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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Davis New York Venture Fund, Inc.; and
Davis Series, Inc.
(joint proxy solicitation)
Name of Registrants as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement., if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
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Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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CONTENTS
1. Shareholder message
2. Questions and Answers
3. Notice of Special Meeting
4. Proxy Statement
5. Appendix
A: Definitions of Some Terms used in this Proxy
B: Eligible Votes of Each Davis Fund
C: Shareholders owning over 5% of any Class And Nominees owning over 1%
of any Class
D: Audit Committee Charter
E: Officers of the Davis Funds, the Adviser, and the Sub-Adviser
F: New Advisory Agreements
G: New Sub-Advisory Agreements
H: Dates that the Existing Advisory and Sub-Advisory Agreements were most
recently submitted to shareholders.
I: Other Investment Companies which Davis Selected Advisers serves as
Investment Adviser
J: Proposed Fundamental Policies
K: Current Fundamental Policies for Each Davis Fund
6. Form of Proxy Card
7. Financial Advisers Letter
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SHAREHOLDER MESSAGE
A special meeting of shareholders of all Davis Funds will take place on
December 1, 2000, and we are asking for your participation.
You do not need to attend the meeting to participate. It is important that you
take a few minutes to read the enclosed material and vote your shares. You can
vote by Internet, by telephone or by mailing the enclosed proxy voting card(s)
in the postage-paid envelope.
Every Davis Fund has four proposals up for a vote. Shareholders of all funds are
being asked to:
(1) elect a board of directors;
(2) re-approve advisory agreements with Davis Selected Advisers, L.P. and its
subsidiary Davis Selected Advisers - NY, Inc.;
(3) approve proposals that are intended to help the funds increase their
management efficiency by granting them additional investment flexibility;
and
(4) ratify the selection of KPMG LLP as independent accountants of the funds.
NONE OF THESE PROPOSALS WILL INCREASE FEES OR CHANGE THE PORTFOLIO MANAGER(S)
FOR YOUR INVESTMENT(S)
The directors and I believe these proposals are in the best interests of the
shareholders, and we recommend a vote FOR each of them.
No matter how many shares you own, your vote is important. A proxy solicitor,
D.F. King & Co., has been retained to make follow-up phone calls as may be
necessary on behalf of the funds. But your prompt response will help reduce
proxy costs and will also mean that you can avoid receiving follow-up phone
calls or mailings. Voting by internet or phone lowers proxy costs even further.
All of us thank you for your attention to this important matter.
Sincerely,
Shelby M.C. Davis
Founder and Senior Research Adviser
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ABOUT THE PROPOSALS
WHAT ARE SHAREHOLDERS VOTING ON?
Davis Funds are asking shareholders to vote on four proposals:
1. TO ELECT DIRECTORS. Shareholders of each of the Davis Funds are being asked
to elect or re-elect Davis Funds directors. Eight of the eleven directors
are independent of the investment adviser.
2. TO RE-APPROVE ADVISORY AND SUB-ADVISORY AGREEMENTS. Shareholders of each
Davis Fund are being asked to re-approve the advisory and sub-advisory
agreements with Davis Selected Advisers, L.P. and its wholly owned
subsidiary, Davis Selected Advisers - NY, Inc. The agreements are not being
changed, fees are not being increased, and the same portfolio managers will
be managing your investments.
3. TO CONSIDER CHANGING OR ELIMINATING CERTAIN INVESTMENT POLICIES. The main
reason for these proposed changes is to allow the Funds a greater degree of
investment flexibility.
4. TO RATIFY DAVIS FUNDS' INDEPENDENT ACCOUNTANTS. Shareholders are being asked
to ratify the directors appointment of KPMG LLP as independent auditors.
These pages tell you more about the proposals and explain the main reasons that
the directors believe the proposals are in the best interests of shareholders.
WHAT ROLE DO THE DIRECTORS PLAY? (Proposal 1).
The Board of Directors is responsible for protecting the interests of the Funds'
shareholders. The Directors meet regularly to review the Funds' activities,
contractual arrangements and performance. Directors are fiduciaries and have an
obligation to serve the best interests of shareholders, including approving
policy changes such as those proposed in the proxy statement. In addition, the
Directors review Fund performance, oversee Fund activities, and review
contractual arrangements with companies that provide services to the Funds.
WHY ARE SHAREHOLDERS BEING ASKED TO APPROVE ADVISORY AND SUB-ADVISORY
AGREEMENTS? (Proposal 2)
Currently Venture Advisers, Inc. (an entity controlled by Shelby M.C. Davis)
controls, as general partner, Davis Selected Advisers, L.P. which provides
investment advice and administrative services to each of the Davis Funds. On
December 31, 2000, Venture
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Advisers, Inc. proposes to transfer control of Davis Selected Advisers, L.P. to
Davis Investments, LLC (an entity controlled by Christopher C. Davis, son of
Shelby M.C. Davis) which will become the new general partner of Davis Selected
Advisers, L.P. this will be accomplished though the sale of 100 general
partnership units from Venture Advisers, Inc., to Davis Investments LLC. Venture
Advisers, Inc. will continue to own approximately 45% of Davis Selected
Advisers, L.P. The 1940 Act requires that directors and shareholders be asked to
approve all advisory and sub-advisory agreements after a change in control such
as this.
Neither the advisory nor the sub-advisory agreements are being changed, no new
fees are being added and no fees are being increased. The same portfolio
managers will continue to manage your investments. Shelby M.C. Davis will
continue as Founder and Senior Research Adviser as described in the current
prospectuses of each Fund.
WHAT ARE THE REASONS FOR THE PROPOSED CHANGES IN FUNDAMENTAL POLICIES
(Proposal 3)?
Some of the Davis Funds' policies reflect government regulations that no longer
exist. In other cases, limitations are more stringent than current government
regulations require. The Board of Directors believes the proposed changes in
investment policies will benefit shareholders by allowing the portfolio managers
of the Davis Funds to adapt more quickly to future changes in investment
opportunities.
WHAT IS THE ROLE OF THE INDEPENDENT ACCOUNTANTS? (Proposal 4)
The independent accountants act as the Davis Fund's auditors. They review the
Funds' annual financial statements and provide other audit and tax-related
services to the Funds.
HAVE THE DIRECTORS APPROVED EACH PROPOSAL?
Yes. The Directors have unanimously approved all of the proposals and recommend
that you vote to approve them.
HOW MANY VOTES AM I ENTITLED TO CAST?
As a shareholder, you are entitled to one vote for each dollar of net asset
value you own of a Davis Fund on the record date. The record date is September
8, 2000.
HOW TO VOTE YOUR SHARES
Voting your shares is easy and will only take a few minutes. You may use any of
the following options -- and remember that VOTING BY INTERNET OR PHONE WILL HELP
LOWER PROXY EXPENSES. For Internet and touch-tone telephone voting, you will
need the 12-digit number(s) on your enclosed proxy voting card(s).
-- BY INTERNET: go to www.proxyvote.com and follow the instructions
-- BY TOUCH TONE PHONE: call toll-free 800-xxx-xxxx and follow the recorded
instructions
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-- BY MAIL: mark your votes on the enclosed proxy card(s), sign your name
exactly as it appears on your latest account statement. Be sure to date, and
mail your vote using the postage-paid envelope provided
Remember: if you vote by Internet or phone, you should not mail in your proxy
card(s). Please make sure you vote all the enclosed proxy card(s).
If you have questions on any part of this document, please call our proxy
solicitor, D.F. King, at 800-xxx-xxxx. A specially trained customer service
representative will be pleased to assist you with any questions or instructions
on how to vote your shares.
The information on these pages is only a summary. Before you vote, please read
the following proxy statement.
It's important to vote as soon as you can.
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NOTICE OF SPECIAL MEETING
To shareholders all Davis Funds: Notice is hereby given that a special meeting
of shareholders of Davis New York Venture Funds, Inc. and Davis Series, Inc.
will be held at 3480 East Britannia Drive, Tucson, Arizona 85706 on December 1,
2000 beginning at 9:00 a.m. Pacific time for the following purposes:
1. To elect directors to hold office until their successors are duly elected
and qualified;
2. To re-approve the advisory and sub-advisory agreements with Davis Selected
Advisers, L.P. and its wholly owned subsidiary, Davis Selected Advisers -
NY, Inc.;
3. To eliminate, reclassify or amend certain fundamental investment policies
and restrictions; and
4. To ratify the selection of KPMG LLP as independent accountants;
The close of business on September 8, 2000 was fixed as the record date for
determining which shareholders are entitled to notice of the meeting and any
adjournments thereof and are entitled to vote.
By order of the Board of Directors,
THOMAS TAYS
Secretary
September 29 , 2000
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PROXY STATEMENT
Proxy statement for special meetings of shareholders
of the Funds to be held on December 1, 2000
DAVIS FUNDS
2949 EAST ELVIRA ROAD, SUITE 101
TUCSON, ARIZONA 85706
INTRODUCTION
PURPOSE OF THIS DOCUMENT
This proxy statement is being furnished to shareholders of each of the Davis
Funds in connection with the solicitation of proxies by and on behalf of the
Board of Directors for use at each fund's meeting. The meetings will be held at
3480 East Britannia Drive, Tucson, Arizona 85706 on December 1, 2000, beginning
at 10 a.m. Pacific Time. This proxy statement is first being mailed to
shareholders on or about September 29, 2000. Appendix A defines some of the
terms used in this proxy
WHO MAY VOTE
The Board of Directors has fixed the record date as the close of business on
September 8, 2000. Only holders of shares of the funds at the close of business
on the record date are entitled to notice of and to vote at, the meetings.
Appendix B shows the eligible votes of each Davis Fund. "Eligible votes" is
defined in Appendix A.
Shareholders as of record date are entitled to one vote for each dollar of net
asset value and each fractional share is entitled to a proportionate share of
one vote upon each matter properly submitted to the meeting. Shareholders will
vote in the aggregate on each of the proposals and any element thereof; classes
of shares will not vote separately. Shareholders may vote by class or in the
aggregate, as appropriate, on such other business as may properly come before
the meeting as required by law.
HOW TO VOTE
Shareholders are requested to vote by Internet, phone or by returning the
enclosed proxy cards. Voting by Internet costs the Fund less than if you vote by
telephone or mail. Depending on the number of funds for which you are a
shareholder and the number of accounts you have, you may receive more than one
proxy card.
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If you vote by mail, complete, date, sign and promptly return the enclosed proxy
cards in the accompanying envelope. If you properly execute and return your
proxy cards prior to the meeting, your shares will be voted in accordance with
the instructions marked on the proxy cards. If no instructions are marked on the
proxy cards, the proxies will be voted FOR the proposals described in this proxy
statement.
The Directors do not intend to present any other business at the Meeting. If,
however, any other matters are properly brought before the Meeting, the persons
named in the accompanying form of proxy will vote thereon in accordance with
their judgment. If you object to our voting other matters on your behalf, please
tell us so in writing before the meeting.
You may revoke your proxy at any time prior to its exercise by voting in person
at the meeting or by submitting, before the meeting, written notice of
revocation or a later-dated proxy.
QUORUM AND VOTING REQUIREMENTS
In order to take action on any proposal (or element of a proposal), a "quorum"
or a majority of the votes entitled to be cast on that proposal must be
represented in person or by proxy.
PROPOSAL 1:
The eleven nominees for the board of directors who receive the highest number of
votes will be elected directors. Davis New York Venture Fund and Davis Growth &
Income Fund are authorized series of a single corporation, Davis New York
Venture Fund, Inc., and together will elect single board of directors. Likewise,
Davis Growth Opportunity Fund, Davis Financial Fund, Davis Real Estate Fund,
Davis Convertible Securities Fund, Davis Government Bond Fund and Davis
Government Money Market Fund are each an authorized series of a single
corporation, Davis Series, Inc., and together will elect a single board of
directors.
PROPOSAL 2:
The new advisory and sub-advisory agreements with Davis Selected Advisers, L.P.
and its wholly owned subsidiary, Davis Selected Advisers - NY, Inc. requires
approval of a majority the eligible
FUNDS VOTING ON EACH PROPOSAL
Each of the Davis Funds will vote on Proposals, 1, 2, and 4.
Each of the Davis Funds is voting to approve new uniform fundamental investment
policies (elements A,B,C,D, E,F and G of Proposal 3). Additionally, some of the
Davis Funds are also voting whether or not to eliminate one or more obsolete
fundamental investment policies:
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PROPOSAL 1 All Funds
PROPOSAL 2 All Funds
PROPOSAL 3 PROPOSED CHANGES IN
FUNDAMENTAL INVESTMENT POLICIES
PROPOSAL 3
Davis New York Venture Fund A, B, C, D, E, F, G, H, I, J, K, L, M, N, O
Davis Growth & Income Fund A, B, C, D, E, F, G
Davis Growth Opportunity Fund A, B, C, D, E, F, G, H, I, J, K, L, M
Davis Financial Fund A, B, C, D, E, F, G, H, I, J, K, L, M
Davis Real Estate Fund A, B, C, D, E, F, G, H, I, J, K, L, M
Davis Convertible Securities Fund A, B, C, D, E, F, G, H, I, J, K, L, M
Davis Government Bond Fund A, B, C, D, E, F, G, H, I, J, K, L, M
Davis Government Money Market Fund A, B, C, D, E, F, G, H, I, J, K, L, M, P
PROPOSAL 4 All Funds
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votes of each Fund as defined by the 1940 Act. A majority of eligible votes of a
Fund is the affirmative vote of the lesser of (i) 67% of such votes if the
holders of more than 50% of the total eligible votes of the Fund are represented
at the meeting, or (ii) more than 50% of the total eligible votes of the Fund.
PROPOSAL 3:
The amendment or elimination of certain fundamental investment policies for each
Fund requires the favorable vote of a majority of the eligible vote of a Fund as
defined by the 1940 Act (see description of vote under Proposal 2, above).
PROPOSAL 4:
To ratify the selection of KPMG LLP as independent accountants the proposal must
receive the affirmative vote of the holders of a majority of the votes
represented at the meeting.
OTHER VOTING-RELATED ISSUES
If a quorum is not present at a meeting, or if sufficient votes to approve a
proposal are not received, the persons named as proxies may propose one or more
adjournments of such meeting to permit further solicitation of proxies. Any
adjournment(s) of a meeting will require the approval of a majority of the votes
of the Davis Funds represented at the meeting.
A shareholder vote may be taken on any other matter to come properly before the
meeting prior to such adjournment(s) if sufficient votes to approve such matters
have been received and such vote is otherwise appropriate. The Board of
Directors does not presently know of any matter to be considered at the meeting
other than the matters described in the Notice of Special Meeting accompanying
this proxy statement.
Abstentions and broker "non-votes" (i.e., proxies received from brokers or
nominees indicating that they have not received instructions from the beneficial
owner or other person entitled to vote) will be counted as present for purposes
of determining the presence of a quorum, but will have no effect on the election
of directors (Proposal 1) and not be counted as votes FOR Proposals 2 through 4.
Accordingly, abstentions and broker non-votes will have the effect of a vote
AGAINST Proposals 2 through 4.
SOLICITATION OF PROXIES
Each Fund has retained D.F. King & Co., Inc., a proxy solicitation firm, to
assist in the solicitation of proxies. The cost of these services will depend
upon the amount and types of services rendered. The Adviser has agreed to pay
75% of the expenses of holding the special meeting of shareholders, including
solicitation of proxies and the Davis Funds will pay 25% of the expenses. Each
Fund will bear its pro rata share of costs of solicitation and expenses incurred
in connection with preparing this proxy statement, including the cost of
retaining a proxy solicitation firm. The Adviser and the Davis Funds also will
reimburse certain parties for their expenses in forwarding proxy materials to
beneficial owners of Fund shares.
In addition to the solicitation of proxies by mail, officers of the funds and of
the Adviser may also solicit proxies electronically, by telephone, by fax, in
person or by other means.
Additional information about the Davis Funds and their operations may be found
throughout the proxy statement.
IMPORTANT SERVICE PROVIDERS
ADVISER. Davis Selected Advisers, L.P.
SUB-ADVISER. Davis Selected Advisers - NY, Inc.
PRINCIPAL UNDERWRITER. Davis Distributors, LLC.
INDEPENDENT ACCOUNTANTS. KPMG LLC
COUNSEL. D'Ancona & Pflaum
CUSTODIAN. State Street Bank
TRANSFER AGENT. Boston Financial Data Services
The address for both Davis Selected Advisers, L.P. and Davis Distributors, LLC
is 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706. The address for
Davis Selected Advisers - NY, Inc. is 609 Fifth Avenue, New York, New York
10017.
SHAREHOLDER REPORTS
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Each Fund will furnish, without charge, a copy of its most recent Annual Report
and, if available, Semiannual Report, to any shareholder upon request.
Shareholders desiring a copy of such reports should direct all written requests
to the Davis Funds, P.O. Box 8406 Boston Massachusetts 0226-8406, or should call
Davis Funds at 800-279-0279.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Davis Funds are not required to hold annual shareholders' meetings and none
of the Funds intends to do so.
A Fund may hold special meetings as required or as deemed desirable by its Board
of Directors for other purposes, such as changing fundamental policies, electing
or removing directors, or approving or amending an investment advisory
agreement.
In addition, a Director may be removed by shareholders of the Funds at a special
meeting called upon written request of shareholders owning, in the aggregate, at
least 25% of the eligible votes.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a future shareholder meeting should send their written submissions to the
particular Davis Fund in which they own shares. The address for each Fund is
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706.
Proposals must be received a reasonable time in advance of a proxy solicitation
to be included. Submission of a proposal does not guarantee inclusion in a proxy
statement, because the proposal must comply with certain federal securities
regulations.
NOTICE TO BANKS, BROKERS-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Davis Funds in writing whether other persons are the
beneficial owners of the shares for which proxies are being solicited and if so,
the number of copies of the proxy statements, other soliciting material and
Annual Reports (or Semiannual Reports) you wish to receive in order to supply
copies to the beneficial owners of shares. Write in care of the particular Davis
Fund, P.O. Box 8406, Boston, Massachusetts 02266-8406.
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PROPOSAL 1:
Election of Directors
It is proposed that shareholders of each Davis Fund elect eleven (11) nominees
to serve as directors, each to hold office until a successor is elected and
qualified. All eleven of the nominees currently serve as directors and it is
proposed that they be reelected. The persons named in the accompanying proxies
intend to vote for the election of the persons listed below unless shareholders
indicate on their proxy cards their desire to withhold authority to vote for
elections to office.
