UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION Proxy Statement Pursuant to SectionREQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
Exchange Act ofOF THE
SECURITIES EXCHANGE ACT OF 1934 (Amendment No. ____)
Filed by the Registrant |X|[X]
Filed by a Party other than the Registrant |_|[_]
Check the appropriate box:
|_|[_] Preliminary Proxy Statement
|_|[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|x|[x] Definitive Proxy Statement
|_|[_] Definitive Additional Materials
|_|[_] Soliciting Material Pursuant to ss.240.14a-12Sec.240.14a-12
BMC 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|[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:
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[BMC Fund, Inc. Letterhead]
December 17, 2003
Dear BMC Shareholder:
As you know, BMC Fund, Inc. held its most recent annual meeting last summer at
Hound Ears, following a tradition that we established many years ago. Your Board
of Directors has decided that it would be more appropriate to hold future annual
meetings within three or four months after the end of the Fund's fiscal year
(October 31). This will mean that future annual meetings will be held in the
January - February time frame.
The Board has decided to implement this new schedule now, rather than to wait
until the winter of 2005 to hold the next annual meeting. Accordingly, we will
hold the 2004 annual meeting on January 31, 2004 in Naples, Florida, our usual
winter meeting location. The official notice of meeting and proxy material for
the meeting are enclosed. Please review the enclosed material and send in your
proxy card, whether or not you plan to attend.
As always, please do not hesitate to contact me should you have any questions or
concerns.
Sincerely,
Paul H. Broyhill
Chairman of the Board-------------------------------------------------------------------------
BMC FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 31, 2004FEBRUARY 26, 2005
NOTICE IS HEREBY GIVEN THAT the annual meeting of shareholders of BMC Fund,
Inc. (the "Fund") will be held on Saturday, January 31, 2004,February 26, 2005, at 9:00 a.m., at
The Registry Resort & Club, 475 Seagate Drive, Naples, Florida (telephone:
239-597-3232), for the following purposes:
1. To elect 1011 directors to hold office until the next annual meeting of
shareholders and until their successors have been elected and
qualified.
2. To approve an amendment to the Fund's Investment Objectives and
Policies.
3. To transact such other business as may properly come before the
meeting.
Only shareholders of record as of the close of business on December 10,
2003January 25, 2005
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.
December 17, 2003January 26, 2005 By Order of the Board of Directors
Paul H. Broyhill
Chairman of the Board
BMC FUND, INC.
800 Golfview Park
Lenoir, North CarolinaGOLFVIEW PARK
LENOIR, NORTH CAROLINA 28645
(Tel.(TEL.: 828-758-6100)
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 31, 2004FEBRUARY 26, 2005
GENERAL
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of BMC Fund, Inc. (the "Fund") of proxies for use at the
annual meeting of shareholders and at any and all adjournments thereof (the
"annual meeting" or the "meeting") to be held at The Registry Resort & Club, 475
Seagate Drive, Naples, Florida, on Saturday, January 31, 2004,February 26, 2005, at 9:00 a.m.,
for the purpose of considering and acting upon the matters specified in the
accompanying notice of the meeting and detailed below. The Fund 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 December 17, 2003.January 26, 2005.
The Board of Directors has fixed the close of business on December 10,
2003January 25, 2005
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 Fund 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 Fund is set forth below. See
"Principal Shareholders" and "Certain Beneficial Ownership Information
Concerning Directors," below.
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 election of
the slate of nominees listed on the proxy.proxy and in favor of the proposed amendment
to the Fund's Investment Objectives and Policies.
Any shareholder who submits the accompanying proxy has the right to revoke
it by notifying the Secretary of the Fund 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.
AThe holders of a majority of votesthe shares entitled to be cast on a particular matter,vote, represented in
person or by proxy, constitutesconstitute a quorum for purposes of the 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). SharesAbstentions and shares which are withheld as to voting with
respect to one or more nominees for director and abstentionsa
proposal are counted in determining the existence of a quorum, but shares held
by a broker, as nominee, and not voted on any matter will not be counted for
such purpose.
1
Assuming the existence of a quorum, the persons receiving a plurality of
the votes cast by the shares entitled to vote will be elected as directors. The
proposal to approve the amendment to the Fund's Investment Objectives and
Policies will be approved if the votes cast in favor of the proposal exceed the
votes cast against it. Abstentions, shares which are withheld as to voting with
respect to a proposal and shares held of record by a broker, as nominee, that
are not voted with respect to a proposal will not be counted as a vote in favor
of or against the proposal and, therefore, will have no effect on any of the
proposals described in this proxy statement.
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.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The bylaws of the Fund provide that the number of directors of the Fund
shall be not less than three nor more than 15. Those members of the Board of
Directors who are considered independent directors undernot to be "interested persons" of the Fund, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"), have
approved the selection and nomination of each candidate who, if elected, would
be a director under the 1940 Act. Unless contrary action is specified by a
shareholder on the enclosed proxy, the proxy agents named in the proxy intend to
vote the proxies received by them for the election of the 1011 nominees listed
below, who, if elected, will hold office until the next annual meeting of
shareholders and until their respective successors have been elected and
qualified. All of the nominees are currently serving as directors of the Fund
except Brent B. Kincaid, who is a first-time nominee.
It is not anticipated that any of the nominees will be unable or unwilling
to serve; but,however, if that should occur, the proxies shall be voted for a
replacement nominee designated by the present Board of Directors or the number
of directors to be elected shall be reduced.
The corporation laws of North Carolina, under which the Fund is
incorporated, provide that shareholders of a company, such as the Fund,
incorporated before July 7, 1957, under a charter not granting the right of
cumulative voting and which has at the time of the election of directors one
shareholder who owns or controls more than 25% of the company's voting stock
shall have the right to cumulate their votes for directors. Because no
shareholder currently owns or controls more than 25% of the Fund's voting
shares, cumulative voting will not be available to shareholders of the Fund at
the meeting.
Assuming the existence of a quorum, the persons receiving a plurality of
the votes cast by the shares entitled to vote will be elected as directors.
Abstentions, shares which are withheld as to voting with respect to nominees for
director and shares held of record by a broker, as nominee, that are not voted
with respect to a proposal will not be counted as a vote in favor of or against
the proposal and, therefore, will have no effect on the election of directors.
2
Information About Directors and Officers
CertainINFORMATION ABOUT DIRECTORS AND OFFICERS
The following table provides certain information about the Fund'snominees for
election as directors and the officers follows:
Directors Who Are Interested Personsof the Fund:
DIRECTORS WHO ARE INTERESTED PERSONS
Term of Principal
Positions
Office and Occupations Other
Name, Positions Held Length of During Past Directorships Held
Address and Age With Fund Time Served 5 Years by Director
- -------------------------- ---------------------------------------------- -------------- ----------- -------------------------------- ------------------
James T. Broyhill (76)(77) (1) Director Since 1976 Retired; President of Old The Shepherd
1930 Virginia Road Clemmons School Properties, Street Equity Fund
Winston-Salem, NC 27104 Inc. (1998-present); former
Secretary of The Shepherd Street
1930 Virginia Road the North Carolina
Department Fund, Inc.
