligations to investment grade
securities. The Corporation also believes the proposed
amendment should enhance the yield the Corporation
will realize from its investments in Taxable
Obligations. In summary, the Board believes the
proposed amendment will increase the universe of
investment grade securities the Corporation may
acquire without a material adverse effect on the quality
of the Corporation's portfolio.
In order for the proposed amendment to become
effective, it must be approved by the holders of a
majority of the shares of the Corporation's common
stock entitled to vote. The Board of Directors
recommends a vote FOR the approval of the proposed
amendment to the Corporation's investment objective.
Amendment to Permit Current Income Investments in
Preferred Stocks. The Corporation's investment
objectives currently provide that the Corporation may
invest its assets in, among other securities, preferred
stocks in order to achieve its secondary investment
objective, which is to provide long term capital
appreciation. The Board of Directors of the
Corporation believes that it would be in the
Corporation's best interest for the Corporation to be
permitted to invest in preferred stocks in order to
achieve the Corporation's primary investment
objective, which is to seek as high a level of current
income as is consistent with the preservation of capital.
The Board believes this amendment will enhance the
Corporation's ability to take advantage of the change in
the Corporation's investment strategy, discussed above,
to divest the Corporation of its investments in
Municipal Bonds after April 1, 1999 and to reinvest the
proceeds thereof in Taxable Obligations.
In order for the proposed amendment to become
effective, it must be approved by the holders of a
majority of the shares of the Corporation's common
stock entitled to vote. The Board of Directors
recommends a vote FOR the approval of the proposed
amendment to the Corporation's investment objective.
PROPOSAL RELATING TO INVESTMENT
ADVISORY AGREEMENTS
Subject to approval of the holders of the majority of the
outstanding voting securities of the Corporation, the
Corporation proposes to enter into an Investment
Advisory Agreement, dated as of April 1, 1999, with
each of Northern Trust Bank of Florida, N.A.
("Northern Trust") and Wellington Management
Company, LLP ("Wellington Management"). If the
shareholders approve the new Investment Advisory
Agreements, the Corporation will use the services of
Northern Trust and Wellington Management in addition
to (and not in lieu of) the services of Whitehall and
Reaves. The description of the Investment Advisory
Agreements set forth below is qualified in its entirety by
the terms of each agreement, a copy of which is
attached hereto as Exhibit B and Exhibit C,
respectively. (Northern Trust and Wellington
Management are hereafter referred to individually as a
"New Adviser" and collectively as the "New Advisers"
and, together with Whitehall and Reaves, as the
"Advisers.")
First Union National Bank, the Corporation's Custodian,
will maintain custody of all assets managed by Northern
Trust and Wellington Management under the terms of
the Corporation's existing Custodian Agreement with
First Union National Bank.
Interested Person Status of Certain of the
Corporation's Directors
Dolph W. von Arx, who is a member of the Board of
Directors of the Corporation and of Northern Trust of
Florida Corporation, which is the parent corporation of
Northern Trust, owns 2002 shares of common stock of
Northern Trust Corporation, which is the parent
corporation of Northern Trust of Florida Corporation.
By virtue of owning such shares, Mr. von Arx will
become an "interested person" of the Corporation as
defined in the Investment Company Act of 1940 upon
the effectiveness of the Investment Advisory Agreement
between the Corporation and Northern Trust. Currently,
five members of the eleven-member Board of Directors
of the Corporation are interested persons. Following the
effectiveness of the Investment Advisory Agreement
with Northern Trust, six (a majority) of the members of
the Board will be interested persons.
Terms of the Agreements
The Agreements authorize the New Advisers to manage
separate portions of the Corporation's investment
portfolio, with each New Adviser having investment
discretion with respect to the portion under its
management. The Board of Directors has authorized
Paul H. Broyhill, the Chairman of the Corporation, or
E.D. Beach, the President of the Corporation, to
allocate portions of the portfolio over which each New
Adviser shall be given investment discretion. The
Corporation from time to time may increase or
decrease the amount of assets under a New Adviser's
management, depending on such factors as the
investment performance of the New Adviser in relation
to the fees charged by it, management's perception of
the benefits of diversification of external management
of the Corporation's investments and administrative
considerations. The Corporation's investment
portfolio as of September 30, 1998 was valued at
approximately $122.1 million, of which the
Corporation's two existing external investment
advisers, Whitehall and Reaves, managed $16.2 million
and $7.5 million, respectively, with the balance of
approximately $98.4 million being managed internally
and available to be managed by Northern Trust and
Wellington Management. The Corporation currently
expects that management will maintain investment
discretion with respect to approximately $63.4 million
of the Corporation's investment portfolio (based on the
Corporation's September 30, 1998 valuation).
The Agreements authorize and direct the New Advisers
to provide a continuous investment program consistent
with the Corporation's investment objectives and
policies and instructions of the Board of Directors.
The Corporation's investments in the aggregate must
comply at all times with the Corporation's objectives
and policies, regardless of whether such investments
are under the direct management of the Board of
Directors or of external investment advisers. The
Corporation may provide each New Adviser with
written instructions to enable the New Adviser to
comply with the Corporation's investment objectives
and policies. Such instructions would reflect
limitations on the New Advisers' investment activities
designed to prevent inadvertent violations of the
Corporation's policies that might otherwise result from
more than one adviser managing separate portions of
the Corporation's assets. Except for compliance with
these instructions, the New Advisers will not be
responsible for compliance with any requirement that
the overall mix of the Corporation's assets meets
specified percentages.
The Agreements are for terms of two years and may be
renewed from year to year by mutual consent, provided
that such renewal shall be specifically approved at least
annually by the Board of Directors of the Corporation
or by a vote of the holders of the majority of the
outstanding shares of the Corporation. In either event,
each of the Agreements must be approved by a majority
of those Directors who are not interested persons of the
Corporation. Each of the Agreements may be
terminated at any time, without payment of any
penalty, by the Board of Directors of the Corporation
or by a vote of the holders of a majority of the
Corporation's shares on 60 days' written notice to the
New Adviser, or by the New Adviser on 90 days'
written notice to the Corporation. The Agreements are
not assignable by either party. In the event of
assignment by the New Adviser, the respective
Agreement automatically terminates.
Fees
The Investment Advisory Agreements provide for the
payment of quarterly fees to the New Advisers. The
quarterly fee payable to the New Advisers will be
payable in advance and will be the product of the
closing value of the assets under management on the
last day of the preceding fiscal quarter multiplied by the
applicable percentage set forth below, subject to
adjustment in the event the Corporation contributes
assets to or withdraws assets from managed assets
during the quarter and in the event the Investment
Advisory Agreement is terminated prior to the end of
a quarter.
Quarterly Fee
Adviser (Percent of Closing Value)
Northern Trust 0.0875% (1)
Wellington Management 0.075%
_____________________
(1) With respect to Northern Trust, the applicable
percentage for assets in excess of $15 million
will be 0.075% and for assets in excess of $20
million will be 0.0625%. Northern Trust's
investment activities on behalf of the
Corporation will include both fixed income
investments and equity investments.