Each nominee has consented to being named in this proxy statement and has agreed
to serve as a director if elected. The Board of Directors does not know of any
reason why any nominee would be unable or unwilling to serve as a director, but
if any nominee should become unable to serve prior to the meeting, the proxy
holders reserve the right to vote for another person of their choice as nominee
or nominees. Appendix C lists all shareholders which owned 5% or more of any
class of a Fund and any nominees which owned more than 1% in any class of a
Fund. The Davis Funds have no knowledge as to whether any nominee has the right
to acquire beneficial ownership of shares of any class of a Fund.
INFORMATION ABOUT THE NOMINEES
This table shows basic information about each nominee. Each nominee currently
serves as a Director of each Davis Fund. For purposes of their duties as
directors, the address of each individual listed below is 2949 East Elvira Road,
Suite 101, Tucson, Arizona 85706. Eight of the eleven nominees are Independent
Directors (that is they are not "interested persons" as defined in the 1940
Act). The interested directors are indicated by footnote below.
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NAME/BIRTHDATE DIRECTOR SINCE PRINCIPAL OCCUPATION
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WESLEY E. BASS, JR. 1990 for DNYVF and Director of each of the Davis Funds;
August 21, 1931 Davis Series. Director of Davis Variable Account
Fund, Inc., President, Bass & Associates
(a financial consulting firm); formerly
First Deputy City Treasurer, City of Chicago
and Executive Vice President, Chicago Title
and Trust Company.
JEREMY H. BIGGS(1) July 31, 1995 for Director and Chairman of each of the Davis Funds,
August 16, 1935 DNYVF and Davis Director and Chairman of Davis International
Series. Series, Inc.; Director and Chairman of Davis
Variable Account Fund, Inc., Consultant to the
Adviser; Director of the Van Eck Chubb Funds;
Vice Chairman, Head of Equity Research
Department, Chairman of the U.S. Investment
Policy Committee and member of the International
Investment Committee of Fiduciary Trust Company
International.
MARC P. BLUM 1986 for DNYVF and Director of each of Davis Funds; Director of
September 9, 1942 Davis Series. Davis Variable Account Fund, Inc., Chief
Executive Officer, World Total Return Fund,
LLP; of Counsel to Gordon, Feinblatt, Rothman,
Hoffberger and Hollander, LLC (attorneys);
Director, Mid-Atlantic
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Realty Trust.
ANDREW A. DAVIS(2) October 6, 1997 for Director and President or Vice President of
June 25, 1963 Davis Series, October each of the Davis Funds; Director and Vice
16, 1997 for DNYVF President of Davis Variable Account Fund, Inc.,
Director and Vice President of each of the
Selected Funds; Director and President, Venture
Advisers, Inc.; Director and Vice President,
Davis Selected Advisers-NY, Inc.
CHRISTOPHER C. DAVIS(2) October 6, 1997 for Director and Chief Executive Officer, President
July 13, 1965 Davis Series; October or Vice President of each of the Davis Funds;
16, 1997 for DNYVF. Director and Chief Executive Officer of Davis
Variable Account Fund, Inc., Director and
President of Davis International Series, Inc.;
Director and President of each of the Selected
Funds; Director, Vice Chairman, Venture
Advisers, Inc.; Director and Chief Executive
Officer of Davis Investments, LLC, Director
Chairman, Chief Executive Officer, Davis
Selected Advisers-NY, Inc.; Chairman and
Director, Shelby Cullom Davis Financial
Consultants, Inc.; Employee of Shelby Cullom
Davis & Co., a registered broker/dealer;
Director, Kings Bay Ltd., an offshore
investment management company.
JERRY D. GEIST 1986 for DNYVF and Director of each of the Davis Funds; Director
May 23, 1934 Davis Series. of Davis Variable Account Fund, Inc., Chairman,
Santa Fe Center; Chairman, Energy & Technology
Company, Ltd., Director, CH2M-Hill, Inc.;
Member, Investment Committee for Microgeneration
Technology Fund, UTECH Funds; Retired Chairman
and President, Public Service Company of
New Mexico.
D. JAMES GUZY 1982 for DNYVF and Director of each of the Davis Funds; Director
March 7, 1936 Davis Series. of Davis Variable Account Fund, Inc., Chairman,
PLX Technology, Inc. (a manufacturer of
semi-conductor circuits); Director, Intel Corp.
(a manufacturer of semi-conductor circuits),
Cirrus Logic Corp. (a manufacturer of
semi-conductor circuits), Alliance Technology
Fund (a mutual fund); Micro Component
Technology, Inc.; and Novellus Systems, Inc.
(a manufacturer of semi-conductor equipment).
G. BERNARD HAMILTON 1978 for DNYVF and Director of each of the Davis Funds; Director
March 18, 1937 Davis Series. of Davis International Series, Inc.; Director
of Davis Variable Account Fund, Inc., Managing
General Partner, Avanti Partners, L.P.
LAURENCE W. LEVINE 1969 to 1983, and 1984 to Director of each of the Davis Funds; Director
April 9, 1931 1984 to present; for of Davis Variable Account Fund, Inc., Partner,
DNVYF and Daves Series. Bigham, Englar, Jones and Houston (attorneys);
United States Counsel to Aerolineas Argentia;
United States Counsel to Banco de la Ciudad
de Buenos Aires; Director, various private
companies.
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CHRISTIAN R. SONNE 1990 for DNYVF and Director of each of the Davis Funds; Director
May 6, 1936 Davis Series. of Davis Variable Account Fund, Inc., General
Partner of Tuxedo Park Associates (a land
holding and development firm); President and
Chief Executive Officer of Mulford Securities
Corporation (a private investment fund) until
1990; formerly Vice President of Goldman
Sachs & Co.
Marsha Williams January 1, 1999 for Director of each of the Davis Funds; Director
March 28, 1951 DNYVF and Davis of Davis Variable Account Fund, Inc., Director
Series. of each of the Selected Funds; Chief
Administrative Officer of Crate & Barrel;
Director, Modine Manufacturing, Inc.; Director,
Chicago Bridge & Iron Company, M.V.; former
Vice President and Treasurer, Amoco Corporation.
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(1) Jeremy H. Biggs, Jr.. is an indirect owner of the Adviser and Principal
Underwriter and an "interested person" of the Funds as defined in the
1940 Act. .
(2) Andrew A. Davis and Christopher C. Davis are both owners and officers
of the Adviser and indirect owners of the Principal Underwriter and
"interested persons" of the Funds as defined in the 1940 Act.
DIRECTOR ACTIVITIES AND COMPENSATION
MEETINGS AND COMMITTEES. Each Davis Fund's Board of Directors met four times in
person and once by telephone during calendar year 1999 and have met in person
three times through September 2000 with a total of four in-person meetings
scheduled in the year 2000. In each year, each Director attended at least 75% of
those meetings.
Each Davis Fund has an Audit Committee, which is comprised entirely of
Independent Directors (Marc P. Blum, Chair, Marsha Williams, Vice Chair, Wesley
E. Bass, Jr., D. James Guzy, Laurence W. Levine and Christian R. Sonne). . The
Audit Committee reviews financial statements and other audit-related matters for
the Davis Funds. The Audit Committee holds discussions with management and with
the Independent Auditors, including the scope of the audit and the Auditor's
independence. The Audit Committee meets at least quarterly and, if necessary,
more frequently. The Audit Committee met four times during each Davis Fund's
most recent full fiscal year. In each such year, each member attended at least
75% of those meetings The Audit Committee has a written charter, attached as
Appendix D.
Each Davis Fund also has a Nominating Committee, which is comprised entirely of
Independent Directors (Jerry D. Geist, Chair, Marc P. Blum, D. James Guzy, G.
Bernard Hamilton and Christian R. Sonne), which meets as often as deemed
appropriate by the Nominating Committee. The Nominating Committee met once
during each Fund's most recent fiscal year. The Nominating Committee reviews and
nominates persons to serve as members of the Board of Directors, reviews and
makes recommendations concerning the compensation of the Independent Directors
and the chair of the Nominating Committee also serves as the Lead Independent
Director. The Nominating Committee does not ordinarily consider nominees
recommended by shareholders. However, shareholders may propose nominees by
writing to the Nominating Committee, in care of the secretary of the Davis
Funds, at 2949 East Elvira, Suite 101, Tucson, Arizona 85706.
COMPENSATION OF DIRECTORS, OFFICERS AND OTHERS. Directors and officers of the
Davis Funds who are also "interested persons" of the Funds receive no
compensation from the Davis Funds. However, each Independent Director currently
receives an aggregate quarterly fee of $9,450 from Davis Funds and an additional
aggregate of $4,050 from the Davis Funds for each regular meeting of the Board
of Directors and is reimbursed for all reasonable out-of-pocket expenses. The
Chairman of the Audit Committee also
7
<PAGE>
receives an additional $900 per meeting. The Vice Chairman of the Audit
Committee also receives an additional $450 per meeting. The compensation paid to
each Director is shown in the table below.
The Davis Funds have no bonus, pension, profit sharing or retirement plans.
AGGREGATE COMPENSATION FROM THE DAVIS FUNDS
<TABLE>
<CAPTION>
TOTAL
DAVIS COMPENSATION
DAVIS NEW YORK SERIES, FROM THE FUND
NAME/POSITION VENTURE FUND, INC.(1) INC.(2) COMPLEX
-------------- --------------------- -------- -------------
<S> <C> <C> <C>
WESLEY E. BASS, JR. $xx $xx $xx
Director
JEREMY H. BIGGS $0.00 $0.00 $0.00
Director
MARC P. BLUM
Director
ANDREW A. DAVIS $0.00 $0.00 $0.00
Director
CHRISTOPHER C. DAVIS $0.00 $0.00 $0.00
Director
JERRY D. GEIST
Director
D. JAMES GUZY
Director
G. BERNARD HAMILTON
Director
LAURENCE W. LEVINE
Director
CHRISTIAN R. SONNE
Director
MARSHA WILLIAMS
Director
</TABLE>
(1) Davis New York Venture Fund, Inc. includes Davis New York Venture Fund
and Davis Growth & Income Fund. Amounts are for the fiscal year ended
July 31, 1999.
(2) Davis Series, Inc. includes Davis Growth Opportunity Fund, Davis
Financial Fund, Davis Real Estate Fund, Davis Convertible Securities
Fund, Davis Government Bond Fund and Davis Government Money Market
Fund. Amounts are for the fiscal year ended December 31, 1999.
The Board of Directors recommends that you vote FOR each nominee.
8
<PAGE>
PROPOSAL 2:
To approve of the New Advisory and Sub-Advisory Agreements with Davis Selected
Advisers, L.P. and its wholly owned subsidiary, Davis Selected Advisers - NY,
Inc.
The Board of Directors, including the Independent Directors, has approved and
recommends that shareholders of the Davis Funds approve, the New Advisory and
Sub-Advisory Agreements with Davis Selected Advisers, L.P. ("Adviser") and its
wholly owned subsidiary, Davis Selected Advisers - NY, Inc. ("Sub-Adviser"); The
agreements are not being changed, fees are not being increased and the same
portfolio managers will continue managing your investments.
PROPOSED CHANGE IN CONTROL. Currently Venture Advisers, Inc. (an entity
controlled by Shelby M.C. Davis), as general partner, controls the Adviser that
provides investment advice and administrative services to each of the Davis
Funds. Venture Advisers, Inc. proposes to transfer control of the Adviser to
Davis Investments, LLC on December 31, 2000. Davis Investments, LLC. is
controlled by Christopher C. Davis, son of Shelby M.C. Davis. Davis Investments,
LLC will become the new general partner of the Adviser. Venture Advisers, Inc.
and Davis Investments, LLC both have the same business address as the Adviser.
Shelby M.C. Davis will continue as Senior Research Adviser and Founder as
described in the current prospectuses of each Davis Fund.
Venture Advisers, Inc. currently controls the Adviser by owning all of the
general partnership units issued by the Adviser. Venture Advisers, Inc. proposes
to transfer one hundred general partnership units to Davis Investments, LLC.
Immediately thereafter Venture Advisers, Inc. would convert its remaining
general partnership units into limited partnership units. Venture Advisers, Inc.
would continue to own approximately 44% of the economic value of the Adviser.
Davis Investments, LLC would then own all of the general partnership units
issued by the Adviser, be the general partner and thereby control the Adviser.
Davis Investments, LLC will pay approximately $11,000 to Venture Advisers, Inc.
as consideration for purchasing general partnership units.
Christopher Davis is the vice chairman and a director of Venture Advisers, Inc.
Christopher Davis is also chairman, director and chief executive officer of
Davis Investments, LLC. Christopher Davis serves as a portfolio manager of Davis
New York Venture Fund, Davis Growth & Income Fund, Davis Financial Fund and is a
senior member of the team managing Davis Growth Opportunity Fund. Christopher
Davis would continue to serve as portfolio manager after the change in control.
The officers of the Davis Funds, the Adviser, and the Sub-Adviser will not
change as a result of the change in control. Officers are listed in Appendix E.
The change in control may be deemed an assignment of the Existing Advisory and
Sub-Advisory Agreements currently in effect for purposes of Section 15(a) of the
1940 Act, which automatically terminates such agreements. Therefore the New
Advisory and Sub-Advisory Agreements are being submitted to the shareholders of
each Davis Fund for their approval at this time. If such approvals are not
obtained, the change in control will be delayed and the Existing Advisory and
Sub-Advisory Agreements will remain in full force and effect.
TERMS OF THE NEW ADVISORY AGREEMENTS. Shareholders are being asked to approve
the New Advisory Agreements without material change from the Existing Advisory
Agreements. The following discussion of the New Advisory Agreements is qualified
in its entirety by reference to the form of the New Advisory Agreements set
forth in Appendix F.
As under the Existing Advisory Agreements, the New Advisory Agreements provide
that the Adviser, subject to the general supervision of the Board of Directors,
will provide management and investment advice and will furnish statistical,
executive and clerical personnel, bookkeeping, office space and equipment
necessary to carry out its investment advisory functions and such corporate
managerial duties as
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<PAGE>
are requested by the Board of Directors. The Davis Funds pay for all expenses of
their operations not specifically assumed by the Adviser. The Board of Directors
may arrange for the Adviser to perform any of the corporate management services
necessary or advisable for the operations of the Davis Funds or contract with
another person to perform them. In the absence of willful misfeasance, bad faith
or gross negligence or reckless disregard of its obligations and duties, the
Adviser will not be subject to liability to the Davis Funds or any shareholder
of the Davis Funds for any act or omission in the course of, or in connection
with, rendering services thereunder or for any losses that may be sustained in
the purchase, holding or sale of any security.
TERMS OF THE NEW SUB-ADVISORY AGREEMENTS. Shareholders are being asked to
approve the New Sub-Advisory Agreements with out material change from the
Existing Sub-Advisory Agreements. The following discussion of the New
Sub-Advisory Agreements is qualified in its entirety by reference to the form of
the New Sub-Advisory Agreements set forth in Appendix G. The Adviser, not the
Davis Funds, pays for the Sub-Adviser's services.
As under the Existing Sub-Advisory Agreements, Davis Selected Advisers - NY,
Inc. ("Sub-Adviser"), a wholly owned subsidiary of the Adviser, located at 609
Fifth Avenue, New York, New York 10017, agrees to perform research and portfolio
management functions for the Funds on behalf of the Adviser.
The Sub-Adviser performs research and portfolio management services as requested
by the Adviser. The Sub-Adviser is responsible for complying with stated
policies and applicable laws, including compliance with the Adviser's Code of
Ethics. As payment for its services, the Adviser pay the Sub-Adviser's
reasonable direct and indirect costs associated with the maintenance of an
office and the performance of the terms of the Agreement and, in addition, an
agreed profit margin. All the fees paid to the Sub-Adviser are paid by the
Adviser and not the Davis Funds. The fees paid by the Davis Funds will not be
affected by the New Sub-Advisory Agreements..
The Adviser and the Board of Directors believe the New Sub-Advisory Agreements
are advantageous to the Davis Funds because they enable the Adviser, through the
Sub-Adviser, to attract additional, experienced personnel to perform services on
behalf of the Davis Funds but who desire to remain in the vicinity of New York
City.
Appendix H lists the date when the Existing Advisory and Sub-Advisory Agreements
were last presented to shareholders for approval and the purpose of the vote.
ADVISORY FEES. No new fees are being added and no fees are being increased. The
advisory fee is calculated and paid monthly and is normally expressed as an
annual percentage of each Fund's average net assets. Advisory fees are allocated
among each Class of shares in proportion to each Class's relative total net
assets.
Davis New York Venture Fund pays the Adviser a fee at the annual rate based on
average net assets, as follows: 0.75% on the first $250 million; 0.65% on the
next $250 million; 0.55% on the next $2.5 billion; 0.54% on the next $1 billion;
0.53% on the next $1 billion; 0.52% on the next $1 billion; 0.51% on the next $1
billion; and 0.50% of average net assets in excess of $7 billion.
Davis Growth & Income Fund pays the Adviser a fee at the annual rate based on
average net assets, as follows: 0.75% on the first $250 million; 0.65% on the
next $250 million; 0.55% on total net assets over $500 million.
Davis Growth Opportunity Fund, Davis Financial Fund, Davis Real Estate Fund and
Davis Convertible Securities Fund each pay the Adviser a monthly fee at an
annual rate based on average net assets, as follows: 0.75% on the first $250
million of average net assets; 0.65% on the next $250 million of average net
assets; and 0.55% on average net assets in excess of $500 million.
Davis Government Bond Fund pays the Adviser a fee at the annual rate of 0.50% of
total net assets. Davis Government Money Market Fund pays the Adviser 0.50% on
the first $250 million of average net assets;
10
<PAGE>
0.45% on the next $250 million of average net assets; and 0.40% on average net
assets in excess of $500 million.
These fees may be higher than those of most other mutual funds, but are not
necessarily higher than those paid by funds with similar objectives. Under the
Sub-Advisory Agreement with DSA-NY, the Adviser pays all of DSA-NY's direct and
indirect costs of operations. All of the fees paid to DSA-NY are paid by the
Adviser and not the Funds.