Winston-Salem, NC 27104 of Commerce
(1989-1991); former Chairman
of the North Carolina Economic
Development Board (1987-1989)(1987-
1989); former member, U. S.
Senate (1986); former member,
U.S. House of Representatives
(1963-1986)
Paul H. Broyhill (79)(80) (1) (2) Director Since 1976 Director, President, (formerlyChairman
135 Claron Place, S.E. President Since 2001 Chairman) and Chief Executive Officer of
Lenoir, NC 28645 and Chief the Fund
Executive
Officer
Chairman Since 1976
Officer of the Fund
Michael G. Landry (57)(58) (3) Director Since 1993 Managing PartnerPresident of GrayRocksGray Rocks Asset
211 South Gordon Road Vice President Since 2001 Asset Management, LLC and Landry
Ft. Lauderdale, FL 33301 Presidentand Chief Trebbi Investment Corporation
Investment (1999-present); CEO of
and ChiefOfficer Mackenzie Investment Investment
Management, Inc., Chairman of
Officer
Ivy Funds and Executive Vice
President of Mackenzie
Financial Fund (1987-1999)
Allene B. Heilman (81)(82) (4) Director Since 1983 Private Investor
941 Bay Esplanade
Clearwater, FL 34630153 Hillhaven Place SE
Lenoir, NC 28645
3
Other Directors
OTHER DIRECTORS
Term of Principal
Positions
Office and Occupations Other
Name, Positions Held Length of During Past Directorships Held
Address and Age With Fund Time Served 5 Years by Director
- -------------------------- -------------------------------------- -------------- ----------- -------------------------------- ------------------
William E. Cooper (82)(83) Director Since 1981 Investor (since 1983); Chairman
5418 Preston Haven Drive Emeritus, former chairman and
Dallas, TX 75207 CEO of Dallas Market Center
Company, a wholesale marketing
complex
Lawrence Z. Crockett (74)(75) Director Since 1983 Retired; former director and
CEO
777 Sea Oak Drive, #719 CEO of Mortgage Corporation of the
Vero Beach, FL 32963 of the South
Jan E. Gordon (51)(53) Director Since 2001 Pinellas County, FL Supervisor
3075 Rolling Woods Dr.Drive of Elections (1992 - present)
Palm Harbor, FL 34683
Gene A. Hoots (64)(65) Director Since 1987 Chairman, CornerCap
Investment
2508 Giverny Drive Investment Counsel, a registered
investment
Charlotte, NC 28226 investment adviser serving
private and pension fund clients
(since 1989)2000)
John S. Little (71)(73) Director Since 2001 Retired; former Managing
4601Gulf4601 Gulf Shore Blvd. N. #18 Director and Chief Executive,
Naples, FL 34103 Associated Octel, London (1989-1995)(1989-
1995); former Senior Vice
President of Corporate
Technology, Great Lakes
Chemical Corporation (1981-1989)(1981-
1989)
L. Glenn Orr, Jr. (63)(64) Director Since 1999 Senior Managing Director, The Orr Highwoods
2735 Forest Drive Orr Group, an investment Properties, Inc.
Winston-Salem, NC 27104 banking firm
(since 1995)
Brent B. Kincaid (73) Retired since 1998; former
2703 Lakeview Drive President and CEO of Broyhill
Lenoir, NC 28645 Furniture Industries, Inc.
4
Other Officers
OTHER EXECUTIVE OFFICERS
Term of Principal
Positions Office and Occupations OtherOccupation
Name, Held Length of During Past Directorships Held
Address and Age With Fund Time Served 5 Years
by Director
- -------------------------- ----------------------- ----------- -------------------------------- ------------------------------------------------------
M. Hunt Broyhill (39)(40)(5) Vice President Since 2001 Vice President of the Fund since
1870 9th Street Ct.,Court, NW President since March 2001; Chief Executive of
Hickory, NC 28601 Executive of Broyhill Asset Management, LLC
(1997 - present); President of
Broyhill Investments, Inc. and
Broyhill Family Foundation, Inc.
(1988 - present); General Partner
of CapitalSouth Partners I, LP and
CapitalSouth Partners II, LP
(2000-present)
D. Eugene Hendricks (67)(69) Vice President Since 2002 Vice President since August 2002;
106 Cedar Crest Drive President 2002; Chief Financial Officer of the Fund
Lenoir, NC 28645 and Chief Since 2001 of the Fund since March 2001; Staff
Financial Staff Accountant for the Fund (1990-
Officer (1990-2001)2001); Executive in
ResidenceLecturer in Accounting at
Appalachian State University,
Boone, NC (1990-2001)
- --------------------------------------------------------------------------------(1998-2001)
____________________
(1) Messrs. James Broyhill and Paul Broyhill are interested persons within the meaning of
the 1940 Act by virtue of their beneficial ownership of more than five percent of the
Fund's Common Stock. See "Principal Shareholders" below. Mr. Paul Broyhill is also an
interested person by virtue of his serving as President and Chief Executive Officer of
the Fund. Messrs. James Broyhill and Paul Broyhill and Ms. Heilman are siblings.
(2) Mr. Paul Broyhill is President of P. B. Realty, Inc. and Broyhill Industries, Inc.,
wholly owned subsidiaries of the Fund.
(3) Mr. Landry is an interested person by virtue of his serving as Vice President and
Chief Investment Officer of the Fund.
(4) Ms. Heilman is an interested person by virtue of her immediate family relationship to
Messrs. James Broyhill and Paul Broyhill.
(5) Mr. Hunt Broyhill is the son of Paul H. Broyhill and the Vice President of P. B.
Realty, Inc. and Broyhill Industries, Inc., wholly owned subsidiaries of the Fund.
5
The Fund consists of a single fund managed internally by its Board of
Directors (at October 31, 2003,2004, the Board of Directors managed investment
securities valued at $127.06approximately $133 million). Accordingly, information
called for by the disclosure rules of the Securities and Exchange
5
Commission (the "Commission") relating to the number of portfolios in the fund
complex overseen by the directors is not applicable.
UnderTHE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ENTIRE SLATE OF NOMINEES
SET FORTH ABOVE.
CORPORATE GOVERNANCE
BOARD COMPOSITION
In accordance with the laws of North Carolina, the persons receiving a pluralityrequirements of the votes cast by1940 Act and the shares entitled to vote will be elected as directors. TheFund's
Corporate Governance Guidelines, at least 40% of the members of the Fund's Board
of Directors recommends a vote FORmust not be interested persons of the entire slate of nominees set forth
above.
CORPORATE GOVERNANCEFund. The Board has
determined that William E. Cooper, Lawrence Z. Crockett, Jan E. Gordon, Gene A.
Hoots, John S. Little, L. Glenn Orr, Jr. and Brent B. Kincaid are not interested
persons of Directors has 10 members, four of whom are an "interested
person" as such term is defined in the 1940 Act. The Board met three times
during the fiscal year ended October 31, 2003.Fund.