The foregoing fees were negotiated by the Corporation
with the New Advisers, each independently of the
other, and reflect the customary fee structures of such
New Adviser for the type of investment program
requested by the Corporation.
The Corporation currently proposes to retain
investment authority over approximately $63.4 million
of its investment portfolio (based on the Corporation's
September 30, 1998 valuation) and grant investment
authority to the New Advisers in the following
amounts:
Northern Trust $20 million
Wellington Management $15 million
The Corporation may elect, at the outset of the
Investment Advisory Agreements or thereafter, to grant
investment authority to the New Advisers in amounts
different from those set forth above, depending on such
factors as management's perception of the benefits of
diversification of external management of the
Corporation's investments and the investment
performance of the New Advisers in relation to their
advisory fees.
Since the assets under the New Advisers' management
previously were internally managed by the
Corporation's officers, the Investment Advisory
Agreements with the New Advisers will result in an
increase in the management fees currently being paid
by the Corporation. To illustrate this increase in fees,
the following table shows in the left hand column the
actual fees (as a percentage of net assets) paid by the
Corporation for the year ended March 31, 1998 and in
the right hand column the fees the Corporation would
have paid in such fiscal year had the Investment
Advisory Agreements with the New Advisors been in
effect (assuming the above allocations):
Percentage of Net Assets
Actual (1) Pro Forma (2)
Annual Expenses:
Management Fees 0.07%
Northern Trust Agreement 0.03%
Wellington Management
Agreement 0.03%
Total Management Fees 0.13%
Other Expenses (3) 0.20%
Northern Trust Agreement -%
Wellington Management
Agreement -%
Total Other Expenses 0.20%
Total Annual Expenses 0.27%
Northern Trust Agreement 0.03%
Wellington Management
Agreement 0.03%
Total Annual Expenses 0.33%
________
(1) Based on estimated amounts for the current
fiscal year ending March 31, 1999.
(2) After giving effect to the payment of advisory
fees to the New Advisers assuming the
Investment Advisory Agreements had been in
effect beginning April 1, 1998 and the
allocation of assets between the New Advisers
set forth above.
(3) Includes salaries, professional fees and other
expenses.
The table set forth above and the following example are
intended to assist the Corporation's shareholders in
understanding the indirect effect of the fees payable
under each of the Investment Advisory Agreements on
the shareholders' investment in the Corporation. To
facilitate the shareholders' comparison of this fee
structure with fee structures of other funds, the
Securities and Exchange Commission requires the
Corporation to assume a 5% annual return. The
Corporation has interpreted "5% annual return" to
mean growth in assets under management at a
compounded annual rate of 5%. The information set
forth above and below should not be considered to be
a representation of past or future expenses, and actual
expenses may be greater or less than those shown.
Example
You would pay the following expenses on a
$1,000 investment, assuming a 5% annual return:
1 Year 3 Years 5 Years 10 Years
Northern Trust
Agreement $3.38 $10.62 $18.55 $41.85
Wellington
Management
Agreement $3.00 $ 9.43 $16.48 $37.21
Information Concerning Northern Trust
Northern Trust is a national banking association with its
principal offices located at 700 Brickell Avenue,
Miami, Florida 33131. It is a wholly owned subsidiary
of Northern Trust of Florida Corporation, 700 Brickell
Avenue, Miami, Florida, which in turn is a wholly
owned subsidiary of Northern Trust Corporation, 50
South LaSalle Street, Chicago, Illinois 60675.
Exhibit D is a list of Northern Trust's principal
executive officers and directors all of whom may be
reached at the principal offices of Northern Trust,
except for Donna R. Spivey, who may be reached at
the principal offices of Northern Trust Corporation, 50
South LaSalle Street, Chicago, Illinois 60675.
Northern Trust does not serve as adviser to any other
registered investment company with similar investment
objectives.
None of the officers or directors of the Corporation and
none of the directors or executive officers of Northern
Trust has purchased or sold any securities of Northern
Trust in excess of one percent of the outstanding shares
since the beginning of the Corporation's last fiscal
year. None of the officers or directors of the
Corporation owns any securities of or has any other
direct or indirect interest in Northern Trust, except for
Mr. von Arx as described above under "- - Interested
Person Status of Certain of the Corporation's
Directors. "
Information Concerning Wellington Management
Wellington Management is a Massachusetts limited
liability partnership with principal offices at 75 State
Street, Boston, Massachusetts 02109. Wellington
Management is a professional investment counseling
firm which provides investment services to
investment companies, employee benefit plans,
endowments, foundations and other institutions and
individuals. Wellington Management's predecessor
organizations have provided investment advisory
services for over 60 years. As of January 31, 1999,
Wellington Management had investment management
authority with respect to approximately $24 billion
in assets.
Wellington Management is managed
by its active partners. The managing partners of
Wellington Management as of January 31, 1999
were Robert W. Doran, Duncan M. McFarland and
John R. Ryan. Exhibit E is a listing of the general
partners and Senior Vice Presidents of Wellington
Management as of January 31, 1999, all of whom
may be reached at the principal offices of the firm.
Wellington Management does not serve as adviser to
any other registered investment company with similar
investment objectives.
Brokerage Commissions
The Corporation paid brokerage commissions in the
aggregate of $85,847 during the fiscal year ended
March 31, 1998. Except with respect to brokerage
commissions paid to Reaves, which is an affiliated
person of the Corporation by virtue of its serving as an
investment adviser to the Corporation, no brokerage
commissions were paid to affiliated persons of the
Corporation or to affiliated persons of such affiliated
persons, or to any broker an affiliated person of which
is an affiliated person of the Corporation or of
Whitehall or Reaves. For the fiscal year ended March
31, 1998, the Corporation paid Reaves brokerage
commissions in the aggregate amount of $34,802. For
the fiscal year ended March 31, 1998, such amount
represented 40.5% of the aggregate brokerage
commissions paid by the Corporation to all brokers.
With the exception of those Advisers whose investment
activities are or will be limited to principal transactions
involving fixed income securities, the Advisers'
commissions are limited to the lesser of (i) 50% of the
regular New York Stock Exchange rates, (ii) the
maximum amount permissible pursuant to Section 17(e)
of the Investment Company Act of 1940 or (iii) $.07
per share. In addition, the amounts paid to an Adviser
in commissions and fees (as described above) shall not
exceed 2% of the average daily market value of the
Corporation's assets under such Adviser's management
for the preceding fiscal year.