ADVISORY FEE
FOR THE MOST RECENT FISCAL YEAR
FOR EACH FUND
ANNUAL% MOST RECENT
OF NET FISCAL YEAR
FUND ASSETS ENDED
---- ------- -------------
Davis New York Venture Fund Xx% July 31, 1999
Davis Growth & Income Fund Xx% July 31, 1999
Davis Growth Opportunity Fund Xx% December 31, 2000
Davis Financial Fund Xx% December 31, 2000
Davis Real Estate Fund Xx% December 31, 2000
Davis Convertible Securities Fund Xx% December 31, 2000
Davis Government Bond Fund Xx% December 31, 2000
Davis Government Money Market Fund xx% December 31, 2000
The Adviser and not the Funds pays the Sub-Adviser's fees.
Appendix I lists other investment companies with investment objectives similar
to the Davis Funds which the Adviser serves as investment adviser. The Adviser
also serves as sub-adviser to other investment companies with similar investment
objectives. As sub-adviser, the Adviser is not responsible for managing the
investment companies or supervising other service providers and the negotiated
fees reflect this fact.
ADMINISTRATIVE FEES, REGISTRATION FEES AND SHAREHOLDER SERVICES FEES.
Pursuant to the Advisory Agreement, the Adviser, subject to the general
supervision of the Funds' Board of Directors, provides advisory services, which
are described above. The Davis Funds bear all expenses other than those
specifically assumed by the Adviser under the Advisory Agreement, including
preparation of its tax returns, financial reports to regulatory authorities,
dividend determinations, transaction and accounting matters related to its
custodian bank, transfer agency, custodial and shareholder services and
qualification of its shares under federal and state securities laws. Each Davis
Fund reimburses the Adviser for providing certain services including accounting
and administrative services, qualifying shares for sale with state agencies and
shareholder services. During fiscal year ended July 31, 1999 Davis New York
Venture Fund and Davis Growth & Income Fund reimbursed the Adviser a total of
$xx, $xx and $xx for accounting and administrative services, qualifying shares
for sale with state agencies and shareholder services, respectively. During
fiscal year ended December 31, 1999 Davis Growth Opportunity Fund, Davis
Financial Fund, Davis Real Estate Fund, Davis Convertible Securities Fund, Davis
Government Bond Fund and Davis Government Money Market Fund reimbursed the
Adviser a total of $xx, $xx and $xx for accounting and administrative services,
qualifying shares for sale with state agencies and shareholder services,
respectively. These services will not be affected by the approval or disapproval
of Proposal 2.
PORTFOLIO TRANSACTIONS. Shelby Cullom Davis & Co. ("SCD") is a broker-dealer who
may be considered an affiliated person of the Adviser because it is also
controlled by Davis family members. SCD executes certain brokerage transactions
for the Davis Funds. The Adviser follows procedures designed to ensure that the
commissions paid to SCD are equal to or less than those paid to other brokers in
connection with comparable transactions
11
<PAGE>
involving similar securities and that the commissions charged the Davis Funds by
SCD do not exceed commissions charged to other clients in connection with
comparable transactions involving similar securities. Davis Funds paid the
following commissions to SCD during their most recently completed fiscal year:
Dollar % of Total
Fund Name Amount Commissions Fiscal Year
--------- ------ ----------- -----------
Davis New York Venture Fund $xx xx% July 31, 1999
Davis Growth & Income Fund $xx xx% July 31, 1999
Davis Growth Opportunity Fund $xx xx% December 31, 1999
Davis Financial Fund $xx xx% December 31, 1999
Davis Real Estate Fund $xx xx% December 31, 1999
Davis Convertible Securities Fund $xx xx% December 31, 1999
EFFECTIVE DATE AND TERMINATION OF THE NEW ADVISORY AND SUB-ADVISORY AGREEMENTS.
If approved by shareholders, the New Advisory and Sub-Advisory Agreements will
take effect immediately upon the change in control and will remain in effect
through December 31, 2002 and thereafter, but only as long as their continuance
is approved at least annually by (i) the vote, cast in person at a meeting
called for the purpose, of a majority of the Independent Directors and (ii) the
vote of either a majority of the Directors or a majority of the outstanding
shares of the Fund. If the New Advisory and Sub-Advisory Agreements are not
approved, the change in control described above will be delayed while other
options are considered. If Proposal 2 is not approved, the Existing Advisory and
Sub-Advisory Agreements will continue in effect through March 31, 2001 and
thereafter only as long as their continuance is approved at least annually as
described above.
MATTERS CONSIDERED BY THE BOARD
On March 20, 2000, the Board of Directors, including all of the Independent
Directors approved of the Existing Advisory and Sub-Advisory Agreements without
any changes. At that meeting the Independent Directors were notified of the
proposed change in control.
On June 13, 2000, the Board of Directors, including all of the Independent
Directors approved the New Advisory and Sub-Advisory Agreements following the
change in control and called for a meeting of shareholders to approve the New
Advisory and Sub-Advisory Agreements following the change in control.
In their March 20, 2000, meeting, the Independent Directors reviewed materials
specifically relating to the Existing Advisory and Sub-Advisory Agreements.
These materials included: (i) information on the investment performance of each
Davis Fund compared against a peer group of funds, (ii) sales and redemption
data in respect of each Davis Fund, (iii) information concerning the expenses of
each Davis Fund compared against a peer group of funds and (iv) The Adviser's
and Sub-Adviser's operations and financial condition. The Directors, including
the Independent Directors, regularly review, among other issues: (i)
arrangements in respect of the distribution of Davis Fund's shares, (ii) the
allocation of each Fund's brokerage, if any, including allocations to brokers
affiliated with the Adviser and the use of "soft" commission dollars to pay Fund
expenses and to pay for research and other similar services, (iii) the Adviser's
management of the relationships with the Davis Funds' third party providers,
including custodian and transfer agents, (iv) the resources devoted to and the
record of compliance with the Davis Funds' investment policies and restrictions
and with policies on personal securities transactions and (v) the nature, cost
and character of non-investment management services provided by the Adviser and
its affiliates.
In their June 13, 2000 the Independent Directors considered the New Advisory and
Sub-Advisory Agreements required because of the proposed change in control
including: (i) the Adviser and Sub-Adviser do not anticipate any material
changes in their operations as a result of the proposed change in control, (ii)
each of the Davis Funds would continue to be managed by the same portfolio
manager, (iii) Shelby M.C. Davis will continue as Senior Research Adviser and
Founder as described in the current prospectuses of each Fund, (iii) the
Adviser's and Sub-Adviser's senior management will not change as a result of the
12
<PAGE>
change in control and (iv) the Advisory and Sub-Advisory Agreements will be
unchanged, including no new fees and no increase in fees.
CONCLUSION. In considering the Existing Advisory and Sub-Advisory Agreements in
the March meetings and the New Advisory and Sub-Advisory Agreements in June, the
Board of Directors and the Independent Directors did not identify any single
factor as all-important or controlling. Based on their evaluation of all
material factors and assisted by the advice of independent counsel, the
Directors and Independent Directors concluded that the New Advisory and
Sub-Advisory Agreements are fair and reasonable and that they should be approved
without change following the change in control.
The Board of Directors, including the Independent Directors, voted to approve
the submission of the New Advisory and Sub-Advisory Agreements to shareholders
of the Davis Funds and recommends that shareholders vote FOR Proposal 2.
13
<PAGE>
PROPOSAL 3:
Eliminating or Amending Fundamental
Investment Policies and Restrictions
BACKGROUND
Each Davis Fund operates in accordance with the investment objectives, policies
and restrictions described in its prospectus and statement of additional
information.
The Davis Funds generally classify their investment policies as either
"fundamental" or "non-fundamental." A fundamental policy may be changed only by
shareholder vote, while non-fundamental policies may be changed by vote of a
Fund's Board of Directors. The 1940 Act requires mutual funds to classify only
certain policies as fundamental. With this proposal, the Davis Funds seek to
modernize their fundamental policies and gain greater investment flexibility by
adopting a set of uniform fundamental investment policies. A copy of the
proposed uniform fundamental investment policies is included in Appendix J.
Adopting the proposed uniform fundamental investment policies involves restating
certain fundamental policies and eliminating other, unnecessary, fundamental
policies.
Since the time each Fund was created, there have been a number of changes in the
laws and regulations that govern the Funds. For example, significant federal
legislation in 1996 pre-empted state regulation of all mutual funds. As a
result, many investment policies previously imposed on the Davis Funds by
various states are no longer required.
Recently, the Adviser performed a comprehensive review of the Davis Funds'
fundamental and non-fundamental policies. Based on the recommendations of the
Adviser, the Board of Directors has approved policy revisions that are designed
to simplify and modernize those policies that are required to be fundamental and
eliminate those policies that are not required under the law.
If each element of Proposal 3 is approved, each of the Davis Funds will have a
uniform set of fundamental policies (Davis Real Estate Fund and Davis Financial
Fund would have different concentration policies and Davis Real Estate Fund
would also have a different diversification policy, as described below). Each of
the Davis Funds also has a number of non-fundamental policies that the Board of
Directors can change or eliminate without the expense and delay of holding a
shareholder meeting. After the results of the shareholders meetings are known,
the Board of Directors will consider which non-fundamental policies should be
added, changed or eliminated.
Approval of these changes by shareholders would allow the Adviser greater
flexibility to respond to a changing investment environment, subject to the
supervision of the Board of Directors and consistent with legal requirements.
The Adviser believes that the proposed changes will enhance its ability to
manage the Davis Funds' investment portfolios.
Each proposed change to a Fund's fundamental policies recommended by the Board
of Directors is discussed in detail below. The exact language of each
fundamental policy is presented, often followed by further discussion of the
policy. If approved, the fundamental policy could not be changed again without a
shareholder vote. The discussion following the fundamental policy could be
changed by the Board of Directors without a shareholder vote to reflect changes
in the governing law. In order to help you understand the proposed changes, we
have attached Appendixes J and K to this proxy statement. Appendix J shows the
proposed uniform fundamental polices that each of the Davis Funds would adopt.
Appendix K shows each Davis Fund's current fundamental policies proposed to be
replaced by new fundamental policies or eliminated.
14
<PAGE>
VOTING REQUIREMENTS
Approval of each element of Proposal 3 requires the favorable vote of a majority
of the eligible votes of a Fund as defined by the 1940 Act. Proposal 3 is
separated into elements specific to each type of fundamental policy involved,
e.g., diversification, borrowing and concentration. YOU MAY VOTE FOR THE
ELEMENTS OF PROPOSAL 3 APPLICABLE TO YOUR FUND EITHER AS A GROUP OR BY EACH
ELEMENT. If you vote on the elements of Proposal 3 as a group, a Fund will
record your votes as having been cast FOR or AGAINST, according to your vote,
each applicable element within the proposal. Alternatively, you may vote
separately for or against each element of Proposal 3. If you return a proxy card
with a vote on the entire proposal as a group and separate votes on specific
elements of the proposal, your vote on the entire proposal as a group will
control and be recorded as your intended vote.
If shareholders of a Fund approve some, but not all, elements of Proposal 3, the
Fund will have a combination of certain current fundamental policies and certain
new fundamental policies. The Funds intend to implement new policies after the
meeting, as soon as practicable.
The Board of Directors recommends that you vote FOR Proposal 3 and all its
elements.
PROPOSAL 3A:
Proposal to Amend Fundamental Policies Regarding Diversification
Each of the Davis Funds is currently diversified. If this element of Proposal 3
is adopted Davis New York Venture Fund and Davis Growth Opportunity Fund would
each have greater investment flexibility yet remain diversified mutual funds.
Davis Real Estate Fund would become a non-diversified mutual fund and thus have
the flexibility to make more concentrated investments in the Adviser's favorite
companies. The other Davis Funds would all adopt the proposed uniform
fundamental policy regarding diversification, but this would not result in a
material change in their fundamental policies regarding diversification.
Appendix K shows each Davis Fund's current fundamental policy.
This element of Proposal 3 would give the Davis New York Venture Fund, Davis
Growth Opportunity Fund and Davis Real Estate Fund greater investment
flexibility by permitting the Funds to acquire larger positions in the
securities of individual companies. The Adviser believes that this increased
flexibility may provide opportunities to enhance investment performance. At the
same time, investing a larger percentage of a Fund's assets in a single issuer's
securities increases the Fund's exposure to risks associated with that issuer's
financial condition and business operations. The Adviser will use the increased
flexibility to invest more than 5% of a Fund's total assets in an issuer's
securities only when it believes the securities potential return justifies
accepting the risks associated with the higher level of investment.
THE NEW FUNDAMENTAL POLICY ON DIVERSIFICATION FOR ALL DAVIS FUNDS (OTHER THAN
DAVIS REAL ESTATE FUND) WOULD BE:
Diversification:
The Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
To remain classified as a diversified investment company under the 1940 Act, the
Fund must conform with the following: With respect to 75% of its total assets, a
diversified investment company may not invest more than 5% of its total assets,
determined at market or other fair value at the time of purchase, in the
securities of any one issuer, or invest in more than 10% of the outstanding
voting securities of any one issuer, determined at the time of purchase. These
limitations do not apply to investments in securities issued or guaranteed by
the United States ("U.S.") government or its agencies or instrumentalities.
15
<PAGE>
THE NEW FUNDAMENTAL POLICY ON DIVERSIFICATION FOR DAVIS REAL ESTATE FUND WOULD
BE:
Diversification:
The Fund is not required to diversify its investments.
Further Explanation of Diversification Policy:
The Fund intends to remain classified as a regulated investment company under
the Internal Revenue Code. This requires the Fund to conform with the following:
at the end of each quarter of the taxable year, at least 50% of the value of the
Fund's total assets must be represented by: cash and cash items; U.S. government
securities; securities of other regulated investment companies and "other
securities". For this purpose, "other securities" does not include investments
in the securities of any one issuer that represent more than 5% of the value of
the Fund's total assets or more than 10% of the issuer's outstanding voting
securities.
PROPOSAL 3B:
Proposal to Amend Fundamental Policies Regarding Concentration
Davis Financial Fund and Davis Real Estate Fund both concentrate their
investments in specific industries. Each of the other Davis Funds are prohibited
from investing more than 25% of their assets in companies considered to be in
the same industry.
This element of Proposal 3 would allow Davis Financial Fund greater flexibility
in meeting its concentration requirements. Currently, Davis Financial Fund may
not invest less than 25% of its total assets in companies principally in banking
and another 25% of its total assets in companies principally engaged in
financial services. The Adviser believes that the banking industry is in fact a
sub-sector of the financial services industry. If approved, Davis Financial Fund
would be required to invest a greater percentage of its total assets in the
financial services industry (65% rather than 25% +25% = 50%) but would have the
flexibility to meet this requirement by investing in all manner of companies in
the financial services industry. Davis Financial Fund would continue to be
prohibited from investing more than 25% of its total assets in any other
industry.
This element of Proposal 3 would simplify Davis Real Estate Fund's fundamental
policy regarding concentration, but would not result in a material change. Each
of the other Davis Funds would adopt uniform concentration language, but this
would not result in a material change in their fundamental policies regarding
concentration. Appendix K shows each Davis Fund's current fundamental policy
THE NEW FUNDAMENTAL POLICY ON CONCENTRATION FOR DAVIS FINANCIAL FUND WOULD BE:
Concentration:
Davis Financial Fund concentrates its investments in the financial services
industry.
Further Explanation of Concentration Policy:
During normal market conditions, at least 65% of the Fund's assets are invested
in companies "principally engaged" in financial services.
A company is "principally engaged" in financial services if it owns financial
services related assets constituting at least 50% of the total value of its
assets, or if at least 50% of its revenues are derived from its provision of
financial services. Companies in the financial services industry include
commercial banks, industrial banks, savings institutions, finance companies,
diversified financial services companies, investment banking firms, securities
brokerage houses, investment advisory companies, leasing companies, insurance
companies and companies providing similar services.
The Fund may not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than issuers in the financial services industry or securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities).
16
<PAGE>
THE NEW FUNDAMENTAL POLICY ON CONCENTRATION FOR DAVIS REAL ESTATE FUND WOULD BE:
Concentration:
Davis Real Estate Fund concentrates its investments in real estate securities.
Further Explanation of Concentration Policy:
During normal market conditions, at least 65% of the Fund's assets are invested
in real estate securities.
Real estate securities are issued by companies that have at least 50% of the
value of their assets, gross income, or net profits attributable to ownership,
financing, construction, management or sale of real estate, or to products or
services that are related to real estate or the real estate industry. Real
estate companies include real estate investment trusts or other securitized real
estate investments, brokers, developers, lenders and companies with substantial
real estate holdings such as paper, lumber, hotel and entertainment companies.
The Fund may not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than real estate securities or securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities).
THE NEW FUNDAMENTAL POLICY ON CONCENTRATION FOR ALL DAVIS FUNDS (OTHER THAN
DAVIS FINANCIAL FUND AND DAVIS REAL ESTATE FUND) WOULD BE:
Concentration:
The Fund may not concentrate its investments in the securities of issuers
primarily engaged in any particular industry, except as allowed under applicable
law, including the 1940 Act.
Further Explanation of Concentration Policy:
The Fund may not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities).
PROPOSAL 3C:
Proposal to Amend Fundamental Policies
Regarding Senior Securities
Currently, each of the Davis Funds (except for Davis Growth & Income Fund) has a
non-fundamental policy governing the issuance of senior securities. The 1940 Act
currently requires all mutual funds to adopt fundamental policies restricting
the issuance of senior securities. If this element of Proposal 3 is adopted,
each of the Davis Funds will adopt the uniform fundamental policy regarding
senior securities. Appendix K shows Davis Growth & Income Fund's current
fundamental policy
THE NEW FUNDAMENTAL POLICY ON ISSUING SENIOR SECURITIES FOR ALL DAVIS FUNDS
WOULD BE:
Issuing Senior Securities: Except as permitted under applicable law, including
the 1940 Act, the Fund may not issue senior securities.
Further Explanation of Issuing Senior Securities:
The Fund may not issue senior securities nor sell short more than 5% of its
total assets, except as provided by the 1940 Act and any rules, regulations or
orders issued thereunder. This limitation does not apply to selling short
against the box.