COMMITTEES
The Board of Directors has an Audit Committee, established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which operates under a written charter adopted by the Board in
July 2000 and amended and restated by the Board in July 2003. The members of whichthe
Audit Committee are William E. Cooper (Chairman), Lawrence Z. Crockett, and L.
Glenn Orr, Jr. Each
member, each of the Audit Committeewhom is an "independent director"director," as defined in Section
10A(m)under the
rules of the SecuritiesNew York Stock Exchange, Actand not an interested person of 1934, as amended (the "Exchange Act"the Fund.
(The requirements of the New York Stock Exchange are not applicable to the
Fund.). The Audit Committee is directly responsible for the hiring, firing,
overseeing the work of and determining the compensation for the Fund's
independent auditors (subject to the requirement of the 1940 Act that a majority
of the Fund's directors who are not "interested persons"interested persons of the Fund ratify the
selection of the independent auditors). The independent auditors report directly
to the Audit Committee. The Audit Committee had two meetings during the fiscal year ended
October 31, 2003.
The Board of Directors has an Investment Committee, the members of which
are James T. Broyhill, Paul H. Broyhill, Allene B. Heilman, Gene A. Hoots and
Michael G. Landry.Landry (Chairman). In addition, M. Hunt Broyhill, a Vice President of
the Fund, serves as a nonvoting consultant to the Committee. Each member of the
Investment Committee, with the exception of Mr. Hoots, is an "interested person"interested person
of the Fund as defined in the 1940 Act.Fund. The Investment Committee is responsible for reviewing the Fund's
investments at the request of management. The Investment
Committee had four meetings during the fiscal year ended October 31, 2003. Under the Fund's investment objectives
and policies, the Investment Committee has substantial oversight responsibility
with respect to the Fund's investments.
The Board of Directors did not havehas a Compensation or Nominating Committee, during such year.the members of which are
William E. Cooper, Lawrence Z. Crockett, Jan E. Gordon, Gene A. Hoots, John S.
Little (Chairman) and L. Glenn Orr, Jr. The Board has determined that each
member of the Nominating Committee is not an interested person of the Fund. The
Nominating Committee is responsible for identifying and recommending to the
Board qualified candidates for Board membership. The Nominating Committee was
formed on September 28, 2004 and operates under a written charter adopted on
6
December 8, 2004. A copy of the Nominating Committee charter is attached to this
proxy statement as Appendix A.
The Board of Directors will consider written nominationshas a Valuation Committee, the members of candidates for electionwhich are
William E. Cooper, Lawrence Z. Crockett, Jan E. Gordon, Gene A. Hoots
(Chairman), John S. Little and L. Glenn Orr, Jr. No member of the Valuation
Committee is an interested person of the Fund. The purpose of the Valuation
Committee is to assist the Board submitted by shareholders that are
submittedof Directors in its duty to determine the
valuation of the assets of the Fund in accordance with the procedures set forth under
"Shareholder Proposals," below.
EachFund's Asset
Valuation Procedures.
MEETING AND ATTENDANCE
During the fiscal year ended October 31, 2004, the Board held four
meetings, the Audit Committee held three meetings, the Investment Committee held
four meetings, the Nominating Committee did not meet (because it was formed near
the end of the fiscal year) and the Valuation Committee held four meetings. With
the exception of L. Glenn Orr, Jr., each incumbent member of the Board of
Directors attended at least 75% of the aggregate number of meetings of the Board
and the committees on which theyhe or she served during the fiscal year ended
October 31, 2003.
6
AUDIT COMMITTEE REPORT
The Audit Committee2004. Under the Fund's Corporate Governance Guidelines, all
directors are expected to make every effort to attend meetings of the Board, the
committees of which they are members and annual meetings of shareholders. Nine
members of the Board of Directors is comprised entirelyattended the 2004 annual meeting of
directors who are considered independent under Section 10A(m)shareholders.
PROCEDURES FOR DIRECTOR NOMINATIONS
In accordance with the Fund's Corporate Governance Guidelines, members of
the Exchange
ActBoard are expected to collectively possess a broad range of skills, industry
and New York Stock Exchange Standards. (The Exchange's requirements are not
applicableother knowledge and expertise, and business and other experience useful for
the effective oversight of the Fund's business. The Nominating Committee is
responsible for identifying and recommending to the Fund.) The Audit Committee currently has three members and
operates under a written charter adoptedBoard qualified candidates
for membership. Candidates are evaluated based on criteria established from
time to time by the Board and the criteria identified in July 2000the Corporate
Governance Guidelines. These criteria include, but are not limited to:
- Integrity, demonstrated sound business judgment and amendedhigh moral and
restated in July 2003. A copyethical character;
- Diversity of viewpoints, backgrounds, experiences and other
demographics;
- Business or other relevant professional experience;
- Capacity and desire to represent the balanced, best interests of the
AuditFund and its shareholders as a whole and not primarily a special
interest group or constituency;
- Ability and willingness to devote time to the affairs and success of
the Fund and in fulfilling the responsibilities of a director; and
7
- The extent to which the interplay of the candidate's expertise,
skills, knowledge and experience with that of other Board members will
build a Board that is effective, collegial and responsive to the needs
of the Fund.
The Nominating Committee charter is attachedauthorized to thisdevelop additional policies
regarding Board size, composition and member qualification.
The Nominating Committee evaluates suggestions concerning possible
candidates for election to the Board submitted to the Fund, including those
submitted by Board members and shareholders. All candidates, including those
submitted by shareholders, will be similarly evaluated by the Nominating
Committee using the Board membership criteria described above and in accordance
with applicable procedures. Once candidates have been identified, the Nominating
Committee will determine whether such candidates meet the qualifications for
director nominees established in the Corporate Governance Guidelines or under
applicable laws, rules or regulations. The Board, taking into consideration the
recommendations of the Nominating Committee, is responsible for selecting the
nominees for director and for appointing directors to fill vacancies.
The Nominating Committee has authority to retain and approve the
compensation of search firms to be used to identify director candidates. No
third party is currently retained by the Nominating Committee to identify such
candidates.
As noted above, the Nominating Committee will consider qualified director
nominees recommended by shareholders when such recommendations are submitted in
accordance with applicable SEC requirements, the Fund's bylaws and Corporate
Governance Guidelines and any other applicable law, rule or regulation regarding
director nominations. When submitting a nomination to the Fund for
consideration, a shareholder must provide certain information that would be
required under applicable SEC rules, including the following minimum information
for each director nominee: full name, age and address; principal occupation
during the past five years; current directorships on publicly held companies and
investment companies; and number of shares of Fund common stock owned, if any.
Brent B. Kincaid, the only nominee approved for inclusion on the proxy statementcard
who is not an incumbent director of the Fund, was recommended by the chief
executive officer and another executive officer of the Fund, each of whom is
also a shareholder.