Recommendation of the Board of Directors
The Board of Directors approved each of the proposed
Investment Advisory Agreements at a meeting of the
Board of Directors held on Wednesday, February 17,
1999 in Charlotte, North Carolina. The principal
factor in the Board's approval of the Investment
Advisory Agreements is the Board's judgment that the
engagement of additional advisers with strong
reputations in fixed income investments and equity
investments would better enable the Corporation to
execute the change in investment strategy described
above (see "Proposals Relating to Amendments to
Investment Objectives"). This change in investment
strategy will involve replacing the Corporation's
Municipal Bond portfolio with investments in Taxable
Obligations pursuant to its current income objective and
with investments in equity securities pursuant to its
capital appreciation objective.
In this connection, the Board considered the reputation
of each of Northern Trust and Wellington
Management, the amount of assets under their
respective management, the financial strength of each
institution and similar factors. The Corporation
believes its two existing investment advisers, Whitehall
and Reaves, are not positioned to assist the Corporation
in implementing the change in investment strategy
described above. Reaves' investment responsibilities
on behalf of the Corporation are confined primarily to
equity investments in energy related companies.
Further, the Corporation believes the amount of funds
currently under Whitehall's management ($16.2 million
at September 30, 1998) is at a desirable level and does
not wish at this time to substantially increase such
amount. Accordingly, the Corporation believes that the
assistance of new investment advisers to supplement the
services currently being provided by Whitehall and
Reaves would be appropriate.
In order for each of the proposed Investment Advisory
Agreements to become effective, it must be approved
by the holders of a majority of the shares of the
Corporation's common stock entitled to vote. The
Board of Directors recommends a vote FOR the
approval of the Corporation's proposed Investment
Advisory Agreement with each of Northern Trust and
Wellington Management.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table reflects information concerning all
directors and executive officers individually and as a
group, and those persons known to the Corporation to
own beneficially 5% or more of the Corporation's
Common Stock as of February 5, 1999:
Amount and Nature of Beneficial
Ownership of Common Stock
Percent of
Voting and Investment Outstanding
Name Sole Shared Common Stock
Directors and Executive Officers
E. D.
Beach 300 87,043 (1) 1.8%
James T.
Broyhill 785,788 96,212 17.9%
Paul H.
Broyhill 1,301,420 (2) 206,208 (1) 30.6%
William
E. Cooper 3,240 0 (3)
Lawrence
Z.Crockett 200 0 (3)
Willard A.
Gortner 166,469 691,653 17.4%
Allene B.
Heilman 470,298 29,777 10.1%
Harry
Heltzer 200 6,060 (3)
Gene A.
Hoots 25 0 (3)
Dolph W.
von Arx 25 -- (3)
Michael
Landry 25 -- (3)
All
directors
and
executive
officers as
a group
(11
persons) 2,727,990 1,030,980 76.2%
Five Percent
Shareholders
Satie E.
Gortner
PH-1 4601
Gulf Shore
Blvd. North
Naples, FL
33940-2215 661,877 122,493 15.9%
Broyhill
Investments,
Inc.
Golfview
Park
Lenoir, NC
28645 316,871 0 6.4%
__________________________
(1) Includes 85,973 shares owned of record by
Broyhill Family Foundation, Inc., a non-profit
corporation. By resolution of the Foundation
trustees, E. D. Beach and Paul H. Broyhill
control the voting and disposition of shares of the
Corporation owned by the Foundation.
(2) Includes 316,871 shares owned of record by
Broyhill Investments, Inc., the voting stock of
which is principally owned by Paul H. Broyhill
and his immediate family.
(3) Total shares represent less than 1.0% of the
Corporation's outstanding Common Stock.
SHAREHOLDER PROPOSALS
In order to be included in proxy material for the 1999
annual meeting of shareholders, shareholder proposals
must be received at the offices of the Corporation by
March 19, 1999.
ANNUAL AND SEMI-ANNUAL REPORTS
The Corporation will furnish, without charge, to any
shareholder a copy of its annual report for the fiscal
year ended March 31, 1998 and its semi-annual report
for the six months ended September 30, 1998 to any
shareholder upon request. Any such request should
be sent to Carol Frye, Assistant Secretary, Golfview
Park, Lenoir, North Carolina 28645. A stamped,
addressed postal card is enclosed for use in requesting
such report. The annual report was previously
furnished to shareholders on May 22, 1998 and the
semi-annual report for the six months ended
September 30, 1998 was previously furnished to
shareholders on or about November 13, 1998.
<PAGE>
EXHIBIT A
(Revised March 19, 1999)
INVESTMENT OBJECTIVES AND POLICIES OF
BMC FUND, INC.
Investment Objectives
The Corporation's investment objectives are two-fold.
The majority of the Corporation's assets will be invested
in accordance with its first objective, which is to seek as
high a level of current income as is consistent with the
preservation of capital. The balance of the
Corporation's assets will be invested in accordance with
its second objective, which is to provide long term
capital appreciation. The Corporation's investment
objectives may not be amended without the approval of
a majority of the holders of the Corporation's
outstanding voting securities.
Current Income. In accordance with its current income
objective, the Corporation may invest its assets in (i)
debt obligations that are exempt from federal income tax
under Section 103(a) of the Internal Revenue Code (the
"Code"), including debt obligations issued by or on
behalf of states, territories and possessions of the United
States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or multi-
state agencies or authorities, the interest on which is
exempt from federal income tax ("Municipal Bonds");
(ii) project notes the interest on which is exempt from
federal income tax under Section 11(b) of the United
States Housing Act of 1937, as amended, and bond, tax
or revenue anticipation notes issued by states or
municipalities with a term, when issued, of less than
three years ("Temporary Investments"); and (iii)
securities of investment companies having a similar
investment objective, subject to limitations of the
Investment Company Act of 1940 on ownership of
investment company securities. (The investments
described in clauses (i) through (iii) hereinafter are
referred to collectively as "Tax-Exempt Securities.")
In accordance with its current income objective, the
Corporation may also invest its assets in preferred stocks
and in obligations that generate taxable interest, such as
corporate bonds and debentures, Treasury bills and
other securities issued by the federal government or its
agencies, certificates of deposit issued by domestic
banks and other obligations that produce taxable interest.
The Corporation's assets invested pursuant to its current
income objective will be invested in obligations rated no
lower than A BBB by Moody's or Standard & Poor's,
except that (i) the Corporation may purchase Temporary
Investments having a Moody's rating of no lower than
MIG-3 and (ii) the Corporation may invest up to 17.5%
of its assets in more speculative and higher yielding
Municipal Bonds that are rated lower than A BBB (but
no lower than B) or are unrated. If unrated, Municipal
Bonds or Temporary Investments purchased by the
Corporation must be issued by a state or municipality
with a rating of A BBB or better and must have
characteristics that, in the judgment of the Board of
Directors, are consistent with obligations having ratings
that meet the minimum acceptable ratings set forth
herein.
Subsequent to the purchase by the Corporation of an
issue of Tax-Exempt Securities, the issue may cease to
be rated or its rating may be reduced below the
minimum required for purchase by the Corporation.