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<PAGE>
PROPOSAL 3D:
Proposal to Amend Fundamental Policies Regarding Borrowing
Each Davis Fund's (except Davis Growth & Income Fund) current fundamental policy
regarding borrowing is more restrictive than required by the 1940 Act. It is
proposed that each Davis Fund adopt a new fundamental policy regarding
borrowing, which provides more flexibility. Appendix K shows each Davis Fund's
current fundamental policy.
This element of Proposal 3 would increase the borrowing limits for each of the
Davis Funds (other than Davis Growth & Income Fund, which would remain
unchanged). Neither the current policy nor the proposed policy allow the funds
to purchase additional portfolio securities if borrowing exceeds 5% of total
assets. The expanded borrowing limits may be useful in a number of situations,
such as to meet unanticipated redemptions without selling portfolio securities
at disadvantageous prices. The Adviser believes that this more flexible
fundamental borrowing policy is in the best interests of the funds and their
shareholders because it will allow the Davis Funds, subject to approval by the
Board of Directors, to adapt to future developments in investment practices and
changes in the governing laws and regulations without the delay and cost of a
shareholder meeting.
THE NEW FUNDAMENTAL POLICY ON BORROWING FOR ALL DAVIS FUNDS WOULD BE:
Borrowing: The Fund may not borrow money, except to the extent permitted by
applicable law, including the 1940 Act.
Further Explanation of Borrowing Policy: The Fund may borrow from banks and
enter into reverse repurchase agreements in an amount up to 33 1/3% of its total
assets, taken at market value. The Fund may also borrow up to an additional 5%
of its total assets from banks or others. The Fund may borrow only as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. The Fund may purchase additional securities so long as
borrowings do not exceed 5% of its total assets. The Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities. The Fund may purchase securities on margin to the
extent permitted by applicable law.
PROPOSAL 3E:
Proposal to Amend Fundamental Policies Regarding Underwriting
Each of the Davis Funds currently has a fundamental policy that prevents it from
engaging in the underwriting of securities, except in connection with the
disposition of securities from its investment portfolio. Appendix K shows each
Davis Fund's current fundamental policy. While the Davis Funds' current policies
generally have not affected their investments in the past, their replacement
with a more flexible fundamental policy could provide investment flexibility in
the future. Accordingly, the Board of Directors believes that approval of this
element of Proposal 3 is in the best interests of the Funds and their
shareholders.
THE NEW FUNDAMENTAL POLICY ON UNDERWRITING FOR ALL DAVIS FUNDS WOULD BE:
Underwriting: The Fund may not underwrite securities of other issuers except to
the extent permitted by applicable law, including the 1940 Act.
Further Explanation of Underwriting Policy: The Fund may not underwrite
securities of other issuers, except insofar as the Fund may be deemed to be an
underwriter in connection with the disposition of its portfolio securities.
PROPOSAL 3F:
18
<PAGE>
Proposal to Amend Fundamental Policies
Regarding Investments in Commodities and Real Estate
The 1940 Act requires every mutual fund to adopt a fundamental policy regarding
investment in commodities and real estate. Each of the Davis Funds' current
fundamental policy restricting investments in commodities and real estate is
more restrictive than required by the 1940 Act. Appendix K shows each Davis
Fund's current fundamental policy.
This element of Proposal 3 would adopt a new fundamental policy restricting
investments in commodities and real estate, which provides more flexibility. The
proposed fundamental policy will not prevent Davis Real Estate Fund (or the
other equity funds) from investing in securities issued by real estate
companies. The Adviser believes that this more flexible fundamental policy
restricting investments in commodities and real estate is in the best interests
of the funds and their shareholders because it will allow the Davis Funds,
subject to approval by the Board of Directors, to adapt to future developments
in investment practices and changes in the governing laws and regulations
without the delay and cost of a shareholder meeting.
THE NEW FUNDAMENTAL POLICY FOR ALL DAVIS FUNDS REGARDING INVESTMENTS IN
COMMODITIES AND REAL ESTATE WOULD BE:
Investments in Commodities and Real Estate: The Fund may not purchase or sell
commodities or real estate, except to the extent permitted by applicable law,
including the 1940 Act.
Further Explanation of Policy Restricting Investments in Commodities and Real
Estate: The Fund may purchase or sell financial futures contracts and related
options and currency contracts and related options as described in its
prospectus and statement of additional information. The Fund may not purchase or
sell real estate, except that the Fund may invest in securities that are
directly or indirectly secured by real estate, or securities issued by issuers
that invest in real estate.
PROPOSAL 3G:
Proposal to Amend Fundamental Policies Regarding Making Loans
The 1940 Act requires every mutual fund to adopt a fundamental policy regarding
making loans. Each of the Davis Funds' current fundamental policy restricting
making loans is more restrictive than required by the 1940 Act. It is proposed
that each Davis Fund adopt a new fundamental policy restricting making loans,
which provides more flexibility. The Adviser believes that this more flexible
fundamental policy regarding making loans is in the best interests of the Davis
Funds and their shareholders because it will allow the Davis Funds, subject to
approval by the Board of Directors, to adapt to future developments in
investment practices and changes in the governing laws and regulations without
the delay and cost of a shareholder meeting. Appendix K shows each Davis Fund's
current fundamental policy.
THE NEW FUNDAMENTAL POLICY FOR ALL DAVIS FUNDS REGARDING MAKING LOANS WOULD BE:
Making Loans: The Fund may not make loans to other persons, except as allowed by
applicable law, including the 1940 Act.
Further Explanation of Lending Policy: The acquisition of investment securities
or other investment instruments is not be deemed to be the making of a loan.
To generate income and offset expenses, the Fund may lend portfolio securities
to broker-dealers and other financial institutions in an amount up to 33 1/3% of
its total assets, taken at market value. While securities are on loan, the
borrower will pay the Fund any income accruing on the security. The Fund may
invest any collateral it receives in additional portfolio securities, such as
U.S. Treasury notes, certificates of deposit,
19
<PAGE>
other high-grade, short-term obligations or interest-bearing cash equivalents.
Gains or losses in the market value of a security lent will affect the Fund and
its shareholders.
When the Fund lends its securities, it will require the borrower to give the
Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.
PROPOSAL 3H:
Proposal to Eliminate the Fundamental Policy
Regarding Investments in Unseasoned Issuers
The Davis Funds' (other than Davis Growth & Income Fund) current fundamental
policies limit the Funds' ability to purchase securities issued by "unseasoned
issuers" (i.e., issuers who have less than three years of operations) to 5% of
total assets. Appendix K shows each Davis Fund's current fundamental policy.
Each Fund's current fundamental policy is based on requirements imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares and the 1940 Act does not require the current
fundamental policy. If this policy is eliminated and the Adviser determines it
is advisable to so invest, shareholders would have a greater exposure to the
risks associated with such investments. The Adviser does not believe that
elimination of the current fundamental policy would materially increase the
risks to the Davis Funds or their shareholders. Accordingly, the Board of
Directors believes that elimination of the current fundamental policies
regarding investment in "unseasoned issuers" is in the best interests of the
Davis Funds and their shareholders.
PROPOSAL 3I:
Proposal to Eliminate the Fundamental Policy
Regarding Investments in Options
The Davis Funds' (other than Davis Growth & Income Fund) current fundamental
policies limit the Funds' ability to purchase or sell put and call options.
Appendix K shows each Davis Fund's current fundamental policy. Each Fund's
current fundamental policy is based on requirements imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares and the 1940 Act does not require the current
fundamental policy. If this policy is eliminated and the Adviser determines it
is advisable to so invest, shareholders would have a greater exposure to the
risks associated with such investments. The Adviser does not believe that
elimination of the current fundamental policy would materially increase the
risks to the Davis Funds or their shareholders. Accordingly, the Board of
Directors believes that elimination of the current fundamental policies
regarding investment in options is in the best interests of the Davis Funds and
their shareholders.
PROPOSAL 3J:
Proposal to Eliminate the Fundamental Policy Regarding Investments in Other
Investment Companies
The Davis Funds' (other than Davis Growth & Income Fund) current fundamental
policies limit the Funds' ability to invest in other registered investment
companies. Appendix K shows each Davis Fund's current fundamental policy. Each
Fund's current fundamental policy is based on requirements imposed by the
20
<PAGE>
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds. Investment in shares of other investment companies is specifically
addressed by section 12(d)(1) of the 1940 Act and is further limited for money
market funds by Rule 2a-7. The 1940 Act generally limits a fund to (i)
purchasing 3% of the total outstanding voting stock of a single other investment
company; (ii) investing 5% of its total assets in the securities of a single
other investment company; and (iii) investing 10% of its total assets in
securities of all other investment companies.
Rule 2a-7 imposes additional limitations on the money market funds' investments
in other investment companies because Rule 2a-7 limits money market fund
investments to high quality instruments that present minimal credit risk.
Accordingly, money market funds generally may only invest in other investment
companies if the investment companies are money market funds.
Elimination of the current fundamental policy will allow each Fund to invest in
other investment companies to the extent permitted by the 1940 Act. To the
extent a Fund invests in shares of other investment companies, shareholders may
indirectly bear a portion of the expenses of the investment companies in which
the Fund invests. The investment adviser will take these expenses into account
prior to deciding that such an investment is suitable for a fund and its
shareholders.
The Adviser does not believe that elimination of the current fundamental policy
would materially increase the risks to the Davis Funds or their shareholders.
Accordingly, the Board of Directors believes that elimination of the current
fundamental policies regarding investment in other investment companies is in
the best interests of the Davis Funds and their shareholders.
PROPOSAL 3K:
Proposal to Eliminate the Fundamental Policies
Regarding Short Selling, Margin and Arbitrage
The Davis Funds' (other than Davis Growth & Income Fund) current fundamental
policies limit the Funds' ability to sell short or buy on margin. Davis New York
Venture Fund, Davis Growth Opportunity Fund and Davis Government Bond Fund are
prohibited from engaging in arbitrage. Appendix K shows each Davis Fund's
current fundamental policy.
Each Fund's current fundamental policy is based on requirements imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares and the 1940 Act does not require the current
fundamental policy. If this policy is eliminated and the Adviser determines it
is advisable to so invest, shareholders would have a greater exposure to the
risks associated with such investments. The Adviser does not believe that
elimination of the current fundamental policy would materially increase the
risks to the Davis Funds or their shareholders. Accordingly, the Board of
Directors believes that elimination of the current fundamental policies
regarding investment in options is in the best interests of the Davis Funds and
their shareholders.
PROPOSAL 3L:
Proposal to Eliminate the Fundamental Policy
Regarding Investing for Control
The Davis Funds' (other than Davis Growth & Income Fund) current fundamental
policies prohibit the Funds from investing for the purpose of exercising control
or management of other companies. Appendix K shows each Davis Fund's current
fundamental policy.
21
<PAGE>
The 1940 Act does not require mutual funds to have a fundamental policy
regarding investing for the purpose of exercising control of an issuer. Each
Fund's current fundamental policy is based on requirements imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares.
The Adviser does not believe that elimination of the current fundamental policy
would materially increase the risks to the Davis Funds or their shareholders.
Approval of this element of Proposal 3 would allow the Board Directors to take
appropriate and timely action to adopt or amend a non-fundamental policy,
without the expense and delay associated with a shareholder meeting.
Accordingly, the Board of Directors believes that approval of this element of
Proposal 3 would be in the best interests of the Davis Funds and their
shareholders.
PROPOSAL 3M:
Proposal to Eliminate the Fundamental Policy Regarding Investments in Companies
with Affiliated Ownership
The Davis Funds' (other than Davis Growth & Income Fund) current fundamental
policies limit the Funds' ability to purchase securities of issuers whose
securities are owned by officers or directors of the Funds or by the Adviser.
Appendix K shows each Davis Fund's current fundamental policy.
The 1940 Act does not require mutual funds to adopt fundamental policies
regarding investments in companies with affiliated ownership. Each Fund's
current fundamental policy is based on requirements imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares.
The Adviser believes that eliminating this policy would be in the best interests
of the Davis Funds and their shareholders because it would increase the
Adviser's flexibility in managing the assets of each Fund without any material
increase in risks to shareholders. Accordingly, the Board of Directors believes
that elimination of the current fundamental policies regarding investment in
securities of issuers whose securities are owned by affiliates in the best
interests of the Davis Funds and their shareholders.
PROPOSAL 3N:
Proposal to Eliminate Fundamental Policy
Regarding Investments in Illiquid Securities
Davis New York Venture Fund has a fundamental policy prohibiting the Fund from
purchasing more illiquid securities if, after the purchase, more than 15% of the
value of the Fund's net assets would be invested in such securities. None of the
other Davis Funds has a fundamental policy restricting investments in illiquid
securities. Appendix K shows Davis New York Venture Fund's current fundamental
policy.
Davis New York Venture Fund's current fundamental policy is based on
requirements imposed by the administrators of securities laws in various states.
However, federal legislation passed in 1996 preempted substantive state
regulation of mutual funds and the sale of their shares and the 1940 Act does
not require the current fundamental policy.
Current SEC rules, which have changed in the past and may be changed in the
future, limit a mutual fund's investment in illiquid securities to not more than
15% of total assets. If this element of Proposal 3 is approved, Davis New York
Venture Fund would adopt a non-fundamental policy, similar to the other Davis
Funds (except the money market fund), limiting investments in illiquid
securities to no more than 15% of the value of total assets. The Adviser does
not believe that elimination of the current fundamental policy
22
<PAGE>
and adoption of the similar non-fundamental policy would materially increase the
risks to the Davis Funds or their shareholders. Approval of this element of
Proposal 3 would allow the Board Directors to take appropriate and timely action
to adopt or amend a non-fundamental policy, without the expense and delay
associated with a shareholder meeting. Accordingly, the Board of Directors
believes that approval of this element of Proposal 3 would be in the best
interests of the Davis Funds and their shareholders.
PROPOSAL 3O:
Proposal to Eliminate Fundamental Policy
Making the Investment Objective Fundamental
Davis New York Venture Fund's investment objective is "growth of capital." The
Fund has a policy making this objective fundamental. This is more restrictive
than is required under the 1940 Act and none of the other Davis Funds has such a
fundamental policy. If this element of Proposal 3 is approved, the Board of
Directors could change the Fund's investment objective without the delay and
expense of holding a meeting of shareholders. Shareholders would be notified of
the change and the Fund's prospectus would be amended to reflect the change. The
Board of Directors believes that eliminating this unnecessary fundamental policy
is in the best interests of the fund and its shareholders because it will allow
Davis New York Venture Fund, subject to approval by the Board, to adapt to
future developments in investment practices and changes in the governing laws
and regulations without the delay and cost of a shareholder meeting. Appendix K
shows Davis New York Venture Fund's current fundamental policy.
PROPOSAL 3P:
Proposal to Eliminate Fundamental Policies Regarding Maturity, Restricted
Securities and Investments in Oil, Gas and Minerals
Davis Government Money Market Fund's current fundamental policies prohibits the
Fund from purchasing any security that has a maturity date exceeding that
prescribed in Rule 2a-7 under the 1940 Act, prohibit the Fund from investing in
restricted securities and also prohibit it from investing in oil, gas or other
mineral exploration or development programs. Appendix K shows Davis Government
Money Market Fund's current fundamental policies.
The 1940 Act does not require any of these three fundamental policies. Current
SEC rules, which have changed in the past and may be changed in the future,
limit a money market fund's ability to purchase securities with maturities of
more than 397 days, limit the purchase of illiquid securities to not more than
10% of net assets and prohibit investment in excessively risky securities, such
as unproven mineral exploration or development programs. If this element of
Proposal 3 is approved, Davis Government Money Market Fund will adopt
non-fundamental policies prohibiting it from purchasing any security that has a
maturity date exceeding that prescribed by SEC rules and regulations governing
money market funds and prohibiting the Fund from purchasing illiquid securities
if more than 10% of the value of the Fund's net assets would be invested in such
securities. Davis Government Money Market Fund would not adopt an explicit
prohibition against investing in oil, gas or other mineral exploration or
development programs as such a policy would be irrelevant to the Fund's
investment strategy.
The Adviser does not believe that elimination of the current fundamental
policies and adoption of the non-fundamental policy would materially increase
the risks to the Davis Government Money Market Fund or its shareholders.
Approval of this element of Proposal 3 would allow the Board Directors to take
appropriate and timely action to amend non-fundamental policies without the
expense and delay associated with a shareholder meeting. Accordingly, the Board
of Directors believes that approval of this element of Proposal 3 would be in
the best interests of Davis Government Money Market Fund and its shareholders.
23
<PAGE>
PROPOSAL 4:
To ratify the selection of KPMG LLP as
independent accountants of the Funds
By a vote of the Independent Directors, the firm of KPMG LLP has been selected
as independent accountants for each of the Davis Funds to sign or certify any
financial statements of each Fund required by any law or regulation to be
certified by an independent accountant and filed with the SEC or any state.
Pursuant to the 1940 Act, such selection requires the ratification of
shareholders. In addition, as required by the 1940 Act, the vote of the
Directors is subject to the right of the Davis Funds, by vote of a majority of
their eligible votes at any meeting called for the purpose of voting on such
action, to terminate such employment without penalty. KPMG LLP has advised the
Davis Funds that to the best of its knowledge and belief, as of the record date,
no KPMG LLP professional had any direct or material indirect ownership interest
in the Davis Funds inconsistent with the independence standards pertaining to
accountants.
The independent accountants examine annual financial statements for the Davis
Funds and provide other audit and tax-related services. In recommending the
selection of the Davis Fund's accountants, the Audit Committee reviewed the
nature and scope of the services to be provided (including non-audit services)
and whether the performance of such services would affect the accountants'
independence. Representatives of KPMG LLP are not expected to be present at the
Meeting, but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
LIST OF APPENDIXES
Appendix A: Definitions of Some Terms used in this Proxy
Appendix B: Eligible Votes of Each Davis Fund
Appendix C: Shareholders owning over 5% of any Class and Nominees owning
over 1% of any Class
Appendix D: Audit Committee Charter
Appendix E: Officers of the Davis Funds, the Adviser, and the Sub-Adviser
Appendix F: New Advisory Agreements
Appendix G: New Sub-Advisory Agreements
Appendix H: Dates that the Existing Advisory and Sub-Advisory Agreements
were most recently submitted to shareholders.