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
Any shareholder desiring to contact the Board, or any specific director(s),
may send written communications to: Board of Directors (Attention: (Name(s) of
director(s), as Appendix A.applicable)), c/o the Fund's Secretary, Post Office Box 500,
Lenoir, North Carolina 28645. Any proper communications so received will be
processed by the Secretary. If it is unclear from the communication received
whether it was intended or appropriate for the Board, the Secretary will
(subject to any applicable regulatory requirements) use her judgment to
determine whether such communication should be conveyed to the Board or, as
appropriate, to the member(s) of the Board named in the communication.
8
AUDIT COMMITTEE REPORT
As noted above, the Audit Committee is directly responsible for hiring,
firing, overseeing the work of and determining the compensation for the Fund's
independent auditors (subject to the requirement of the 1940 Act that a majority
of the Fund's directors who are not "interested persons"interested persons of the Fund ratify the
selection of the independent auditors). The independent auditors report directly
to the Audit Committee.
Management is responsible for preparing the Fund's financial statements.
The independent auditors are responsible for performing an independent audit of
the Fund's audited financial statements in accordance with generally accepted
auditing standards and issuing a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has reviewed and discussed the audited
financial statements with management and the independent accountants.auditors. The Audit
Committee also has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees).
The Fund's independent auditors also provided to the Audit Committee the
written disclosures and letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent auditors that firm's independence.
Based on the above discussions and review with management and the
independent auditors, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Fund's annual report to
shareholders for the fiscal year ended October 31, 20032004 for filing with the
Commission.
Respectfully submitted by the Audit Committee:
William E. Cooper (Chairman)
Lawrence Z. Crockett
L. Glenn Orr, Jr.
79
ADMINISTRATION OF THE FUND
Administration of the Fund is primarily the responsibility of the Fund's
President and Chief Executive Officer, Paul H. Broyhill, its Vice President, M.
Hunt Broyhill, its Vice President and Chief Investment Officer, Michael G.
Landry, and its Vice President and Chief Financial Officer, D. Eugene Hendricks.
The Fund's portfolio is managed primarily by such officers,Paul H. Broyhill, M. Hunt Broyhill
and Michael G. Landry, under the supervision of the Board of Directors. Until September 30, 2003, theThe Fund
haddoes not have an external investment advisory agreement with one investment adviser, W. H. Reaves & Co.,
Inc. ("Reaves"), located at 10 Exchange Place, Jersey City, New Jersey 07032.
Reaves was responsible for managing a total of approximately $5.86 million of
the Fund's assets as of such date. The shareholders of the Fund approved the
investment advisory agreement with Reaves in 1986. The Board of Directors,
including a majority of the directors who are not interested persons of the
Fund, terminated the Fund's agreement with Reaves effective September 30, 2003
after comparing the performance of the portfolio managed by Reaves with the
performance of the Fund's internally-managed portfolios and considering the cost
of Reaves' investment management services.adviser.
The Custodian of the Fund's portfolio securities is Wachovia Bank, National
Association, (formerly First Union National Bank), Charlotte, North Carolina, pursuant to an Amended and Restated
Custodian Agreement dated as of December 31, 1986.
Brokerage Commissions
The Fund paid brokerage commissions in the aggregate of $107,075 during
the fiscal year ended October 31, 2003. Except with respect to brokerage
commissions paid to Reaves, which was an affiliated person of the Fund by virtue
of its serving as an investment adviser to the Fund, no brokerage commissions
were paid to affiliated persons of the Fund or to affiliated persons of such
affiliated persons, or to any broker an affiliated person of which is an
affiliated person of the Fund or of Reaves. For the fiscal year ended October
31, 2003, the Fund paid Reaves brokerage commissions in the aggregate amount of
$20,752. For the fiscal year ended October 31, 2003, such amount represented
19.4% of the aggregate brokerage commissions paid by the Fund to all brokers.
The commissions charged by the Fund's advisers for agency transactions using
affiliated brokers 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) 1940 Act, which regulates commissions and other remuneration received by
brokers in connection with the sale of securities to or by registered investment
companies with which they are affiliated, or (iii) $0.07 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 Fund's assets under
such adviser's management for the preceding fiscal year. An adviser may pay
higher commission rates than otherwise would be applicable in exchange for
brokerage and research services in accordance with the Exchange Act. In no event
may an adviser pay a brokerage commission in excess of $0.07 per share.
8
MANAGEMENT
Executive OfficersEXECUTIVE OFFICERS
The executive officers of the Fund are Paul H. Broyhill, age 7980 (President
and Chief Executive Officer), M. Hunt Broyhill, age 3940 (Vice President), Michael
G. Landry, age 5758 (Vice President and Chief Investment Officer), and D. Eugene
Hendricks, age 6769 (Vice President and Chief Financial Officer). Mr. Paul
Broyhill has served in executive capacities with the Fund and its predecessors
for more than five years. Messrs. Hunt Broyhill, Landry and Hendricks have
served in executive capacities with the Fund since March 2001. In addition, Mr.
Hendricks and Mr. Hunt Broyhill have served in administrative capacities with
the Fund for more than five years.
CompensationCOMPENSATION
For the fiscal year ended October 31, 2003,2004, the Fund paid Paul H. Broyhill
an annual salary of $19,228 for his services to the Fund as a President and
Chief Executive Officer. M. Hunt Broyhill, D. Eugene Hendricks and Michael G.
Landry who became executive officers March 19, 2001, were paid $15,570, $29,680,$67,032, $33,340 and $130,000,$120,323, respectively, for their services
to the Fund as executive officers. Directors other than those who are officers
of the Fund or who are related by blood or marriage to the Broyhill family (with
the exception of Ms. Gordon) are paid $3,000 per year, plus $1,000 per meeting
attended (or $500 for participating in a Board meeting by telephone), for
service on the Board during a full year. Each such outside director is paid an
additional $1,000 for each day of attending a committee meeting held other than
on the date of a Board meeting.meeting (or $500 for participating in a committee meeting
by telephone). In addition, all directors are reimbursed for their reasonable
expenses incurred in attending meetings.
The following table sets forth the aggregate compensation from the Fund for
the fiscal year ended October 31, 20032004 for each director and for each officer
who received compensation from the Fund in excess of $60,000:
10
Name of Person; Position Aggregate Compensation From Fund
- ------------------------ --------------------------------
Paul H. Broyhill
(President and Chief Executive Officer) $19,228
James T. Broyhill 0
William E. Cooper $6,000
Lawrence Z. Crockett $6,000$7,000
Jan E. Gordon $6,000
Allene B. Heilman 0
9
Name of Person; Position Aggregate Compensation From Fund
- ------------------------ --------------------------------
Gene A. Hoots $6,000$7,500
Michael G. Landry $120,323
(Vice President and Chief Investment Officer)
$130,000
John S. Little $6,000$6,500
L. Glenn Orr, Jr. $6,000$5,500
CERTAIN TRANSACTIONS
The Fund leases its executive offices from Broyhill Investments, Inc., a
corporation controlled by Paul H. Broyhill and members of his family. The terms
of the lease, which have been approved by the Fund's Board of Directors,
including those persons who are not interested persons of the Fund, provide that
the Fund and its two wholly owned subsidiaries shall pay an annual rental of
$18,000 to Broyhill Investments, Inc. during the term of the lease, which is on
a month-to-month basis.