Neither event will require the elimination of such
obligation from the Corporation's portfolio, but the
Corporation will consider such an event in determining
whether to continue to hold such obligation in its
portfolio. To the extent that the ratings given by
Moody's or Standard & Poor's for Municipal Bonds or
by Moody's for Temporary Investments may change as
a result of changes by such rating organizations, or
changes in their rating systems, the Corporation will
attempt to use comparable ratings as standards for its
investments in Municipal Bonds or Temporary
Investments in accordance with this investment
objective.
Capital Appreciation. The Corporation's second
investment objective is to provide long term capital
appreciation. Whatever current income would be
generated by the Corporation pursuant to this objective
would likely be incidental to the objective of capital
growth.
The Corporation will attempt to accomplish this
objective by investing primarily in common stocks,
preferred stocks and beneficial interests and warrants,
options or other rights to acquire common stocks,
preferred stocks and beneficial interests. In addition,
the Corporation also may invest in precious metals,
precious stones and real estate. From time to time
management may attempt to assume temporarily a
defensive position with respect to those assets dedicated
to capital growth. Management's judgment in this
regard may result in the acquisition of short term
investments, securities issued by the federal government
or its agencies, commercial paper and certificates of
deposit issued by domestic banks.
If an investment complies with a non-statutory
percentage restriction set forth in the Corporation's
investment objectives and policies at the time the
investment is made, a later change in market value of
the investment or of other assets of the Corporation, or
in any ratings, will not be deemed to result in a violation
of the percentage restriction.
Fundamental Policies
Subject to the restrictions and limitations of the
Corporation's investment objectives set forth above, the
following fundamental policies will govern the
Corporation's investment activities and may not be
changed without approval by the holders of a majority
of the Corporation's outstanding voting securities:
1. The Corporation will not issue any senior
securities.
2. The Corporation will not engage in the making
of short sales, purchases on margin or the writing of put
options; however, to the extent of 10% of its assets, the
Corporation may write call options with respect to
securities owned by the Corporation.
3. The Corporation may obtain such short-term
credit as is necessary for the clearance of securities
transactions or for similar short-term or temporary
purposes. In any event, the total amount outstanding
shall not exceed 20% of the value of the Corporation's
assets immediately following any such borrowing.
4. The Corporation will not underwrite the
securities of other issuers, except insofar as the
Corporation may purchase securities of other issuers
under circumstances in which the Corporation, were it
later to publicly offer or sell such securities, might be
deemed to be an underwriter for the purposes of the
Securities Act of 1933.
5. The Corporation may invest up to 25% of the
value of its assets in securities (other than U.S.
Government securities and securities of other regulated
investment companies) of any one issuer or two or more
issuers controlled by the Corporation and engaged in
related businesses. The Corporation may acquire
securities of other investment companies, provided that
after such acquisition the Corporation, and any company
or companies controlled by the Corporation, own in the
aggregate (i) not more than 3% of the total outstanding
voting stock of such other investment company; (ii)
securities issued by such other investment company
having an aggregate value of not more than 5% of the
value of the Corporation's assets; and (iii) securities
issued by such other investment company and all other
investment companies (other than treasury stock of the
Corporation) having an aggregate value of not more than
10% of the value of the Corporation's assets. The
registrant may acquire securities of other investment
companies without regard to the above limitations,
however, if immediately after such acquisition not more
than 3% of the total outstanding stock of such other
investment company or companies is owned by the
Corporation and all affiliated persons of the
Corporation. The intent of this policy is to permit the
Corporation to invest in securities of other investment
companies to the extent permitted by section 12 of the
Investment Company Act of 1940.
6. Except to the extent of 30% of its assets, the
Corporation will not engage in the purchase, sale or
holding of interests in real estate. This restriction is in
part a result of the potentially illiquid nature of such an
investment. The Corporation, however, may purchase,
hold or sell tax-exempt revenue bonds representing
interests in real estate and beneficial interests in real
estate investment trusts. The Corporation may also
engage in the purchase or sale of mortgage loans to the
extent of 10% of the value of its assets.
7. The Corporation may engage in the purchase or
sale of precious metals and precious stones only to the
extent of 5% of its assets. This restriction is in part a
result of the potentially illiquid nature of such an
investment. The Corporation will not engage, however,
in the purchase or sale of commodity contracts.
8. The Corporation may engage in the making of
loans to other persons only to the extent of 20% of its
assets and only in compliance with the Investment
Company Act of 1940 and the North Carolina Business
Corporation Act. This restriction is in part a result of
the potentially illiquid nature of such an investment.
The Corporation may purchase debt securities, however,
in accordance with its investment objectives in excess of
5% of its assets.
9. The Corporation anticipates that its portfolio
turnover rate (the lesser of purchases or sales of
portfolio securities for the year divided by the monthly
average value of the portfolio securities) will usually not
exceed 100%. The Corporation may sell a portion of its
portfolio, however, in anticipation of a rise in interest
rates (market decline), or it may purchase securities in
anticipation of a decline in interest rates (market rise)
and thereafter sell them. Additionally, the Corporation
may sell a security and then purchase another one of
comparable quality at approximately the same time to
take advantage of what the Board of Directors believes
to be a temporary disparity in the normal yield
relationship between the two securities. These yield
disparities may occur for reasons not directly related to
the investment quality of particular issues or the general
movement of interest rates, such as changes in the
overall demand for, or supply of, various types of tax-
exempt securities. Accordingly, the Corporation's
portfolio turnover rate could exceed 100% in particular
years. Such portfolio turnover rate, however, will not
be a limiting factor when the Corporation deems the
purchase or sale of a security to be consistent with its
fundamental objective and policies.
10. The Corporation will observe all restrictions and
requirements of the Code necessary to maintain its status
as a regulated investment company under the Code and
to avoid incurring the personal holding company income
tax imposed by the Code on undistributed personal
holding company income.
11. The Corporation shall operate as a closed-end,
non-diversified management company.
Other Investment Policies
Subject to the restrictions and limitations of the
Corporation's investment objectives set forth above, the
following policies will govern the Corporation's
investment activities and may be changed by the Board
of Directors without approval by the holders of a
majority of the Corporation's outstanding voting
securities:
1. The Corporation will not invest in any security
that would cause more than 25% of the value of its
assets to be invested in securities of issuers in any one
industry. The Corporation may invest its assets in
Municipal Bonds, which generally cannot be classified
by industry, and may invest as much as 40% of the
value of its assets in Municipal Bonds the issuers of
which are located in North Carolina.
2. The Corporation may engage in the purchase and
sale of securities of foreign issuers only to the extent of
20% of its assets.
<PAGE>
EXHIBIT B
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, is made as of the lst day of April,
1999, between BMC Fund, Inc., a North Carolina
corporation (the "Fund"), and Northern Trust Bank of
Florida, N.A., a national banking association (the
"Adviser").