Appendix I: Other Investment Companies which Davis Selected Advisers
serves as Investment Adviser
Appendix J: Proposed Fundamental Policies
Appendix K: Current Fundamental Policies for Each Davis Fund
24
<PAGE>
APPENDIX A:
-------------------------------------------------------------------------------
DEFINITIONS OF SOME TERMS USED IN THIS PROXY
1940 ACT - The Investment Company Act of 1940, as amended and the rules and
regulations thereunder.
ADVISER - Davis Selected Advisers, L.P..
BOARD OR BOARD OF DIRECTORS - The board of directors for each Fund. The term is
used in the singular because the board for each fund is comprised of the
same individuals.
CORPORATION - The Davis Funds are organized as two Maryland corporations: Davis
New York Venture Fund, Inc. and Davis Series, Inc.
DAVIS FUNDS - Eight of the Davis Funds offered to the public: Davis New York
Venture Fund, Davis Growth & Income Fund, Davis Growth Opportunity Fund,
Davis Financial Fund, Davis Real Estate Fund, Davis Convertible Securities
Fund, Davis Government Bond Fund and Davis Government Money Market Fund.
DIRECTOR - A member of the Board of Directors.
ELIGIBLE VOTE - The holder of each full share of a Fund outstanding as of the
close of business on the record date is entitled to one vote for each
dollar of net asset value and each fractional share is entitled to a
proportionate share of one vote upon each matter properly submitted to the
meetings.
EXISTING ADVISORY AND SUB-ADVISORY AGREEMENTS - The existing advisory agreements
between the Adviser and each of the Davis Funds; and the existing
sub-advisory agreements between the Adviser, the Sub-Adviser and each of
the Davis Funds.
FUND - any of the eight Davis Funds.
INDEPENDENT ACCOUNTANTS - KPMG LLP serves as independent auditors of the Davis
Funds.
INDEPENDENT DIRECTORS - Those directors of a Davis Fund who, under the 1940 Act,
are not considered an "interested person" of the Fund.
INVESTMENT POLICIES - The investment objectives, policies and restrictions
described in a Fund's prospectus and statement of additional information.
MEETING - A Fund's Special Meeting of Shareholders of the Funds and any
adjournment(s) thereof.
MEETINGS - The meetings of any two or all of the Davis Funds.
NEW ADVISORY AND SUB-ADVISORY AGREEMENTS - The proposed advisory agreements
between the Adviser and each of the Davis Funds; and the proposed
sub-advisory agreements between the Adviser, the Sub-Adviser and each of
the Davis Funds. All terms of the New Advisory and Sub-Advisory Agreements
are in substance identical to those of the Existing Advisory and
Sub-Advisory Agreements, no new fees are being proposed and no fees are
being increased.
NOMINEE - An individual nominated for election or re-election to the Board of
Directors.
PROPOSAL - One of the five proposals described in the proxy statement.
PROPOSALS - The five proposals described in the proxy statement.
<PAGE>
PROXY STATEMENT - The proxy statement itself, not including supplemental
material.
RECORD DATE - The date for determining which Fund shareholders are entitled to
notice of and to vote at, a meeting and any adjournment(s) thereof.
SEC - The Securities and Exchange Commission.
SUB-ADVISER - Davis Selected Advisers - NY, Inc.
<PAGE>
APPENDIX B:
-------------------------------------------------------------------------------
ELIGIBLE VOTES
AS OF SEPTEMBER 8, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fund Class A Class B Class C Class Y SUM
---------------------------------------------------------------------------------------------------------
Davis New York Venture Fund
---------------------------------------------------------------------------------------------------------
Davis Growth and Income Fund
---------------------------------------------------------------------------------------------------------
DAVIS NEW YORK VENTURE FUND, INC.
---------------------------------------------------------------------------------------------------------
Davis Growth Opportunity Fund
---------------------------------------------------------------------------------------------------------
Davis Financial Fund
---------------------------------------------------------------------------------------------------------
Davis Real Estate Fund
---------------------------------------------------------------------------------------------------------
Davis Convertible Securities Fund
---------------------------------------------------------------------------------------------------------
Davis Government Bond Fund
---------------------------------------------------------------------------------------------------------
Davis Government Money Market Fund
---------------------------------------------------------------------------------------------------------
DAVIS SERIES, INC.
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX C:
-------------------------------------------------------------------------------
LARGE NOMINEES AND SHAREHOLDERS
The following list sets forth as of September 8, 2000, each nominee who owns
more than 1% of the total outstanding shares of any Class of any of the Funds.
NOMINEE FUND(S) IN WHICH % OF SHARES NO. OF SHARES
NAME OWNERSHIP IS >1% OUTSTANDING OWNED
-------------------------------------------------------------------------------
JEREMY BIGGS
The following table sets forth as of September 8, 2000, the name and holdings of
any persons known by the Davis Funds to be a record owner of more than 5% of the
outstanding shares of any Class of its Funds. Other than as indicated below,
Davis Funds are not aware of any shareholder that beneficially owns in excess of
25% of the Funds' total outstanding shares.
SHAREHOLDERS OWNING MORE THAN 5% OF SHARES OF ANY CLASS
<TABLE>
<CAPTION>
% OF CLASS NUMBER OF
NAME AND ADDRESS OF SHAREHOLDER OUTSTANDING SHARES OWNED
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DAVIS NEW YORK VENTURE FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS NEW YORK VENTURE FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS NEW YORK VENTURE FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS NEW YORK VENTURE FUND - CLASS Y SHARES
John Doe, Address, City, State, Zip xx.xx%
<PAGE>
DAVIS GROWTH & INCOME FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
% OF CLASS NUMBER OF
NAME AND ADDRESS OF SHAREHOLDER OUTSTANDING SHARES OWNED
---------------------------------------------------------------------------------------------------------------
DAVIS GROWTH & INCOME FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GROWTH & INCOME FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS CONVERTIBLE SECURITIES FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS CONVERTIBLE SECURITIES FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS CONVERTIBLE SECURITIES FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS FINANCIAL FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS FINANCIAL FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS FINANCIAL FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GOVERNMENT BOND FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GOVERNMENT BOND FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
<PAGE>
DAVIS GOVERNMENT BOND FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GOVERNMENT MONEY MARKET FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
% OF CLASS NUMBER OF
NAME AND ADDRESS OF SHAREHOLDER OUTSTANDING SHARES OWNED
---------------------------------------------------------------------------------------------------------------
DAVIS GOVERNMENT MONEY MARKET FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GOVERNMENT MONEY MARKET FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GOVERNMENT MONEY MARKET FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GOVERNMENT MONEY MARKET FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GOVERNMENT MONEY MARKET FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GROWTH OPPORTUNITY FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GROWTH OPPORTUNITY FUND - CLASS B SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS GROWTH OPPORTUNITY FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS REAL ESTATE FUND - CLASS A SHARES
John Doe, Address, City, State, Zip xx.xx%
DAVIS REAL ESTATE FUND - CLASS B SHARES
<PAGE>
John Doe, Address, City, State, Zip xx.xx%
DAVIS REAL ESTATE FUND - CLASS C SHARES
John Doe, Address, City, State, Zip xx.xx%
<PAGE>
APPENDIX D:
-------------------------------------------------------------------------------
Davis Funds Audit Committee Charter
as amended 12/07/99
1. The Audit Committee shall be composed entirely of independent directors.
2. The purposes of the Audit Committee are:
(a) to oversee the Funds' accounting and financial reporting policies and
practices, its internal controls and, as appropriate, the internal
controls of certain service providers;
(b) to oversee the quality and objectivity of the Funds' financial
statements and the independent audit thereof; and
(c) to act as a liaison between the Funds' independent auditors and the
full Board of Directors.
The function of the Audit Committee is oversight; it is management's
responsibility to maintain appropriate systems for accounting and internal
control and the auditor's responsibility to plan and carry out a proper
audit.
3. To carry out its purposes, the Audit Committee shall have the following
duties and powers:
(a) to recommend the selection, retention or termination of auditors and,
in connection therewith, to evaluate the independence of the auditors,
including whether the auditors provide any consulting services to the
manager, and to receive the auditors' specific representations as to
their independence;
(b) to meet with the Funds' independent auditors, including private
meetings, as necessary (i) to review the arrangements for and scope of
the annual audit and any special audits; (ii) to discuss any matters of
concern relating to the Funds' financial statements, including any
adjustments to such statements recommended by the auditors, or other
results of said audit(s); (iii) to consider the auditors' comments with
respect to the Funds' financial policies, procedures and internal
accounting controls and management's responses thereto: and (iv) to
review the form of opinion the auditors propose to render to the Board
and shareholders;
(c) to consider the effect upon the Funds on any changes in accounting
principles or practices proposed by management or the auditors;
(d) to review the fees charged by the auditors for audit and non-audit
services;
(e) to investigate improprieties or suspected improprieties in fund
operations;
1
<PAGE>
(f) to consider such other matters as the full Board shall request the
Committee to review such as (but not limited to) advisory,
sub-advisory, and underwriting agreements, Rule 12b-1 distribution
plans, custodian and shareholder servicing issues, regulatory matters
and taxation issues; and
(g) to report its activities to the full Board on a regular basis and to
make such recommendations with respect to the above and other matters
as the Committee may deem necessary or appropriate.
4. The Committee shall meet on a regular basis and is empowered to hold
special meetings as circumstances require.
5. The Committee shall regularly meet with the Treasurer of the Funds and with
internal auditors, if any, for the management company.
6. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the expense of the appropriate
Fund(s).
7. The Committee shall review this Charter at least annually and recommend any
changes to the full Board of Directors.
2
<PAGE>
APPENDIX E:
-------------------------------------------------------------------------------
OFFICERS OF THE DAVIS FUNDS, THE ADVISER AND THE SUB-ADVISER
OFFICERS OF THE DAVIS FUNDS
NAME BIRTHDATE POSITION
-----------------------------------------------------------------------------------------------------
Chief Executive Officer, Davis
Series; President, Davis New
York Venture Fund, Davis Growth
CHRISTOPHER C. DAVIS(1)* & Income Fund, Davis Growth
July 13, 1965 Opportunity Fund and Davis
Financial Fund
President, Davis Real Estate
ANDREW DAVIS(2)* June 25, 1963 Fund and Davis Convertible
Securities Fund; Vice President,
all Davis Funds
President, Davis Government
CRESTON KING, III(3) April 19, 1963 Bond Fund and Davis
Government Money Market
Fund
KENNETH C. EICH(3)* August 14, 1953 Vice President, all Davis Funds
Vice President, Treasurer and
SHARRA L. REED(3)* September 25, 1966 Assistant Secretary, all Davis
Funds
THOMAS D. TAYS(3)* March 7, 1957 Vice President and Secretary,
all Davis Funds
</TABLE>
* These persons are also officers of the Adviser.
(1) Davis Selected Advisers - NY, Inc., 609 Fifth Avenue, New York,
New York 10017
(2) Davis Selected Advisers, L.P., 124 East Marcy Street, Santa Fe,
New Mexico 87501
(3) Davis Selected Advisers, L.P., 2949 East Elvira Road, Suite 101, Tucson,
Arizona 85706
<PAGE>
OFFICERS OF THE ADVISER
AS GENERAL PARTNER, DAVIS INVESTMENTS, LLC WILL MANAGE THE
BUSINESS AFFAIRS OF THE ADVISER. THE DIRECTORS AND OFFICERS
OF DAVIS INVESTMENTS, LLC, ARE:
<TABLE>
<CAPTION>
NAME BIRTHDATE POSITION
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
CHRISTOPHER C. DAVIS(1) July 13, 1965 Chairman (Sole Member), Chief
Executive Officer
SHELBY M.C. DAVIS(1) March 20, 1937 Founder and Senior Research
Advisor
ANDREW DAVIS(2) June 25, 1963 President
KENNETH C. EICH(3) August 14, 1953 Chief Operating Officer
RUSSELL O. WIESE(1) May 18, 1966 Chief Marketing Officer
GARY P. TYC(3) May 27, 1956 Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
SHARRA L. REED(3) September 25, 1966 Vice President
SANDRA E. DURAN(2) June 2, 1970 Vice President
THOMAS D. TAYS(3) March 7, 1957 Vice President, General Counsel
and Secretary
</TABLE>
(1) Davis Selected Advisers - NY, Inc., 609 Fifth Avenue, New York,
New York 10017
(2) Davis Selected Advisers, L.P., 124 East Marcy Street, Santa Fe,
New Mexico 87501
(4) Davis Selected Advisers, L.P., 2949 East Elvira Road, Suite 101, Tucson,
Arizona 85706
Shelby M.C. Davis is the father of Andrew A Davis and Christopher C. Davis.
<PAGE>
OFFICERS OF THE SUB-ADVISER
THE SUB-ADVISER IS A WHOLLY OWNED SUBSIDIARY OF THE ADVISER ORGANIZED AS A
DELAWARE CORPORATION. ITS OFFICERS AND DIRECTORS ARE:
NAME POSITION
CHRISTOPHER C. DAVIS(1) Chairman (Director), Chief
Executive Officer & President
ANDREW A. DAVIS(2) Director, Vice President
RUSSELL O. WIESE(1) Director, Vice President
KENNETH C. EICH(3) Vice President, Chief Operating
Officer
GARY P. TYC(3) Vice President, Treasurer and
Assistant Secretary
THOMAS D. TAYS(3) Vice President, General Counsel
and Secretary
The principal occupation of each of the directors and officers is working for
the Adviser and/or Sub-Adviser.
(1) Davis Selected Advisers - NY, Inc., 609 Fifth Avenue, New York,
New York 10017
(2) Davis Selected Advisers, L.P., 124 East Marcy Street, Santa Fe, New Mexico
87501
(3) Davis Selected Advisers, L.P., 2949 East Elvira Road, Suite 101, Tucson,
Arizona 85706
<PAGE>
APPENDIX F
NEW YORK VENTURE FUND, INC.
INVESTMENT ADVISORY AGREEMENT
JANUARY 1, 2001
Davis Selected Advisers, L.P.
2949 E. Elvira Road, Suite 101
Tucson, Arizona 85706
Dear Sirs:
We herewith confirm our agreement with you as follows:
1. Management. We desire to employ the capital of New York Venture Fund, Inc.
(the "Company") by investing and reinvesting the same in securities of the type
and in accordance with the limitations specified in the registration statement
under the Securities Act of 1933 and the Investment Company Act of 1940, of
which we enclose a copy, and in such manner and to such extent as may from time
to time be approved by our Board of Directors. We desire to employ you to
supervise and assist in the management of this business for us. You shall for
all purposes herein be deemed an independent contractor and shall, unless
otherwise expressly provided for or authorized, have no authority to act or
represent us.
2. Officers, Directors, Employees. In this connection it is understood that you
will from time to time employ or associate with yourselves such person or
persons as you may believe to be particularly fitted to assist you in the
execution of this Agreement, it being understood that the compensation of such
person or persons shall be paid by you and that no obligation may be incurred on
our behalf in any such respect. This does not apply to such individuals as we
may in due course elect as officers of our corporation, except that no officer,
director, stockholder or employee of your firm shall receive compensation from
us for acting as director, officer or employee of our corporation, and you agree
to pay the compensation of all such persons. We understand that, during the
continuance of this agreement, officers of your firm will, if elected, serve as
directors of our corporation and as its principal officers.
3. Authority, Reporting. You are to have complete and exclusive authority to
develop and handle for us any business of the type above mentioned which you may
consider advantageous for us, subject to the direction and control of our
officers and directors. You will furnish us with such statistical information
with respect to the securities which we may hold or contemplate purchasing as we
may request. We wish to be kept in touch with important developments affecting
our Company and shall expect you on your own initiative to furnish us from time
to time with such information as you may believe appropriate for this purpose,
whether concerning the individual companies whose securities are included in our
portfolio or the industries in which they are engaged. We shall also expect you
of your own motion to advise us whenever in your opinion conditions are such as
to make it desirable that a specific security be eliminated from our portfolio.
4. Standard of Care. We shall expect of you your best judgment in rendering
these services to us, and we agree as an inducement to your undertaking the same
that you shall not be liable hereunder for any mistake of judgment or in any
other event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect or purport to protect you against any
liability to us or to our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
5. Expenses. Except as otherwise provided below in this paragraph, you will
attend to, or arrange for the performance, at your expense, of such clerical and
accounting work related to the investment and reinvestment of our capital for us
as we may specify. We shall, however, bear all costs and expenses of or
<PAGE>
attendant upon: (i) preparation of our federal, state and local tax returns;
(ii) preparation of certain documents we must file with the Securities and
Exchange Commission; (iii) determination of the status and payment of dividends;
(iv) reconciling and reviewing output of our custodian bank, determining the
adequacy of various accruals, approving our expenses, authorizing our bank to
receive and disburse money and securities and verifications related thereto, and
interfacing with our auditors; (v) verification of our security ledger and
preparation and maintenance of other corporate books and records; (vi) brokerage
fees and commissions; (vii) stockholders' and Directors' meetings; (viii)
corporate reports and proxy materials, including their preparation, printing and
distribution; (ix) fees of disinterested Directors; (x) taxes and interest
expenses; (xi) reports to government authorities including all expenses and
costs relating to such reports and to state securities law compliance; (xii)
custodian and transfer agent fees; (xiii) association membership dues; (xiv)
premiums on all insurance and bonds maintained for us or on our behalf; (xv)
retention of the transfer agent and registrar for our shares and the disbursing
agent for our stock-holders, including costs and expenses attendant upon
repurchase and redemption of our shares; (xvi) our counsel; and (xvii) our
independent auditors. We may arrange for you to provide some or all of the
services relating to items (i) to (xvii) above, and any other services not
directly relating to investment and reinvestment of our capital, upon such terms
and conditions as we may agree and subject to the approval and review of our
Board of Directors.
6. Fees. The Company has formed two funds, consisting of separate investment
portfolios, and wishes to employ you to supervise and assist in the management
of both funds upon the terms and conditions described in this Agreement. In
consideration of such services, we shall pay you a fee calculated at the
following annual rates based upon the daily net asset value of each separate
portfolio:
DAVIS NEW YORK VENTURE FUND
ANNUAL RATE DAILY NET ASSET VALUE
0.75% of First $250,000,000
0.65% of Next $250,000,000
0.55% of Next $2,500,000,000
0.54% of Next $1,000,000,000
0.53% of Next $1,000,000,000
0.52% of Next $1,000,000,000
0.51% of Next $1,000,000,000
0.50% of Amount in excess of $7,000,000,000
DAVIS GROWTH & INCOME FUND
ANNUAL RATE DAILY NET ASSET VALUE
0.75% of First $250,000,000
0.65% of Next $250,000,000
0.55% of Amount in excess of $500,000,000
For this purpose, the daily net asset value shall be computed in the same manner
as the value of such daily net assets are computed in connection with the
determination of the net asset value of our shares. The fee shall be accrued
daily and paid monthly on the first business day following the end of the month
in which the services were rendered.