On May 25, 2004, Paul H. Broyhill and certain other members of the Fund's
Board of Directors who are related to Jan E. Gordon provided a personal guaranty
for a loan in the amount of $300,000 secured by Jan E. Gordon. The guarantors
were released from all obligations with respect to the loan on July 26, 2004.
11
PROPOSAL 2 -- AMENDMENTS TO
INVESTMENT OBJECTIVES AND POLICIES
The Board of Directors of the Fund has proposed that shareholders approve
an amendment to the Fund's Investment Objectives and Policies (the "Policies")
that would clarify the Fund's authority to make indirect investments in
commodities and commodity contracts.
Section XI.b.vi. of the Policies currently states:
The Fund will not invest in commodities or commodity contracts.
The Board proposes that Section XI.b.vi. of the Policies be amended (the
"Amendment") to state:
The Fund will not invest in physical commodities or acquire
contracts to purchase or sell in the future physical
commodities (also known as commodity contracts or future
contracts), but this limitation shall not prevent the Fund
from making indirect investments in commodities and futures
contracts. Indirect investments may include, for example,
investments in a mutual fund, a closed-end fund, a limited
partnership, or a similar investment vehicle that is backed
by commodities and futures contracts, and investments in
shares of a commodity company, such as a mining venture. The
value of any indirect commodity or futures contract
investment, together with the value of all other investments
in commodities-backed securities and instruments, may not
exceed 20% of the value of the assets of the Fund at the
time of the investment. This policy shall not affect the
Fund's ability to invest in Fortune 1000 energy companies.
The purpose of the Amendment is to make it clear that (i) the prohibition
in the Policies applicable to commodities and commodity contracts applies to
investments in physical commodities (a few examples are energy, livestock,
grains, industrial and precious metals and "soft" commodities such as coffee,
sugar and cotton) and to the acquisition of futures contracts to purchase
physical commodities, and (ii) the Fund does have the authority to make indirect
investments in commodities and futures contracts by acquiring securities or
other interests in investment vehicles that are backed by commodities and
commodities futures. An example of such an investment vehicle is a commodity
index that provides passive exposure to a broad range of commodities.
The Fund historically has interpreted the Policies' prohibition on
investing in commodities to prohibit investments in physical commodities and
futures contracts to purchase physical commodities and, thus, to allow
investments in investment vehicles that are backed by commodities and
commodities futures. However, out of an abundance of caution, the Board has
determined to seek the shareholders' approval of the proposed amendment to
clarify the Fund's authority in this regard.
12
Commodities and commodity indices represent an asset class that can
diversify a portfolio and provide a hedge against rising inflation. This is
because rising inflation puts downward pressure on most investment assets, while
commodities usually increase in value during periods of rising inflation.
Introducing into a portfolio investments in commodities that do not move in sync
with each other, or with other classes of assets in the portfolio, enhances
diversification and helps reduce the overall volatility of the portfolio.
Though not as risky as direct investments in commodities and futures
contracts, indirect investments in commodities as described above are subject to
risks. For example:
- investments in commodities investment vehicles often are not liquid;
- investment models used by managers of commodities investment vehicles
may be incorrect and may not perform as anticipated;
- managers of commodities investment vehicles may use options, short
selling, non-exchange traded contracts and derivatives that are highly
speculative and could result in a loss of the value of the Fund's
investment;
- managers of commodities investment vehicles may use leverage, which
may increase volatility and reduce returns; and
- commodities investment vehicles are subject to risks associated with
the market sectors in which they invest.
As an example of the kinds of risks that indirect investments in
commodities are subject to, in 2004 the Fund invested $6 million in the BTOP50
CTA Index Fund (the "BTOP50 Fund"). The BTOP50 Fund invests its assets in
managed commodities and futures trading advisor programs included in the Barclay
CTA Index, a widely followed global managed futures index. The Fund acquired $3
million of its investment in the BTOP50 Fund on November 1, 2003 and the
remaining $3 million on October 29, 2004 and liquidated it at a loss of $667,607
on October 29, 2004. It should be noted that investments in funds such as the
BTOP50 Fund normally are expected to be long-term investments characterized by
short-term fluctuations in value. The Board decided to liquidate its BTOP50 Fund
investments, however, after deciding to seek shareholder approval of the
proposed amendment to the Policies described above.
Under the 1940 Act, the policy with respect to investments in commodities
and commodity contracts cannot be changed without shareholder approval. THE
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO THE FUND'S INVESTMENT OBJECTIVES AND POLICIES.
13
INDEPENDENT AUDITORS AND AUDIT FEES
Selection of AuditorsSELECTION OF AUDITORS
The Audit Committee of the Board of Directors of the Fund, at a meeting to
be held prior to the annual meeting of shareholders, intends to select the firm
of Dixon OdomHughes PLLC as the Fund's independent auditors for the fiscal year
beginning November 1, 2003.2004. Dixon OdomHughes PLLC has served as the Fund's
independent auditor since April 17, 2001.
Effective January 1, 2004, the firm of Dixon Odom
PLLC will be known as Dixon Hughes PLLC.
Neither Dixon OdomHughes PLLC nor any of its members has any direct or indirect
financial interest in or any connection with the Fund in any capacity other than
as independent public auditors.
A representative of Dixon OdomHughes PLLC will attend the meeting via
teleconference. The representative will have an opportunity to make a statement
if he desires to do so and will be available to respond to appropriate
questions.
10
AuditAUDIT FEES
Fees
Aggregate fees billed the Fund for the fiscal yearyears ended October 31, 2003 and 2004
by Dixon OdomHughes PLLC for services rendered are set forth in the following table:
Fiscal Year Ended Fiscal Year Ended
Type of Service October 31, 2003 October 31, 2004
- ------------------ ------------------ ------------------
Audit Fees . . . . $ 24,298 $ 23,377
Audit-Related Fees $ 0 $ 0
Tax Fees . . . . . $ 600 $ 2,555
All Other Fees . . $ 1,277 $ 904
Tax fees were incurred in connection with federal, state and local tax
planning and advice, including advice regarding the calculation of Service Amountdividends and
other distributions the Fund is required to make in order to preserve its status
as a regulated investment company under Subchapter M of Fee
- --------------- -------------
Audit Fees....................................................... $24,298
Financial Information Systems Designthe Internal Revenue
Code. The fees listed under "All Other Fees" above were incurred in connection
with the preparation and Implementation Fees..... $0
All Other Fees................................................... $1,877printing of the Fund's semiannual and annual reports to
shareholders.
During the fiscal year ended October 31, 2003,2004, Dixon OdomHughes PLLC did not
utilize any leased personnel in connection with the audit.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted a policy that requires the Audit Committee
to approve all audit and permissible non-audit services to be provided by an
independent auditing firm. The Audit Committee has established a general
pre-approval policy for certain non-audit services, up to a total of $15,000
during any fiscal year. All of the services described above were approved in
accordance
14
with the Audit Committee's pre-approval policy. As a result, none of such
services were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X.