WHEREAS, the Fund is a closed-end management
investment company registered under the Investment
Company Act of 1940 (the "1940 Act");
WHEREAS, the Adviser is a national banking
association that provides investment advisory services as
a part of its general banking activities; and
WHEREAS, the Fund desires to retain the Adviser to
render investment services with respect to a portion of
the Fund's investment assets, and the Adviser is willing
to render such services;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the Fund and the Adviser
agree as follows:
1. Appointment of Adviser. The Fund hereby
appoints the Adviser to act as investment adviser with
respect to the investment assets identified in Annex A
attached hereto (the "Assets") in accordance with the
terms and conditions set forth below, and the Adviser
hereby accepts such appointment.
2. Assets. The Fund may add or remove assets
from the Adviser's management upon 10 days' notice to
the Adviser or such shorter period agreed to by the
Fund and the Adviser. The Fund represents that the
Assets are lawfully owned by the Fund, that there are no
restrictions (whether arising out of contract, operation of
law or otherwise) on the transfer, sale or public
distribution thereof and that neither the Fund nor any
affiliated person of the Fund is an affiliated person of
any issuer whose securities are included in the Assets.
3. Advisory Duties. The Adviser shall manage,
subject to the supervision and control of the Board of
Directors of the Fund, the Assets in accordance with the
Fund's investment objectives and policies, a copy of
which has been provided to the Adviser (the "Objectives
and Policies"), as amended from time to time, and in
accordance with the following understandings:
(a) The Adviser shall provide a continuous
investment program with respect to the Assets in
accordance with the Objectives and Policies and the
instructions of the Board of Directors of the Fund. The
Adviser will have no responsibility for determining that
the total assets of the Fund are invested in compliance
with any requirement of the Objectives and Policies that
specific percentages of such total assets be invested
pursuant to particular objectives.
(b) The Adviser shall provide investment advisory,
research, statistical and clerical services relating to its
management of the Assets.
(c) The Adviser, in the performance of its duties
and obligations under this Agreement, shall act in
conformity with the Articles of Incorporation and
Bylaws of the Fund, the instructions of the Board of
Directors of the Fund, the requirements of the 1940 Act,
the rules of the Securities and Exchange Commission
(the "Commission") and all other applicable federal and
state laws and regulations.
(d) (i) The Adviser will execute all trades on
behalf of the Registrant involving exchange listed
securities through floor brokers selected by the Adviser.
Commissions paid to the Adviser by the Fund with
respect to such transactions shall not exceed the lesser of
(i) 50% of the regular New York Stock Exchange, Inc.
rates in effect immediately prior to the institution of
fully negotiated rates, (ii) $0.07 per share or (iii) the
maximum amount permissible pursuant to Section 17(e)
of the 1940 Act and the rules of the Securities and
Exchange Commission thereunder; provided, the
amounts paid to the Adviser in commissions, when
added to the fees paid to the Adviser pursuant to Section
8 of the Agreement, shall not exceed 2% of the average
daily total market value of the Registrant's assets under
the Adviser's management for the preceding fiscal year.
(ii) Without the written consent of the Fund
and compliance with the 1940 Act and the rules
of the Commission thereunder, the Adviser shall
not cause the Fund to purchase securities from
the Adviser, or any affiliated person of the
Adviser, acting as principal and shall not cause
the Adviser to purchase securities from any
syndicate or selling group of which the Adviser
or any affiliated person of the Adviser is a
member. The Adviser may refrain from
advising the Fund concerning securities of
companies of which any of the directors,
officers or employees of the Adviser or of
affiliated persons of the Adviser are directors,
officers or employees, or concerning securities
of companies for which the Adviser or its
affiliated persons act as financial adviser.
(iii) When the Adviser deems the purchase or
sale of a security to be in the best interests of the
Fund as well as other customers, the Adviser, to
the extent permitted by applicable laws and
regulations, may aggregate the securities to be
sold or purchased in order to obtain the best
execution and most favorable price. In such
event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the
manner it considers to be the most equitable and
consistent with its fiduciary obligations to the
Fund and to such other customers.
(e) The Adviser shall provide the Custodian,
as defined below, and the Fund on each business
day with a list of all securities transactions
directed by the Adviser for the prior business
day and shall render to the Fund's Board of
Directors such other periodic and special reports
as the Board may reasonably request.
(f) The investment management services of
the Adviser to the Fund under this Agreement
are not to be deemed exclusive, and the Adviser
shall be free to render similar services to others.
4. Custody of Assets. First Union National Bank,
Charlotte, North Carolina (the "Custodian") will retain
custody of the Assets. The Fund will cause the
Custodian to settle purchases and sales of securities
made by the Adviser in connection with the Adviser's
management of the Assets, through delivery of
securities, payment of funds or such other acts as may
be necessary to fulfill such custodial responsibilities.
Instructions concerning purchases and sale of securities
by the Adviser on behalf of the Fund shall be
communicated to the Custodian and the Fund in a
manner agreed to by the Fund, the Custodian and the
Adviser. Fees charged by the Custodian shall continue
to be the responsibility of the Fund.
5. Books and Records. The Adviser shall maintain
and preserve the books and records relating to securities
transactions on behalf of the Fund in accordance with
Section 31 of the 1940 Act and the rules of the
Commission thereunder, including, without limitation,
Rule 31a-1(f). The Adviser agrees that all such books
and records are the property of the Fund and that it will
surrender promptly to the Fund any of such books and
records upon the Fund's request. The Adviser further
agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act any such books and records as
are required to be maintained by Rule 31a-1(f) under the
1940 Act.
6. Reports to Adviser. The Fund agrees to furnish
the Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature or
other material prepared for distribution to shareholders
of the Fund or the public, which refer in any way to the
Adviser, 10 days prior to use thereof and not to use such
material if the Adviser should object thereto in writing
within seven days after receipt of such material. The
Fund shall furnish or otherwise make available to the
Adviser such other information relating to the business
affairs of the Fund as the Adviser at any time, or from
time to time, reasonably requests in order to discharge
its obligations hereunder.
7. Expenses. During the term of this Agreement,
the Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other
than the cost of securities purchased for the Fund and
the taxes and brokerage commissions, if any, payable in
connection with the purchase and of such securities.
8. Compensation of the Adviser.
(a) For the services to be rendered by the Adviser
as provided in this Agreement, the Fund shall pay to the
Adviser a quarterly fee in advance. The fee for a
succeeding quarter will be the product of the closing
market value of the Assets on the last day of the
preceding fiscal quarter (the "Closing Value") multiplied
by the applicable percentage set forth below (the
"Applicable Percentage"); provided, however, that the
quarterly fee payable to the Adviser with respect to the
quarter commencing April 1, 1999 will be the product
of the value of the Assets first placed under the
management of the Adviser as of April 1, 1999
multiplied by the Applicable Percentage.