7. Portfolio Transactions. (a) You are authorized to place purchase and sale
orders for our portfolio transactions with brokers and/or dealers who, in your
best judgment, are able to achieve "best execution" of such orders. "Best
execution" shall mean prompt and reliable execution at the most favorable
security price obtainable, taking into account research and other services
available and the reasonableness of commission charges. Purchases and sales of
securities not listed or traded on a securities exchange shall ordinarily be
executed with primary market makers, acting as principal, except where, in your
judgment, better prices and execution may otherwise be obtained.
<PAGE>
(b) You are authorized to allocate brokerage and principal business to members
of securities exchanges, brokers and dealers (such members, brokers and dealers
being hereinafter referred to as "brokers") who have provided brokerage and
research services, as such services are defined in Section 28(e) of the
Securities Exchange Act of 1934 (the "1934 Act") for us and/or other accounts,
if any, for which you exercise investment discretion (as defined in Section 3(a)
(35) of the 1934 Act) and to cause us to pay a commission for effecting a
securities transaction in excess of the amount another broker would have charged
for effecting that transaction if you determine in good faith that such amount
of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker, viewed in terms of either that
particular transaction or your overall responsibilities with respect to us and
the other accounts, if any, as to which you exercise investment discretion.
In reaching such determination, you will not be required to place or attempt to
place a specific dollar value on the research or execution services of a broker
or on the portion of any commission reflecting either of said services. In
demonstrating that such determinations were made in good faith, you shall be
prepared to show that all commissions were allocated and paid in accordance with
this agreement, that commissions were not allocated or paid for products or
services which were readily and customarily available and offered to the public
on a commercial basis and that the commissions were within a reasonable range
shall be based on any available information as to the level of commissions known
to be charged by qualified brokers on comparable transactions, but taking into
account (i) the provisions of this agreement relating to obtaining the most
favorable securities price, since it is recognized by our Board of Directors and
shareholders that it usually is more beneficial to us to obtain a favorable
price than to pay the lowest commission; and (ii) that research from brokers is
useful to you in performing your advisory activities under this Agreement.
(c) Portfolio transactions may be allocated to any broker or dealer taking into
account the sale by such broker or dealer of our shares. Any such allocation
shall be made in accordance with the provisions of this agreement relating to
obtaining "best execution".
(d) In selecting brokers for our portfolio transactions, you shall make use of
a list of a number of brokers which you and we believe, based on past and
current experience, are qualified to execute our portfolio transactions. The
brokers on the list will ordinarily be used for our portfolio transactions, but
other brokers may be used in accordance with the principles of this agreement.
The brokers on the list may be changed from time to time and will include
members of the major and regional securities exchanges and certain non-member
brokers.
8. Non-Exclusive, Use of "Davis" Name. You may act as investment adviser for
any other person, firm or corporation. We recognize that you have given us the
right to use the name "Davis" in our corporate title. If for any reason you no
longer act as our investment adviser, we shall remove the name "Davis" from our
corporate title upon demand made by you.
9. Term and Termination. This Agreement shall become effective for an initial
period of not more than two years from its effective date, and shall continue in
full force and effect continuously there-after, if its continuance is approved
at least annually as required by the Investment Company Act of 1940. The
effective date of this Agreement shall be the later of (i) January 1, 2001, or
(ii) the date this Agreement has been approved as required by the Investment
Company Act of 1940. As of such effective date, this Agreement shall supersede
all prior investment advisory agreements between the parties. This Agreement may
be terminated at any time, without the payment of any penalty, by our Board of
Directors or by vote of a majority of our out-standing voting securities (as
defined in the 1940 Act) on 60 days' written notice to you, or by you on 60
days' written notice to us and it shall be automatically terminated in the event
of its assignment (as defined in said Act).
10. Series of Shares. As of the date of this Agreement, the Company has two
series of shares ("Funds"). In the event that the Company shall create
additional Funds, this Agreement shall apply to and be effective as to each such
Fund, provided that the Agreement is approved as required by the Investment
Company Act of
<PAGE>
1940. The effective date of the Agreement as to each such Fund shall be the date
that it is so approved or any later date as shall be agreed to by the parties.
If the foregoing is in accordance with your understanding, will you so kindly
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
NEW YORK VENTURE FUND, INC.
By:____________________________
Accepted as of the day and year first above written.
DAVIS SELECTED ADVISERS, L.P.
By: DAVIS INVESTMENTS, LLC., General Partner
By:_______________________________________
<PAGE>
DAVIS SERIES, INC.
INVESTMENT ADVISORY AGREEMENT
JANUARY 1, 2001
Davis Selected Advisers, L.P.
2949 E. Elvira Road, Suite 101
Tucson, Arizona 85706
Dear Sirs:
We herewith confirm our agreement with you as follows:
1. Management We desire to employ the capital of Davis Series, Inc. (the
"Company") by investing and reinvesting the same in securities of the type and
in accordance with the limitations specified in the registration statement under
the Securities Act of 1933 and the Investment Company Act of 1940, of which we
enclose a copy, and in such manner and to such extent as may from time to time
be approved by our Board of Directors. We desire to employ you to supervise and
assist in the management of this business for us. You shall for all purposes
herein be deemed an independent contractor, and shall, unless otherwise
expressly provided for or authorized, have no authority to act or represent us.
2. Officers, Directors, Employees In this connection it is understood that you
will from time to time employ or associate with yourselves such person or
persons as you may believe to be particularly fitted to assist you in the
execution of this Agreement, it being understood that the compensation of such
person or persons shall be paid by you and that no obligation may be incurred on
our behalf in any such respect. This does not apply to such individuals as we
may in due course elect as officers of our corporation, except that no officer,
director, stockholder or employee of your firm shall receive compensation from
us for acting as director, officer or employee of our corporation, and you agree
to pay the compensation of all such persons. We understand that, during the
continuance of this agreement, officers of your firm will, if elected, serve as
directors of our corporation and as its principal officers.
3. Authority, Reporting You are to have complete and exclusive authority to
develop and handle for us any business of the type above mentioned which you may
consider advantageous for us, subject to the direction and control of our
officers and directors. You will furnish us with such statistical information
with respect to the securities which we may hold or contemplate purchasing as we
may request. We wish to be kept in touch with important developments affecting
our Company and shall expect you on your own initiative to furnish us from time
to time with such information as you may believe appropriate for this purpose,
whether concerning the individual companies whose securities are included in our
portfolio or the industries in which they are engaged. We shall also expect you
of your own motion to advise us whenever in your opinion conditions are such as
to make it desirable that a specific security be eliminated from our portfolio.
4. Standard of Care We shall expect of you your best judgment in rendering these
services to us, and we agree as an inducement to your undertaking the same that
you shall not be liable hereunder for any mistake of judgment or in any other
event whatsoever, except for lack of good faith, provided that nothing herein
shall be deemed to protect or purport to protect you against any liability to us
or to our security holders to which you would otherwise be subject
<PAGE>
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
5. Expenses Except as otherwise provided below in this paragraph, you will
attend to, or arrange for the performance, at your expense, of such clerical and
accounting work related to the investment and reinvestment of our capital for us
as we may specify. We shall, however, bear all costs and expenses of or
attendant upon: (i) preparation of our federal, state and local tax returns;
(ii) preparation of certain documents we must file with the Securities and
Exchange Commission; (iii) determination of the status and payment of dividends;
(iv) reconciling and reviewing output of our custodian bank, determining the
adequacy of various accruals, approving our expenses authorizing our bank to
receive and disburse money and securities and verifications related thereto, and
interfacing with our auditors; (v) verification of our security ledger and
preparation and maintenance of other corporate books and records; (vi) brokerage
fees and commissions; (vii) stockholders' and Directors' meetings; (viii)
corporate reports and proxy materials, including their preparation, printing and
distribution; (ix) fees of disinterested Directors; (x) taxes and interest
expenses; (xi) reports to government authorities including all expenses and
costs relating to such reports and to state securities law compliance; (xii)
custodian and transfer agent fees; (xiii) association membership dues; (xiv)
premiums on all insurance and bonds maintained for us or on our behalf; (xv)
retention of the transfer agent and registrar for our shares and the disbursing
agent for our stockholders, including costs and expenses attendant upon
repurchase and redemption of our shares; (xvi) our counsel; and (xvii) our
independent auditors. We may arrange for you to provide some or all of the
services relating to items (i) to (xvii) above, and any other services not
directly relating to investment and reinvestment of our capital, upon such terms
and conditions as we may agree and subject to the approval and review of our
Board of Directors.
6. Fees In consideration of such services, we shall pay you a monthly fee as of
the last day of each month in each year based upon the average daily value of
net assets during a month for which the monthly fee is calculated, as follows:
<TABLE>
<CAPTION>
VALUE OF AVERAGE DAILY NET ASSETS
MONTHLY RATE OF THE FUND DURING THE MONTH
------------ ----------------------------
<S> <C>
ALL FUNDS EXCEPT DAVIS GOVERNMENT MONEY MARKET FUND & DAVIS GOVERNMENT BOND FUND
1/12 of 0.75% of..................................First $250,000,000
1/12 of 0.65% of..................................Next $250,000,000
1/12 of 0.55% of..................................Amount in excess of $500,000,000
DAVIS GOVERNMENT MONEY MARKET FUND
1/12 of 0.50% of..................................First $250,000,000
1/12 of 0.45% of..................................Next $250,000,000
1/12 of 0.40% of..................................Amount in excess of $500,000,000
DAVIS GOVERNMENT BOND FUND
1/12 of 0.50%...................................All assets
</TABLE>
provided, however, that such fee for any period which shall not be a full
monthly period shall be prorated according to the proportion which such period
bears to the full month. For this purpose, the value of our net assets shall be
<PAGE>
computed in the same manner as the value of such net assets are computed in
connection with the determination of the net asset value of our shares.
7. Portfolio Transactions (a) You are authorized to place purchase and sale
orders for our portfolio transactions with brokers and/or dealers which, in your
best judgment are able to achieve "best execution" of such orders. "Best
execution" shall mean prompt and reliable execution at the most favorable
security price obtainable, taking into account research and other services
available and the reasonableness of commission charges. Purchases and sales of
securities not listed or traded on a securities exchange shall ordinarily be
executed with primary market makers, acting as principal, except where, in your
judgment, better prices and execution may otherwise be obtained.
(b) You are authorized to allocate brokerage and principal business to members
of securities exchanges, brokers and dealers (such members, brokers and dealers
being hereinafter referred to as "brokers") who have provided brokerage and
research services, as such services are defined in Section 28(e) of the
Securities Exchange Act of 1934 (the "1934 Act") for us and/or other accounts,
if any, for which you exercise investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and to cause us to pay a commission for effecting a
securities transaction in excess of the amount another broker would have charged
for effecting that transaction if you determine in good faith that such amount
of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker, viewed in terms of either that
particular transaction or your overall responsibilities with respect to us and
the other accounts, if any, as to which you exercise investment discretion.
In reaching such determination, you will not be required to place or attempt to
place a specific dollar value on the research or execution services of a broker
or on the portion of any commission reflecting either of said services. In
demonstrating that such determinations were made in good faith, you shall be
prepared to show that all commissions were allocated and paid in accordance with
this agreement, that commissions were not allocated or paid for products or
services which were readily and customarily available and offered to the public
on a commercial basis and that the commissions were within a reasonable range
shall be based on any available information as to the level of commissions known
to be charged by qualified brokers on comparable transactions, but taking into
account (i) the provisions of this agreement relating to obtaining the most
favorable securities price, since it is recognized by our Board of Directors and
shareholders that it usually is more beneficial to us to obtain a favorable
price than to pay the lowest commission; and (ii) that research from brokers is
useful to you in performing your advisory activities under this Agreement.
(c) Portfolio transactions may be allocated to any broker or dealer taking into
account the sale by such broker or dealer of our shares. Any such allocation
shall be made in accordance with the provisions of this agreement relating to
obtaining "best execution".
(d) In selecting brokers for our portfolio transactions, you shall make use of a
list of a number of brokers which you and we believe, based on past and current
experience, are qualified to execute our portfolio transactions. The brokers on
the list will ordinarily be used for our portfolio transactions, but other
brokers may be used in accordance with the principles of this agreement. The
brokers on the list may be changed from time to time and will include members of
the major and regional securities exchanges and certain non-member brokers.
8. Non-Exclusive You may act as investment adviser for any other person, firm
or corporation.
<PAGE>
9. Term and Termination This Agreement shall become effective for an initial
period of not more than two years from its effective date, and shall continue in
full force and effect continuously thereafter, if its continuance is approved at
least annually as required by the Investment Company Act of 1940. The effective
date of this Agreement shall be the later of (i) January 1, 2001, or (ii) the
date this Agreement has been approved as required by the Investment Company Act
of 1940. As of such effective date, this Agreement shall supersede all prior
investment advisory agreements between the parties. This Agreement may be
terminated at any time, without the payment of any penalty, by our Board of
Directors or by vote of a majority of our outstanding voting securities (as
defined in the 1940 Act) on 60 days' written notice to you, or by you on 60
days' written notice to us, and it shall be automatically terminated in the
event of its assignment (as defined in said Act).
10. Series of Shares As of the date of this Agreement, the Company has six
series of shares ("Funds"), namely Davis Growth Opportunity Fund, Davis
Financial Fund, Davis Real Estate Fund, Davis Convertible Securities Fund, Davis
Government Bond Fund, and Davis Government Money Market Fund. In the event that
the Company shall create any additional Funds, this Agreement shall apply to and
be effective as to each such Fund, provided that the Agreement is approved as
required by the Investment Company Act of 1940. The effective date of the
Agreement as to each such future Fund shall be the date as it is so approved or
any later date as shall be agreed to by the parties.
If the foregoing is in accordance with your understanding, will you so
kindly indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
DAVIS SERIES, INC.
By:____________________________
Accepted as of the day and year first above written.
DAVIS SELECTED ADVISERS, L.P.
By: DAVIS INVESTMENTS, LLC, General Partner
By:______________________________________
<PAGE>
APPENDIX G
NEW YORK VENTURE FUND, INC.
SUB-ADVISORY AGREEMENT
JANUARY 1, 2001
This is to confirm that Davis Selected Advisers, L.P. (the "Adviser") is
retaining Davis Selected Advisers - NY, Inc. ("DSA-NY") as investment
sub-adviser for the portfolio of Davis New York Venture Fund, Inc. (the "Fund").
The terms and conditions of your retention are as follows:
1. Service as Sub-Adviser DSA-NY shall act as an investment sub-adviser for the
Fund and will provide such investment management and research services as the
Adviser shall request subject to the general supervision of the Board of
Directors of the Fund, the Adviser and to any applicable provisions as in effect
from time to time of (a) the Articles of Incorporation and Bylaws of the Fund,
(b) the prospectus, statement of additional information and other information
set forth in the Fund's registration documents under the Securities Act of 1933
and the Investment Company Act of 1940 ("1940 Act"), including any supplements
thereto, (c) the Investment Advisory Agreement between the Adviser and the Fund
(the "Investment Advisory Agreement"), the Adviser's and the Fund's Code of
Ethics and (d) any additional policies or guidelines established by the Fund's
Board of Directors or the Adviser. DSA-NY acknowledges receipt of copies of the
above documents as in effect on the date of acceptance of this letter. The
Adviser agrees that it will promptly deliver to DSA-NY any amendments, changes
or additions of or to these documents.
2. Conform to Guidelines DSA-NY agrees that all securities transactions will
conform to (a) the stated objectives and policies of the Fund, (b) the brokerage
policies set forth in the Investment Advisory Agreement (which are hereby
incorporated by reference herein) and the registration documents, and (c) those
investment and brokerage policies or guidelines directed by the Board of
Directors of the Fund, any committee thereof and the Adviser.
3. Independent Contractor DSA-NY shall be an independent contractor. Unless
otherwise expressly provided or authorized hereunder, or by the Board of
Directors of the Fund, DSA-NY shall have no authority to represent the Fund or
the Adviser in any way or otherwise be an agent of the Adviser or the Fund,
except with regard to the execution of securities transactions on behalf of the
Fund with registered broker/dealers, including broker/dealers affiliated with
the Adviser, provided transactions with affiliated broker/dealers comply with
Rule 17e-1 of the 1940 Act.
4. Reports and Documentation DSA-NY shall provide the Adviser with any reports,
analyses or other documentation the Adviser requests including those related to
placement of security transactions, its administrative responsibilities and its
responsibility to monitor compliance with stated investment objectives, policies
and limitations and the investment performance of the Fund. DSA-NY agrees,
directly or through an agent, to provide daily information in respect to any
portfolio transactions of the Fund to the Adviser. DSA-NY agrees to provide all
documentation reasonably required by the Adviser to maintain the Fund's
accounting records in accordance with the 1940 Act and the Investment Advisers
Act of 1940 and the regulations issued thereunder, and to preserve copies of all
documents and records related to asset transactions, positions and valuations
related to the Fund in the manner and for the periods prescribed by such
regulations. DSA-NY further agrees that all documents and records it maintains
relating to the Fund, are the property of the Fund and will be surrendered to
the Adviser or the Fund upon the request of either. DSA-NY agrees to provide
information and to allow inspection of such documents and records at reasonable
times by any authorized representative of the Adviser, the Fund's Board of
Directors or any committee thereof, the Fund's independent public accountants or
appropriate regulatory authorities. DSA-NY shall provide to the Adviser a copy
of its Form ADV as filed with the SEC and as amended from time to time and a
<PAGE>
written list of persons DSA-NY has authorized to give written and/or oral
instructions to the Adviser and the Fund custodian.
5. Officers, Directors, and Employees DSA-NY agrees to make its personnel who
are engaged in activities on behalf of the Fund available at reasonable times
for consultations with the Adviser's personnel and the Fund's Board of Directors
or any committee thereof, including attendance at their meetings, wherever
situated. In addition, personnel of DSA-NY, at the request of the Adviser, will
attend other meetings to be scheduled at mutually convenient times.