CERTAIN BENEFICIAL INTERESTS OF
DIRECTORS IN THE FUND
AND ITS INVESTMENT ADVISERS
Beneficial Ownership by Directors in the FundBENEFICIAL OWNERSHIP BY DIRECTORS IN THE FUND
Certain information about the dollar range of equity securities of the Fund
beneficially owned by the directors and director nominees as of December 10, 2003January 3, 2005
is set forth in the following table:
Dollar Range of Equity
Name of Director Securities in the Fund
- ---------------- ----------------------
Interested Persons
James T. Broyhill Over $100,000
Paul H. Broyhill Over $100,000
Michael G. Landry $1-$10,000
Allene B. Heilman Over $100,000
Other Directors
William E. Cooper $50,000-$100,000
Lawrence Z. Crockett $1-$10,000
Jan E. Gordon Over $100,000
Gene A. Hoots $1-$10,000
John S. Little none
L. Glenn Orr, Jr. $1-$10,000
The Fund
- ------------------------ ----------------------
Interested Persons
James T. Broyhill Over $100,000
Paul H. Broyhill Over $100,000
Michael G. Landry $ 1-$10,000
Allene B. Heilman Over $100,000
Other Directors
William E. Cooper $ 50,001-$100,000
Lawrence Z. Crockett $ 1-$10,000
Jan E. Gordon Over $100,000
Gene A. Hoots $ 1-$10,000
John S. Little None
L. Glenn Orr, Jr. $ 1-$10,000
Brent B. Kincaid $ 10,001-$50,000
BMC consists of a single fund managed internally by its Board of Directors
and officers. Accordingly, information called for by the disclosure rules of the
Commission relating to the value of securities in various funds within the
Fund's family of funds is not applicable.
1115
Beneficial Ownership by Non-Interested Directors in Investment Advisers
None of the directors and their immediate families who are not considered
to be interested persons own securities or have any other interests in W.H.
Reaves & Co., which served as the Fund's investment adviser until September 30,
2003.
BENEFICIAL OWNERSHIP
OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table reflects information concerning directors and director
nominees, executive officers and those persons known to the Fund to own
beneficially 5% or more of the Fund's Common Stock as of December 10, 2003:January 3, 2005:
Amount and Nature of Beneficial
Ownership of Common Stock
----------------------------------------------------------------------------------
Percent of
Voting and Outstanding
Investment Power Common Stock
---------------------------------- ------------
Name Sole Shared
- ---- ---- ---------------- ----------
James T. Broyhill 785,788 96,212 17.9%
Paul H. Broyhill 431,461(1) 85,973(2) 10.5%
Michael G. Landry 25 0 (3)
Allene B. Heilman 29,777(4) 0 (3)
William E. Cooper 3,240 0 (3)
Lawrence Z. Crockett 200 0 (3)
Jan E. Gordon 43,920 72,077 2.4%147,215 310,196 9.3%
Gene A. Hoots 25607 0 (3)
John S. Little 0 0 0
12
Amount and Nature of Beneficial
Ownership of Common Stock
----------------------------------------------
Percent of
Voting and Outstanding
Investment Power Common Stock
---------------- ------------
Name Sole Shared
- ---- ---- ------
L. Glenn Orr, Jr 458Jr. 558 0 (3)
Brent B. Kincaid 884 0 (3)
M. Hunt Broyhill (5) 5,847 1,065,932 21.7%
D. Eugene Hendricks 0 279,732 5.6%5.7%
Broyhill Investments, Inc. 316,871 0 6.4%
800 Golfview Park
Lenoir, NC 28645
316,871 0 6.4%16
Hibriten Investments of N.C., LP (5)(6) 979,959 0 19.9%
800 Golfview Park
Lenoir, NC 28645
979,959 0 19.9%
Satie E. Gortner Investment LLC
c/o Northern Trust Bank of Florida, Manager
4001 Tamiami Trail North
Naples, FL 34103 661,877 0 13.4%
Eastwind Investments, LLC 669,715 0 13.6%
153 Hillhaven Place SE
Lenoir, NC 28645
669,715 0 13.6%
- ----------Directors and officers as a group 1,405,602 1,838,045 65.7%
__________________________
(1) Includes 316,871 shares owned of record by Broyhill Investments, Inc.,
the voting stock of which is principally owned by a trust, of which Paul H.
Broyhill is the trustee, and by Mr. Broyhill's immediate family. Does not
include 979,959 shares owned by Hibriten Investments of N. C., LLP, which
is controlled indirectly by Mr. Broyhill's son. See note (5) below.
(2) Includes 85,973 shares owned of record by Broyhill Family Foundation,
Inc., a non-profit corporation. By resolution of the Foundation trustees,
Paul H. Broyhill and M. Hunt Broyhill control the voting and disposition
of shares of the Fund owned by the Foundation.
(3) Total shares represent less than 1.0% of the Fund's outstanding Common
Stock.
13
(4) Does not include 669,715 shares owned by Eastwind Investments, LLC, which
is controlled by James W. Stevens, Rebecca S. Elliott, John F. Stevens and
Anne S. Hsu, children of Allene B. Heilman.
(5) The General Partner of Hibriten Investments of N. C., LP, which is
controlled indirectly by Mr. Broyhill's son. See note (5) below.
(2) Includes 85,973 shares owned of record by Broyhill Family Foundation,
Inc., a non-profit corporation. By resolution of the Foundation trustees, Paul
H. Broyhill and M. Hunt Broyhill control the voting and disposition of shares
of the Fund owned by the Foundation.
(3) Total shares represent less than 1.0% of the Fund's outstanding Common
Stock.
(4) Does not include 669,715 shares owned by Eastwind Investments, LLC, which
is controlled by James W. Stevens, Rebecca S. Elliott, John F. Stevens
and Anne S. Hsu, children of Allene B. Heilman.
(5) Includes 979,959 shares owned by Hibriten Investments of N.C., LP.
(6) The General Partner of Hibriten Investments of N.C., LP is Hibriten Management
of N.C., LLC. M. Hunt Broyhill is the Manager and owns 30% of the
interests in Hibriten Management of N.C., LLC. The Estate of Faye Arnold
Broyhill, of which Paul H. Broyhill is Executor, owns 70% of the interests
in Hibriten Management of N.C., LLC.
All the interests in Hibriten Management
The addresses of N.
C., LLC are owned byeach of James T. Broyhill, Paul H. Broyhill, M. Hunt
Broyhill (Paul H. Broyhill's son). M. Hunt
Broyhill also serves as Vice President of the Fund.
James T. Broyhill resides at 1930 Virginia Road, Winston-Salem, NC 27104.
Paul H. Broyhill resides at 135 Claron Place, SE, Lenoir, NC 28645.and D. Eugene Hendricks are set forth under "Information about
Directors and Officers," above.