Applicable Percentage Closing Value
.0875% of the first $15 million
.075% of the next $ 5 million
.0625% of amounts over $20 million
The quarterly fee calculated as set forth above will be
subject to the following adjustments:
(i) In the event the Fund, during any fiscal
quarter, contributes additional assets to
be managed by the Adviser (the
"Additional Assets"), the quarterly fee
shall be the product of the Closing Value
times the Applicable Percentage,
reduced by an amount equal to the
closing market value of the Additional
Assets on the date of contribution
multiplied by a fraction the numerator of
which is the number of days during such
fiscal quarter that the Additional Assets
were under management and the
denominator of which is the total
number of days in such fiscal quarter.
(ii) In the event the Fund, during any fiscal
quarter, withdraws assets from the
Adviser's management (the "Withdrawn
Assets"), the quarterly fee shall be the
product of the Closing Value times the
Applicable Percentage, increased by an
amount equal to the closing value of the
Withdrawn Assets on the date of
withdrawal multiplied by a fraction the
numerator of which is the number of
date during such fiscal quarter that the
Withdrawn Assets were under
management and the denominator of
which is the total number of days in the
fiscal quarter.
(iii) In the event of termination of this
Agreement prior to the end of a quarter,
the Adviser shall repay the Fund a pro
rata portion of the quarterly fee for such
quarter based on the number of days
elapsed in the then-current fiscal quarter
as a percentage of the total number of
days in such quarter.
There shall be no adjustment of the fee payable
under this Agreement for fluctuations during a
fiscal quarter in the value of Assets under
management prior to the date the Closing Value
is determined in accordance with this Section 8.
(b) After the end of each fiscal quarter, the
Adviser shall submit to the Fund a report
showing the amount of the fee properly payable
to the Adviser hereunder and the detailed
calculation thereof. The Fund shall pay the
Adviser such fee not later than 30 days after its
receipt of such report. Failure of the Fund to
pay the fee when due shall entitle the Adviser to
pay the fee from cash assets of the Fund under
its management.
9. Limitation of Liability. In the absence of (i)
willful misfeasance, bad faith or gross negligence on the
part of the Adviser in performance of its obligations and
duties hereunder, (ii) reckless disregard by the Adviser
of its obligations and duties hereunder or (iii) a loss
resulting from a breach of fiduciary duty with respect to
the receipt of compensation of services (in which case
any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940
Act), the Adviser shall not be subject to any liability
whatsoever to the Fund, or to any shareholder of the
Fund, for any error of judgment, mistake or law or any
other act or omission in the course of, or connected
with, rendering services hereunder including, without
limitation, for any losses that may be sustained in
connection with the purchase, holding, redemption or
sale of any security on behalf of the Fund. The federal
securities laws impose liabilities under certain
circumstances on persons who act in good faith, and
therefore nothing herein shall in any way constitute a
waiver or limitation of any rights which the undersigned
may have under any federal securities laws.
10. Duration and Termination. This Agreement
shall, if approved by the vote of a majority of the
outstanding voting securities of the Fund at the special
meeting of shareholders on March 19, 1999, become
effective on April 1, 1999 and shall continue in effect
until March 31, 2001, and thereafter only so long as
such continuance is approved at least annually by a vote
of the Fund's Board of Directors (including at least a
majority of the directors who are not interested persons
of the Fund), cast in person at a meeting called for the
purpose of voting on such approval. In addition, the
Fund may present to its shareholders the question of
continuance of the Agreement; in such event, such
continuance shall be effective only if approved by the
affirmative vote of a majority of the outstanding voting
securities of the Fund.
This Agreement may be terminated at any time, without
payment of any penalty, either by vote of the Board of
Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, on 60 days'
written notice to the Adviser. This Agreement shall not
be assigned by either party and shall automatically
terminate in the event of its assignment. This
Agreement may be terminated by the Adviser on 60
days' written notice to the Fund. Any notice under this
Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party as
follows:
If to the Fund:
E. D. Beach
President
BMC Fund, Inc.
P. O. Box 500
Golfview Park
Lenoir, NC 28645
If to the Adviser:
Northern Trust Bank of Florida, N.A.
700 Brickell Avenue
Miami, Florida 33131
Attention: ____________
11. Independent Contractor. The Adviser shall for
all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Directors
of the Fund from time to time, have no authority to act
for or represent the Fund in any way or otherwise be
deemed an agent for the Fund.
12. Amendment of Agreement. This Agreement
may be amended by mutual consent, but the consent of
the Fund must be approved (a) by vote of a majority of
the members of the Board of Directors who are not
interested persons of the Fund, cast in person at a
meeting called for the purpose of voting on such
amendment, and (b) by vote of a majority of the
outstanding voting securities of the Fund.
13. Definitions. As used in this Agreement, the
terms "affiliated person," "assignment," "interested
persons" and "vote of a majority of the outstanding
voting securities" shall have the respective meanings set
forth in Section 2(a)(3), Section 2(a)(4), Section 2(a)(19)
and Section 2(a)(42) of the 1940 Act.
14. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws
of the State of North Carolina.
15. Miscellaneous. The Fund acknowledges that it
has reviewed the Adviser's Form ADV, Part II, as
amended, at least forty-eight hours prior to entering into
this Agreement.
IN WITNESS WHEREOF, the parties hereto have
caused this instrument to be executed by their officers
designated below as of the day and year first above
written.
ATTEST: BMC FUND, INC.
_______________ ___________________
E. D. Beach
President
ATTEST: NORTHERN TRUST
BANK OF FLORIDA,
N.A.
______________ _________________
Name:
Title:
ANNEX A
DESCRIPTION OF ASSETS
<PAGE>
EXHIBIT C
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, is made as of the lst day of April,
1999, between BMC Fund, Inc., a North Carolina
corporation (the "Fund"), and Wellington Management
Company, LLP, a Massachusetts limited liability
partnership (the "Adviser").
WHEREAS, the Fund is a closed-end management
investment company registered under the Investment
Company Act of 1940 (the "1940 Act");
WHEREAS, the Adviser is an investment adviser
registered under the Investment Advisers Act of 1940;
and
WHEREAS, the Fund desires to retain the Adviser to
render investment services with respect to a portion of
the Fund's investment assets, and the Adviser is willing
to render such services;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the Fund and the Adviser
agree as follows:
1. Appointment of Adviser. The Fund hereby
appoints the Adviser to act as investment adviser with
respect to the investment assets identified in Annex A
attached hereto (the "Assets") in accordance with the
terms and conditions set forth below, and the Adviser
hereby accepts such appointment.
2. Assets. The Fund may add or remove assets
from the Adviser's management upon 10 days' notice to
the Adviser or such shorter period agreed to by the
Fund and the Adviser. The Fund represents that the
Assets are lawfully owned by the Fund, that there are no
restrictions (whether arising out of contract, operation of
law or otherwise) on the transfer, sale or public
distribution thereof and that neither the Fund nor any
affiliated person of the Fund is an affiliated person of
any issuer whose securities are included in the Assets.