6. Facilities, Equipment, and Personnel DSA-NY agrees to provide all office
facilities, equipment and personnel needed for carrying out its duties hereunder
at its own expense. In addition, DSA-NY shall, if requested by the Adviser or
the Fund, employ at its own expense and subject to the prior written approval of
the Adviser which approval shall not be unreasonably withheld (i) a public
auditing firm, (ii) attorneys and (iii) such other professional staff as in the
sole discretion of the Adviser are necessary to assure the fulfillment of the
terms and conditions of this agreement.
7. Non-Exclusive It is agreed that DSA-NY's services are not to be deemed
exclusive and DSA-NY shall be free to render similar services or other services
to others provided that (i) its services hereunder are not impaired and are not
in violation of federal or state securities laws and (ii) that it shall not
provide services to any registered investment company other than the Fund or
other investment companies managed by the Adviser without the Adviser's prior
express written permission.
8. Standard of Care In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations or duties hereunder, DSA-NY,
its officers, directors and employees shall not be subject to liability for any
act or omission in the cause of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of any
security. In the event of any claim, arbitration, suit, or administrative
proceedings in which DSA-NY or the Adviser is a party and in which it is finally
determined that there is liability or wrongdoing by only one of us, the party
liable or found to be the wrongdoer shall pay for all liability and expenses of
such claim or proceeding including reasonable attorneys' fees. If it is
determined that there is liability or wrongdoing by both or none of us, then
each shall pay their own liability and expenses. In the event of any settlement
of any such claim, arbitration, suit or proceeding before final determination by
a court or arbitrator(s), the liability and expenses shall be assumed as agreed
between the parties, but if there is no agreement within thirty (30) days of
such settlement, then the assumption of liability and expenses shall be settled
by arbitration, in accordance with the then applicable rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitrator
shall be final and binding and may be entered in any court having jurisdiction.
The parties shall pay for their own costs and expenses in respect to any such
arbitration and such costs may be included in the arbitrator's award.
9. Compliance with Applicable Law. As investment sub-adviser, DSA-NY understands
that it will be responsible for complying with all provisions of applicable law,
including the 1940 Act, the Investment Advisers Act of 1940, and the Insider
Trading and Securities Fraud Enforcement Act of 1988 and all rules and
regulations thereunder. DSA-NY agrees to adopt and comply with the "Code of
Ethics of and for Davis Selected Advisers, L.P. and the Companies For Which It
Acts As Investment Adviser" as in effect from time to time and to keep in effect
a policy and supervisory procedures designed to prevent insider trading.
10. Common Control, Fees The parties acknowledge that DSA-NY is controlled by
or under common control with the Adviser. The Adviser shall pay DSA-NY all
reasonable direct and indirect costs associated with the maintenance of an
office and the performance of the terms of this Agreement. The Adviser shall
also reimburse expenses expressly approved for reimbursement by the Adviser.
Payment for DSA-NY's services and reimbursement of expenses approved by the
Adviser shall be made monthly, in arrears, by the 15th day of the following
month.
<PAGE>
11. Term This Agreement shall become effective on the later of January 1, 2001
or the first business day after the date this Agreement is approved in
accordance with the 1940 Act (provided that it is reflected in an effective
post-effective amendment under the Securities Act of 1933 and the 1940 Act).
Unless sooner terminated as hereunder provided, it shall initially remain in
effect for a period not exceeding two years. Thereafter, subject to the
termination provisions herein, this Agreement shall continue in force from year
to year thereafter, but only as long as such continuance is specifically
approved at least annually in the manner required by the 1940 Act; provided,
however, that if the continuation of this Agreement is not approved, DSA-NY may
continue to serve in the manner and to the extent permitted by the 1940 Act and
the rules and regulations thereunder.
12. Termination This Agreement shall automatically terminate immediately in the
event of its assignment (except as otherwise permitted by the 1940 Act or rules
thereunder) or in the event of the termination of the Investment Advisory
Agreement. This Agreement may be terminated without payment of any penalty at
any time (a) upon sixty (60) days' written notice to DSA-NY by the Adviser or
upon such sixty (60) days' written notice to DSA-NY by the Fund pursuant to
action by its Board of Directors or by the vote of a majority of the outstanding
voting securities of the Fund, or (b) upon sixty (60) days' written notice by
DSA-NY to the Adviser. The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meaning set forth in the 1940 Act
and the rules and regulations thereunder. Termination of this Agreement shall
not effect DSA-NY's right to receive payments on any unpaid balance of the
compensation earned and reimbursable expenses incurred prior to such
termination. Upon receipt of notification of termination as provided above
DSA-NY shall immediately cease all activities in connection with the Fund except
as otherwise directed by the Adviser.
13. Use of Names DSA-NY agrees that it shall abide by the terms of the
agreement of the Adviser with the Fund as to the names of the Fund and the
Adviser and shall not use the name of the Adviser or the Fund without the prior
written consent of the Adviser or the Fund.
14. Severability If any provisions of this Agreement shall be held or made
invalid by a court decision, statute or rule or otherwise, the remainder shall
not be thereby effected.
15. Choice of Law This Agreement shall be construed according to the laws of
the State of New Mexico. It may be executed in counterparts each of which shall
be deemed an original and all of which together shall constitute one and the
same agreement.
If the foregoing terms and conditions are acceptable to you, please acknowledge
in the space provided. Upon your acceptance, the retention and the mutual
obligations in respect thereto shall be effective as provided herein.
Sincerely,
Davis Selected Advisers, L.P.
By Davis Investments, LLC.,
General Partner
By:_________________________
Its:_________________________
Accepted and Approved this 1st day of January, 2001
Davis Selected Advisers - NY, Inc.
By:__________________________
Its:__________________________
3
<PAGE>
DAVIS SERIES, INC.
SUB-ADVISORY AGREEMENT
JANUARY 1, 2001
This is to confirm that Davis Selected Advisers, L.P. (the "Adviser") is
retaining Davis Selected Advisers - NY, Inc. ("DSA-NY") as investment
sub-adviser for the portfolios of Davis Series, Inc. (the "Fund").
The terms and conditions of your retention are as follows:
1. Service as Sub-Adviser DSA-NY shall act as an investment sub-adviser for
the Fund and will provide such investment management and research services
as the Adviser shall request subject to the general supervision of the
Board of Directors of the Fund, the Adviser and to any applicable
provisions as in effect from time to time of (a) the Articles of
Incorporation and Bylaws of the Fund, (b) the prospectus, statement of
additional information and other information set forth in the Fund's
registration documents under the Securities Act of 1933 and the Investment
Company Act of 1940 ("1940 Act"), including any supplements thereto, (c)
the Investment Advisory Agreement between the Adviser and the Fund (the
"Investment Advisory Agreement"), the Adviser's and the Fund's Code of
Ethics and (d) any additional policies or guidelines established by the
Fund's Board of Directors or the Adviser. DSA-NY acknowledges receipt of
copies of the above documents as in effect on the date of acceptance of
this letter. The Adviser agrees that it will promptly deliver to DSA-NY any
amendments, changes or additions of or to these documents.
2. Conform to Guidelines DSA-NY agrees that all securities transactions will
conform to (a) the stated objectives and policies of the Fund, (b) the
brokerage policies set forth in the Investment Advisory Agreement (which
are hereby incorporated by reference herein) and the registration
documents, and (c) those investment and brokerage policies or guidelines
directed by the Board of Directors of the Fund, any committee thereof and
the Adviser.
3. Independent Contractor DSA-NY shall be an independent contractor. Unless
otherwise expressly provided or authorized hereunder, or by the Board of
Directors of the Fund, DSA-NY shall have no authority to represent the Fund
or the Adviser in any way or otherwise be an agent of the Adviser or the
Fund, except with regard to the execution of securities transactions on
behalf of the Fund with registered broker/dealers, including broker/dealer
affiliated with the Adviser, provided transactions with affiliated
broker/dealers comply with Rule 17e-1 of the 1940 Act.
4. Reports and Documentation DSA-NY shall provide the Adviser with any
reports, analyses or other documentation the Adviser requests including
those related to placement of security transactions, its administrative
responsibilities and its responsibility to monitor compliance with stated
investment objectives, policies and limitations and the investment
performance of the Fund. DSA-NY agrees, directly or through an agent, to
provide daily information in respect to any portfolio transactions of the
Fund to the Adviser. DSA-NY agrees to provide all documentation reasonably
required by the Adviser to maintain the Fund's accounting records in
accordance with the 1940 Act and the Investment Advisers Act of 1940 and
the regulations issued thereunder, and to preserve copies of all documents
and records related to asset transactions, positions and valuations related
to the Fund in the manner and for the periods prescribed by such
regulations. DSA-NY further agrees that all documents and records it
maintains relating to the Fund, are the property of the Fund and will be
surrendered to the Adviser or the Fund upon the request of either. DSA-NY
agrees to provide information and to allow inspection of such documents and
records at reasonable times by any authorized representative of the
Adviser, the Fund's Board of Directors or any committee thereof, the
4
<PAGE>
Fund's independent public accountants or appropriate regulatory
authorities. DSA-NY shall provide to the Adviser a copy of its Form ADV as
filed with the SEC and as amended from time to time and a written list of
persons DSA-NY has authorized to give written and/or oral instructions to
the Adviser and the Fund custodian.
5. Officers, Directors, and Employees DSA-NY agrees to make its personnel who
are engaged in activities on behalf of the Fund available at reasonable
times for consultations with the Adviser's personnel and the Fund's Board
of Directors or any committee thereof, including attendance at their
meetings wherever situated. In addition, personnel of DSA-NY at the request
of the Adviser, will attend other meetings to be scheduled at mutually
convenient times.
6. Facilities, Equipment, and Personnel DSA-NY agrees to provide all office
facilities, equipment and personnel needed for carrying out its duties
hereunder at its own expense. In addition, DSA-NY shall, if requested by
the Adviser or the Fund, employ at its own expense and subject to the prior
written approval of the Adviser which approval shall not be unreasonably
withheld (i) a public auditing firm, (ii) attorneys and (iii) such other
professional staff as in the sole discretion of the Adviser are necessary
to assure the fulfillment of the terms and conditions of this agreement.
7. Non-Exclusive It is agreed that DSA-NY's services are not to be deemed
exclusive and DSA-NY shall be free to render similar services or other
services to others provided that (i) its services hereunder are not
impaired and are not in violation of federal or state securities laws and
(ii) that it shall not provide services to any registered investment
company other than the Fund or other investment companies managed by the
Adviser without the Adviser's prior express written permission.
8. Standard of Care In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations or duties hereunder,
DSA-NY, its officers, directors and employees shall not be subject to
liability for any act or omission in the cause of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security. In the event of any claim,
arbitration, suit, or administrative proceedings in which DSA-NY or the
Adviser is a party and in which it is finally determined that there is
liability or wrongdoing by only one of us, the party liable or found to be
the wrongdoer shall pay for all liability and expenses of such claim or
proceeding including reasonable attorneys' fees. If it is determined that
there is liability or wrongdoing by both or none of us, then each shall pay
their own liability and expenses. In the event of any settlement of any
such claim, arbitration, suit or proceeding before final determination by a
court or arbitrator(s), the liability and expenses shall be assumed as
agreed between the parties, but if there is no agreement within thirty (30)
days of such settlement, then the assumption of liability and expenses
shall be settled by arbitration, in accordance with the then applicable
rules of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator shall be final and binding and may be entered in
any court having jurisdiction. The parties shall pay for their own costs
and expenses in respect to any such arbitration and such costs may be
included in the arbitrator's award.
9. Compliance with Applicable Law As investment sub-adviser, DSA-NY
understands that is will be responsible for complying with all provisions
of applicable law, including the 1940 Act, the Investment Advisers Act of
1940, and the Insider Trading and Securities Fraud Enforcement Act of 1988
and all rules and regulations thereunder. DSA-NY agrees to adopt and comply
with the "Code of Ethics of and for Davis Selected Advisers, L.P. and the
Companies For Which It Acts As Investment Adviser" as in effect from time
to time and to keep in effect a policy and supervisory procedures designed
to prevent insider trading.
10. Common Control, Fees The parties acknowledge that DSA-NY is controlled by
or under common control with the Adviser. The Adviser shall pay DSA-NY all
reasonable direct and indirect costs associated with the maintenance of an
office and the performance of the terms of this Agreement. The Adviser
shall also reimburse expenses expressly approved for reimbursement by the
Adviser. Payment for DSA-NY's services
5
<PAGE>
and reimbursement of expenses approved by the Adviser shall be made
monthly, in arrears, by the 15th day of the following month.
11. Term This Agreement shall become effective on the later of January 1, 2001
or the first business day after the date this Agreement is approved in
accordance with the 1940 Act (provided that it is reflected in an effective
post-effective amendment under the Securities Act of 1933 and the 1940
Act). Unless sooner terminated as hereunder provided, it shall initially
remain in effect for a period not exceeding two years. Thereafter, subject
to the termination provisions herein, this Agreement shall continue in
force from year to year thereafter, but only as long as such continuance is
specifically approved at least annually in the manner required by the 1940
Act; provided, however, that if the continuation of this Agreement is not
approved, DSA-NY may continue to serve in the manner and to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
12. Termination This Agreement shall automatically terminate immediately in
the event assignment (except as otherwise permitted by the 1940 Act or
rules thereunder) or in the event of the termination of the Investment
Advisory Agreement. This Agreement may be terminated without payment of
any penalty at any time (a) upon sixty (60) days' written notice to DSA-NY
by the Adviser or upon such sixty (60) days' written notice to DSA-NY by
the Fund pursuant to action by its Board of Directors or by the vote of a
majority of the outstanding voting securities of the Fund, or (b) upon
sixty (60) days' written notice by DSA-NY to the Adviser. The terms
"assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth in the 1940 Act and the rules and
regulations thereunder. Termination of this Agreement shall not effect
DSA-NY's right to receive payments on any unpaid balance of the
compensation earned and reimbursable expenses incurred prior to such
termination. Upon receipt of notification of termination as provided above
DSA-NY shall immediately cease all activities in connection with the Fund
except as otherwise directed by the Adviser.
13. Use of Names DSA-NY agrees that it shall abide by the terms of the
agreement of the Adviser with the Fund as to the names of the Fund and the
Adviser and shall not use the name of the Adviser or the Fund without the
prior written consent of the Adviser or the Fund.
14. Severability If any provisions of this Agreement shall be held or made
invalid by a court decision, statute or rule or otherwise, the remainder
shall not be thereby effected.
15. Choice of Law This Agreement shall be construed according to the laws of
the State of New Mexico. It may be executed in counterparts each of which
shall be deemed an original and all of which together shall constitute one
and the same agreement.
If the foregoing terms and conditions are acceptable to you, please acknowledge
in the space provided. Upon your acceptance, the retention and the mutual
obligations in respect thereto shall effective as provided herein.
Sincerely,
Davis Selected Advisers, L.P.
By Davis Investments, LLC
General Partner
By:____________________________
Its:___________________________
6
<PAGE>
Accepted and approved this 1st day of January, 2001
Davis Selected Advisers - NY, Inc.
By:______________________
Its:_____________________
7
<PAGE>
APPENDIX H:
-------------------------------------------------------------------------------
MOST RECENT SHAREHOLDER APPROVALS OF EXISTING
ADVISORY AND SUB-ADVISORY AGREEMENTS
MOST RECENT SHAREHOLDER APPROVALS
OF EXISTING ADVISORY AGREEMENTS
<TABLE>
<CAPTION>
EXISTING ADVISORY AGREEMENTS DATE OF AGREEMENT/DATE LAST PURPOSE
SUBMITTED TO VOTE OF SHAREHOLDERS
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DAVIS NEW YORK VENTURE FUND March 15, 1993 Approving a change in control
of the Adviser
DAVIS GROWTH & INCOME FUND March 16, 1998 Initial approval of agreement
DAVIS GROWTH OPPORTUNITY FUND March 15, 1993 Approving a change in control
of the Adviser
DAVIS FINANCIAL FUND March 15, 1993 Approving a change in control
of the Adviser
DAVIS REAL ESTATE FUND March 15, 1993 Approving a change in control
of the Adviser
DAVIS CONVERTIBLE SECURITIES FUND March 15, 1993 Approving a change in control
of the Adviser
DAVIS GOVERNMENT BOND FUND March 15, 1993 Approving a change in control
of the Adviser
DAVIS GOVERNMENT March 15, 1993 Approving a change in control
MONEY MARKET FUND of the Adviser
</TABLE>
<PAGE>
MOST RECENT SHAREHOLDER APPROVALS
OF EXISTING SUB-ADVISORY AGREEMENTS
<TABLE>
<CAPTION>
DATE OF AGREEMENT/
EXISTING SUB-ADVISORY AGREEMENTS DATE LAST SUBMITTED TO VOTE
OF SHAREHOLDERS PURPOSE
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DAVIS NEW YORK VENTURE FUND October 16, 1996 Initial approval of
agreement
DAVIS GROWTH & INCOME FUND March 16, 1998 Initial approval of
agreement
DAVIS GROWTH OPPORTUNITY FUND March 25, 1997 Initial approval of
agreement
DAVIS FINANCIAL FUND March 25, 1997 Initial approval of
agreement
DAVIS REAL ESTATE FUND March 25, 1997 Initial approval of
agreement
DAVIS CONVERTIBLE SECURITIES FUND March 25, 1997 Initial approval of
agreement
DAVIS GOVERNMENT BOND FUND March 25, 1997 Initial approval of
agreement
DAVIS GOVERNMENT MONEY MARKET FUND March 25, 1997 Initial approval of
agreement
</TABLE>
<PAGE>
APPENDIX I:
------------------------------------------------------------------------------
INVESTMENT COMPANIES WITH INVESTMENT OBJECTIVES SIMILAR TO THE DAVIS FUNDS THAT
DAVIS SELECTED ADVISERS, L.P. SERVES AS INVESTMENT ADVISER
<TABLE>
<CAPTION>
FUND ANNUAL % OF NET ASSETS NET ASSETS*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Large Cap Equity Funds
Davis Value Portfolio Xx% $xx
Selected American Shares Xx% $xx
MidCap Funds
Selected Special Shares Xx% $xx
Financial Sector Funds
Davis Financial Portfolio Xx% $xx
Real Estate Sector Funds
Davis Real Estate Portfolio Xx% Xx%
Government Bond Funds
Selected U.S. Government Income Fund Xx% Xx%
Government Money Market Funds
Selected Daily Government Fund Xx% Xx%
</TABLE>
*As of the most recently completed
fiscal year
<PAGE>
APPENDIX J:
-------------------------------------------------------------------------------
PROPOSED UNIFORM FUNDAMENTAL INVESTMENT POLICIES
Each Davis Fund operates in accordance with the investment objectives, policies
and restrictions described in its prospectus and statement of additional
information.