17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Fund's directors, officers and
beneficial owners of more than 10% of the Common Stock are required to report
their beneficial ownership of Common Stock and any changes in that ownership to
the Commission. Specific dates for such reporting have been established, and the
Fund is required to report in this Proxy Statement any failure to file by the
established dates during the last fiscal year. In the last fiscal year, to the
Fund's knowledge, all of these filing requirements were satisfied by the Fund's
directors, officers and principal shareholders, with the exception of one late
Form 4 filed by Hibriten Investments of N.C., LP (with respect to one purchase
of Common Stock).shareholders.
SHAREHOLDER PROPOSALS
In order to be included in proxy material for the 20052006 annual meeting of
shareholders, shareholder proposals must be received at the offices of the Fund
by August 20,2004September 28, 2005 and must be submitted in accordance with applicable
procedures.
Shareholder proposals which are not intended to be included in the proxy
materials for the 20052006 annual meeting must be submitted to the Fund no later
than November 3, 2004.December 12, 2005. Only business properly brought before an annual meeting
may be subject to action at the meeting. The chairman of the meeting may refuse
to consider any business that is not raised in accordance with these procedures.
A proxy may confer discretionary authority to vote on any matter at an annual
meeting if the Fund does not receive proper notice of the matter within the
timeframe described above.
ANNUAL AND SEMI-ANNUAL REPORTS
The Fund will furnish, without charge, a copy of its annual report (and the
most recent semi-annual report succeeding the annual report, if any) for the
fiscal year ended October 31, 20032004 to a shareholder upon request. Any such
request should be directed to the Secretary of the Fund by writing to Carol Frye
at the Fund, 800 Golfview Park, P. O. Box 500, Lenoir, North Carolina 28645. (A
stamped, addressed postal card is enclosed for use in requesting such report.)
This annual report was previously furnished to shareholders on or about December
16, 2003.
14
29, 2004.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors knows of no
other business to come before the annual meeting for consideration by the Fund's
shareholders. If any other business properly comes before the meeting, the
persons named as proxy agents in the accompanying proxy card will vote the
shares represented by the proxy in accordance with their best judgment.
By Order of the Board of Directors
Carol Frye
Secretary
1518
Appendix A
BMC FUND, INC.
AUDITNOMINATING COMMITTEE CHARTER
I. Committee PurposeCOMMITTEE PURPOSE
The purpose of the AuditNominating Committee is to assist the Board of Directors
of BMC Fund, Inc. (the "Company""Fund") in its dutyidentifying individuals qualified to overseebecome
Board members and to recommend to the Company's accounting,
financial reporting and internal control functions andBoard the audit of the
Company's financial statements.director nominees. The
Committee will accomplish this purpose by performing the responsibilities
enumerated in this Charter, which include among
others direct responsibility for hiring, firing, overseeing the work of and
determining the compensation for the Company's independent auditors (subject to
the requirement of the Investment Company Act of 1940 that a majority of the
Company's directors who are not interested persons of the Company ratify the
selection of the independent auditors). The independent auditors will report
directly to the Committee.
The Committee's responsibilities under this Charter do not relieve the
Company's management of its responsibilities for preparing the Company's
financial statements so that they comply with generally accepted accounting
principles ("GAAP") and fairly present the Company's financial condition,
results of operations and cash flows; issuing financial reports that comply with
the requirements of the Securities and Exchange Commission (the "SEC"); and
establishing and maintaining adequate internal control structures and procedures
for financial reporting.Charter.
II. Committee Membership and ProcedureCOMMITTEE MEMBERSHIP AND PROCEDURE
The Committee will consist of three or more directors, each of whom must:
A. Be an independent director as defined in Section 10A(m) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
of the SEC under the Exchange Act, which means that no member of the Committee
may:
i. Accept directly or indirectly any consulting, advisory or other
compensatory fee from the Company or any subsidiary of the Company, other
than in his or her capacity as a director; or
ii. Bemust
not be an interested person of the Fund, as that term is defined in Section
2(a)(19) of the Investment Company Act of 1940.
B. Be able to read and understand fundamental financial statements.
The Board of Directors recognizes that it is desirable for at least one
member of the Committee to be an "audit committee financial expert" as such term
is defined in Item 3 of Form N-CSR. The inability of the Board and the Committee
to satisfy this objective, however, will not affect the validity of any actions
taken by the Committee.
The Board will appoint the members of the Committee annually. The members
will serve until their successors are appointed or until their earlier death,
resignation or removal. The Board will designate the Chairman of the Committee
or, if it fails to do so, the members of the Committee will elect a Chairman by
majority vote. The Board will have the power at any time to change the size and
membership of the Committee and to fill vacancies on the Committee, provided
that any new member must satisfy the requirements of this Charter and any other
applicable requirements. The rules and procedures of the Committee will be
governed by the North Carolina Business Corporation Act and the Company'sFund's bylaws
and, to the extent not inconsistent with such Act and the bylaws, this Charter.
The Committee will meet at least semi-annually to discharge its
responsibilities as set forth in Section III of this Charter. At a minimum, the
Committee will meet (i) after the end of the first six months of the fiscal year
and prior to the filing with the SEC of the Company's semi-annual report to
review with management and, if appropriate, with the independent auditors the
financial statements for such six-month period and to address other matters as
necessary to discharge its responsibilities as set forth in Section III of this
Charter, and (ii) following the end of the fiscal year and in connection with
the completion of the fiscal year audit to review with management and the
independent auditors the financial statements for the full fiscal year and to
address other matters as necessary to discharge its responsibilities as set
forth in Section III of this Charter. Upon the call of the Chairman of the
Committee or the Chairman of the Board, the Committee will meet at such other
times and for such other purposes as are necessary to carry out the Committee's
responsibilities. At such times as the Committee determines, the Committee will
meet separately with management and the Company's independent auditors in
discharge of the Committee's obligations under Section III of this Charter.
The Committee will record and maintain minutes of its meetings. The
Chairman of the Committee or a Committee member designated by the Chairman will
make a report to the Board of the Committee's meetings, actions taken at
meetings or by consent, and recommendations made since the most recent Board
meeting, unless the Committee has previously circulated an interim report
addressing the matter or matters.
III. Committee Authority and ResponsibilitiesCOMMITTEE AUTHORITY AND RESPONSIBILITIES
The authority and responsibilities of the Committee are as follows:
Annual Responsibilities
A. Review- Develop policies on the size and reassess annuallycomposition of the adequacy of this CharterBoard and
recommend
any changesqualification criteria for Board members;
- Actively seek, interview and screen individuals qualified to become
Board members for recommendation to the Board. The Chairman ofBoard;
19
- Have the Committee will confirmauthority to retain and terminate any search firm to be used
to identify director candidates and have the authority to approve the
search firm's fees and other retention terms;
- Receive suggestions concerning possible candidates for election to the
Board, including self-nominations and management annually thatnominations from shareholders;
- Recommend to the Committee has reviewed and reassessedBoard individuals for vacancies occurring from time
to time on the adequacy of this Charter.