3. Advisory Duties. The Adviser shall manage,
subject to the supervision and control of the Board of
Directors of the Fund, the Assets in accordance with the
Fund's investment objectives and policies, a copy of
which has been provided to the Adviser (the "Objectives
and Policies"), as amended from time to time, and in
accordance with the following understandings:
(a) The Adviser shall provide a continuous
investment program with respect to the Assets in
accordance with the Objectives and Policies and the
instructions of the Board of Directors of the Fund. The
Adviser will have no responsibility for determining that
the total assets of the Fund are invested in compliance
with any requirement of the Objectives and Policies that
specific percentages of such total assets be invested
pursuant to particular objectives.
(b) The Adviser shall provide investment advisory,
research, statistical and clerical services relating to its
management of the Assets.
(c) The Adviser, in the performance of its duties
and obligations under this Agreement, shall act in
conformity with the Articles of Incorporation and
Bylaws of the Fund, the instructions of the Board of
Directors of the Fund, the requirements of the 1940 Act,
the rules of the Securities and Exchange Commission
(the "Commission") and all other applicable federal and
state laws and regulations.
(d) (i) [Intentionally omitted.]
(ii) Without the written consent of the Fund and
compliance with the 1940 Act and the rules of the
Commission thereunder, the Adviser shall not cause the
Fund to purchase securities from the Adviser, or any
affiliated person of the Adviser, acting as principal and
shall not cause the Adviser to purchase securities from
any syndicate or selling group of which the Adviser or
any affiliated person of the Adviser is a member. The
Adviser may refrain from advising the Fund concerning
securities of companies of which any of the directors,
officers or employees of the Adviser or of affiliated
persons of the Adviser are directors, officers or
employees, or concerning securities of companies for
which the Adviser or its affiliated persons act as
financial adviser.
(iii) When the Adviser deems the purchase or sale of
a security to be in the best interests of the Fund as well
as other customers, the Adviser, to the extent permitted
by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the
best execution and most favorable price. In such event,
allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made
by the Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to
the Fund and to such other customers.
(e) The Adviser shall provide the Custodian, as
defined below, and the Fund on each business day with
a list of all securities transactions directed by the
Adviser for the prior business day and shall render to
the Fund's Board of Directors such other periodic and
special reports as the Board may reasonably request.
(f) The investment management services of the
Adviser to the Fund under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to
render similar services to others.
4. Custody of Assets. First Union National Bank,
Charlotte, North Carolina (the "Custodian") will retain
custody of the Assets. The Fund will cause the
Custodian to settle purchases and sales of securities
made by the Adviser in connection with the Adviser's
management of the Assets, through delivery of
securities, payment of funds or such other acts as may
be necessary to fulfill such custodial responsibilities.
Instructions concerning purchases and sale of securities
by the Adviser on behalf of the Fund shall be
communicated to the Custodian and the Fund in a
manner agreed to by the Fund, the Custodian and the
Adviser. Fees charged by the Custodian shall continue
to be the responsibility of the Fund.
5. Books and Records. The Adviser shall maintain
and preserve the books and records relating to securities
transactions on behalf of the Fund in accordance with
Section 31 of the 1940 Act and the rules of the
Commission thereunder, including, without limitation,
Rule 31a-1(f). The Adviser agrees that all such books
and records are the property of the Fund and that it will
surrender promptly to the Fund any of such books and
records upon the Fund's request. The Adviser further
agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act any such books and records as
are required to be maintained by Rule 31a-1(f) under the
1940 Act.
6. Reports to Adviser. The Fund agrees to furnish
the Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature or
other material prepared for distribution to shareholders
of the Fund or the public, which refer in any way to the
Adviser, 10 days prior to use thereof and not to use such
material if the Adviser should object thereto in writing
within seven days after receipt of such material. The
Fund shall furnish or otherwise make available to the
Adviser such other information relating to the business
affairs of the Fund as the Adviser at any time, or from
time to time, reasonably requests in order to discharge
its obligations hereunder.
7. Expenses. During the term of this Agreement,
the Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other
than the cost of securities purchased for the Fund and
the taxes and brokerage commissions, if any, payable in
connection with the purchase and of such securities.
8. Compensation of the Adviser.
(a) For the services to be rendered by the Adviser
as provided in this Agreement, the Fund shall pay to the
Adviser a quarterly fee in advance. The fee for a
succeeding quarter will be the product of the closing
market value of the Assets on the last day of the
preceding fiscal quarter (the "Closing Value") multiplied
by 0.075%; provided, however, that the quarterly fee
payable to the Adviser with respect to the quarter
commencing April 1, 1999 will be the product of the
value of the Assets first placed under the management of
the Adviser as of April 1, 1999 multiplied by 0.075%.
The quarterly fee calculated as set forth above will be
subject to the following adjustments:
(i) In the event the Fund, during any fiscal
quarter, contributes additional assets to
be managed by the Adviser (the
"Additional Assets"), the quarterly fee
shall be the product of the Closing Value
times 0.075%, reduced by an amount
equal to the closing market value of the
Additional Assets on the date of
contribution multiplied by a fraction the
numerator of which is the number of
days during such fiscal quarter that the
Additional Assets were under
management and the denominator of
which is the total number of days in
such fiscal quarter.
(ii) In the event the Fund, during any fiscal
quarter, withdraws assets from the
Adviser's management (the "Withdrawn
Assets"), the quarterly fee shall be the
product of the Closing Value times
0.075%, increased by an amount equal
to the closing value of the Withdrawn
Assets on the date of withdrawal
multiplied by a fraction the numerator of
which is the number of date during such
fiscal quarter that the Withdrawn Assets
were under management and the
denominator of which is the total
number of days in the fiscal quarter.
(iii) In the event of termination of this
Agreement prior to the end of a quarter,
the Adviser shall repay the Fund a pro
rata portion of the quarterly fee for such
quarter based on the number of days
elapsed in the then-current fiscal quarter
as a percentage of the total number of
days in such quarter.
There shall be no adjustment of the fee payable under
this Agreement for fluctuations during a fiscal quarter in
the value of Assets under management prior to the date
the Closing Value is determined in accordance with this
Section 8.
(b) After the end of each fiscal quarter, the Adviser
shall submit to the Fund a report showing the amount of
the fee properly payable to the Adviser hereunder and
the detailed calculation thereof. The Fund shall pay the
Adviser such fee not later than 30 days after its receipt
of such report. Failure of the Fund to pay the fee when
due shall entitle the Adviser to pay the fee from cash
assets of the Fund under its management.