B. Be solely and directly responsible forBoard, including vacancies resulting from an increase
in the appointment, compensation,
retention and oversightsize of the workBoard; and
- Recommend the slate of nominees to be proposed for election at each
annual meeting of the independent auditors engaged to
prepare or issue an audit report or perform other audit, review or attest
services, including resolution of disagreements between the independent auditors
and management regarding financial reporting. The authority of the Committee
under this paragraph is subject to the requirements of the Investment Company
Act of 1940 and the
2shareholders.
Adopted: December 8, 2004
20
rules of the SEC under the Act that the selection of the independent auditors be
ratified by the shareholders of the Company (to the extent such requirement is
applicable to the Company) and ratified or selected by a majority of the
Company's directors who are not interested persons of the Company.
C. Prior to engaging the independent auditors to perform an audit of the
Company's financial statements, (i) obtain from the independent auditors a
formal written statement delineating all relationships between their firm and
the Company, consistent with Independence Standards Board Standard No. 1 or such
other standard as may be promulgated by the Public Company Accounting Oversight
Board; (ii) actively engage in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors; and (iii) take, or
recommend that the Board of Directors take, appropriate action to oversee the
independence of the independent auditors.
D. Review with the independent auditors their proposed audit scope and
approach, including staffing, locations and coordination of independent audit
work with the work of the Company's accounting (and, if applicable, internal
audit) personnel.
E. Approve, in advance, the engagement letter for the annual audit to be
conducted by the independent auditors, including the compensation to be paid for
such services.
F. Following completion of the annual audit and at such other times as the
Committee deems appropriate, review separately with the independent auditors and
management any significant difficulties encountered during the course of the
audit.
G. Establish a policy for the Committee's pre-approval of audit and
non-audit services to be provided by the independent auditors and annually
review the continuing adequacy of the pre-approval policy.
H. At least annually, review the Company's system of internal controls and
evaluate the adequacy of the Company's financial reporting systems and business
process controls.
I. Prepare the Committee's report that the SEC rules require to be
included in the Company's annual proxy statement.
Periodic Responsibilities
J. Approve, in advance, all audit services not provided for in the
engagement letter for the annual audit, and all permissible non-audit services
to be provided by the independent auditors (including the compensation to be
paid for such services);
K. Review the Company's hiring policies for, and approve the hiring of,
any employees or former employees of the independent auditors.
L. Approve all transactions between the Company and a related party and
any other conflict of interest situations.
3
M. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters and
review the continuing adequacy of such procedures.
N. Engage and determine the compensation of any professional advisers as
the Committee determines are appropriate to carry out its responsibilities under
this Charter.
O. Cause the Company to pay the ordinary administrative expenses of the
Committee as are necessary or appropriate in carrying out the Committee's
duties.
P. Perform any other activities consistent with this Charter, the
Company's bylaws and governing law as the Committee or the Board deems necessary
or appropriate.
Q. Perform the responsibilities of a Qualified Legal Compliance Committee
as set forth in 17 C.F.R. Part 205 of the SEC's regulations ("Part 205") and
Section IV of this Charter.
IV. Part 205 Matters
A. QLCC. The Audit Committee is authorized to serve as a Qualified Legal
Compliance Committee ("QLCC") for the purpose of Part 205 and to receive reports
from outside counsel and in-house counsel of evidence of material violations of
securities laws and breaches of fiduciary duty and similar violations by
officers, directors, employees and agents of the Company ("Material
Violations"), to instruct or retain counsel to conduct an investigation, and to
direct and oversee such investigation, concerning whether such reports have
merit, and, if so, to recommend to the Company's Board of Directors an
appropriate response to such Material Violations. Part 205 will govern the
rights and responsibilities of the Committee and its members in the event of a
conflict between this Charter and Part 205.
B. Meetings. The Committee will meet as soon as practicable following the
report of evidence of a Material Violation and as necessary thereafter in
connection with such report.
C. Authority and Responsibilities. The Committee will have the authority
and responsibility to:
i. Adopt written procedures for the confidential receipt, retention,
and consideration of any report of evidence of a Material Violation;
ii. Receive reports of evidence of a Material Violation from outside
or in-house counsel;
iii. Notify the Company's Chief Executive Officer ("CEO") and the
Company's chief legal officer ("CLO") upon receipt of any such report of
evidence of a Material Violation. The CEO will be deemed to be the CLO for
the purpose of this notification, unless the Company has employed a
general counsel to serve in the capacity of CLO;
4
iv. Decide whether an investigation is necessary to determine
whether the Material Violation described in the report has occurred, is
occurring or is about to occur;
v. If the Committee determines an investigation is necessary
regarding a report of evidence of a Material Violation, to engage or
appoint counsel (which may be outside counsel or, at the Committee's
election, the Company's general counsel if the Company has employed one)
to undertake an investigation of such report;
vi. Retain such expert personnel as the Committee deems necessary;
vii. At the conclusion of any such investigation, to recommend by
majority vote that the Company implement an "appropriate response" (as
such term is defined in Part 205) to such Material Violation; and inform
the CEO, the CLO (if applicable) and the Board of Directors of the results
of any such investigation and the appropriate remedial measures to be
adopted; and
viii. Acting by majority vote, take all other appropriate action,
including the authority to notify the SEC in the event that the Company
fails in any material respect to implement an appropriate response that
the Committee has recommended that the Company take.
V. Additional Resources
The Committee will have the right to use reasonable amounts of time of the
Company's accounting personnel and independent auditors, other internal staff
and legal counsel and also will have the right to hire independent accounting
experts, lawyers and other consultants to assist and advise the Committee in
connection with its responsibilities. The Committee will keep the Company's CEO
advised as to the general range of anticipated expenses for outside consultants.
Amended and Restated: July 26, 2003
5
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BMC FUND, INC.
The undersigned hereby appoints Paul H. Broyhill and Carol Frye, 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 "Fund"), held of record by the undersigned on December
10, 2003January 25,
2005 at the annual meeting of shareholders to be held on January 31, 2004,February 26, 2005, or
at any adjournment thereof.
1. The election of 1011 directors:
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked below to the contrary) |_| to vote for all nominees listed below |_|
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked below to the contrary) [ ] to vote for all nominees
listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
James T. Broyhill, Paul H. Broyhill, William E. Cooper, Lawrence Z. Crockett,
Jan E. Gordon, Allene B. Heilman, Gene A. Hoots, Michael G. Landry, John S.
Little, L. Glenn Orr, Jr., Brent B. Kincaid.
2. Such other businessTo approve an amendment to the Fund's Investment Objective and Policies, as
may properly come beforedescribed in the meeting.Fund's proxy statement dated January 26, 2005.
APPROVE [ ] DISAPPROVE [ ] ABSTAIN [ ]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS PROPERLY SIGNED BUT NO DIRECTION
IS GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR.DIRECTOR
AND FOR APPROVAL OF THE AMENDMENT TO THE FUND'S INVESTMENT OBJECTIVES AND
POLICIES. IN THEIR DISCRETION, THE PROXY AGENTS ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated _______________, 200__.
----------------------------------------_________________, 2005. _________________________________
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
title.