9. Limitation of Liability. In the absence of (i)
willful misfeasance, bad faith or gross negligence on the
part of the Adviser in performance of its obligations and
duties hereunder, (ii) reckless disregard by the Adviser
of its obligations and duties hereunder or (iii) a loss
resulting from a breach of fiduciary duty with respect to
the receipt of compensation of services (in which case
any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940
Act), the Adviser shall not be subject to any liability
whatsoever to the Fund, or to any shareholder of the
Fund, for any error of judgment, mistake or law or any
other act or omission in the course of, or connected
with, rendering services hereunder including, without
limitation, for any losses that may be sustained in
connection with the purchase, holding, redemption or
sale of any security on behalf of the Fund. The federal
securities laws impose liabilities under certain
circumstances on persons who act in good faith, and
therefore nothing herein shall in any way constitute a
waiver or limitation of any rights which the undersigned
may have under any federal securities laws.
10. Duration and Termination. This Agreement
shall, if approved by the vote of a majority of the
outstanding voting securities of the Fund at the special
meeting of shareholders on March 19, 1999, become
effective on April 1, 1999 and shall continue in effect
until March 31, 2001, and thereafter only so long as
such continuance is approved at least annually by a vote
of the Fund's Board of Directors (including at least a
majority of the directors who are not interested persons
of the Fund), cast in person at a meeting called for the
purpose of voting on such approval. In addition, the
Fund may present to its shareholders the question of
continuance of the Agreement; in such event, such
continuance shall be effective only if approved by the
affirmative vote of a majority of the outstanding voting
securities of the Fund.
This Agreement may be terminated at any time, without
payment of any penalty, either by vote of the Board of
Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, on 60 days'
written notice to the Adviser. This Agreement shall not
be assigned by either party and shall automatically
terminate in the event of its assignment. This
Agreement may be terminated by the Adviser on 60
days' written notice to the Fund. Any notice under this
Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party as
follows:
If to the Fund:
E. D. Beach
President
BMC Fund, Inc.
P. O. Box 500
Golfview Park
Lenoir, NC 28645
If to the Adviser:
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Attention: ____________
11. Independent Contractor. The Adviser shall for
all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Directors
of the Fund from time to time, have no authority to act
for or represent the Fund in any way or otherwise be
deemed an agent for the Fund.
12. Amendment of Agreement. This Agreement
may be amended by mutual consent, but the consent of
the Fund must be approved (a) by vote of a majority of
the members of the Board of Directors who are not
interested persons of the Fund, cast in person at a
meeting called for the purpose of voting on such
amendment, and (b) by vote of a majority of the
outstanding voting securities of the Fund.
13. Definitions. As used in this Agreement, the
terms "affiliated person," "assignment," "interested
persons" and "vote of a majority of the outstanding
voting securities" shall have the respective meanings set
forth in Section 2(a)(3), Section 2(a)(4), Section 2(a)(19)
and Section 2(a)(42) of the 1940 Act.
14. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws
of the State of North Carolina.
15. Miscellaneous. The Fund acknowledges that it
has reviewed the Adviser's Form ADV, Part II, as
amended, at least forty-eight hours prior to entering into
this Agreement.
IN WITNESS WHEREOF, the parties hereto have
caused this instrument to be executed by their officers
designated below as of the day and year first above
written.
ATTEST: BMC FUND, INC.
_____________ ____________________
E. D. Beach
President
ATTEST: WELLINGTON
MANAGEMENT
COMPANY, LLP
_____________ ____________________
Name:
Title:
<PAGE>
ANNEX A
DESCRIPTION OF ASSETS
<PAGE>
EXHIBIT D
EXECUTIVE OFFICERS AND
DIRECTORS OFNORTHERN TRUST BANK
OF FLORIDA, N.A.
Juan C. Alonso(1) Carlos Noble (1)
Sheldon T. Anderson Anna K. Rentz (1)
Robert W. Bauchman(1) Douglas P. Regan (1)
Louise F. Dill H. James Sigsbee (1)
Paul W. Dresselhaus Donna R. Spivey
James R. Grinney(1) Harold H. Tyler, Jr. (1)
Stephen A. Lynch III(1) Jorge L. Viera
Ray E. Marchman, Jr.(1) Arthur M. Wood, Jr.(1)
William L. Morrison (1)(2)
____________________________
(1) Executive Officer
(2) Principal Executive Officer
<PAGE>
EXHIBIT E
GENERAL PARTNERS AND
SENIOR VICE PRESIDENTS OF
WELLINGTON MANAGEMENT COMPANY
Kenneth L. Abrams Matthew E. Megargel
Nicholas C. Adams James N. Mordy
Rand L. Alexander Diane C. Nordin
Deborah L. Allinson Stephen T. O Brien
James H. Averill Edward P. Owens
Karl E. Bandtel Saul J. Pannell
Marie-Claude Bernal Thomas L. Pappas
William N. Booth Jonathan M. Payson
Paul Braverman Stephen M. Pazuk
Robert A. Bruno Robert D. Rands
Maryann E. Carroll Eugene E. Record, Jr.
Pamela Dippel James A. Rullo
Robert W. Doran John R. Ryan
Charles T. Freeman Joseph H. Schwartz
Laurie A. Gabriel Theodore Shasta
Frank J. Gilday Binkley C. Shorts
John H. Gooch Trond Skramstad
Nicholas P. Greville Catherine A. Smith
Paul Hamel Stephen A. Soderberg
William C. S. Hicks Brendan J. Swords
Lucius T. Hill, III Harriett Tee Taggart
Paul D. Kaplan Perry M. Traquina
John C. Keogh Gene R. Tremblay
George C. Lodge, Jr. Michael A. Tyler
Nancy T. Lukitsh Mary Ann Tynan
Mark T. Lynch Clare Villari
Christine S. Manfredi Ernst H. von Metzsch
Patrick J. McCloskey James L. Walters
Earl E. McEvoy Kim Williams
Duncan M. McFarland Francis V. Wisneski
Paul M. Mecray III
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
BMC FUND, INC.
The undersigned hereby appoints Paul H. Broyhill and
E. D. Beach, or either of them, as agents, each with the
power to appoint his substitute, and hereby authorizes
them to vote, as designated below, all of the shares of
Common Stock of BMC Fund, Inc. (the "Corporation"),
held of record by the undersigned on February 5, 1999,
at the special meeting of shareholders to be held on
March 19, 1999, or at any adjournment thereof.
1. To approve an amendment to the Corporation's
investment objectives to permit investments in
obligations rated BBB or better.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To approve an amendment to the Corporation's
investment objectives to permit current income
investments in preferred stocks.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve an Investment Advisory Agreement
with Northern Trust Bank of Florida, N.A.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To approve an Investment Advisory Agreement
with Wellington Management Company, LLP.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the proxy agents are authorized to
vote upon such other business as may come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED TO
APPROVE PROPOSALS 1 THROUGH 4.
Dated _____________, 1999 ___________________
Signature*
___________________
Signature*
*Please sign exactly as the name appears hereon.
When shares are held in joint accounts, each joint
owner should sign. Executors, administrators,
trustees, guardians, attorneys and corporate officers
should indicate their titles.