Each Davis Fund which approves all elements of Proposal 3 will adopt the
fundamental investment policies set forth below, which may not be changed
without a shareholder vote. Where necessary, an explanation beneath a
fundamental policy describes the Fund's practices with respect to that policy,
as allowed by current law. If the law governing a policy changes, the Fund's
practices may change accordingly without a shareholder vote.
Unless otherwise stated: (1) all percentage restrictions apply as of the time of
an investment without regard to any later fluctuations in the value of portfolio
securities or other assets; and (2) all references to the assets of the Fund are
in terms of current market value.
A. DIVERSIFICATION
THE NEW FUNDAMENTAL POLICY ON DIVERSIFICATION FOR ALL DAVIS FUNDS (OTHER THAN
DAVIS REAL ESTATE FUND) WOULD BE:
Diversification:
The Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
To remain classified as a diversified investment company under the 1940 Act, the
Fund must conform with the following: With respect to 75% of its total assets, a
diversified investment company may not invest more than 5% of its total assets,
determined at market or other fair value at the time of purchase, in the
securities of any one issuer, or invest in more than 10% of the outstanding
voting securities of any one issuer, determined at the time of purchase. These
limitations do not apply to investments in securities issued or guaranteed by
the United States ("U.S.") government or its agencies or instrumentalities.
THE NEW FUNDAMENTAL POLICY ON DIVERSIFICATION FOR DAVIS REAL ESTATE FUND WOULD
BE:
Diversification:
The Fund is not required to diversify its investments.
Further Explanation of Diversification Policy:
The Fund intends to remain classified as a regulated investment company under
the Internal Revenue Code. This requires the Fund to conform to the following:
at the end of each quarter of the taxable year, at least 50% of the value of the
Fund's total assets must be represented by: cash and cash items; U.S. government
securities; securities of other regulated investment companies and "other
securities". For this purpose, "other securities" does not include investments
in the securities of any one issuer that represent more than 5% of the value of
the Fund's total assets or more than 10% of the issuer's outstanding voting
securities.
<PAGE>
B. CONCENTRATION
THE NEW FUNDAMENTAL POLICY ON CONCENTRATION FOR DAVIS FINANCIAL FUND WOULD BE:
Concentration:
Davis Financial Fund concentrates its investments in the financial services
industry.
Further Explanation of Concentration Policy:
During normal market conditions, at least 65% of the Fund's assets are invested
in companies "principally engaged" in financial services.
A company is "principally engaged" in financial services if it owns financial
services related assets constituting at least 50% of the total value of its
assets, or if at least 50% of its revenues are derived from its provision of
financial services. Companies in the financial services industry include
commercial banks, industrial banks, savings institutions, finance companies,
diversified financial services companies, investment banking firms, securities
brokerage houses, investment advisory companies, leasing companies, insurance
companies and companies providing similar services.
The Fund may not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than issuers in the financial services industry or securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities).
THE NEW FUNDAMENTAL POLICY ON CONCENTRATION FOR DAVIS REAL ESTATE FUND WOULD BE:
Concentration:
Davis Real Estate Fund concentrates its investments in real estate securities.
Further Explanation of Concentration Policy:
During normal market conditions, at least 65% of the Fund's assets are invested
in real estate securities.
Real estate securities are issued by companies that have at least 50% of the
value of their assets, gross income, or net profits attributable to ownership,
financing, construction, management or sale of real estate, or to products or
services that are related to real estate or the real estate industry. Real
estate companies include real estate investment trusts or other securitized real
estate investments, brokers, developers, lenders and companies with substantial
real estate holdings such as paper, lumber, hotel and entertainment companies.
The Fund may not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than real estate securities or securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities).
THE NEW FUNDAMENTAL POLICY ON CONCENTRATION FOR ALL DAVIS FUNDS (OTHER THAN
DAVIS FINANCIAL FUND AND DAVIS REAL ESTATE FUND) WOULD BE:
Concentration:
The Fund may not concentrate its investments in the securities of issuers
primarily engaged in any particular industry, except as allowed under applicable
law, including the 1940 Act.
Further Explanation of Concentration Policy:
The Fund may not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities).
2
<PAGE>
C. SENIOR SECURITIES
THE NEW FUNDAMENTAL POLICY ON ISSUING SENIOR SECURITIES FOR ALL DAVIS FUNDS
WOULD BE:
Issuing Senior Securities: Except as permitted under applicable law, including
the 1940 Act, the Fund may not issue senior securities.
Further Explanation of Issuing Senior Securities:
The Fund may not issue senior securities nor sell short more than 5% of its
total assets, except as provided by the 1940 Act and any rules, regulations or
orders issued thereunder. This limitation does not apply to selling short
against the box.
D. BORROWING
THE NEW FUNDAMENTAL POLICY ON BORROWING FOR ALL DAVIS FUNDS WOULD BE:
Borrowing: The Fund may not borrow money, except to the extent permitted by
applicable law, including the 1940 Act.
Further Explanation of Borrowing Policy: The Fund may borrow from banks and
enter into reverse repurchase agreements in an amount up to 33 1/3% of its total
assets, taken at market value. The Fund may also borrow up to an additional 5%
of its total assets from banks or others. The Fund may borrow only as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. The Fund may purchase additional securities so long as
borrowings do not exceed 5% of its total assets. The Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities. The Fund may purchase securities on margin to the
extent permitted by applicable law.
E. UNDERWRITING
THE NEW FUNDAMENTAL POLICY ON UNDERWRITING FOR ALL DAVIS FUNDS WOULD BE:
Underwriting: The Fund may not underwrite securities of other issuers except to
the extent permitted by applicable law, including the 1940 Act.
Further Explanation of Borrowing Policy: The Fund may not underwrite securities
of other issuers, except insofar as the Fund may be deemed to be an underwriter
in connection with the disposition of its portfolio securities.
F. COMMODITIES AND REAL ESTATE
THE NEW FUNDAMENTAL POLICY FOR ALL DAVIS FUNDS REGARDING INVESTMENTS IN
COMMODITIES AND REAL ESTATE WOULD BE:
Investments in Commodities and Real Estate: The Fund may not purchase or sell
commodities or real estate, except to the extent permitted by applicable law,
including the 1940 Act.
Further Explanation of Policy Restricting Investments in Commodities and Real
Estate: The Fund may purchase or sell financial futures contracts and related
options and currency contracts and related options as described in its
prospectus and statement of additional information. The Fund may not purchase or
sell real estate, except that the Fund may invest in securities that are
directly or indirectly secured by real estate, or securities issued by issuers
that invest in real estate.
3
<PAGE>
G. LOANS
THE NEW FUNDAMENTAL POLICY FOR ALL DAVIS FUNDS REGARDING MAKING LOANS WOULD BE:
Making Loans: The Fund may not make loans to other persons, except as allowed by
applicable law, including the 1940 Act.
Further Explanation of Lending Policy: The acquisition of investment securities
or other investment instruments is not be deemed to be the making of a loan.
To generate income and offset expenses, the Fund may lend portfolio securities
to broker-dealers and other financial institutions in an amount up to 33 1/3% of
its total assets, taken at market value. While securities are on loan, the
borrower will pay the Fund any income accruing on the security. The Fund may
invest any collateral it receives in additional portfolio securities, such as
U.S. Treasury notes, certificates of deposit, other high-grade, short-term
obligations or interest-bearing cash equivalents. Gains or losses in the market
value of a security lent will affect the Fund and its shareholders.
When the Fund lends its securities, it will require the borrower to give the
Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.
4
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APPENDIX K:
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CURRENT FUNDAMENTAL INVESTMENT POLICIES
DAVIS NEW YORK VENTURE FUND FUNDAMENTAL INVESTMENT POLICIES
1. Investment Objective. The Fund's investment objective is growth of capital.
2. Diversification. The Fund may not buy the securities of any company if more
than 5% of the value of the Fund's total assets would then be invested in
that company. (U.S. Government Securities, i.e. securities issued by the
U.S. Government or its agencies or instrumentalities and repurchase
agreements involving such securities, are not included in this limitation.)
The Fund may not buy the securities of any company if after such purchase
the Fund would then own more than 10% of such company's voting securities
or any class of such company's securities. For this purpose, all debt
securities are deemed to comprise a single class.
3. Concentration. The Fund does not concentrate its investments in any one
industry and may not buy the securities of companies in any one industry if
more than 25% of the value of the Fund's total assets would then be
invested in companies in that industry. (U.S. Government Securities are not
included in this limitation.)
4. Commodities and Futures Contracts. The Fund may not buy or sell commodities
or commodity contracts except contracts with respect to foreign currencies
for hedging (risk reduction) purposes.
5. Options. The Fund may not purchase or write puts, calls, or a combination
thereof ("option transactions"), except that the Fund may: (i) write listed
covered call options ("calls") on portfolio securities and purchase call
options to close such transactions (provided that no such call is written
if it would cause more than 25% of the value of the Fund's total assets to
be subject to calls); (ii) purchase warrants issued by a company relating
to its own securities or those of a company it is controlled by or controls
or with which it is under common control; and (iii) engage in option
transactions with respect to foreign currencies for hedging purposes.
6. Real Estate. The Fund may not purchase real estate or real estate mortgages
as such, but may purchase the liquid securities of companies, including
real estate investment trusts, holding real estate or interests (including
mortgage interests) therein.
7. Unseasoned Issuers. The Fund may not buy the securities of companies in
continuous operation for less than three years (including predecessors) if
more than 5% of the value of the Fund's total assets would then be invested
in such securities.
8. Other Investment Companies. The Fund may not buy securities of other
registered investment companies, except: (i) shares of investment companies
investing primarily in foreign securities so long as such purchase does not
cause the Fund to (a) have more than 5% of the value of its total assets
invested in any one such company, (b) have more than 10% of the value of
its total assets invested in the aggregate of all such companies, or (c)
own more than 3% of the total outstanding voting stock of any such company;
or (ii) as a part of a merger, consolidation, reorganization or acquisition
of assets. An investor of the Fund may incur duplicate fees if shares of
investment companies are purchased.
9. Short Selling, Margin, and Arbitrage. The Fund may not sell short, buy on
margin or engage in arbitrage transactions. This restriction does not apply
to transactions with respect to foreign currencies for hedging purposes.
10. Illiquid Securities. The Fund may not purchase illiquid securities if more
than 15% of the value of the Fund's net assets would be invested in such
securities.
<PAGE>
11. Investing for Control. The Fund does not invest for the purpose of
exercising control or management of other companies.
12. Borrowing. The Fund may not borrow money except from banks for
extraordinary or emergency purposes in amounts not exceeding 10% of the
value of the Fund's total assets (excluding the amount borrowed) at the
time of borrowing. The Fund may not pledge or hypothecate any of its
assets, except in connection with permitted borrowing in amounts not
exceeding 15% of the value of the Fund's total assets (excluding the amount
borrowed) at the time of such borrowing. (These restrictions do not apply
to the use of margin deposits in connection with transactions in foreign
currencies for hedging purposes.)
13. Affiliated Ownership. The Fund may not buy or continue to hold securities
if any officers or directors of the Fund, the Adviser or the Adviser's
General Partner own too many of the same securities. This would happen if
any of these individuals own 1/2 of 1% or more of the securities and all
such individuals who own that much or more own 5% of such securities.
14. Underwriting. The Fund does not engage in the underwriting of securities;
however, the Fund may technically be considered an "underwriter" if it
sells restricted securities.
15. Lending Money or Securities. The Fund may not lend money, except that it
may buy debt securities customarily acquired by institutional investors.
These debt securities may comprise all or a portion of an issue of
"restricted" debt securities. The Fund may also buy debt securities that
have been sold to the public and may enter into repurchase agreements. The
Fund may lend its portfolio securities subject to having 100% collateral in
cash or U.S. Government Securities. The Fund will not lend securities if
such a loan would cause more than 20% of the total value of its assets to
then be subject to such loans.
16. Senior Securities. The Fund may not issue senior securities nor sell short
more than 5% of its total assets, except as provided by the 1940 Act and
any rules, regulations or orders issued thereunder. This limitation does
not apply to selling short against the box.
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<PAGE>
DAVIS GROWTH & INCOME FUND FUNDAMENTAL INVESTMENT RESTRICTIONS
1. Senior Securities. The Fund may not issue senior securities nor sell short
more than 5% of its total assets. This limitation does not apply to selling
short against the box.
2. Borrowing. The Fund may borrow money from any source for temporary purposes
in an amount not exceeding 5% of total assets. The Fund may borrow money
from banks as a temporary measure in amounts not exceeding 33 1/3% of the
amount of its total assets (reduced by the amount of all liabilities and
indebtedness other than such borrowing) when deemed desirable or
appropriate to effect redemptions. The Fund will not purchase portfolio
securities on margin and will not purchase additional portfolio securities
while borrowings exceed 5% of the total assets of the Fund.
3. Underwriting. The Fund does not engage in the underwriting of securities;
however, the Fund may technically be considered an "underwriter" if it
sells restricted securities.
4. Real Estate. The Fund may not purchase real estate or real estate mortgages
as such, but may purchase the liquid securities of companies, including
real estate investment trusts, holding real estate or interests (including
mortgage interests) therein.
5. Commodities, Futures Contracts, and Options. The Fund may not purchase or
sell futures contracts, forward contracts, options, and other derivative
investments except for the sole purpose of hedging the portfolio against
market, currency, interest rate, and other risks. Hedging transactions
include, but are not limited to, writing covered calls, purchasing
protective puts, selling futures to hedge existing positions, and buying
futures in anticipation of purchasing the underlying securities. This
prohibition does not limit the Fund's ability to purchase warrants or
adjustable rate debt obligations.
6. Lending. The Fund may not lend money, except that it may buy debt
securities customarily acquired by institutional investors. These debt
securities may comprise all or a portion of an issue of "restricted" debt
securities. The Fund may also buy debt securities that have been sold to
the public and may enter into repurchase agreements. The Fund may lend its
portfolio securities subject to having 100% collateral in cash, U.S.
Government Securities, or other liquid securities. The Fund will not lend
securities if such a loan would cause more than 33 1/3% of the total value
of its assets (including collateral received) to then be subject to such
loans.
7. Diversification. With respect to 75% of its total assets the Fund will not:
(a) make an investment that will cause more than 5% of the value of its
total assets to be invested in securities of any one issuer, except such
limitation shall not apply to obligations issued or guaranteed by the
United States ("U.S.") Government, its agencies or instrumentalities, or
(b) acquire more than 10% of the voting securities of any one issuer.
8. Concentration. The Fund does not concentrate its investments in any one
industry and may not buy the securities of companies in any one industry if
25% or more of the value of the Fund's total assets would then be invested
in companies in that industry. (U.S. Government Securities are not included
in this limitation.)
3
<PAGE>
DAVIS SERIES FUNDS
(DAVIS GROWTH OPPORTUNITY FUND, DAVIS FINANCIAL FUND, DAVIS REAL ESTATE FUND,
DAVIS CONVERTIBLE SECURITIES FUND, DAVIS GOVERNMENT BOND FUND, AND DAVIS
GOVERNMENT MONEY MARKET FUND)
FUNDAMENTAL INVESTMENT RESTRICTIONS COMMON TO ALL OF THE DAVIS SERIES FUNDS
1. Commodities and Commodities Contracts. The Funds may not purchase or sell
commodities or commodity contracts, except that the Funds, other than Davis
Government Bond Fund and Davis Government Money Market Fund, may invest in
contracts with respect to foreign currencies for hedging (risk reduction)
purposes.
2. Real Estate. The Funds, other than Davis Government Money Market Fund, may
invest in securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein, but will not otherwise invest in real estate. (This does not
prevent a Fund from owning and liquidating real estate or real estate
interests incident to a default on portfolio securities.) Davis Government
Money Market Fund may not invest in real estate, interests therein, or real
estate investment trusts.
3. Diversification. The Funds, other than Davis Government Money Market Fund,
may not purchase more than 10% of any one class of an issuer's securities,
other than securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities ("U.S. Government Securities"), repurchase
agreements relating thereto, certificates of deposit or the like, bankers'
acceptances or bank repurchase agreements. For purposes of this
restriction, all debt securities of an issuer are deemed to comprise a
single class. Davis Government Money Market Fund may not purchase more than
10% of the outstanding debt securities (other than U.S. Government
Securities and repurchase agreements related thereto) of any one issuer.
The Funds may not purchase the securities (other than U.S. Government
Securities or repurchase agreements related thereto) of any issuer if
immediately after such purchase more than 5% of the value of a Fund's total
assets would be invested in such issuer; except that up to 25% of the value
of the total assets of Davis Financial Fund, Convertible Securities Fund
and Davis Real Estate Fund may be invested without regard to this 5%
limitation. This restriction does not apply to Davis Government Money
Market Fund.
4. Options. The Funds may not invest in or write puts, calls or combinations
thereof ("option transactions"), except that a Fund, other than Davis
Government Money Market Fund, may (a) write calls so long as at the time of
so doing the security underlying the call is listed on a national
securities exchange, the call is issued by the Options Clearing Corporation
and is traded on a registered securities exchange, such calls do not exceed
10% of that Fund's total assets and are covered calls, (b) make closing
purchase transactions in order to close out outstanding call options
previously written by a Fund and, (c) engage in option transactions with
respect to foreign currencies for hedging purposes. (The convertible
feature of convertible securities is not deemed to be puts, calls or
combinations thereof.) With respect to Davis Government Money Market Fund,
it may not invest in puts, calls, straddles, spreads or any combination
thereof.
5. Unseasoned Issuers. The Funds may not buy the securities of companies in
continuous operation for less than three years (including predecessors) if
more than 5% of a Fund's total assets would then be invested in such
securities. This does not apply to Davis Government Bond Fund or Davis
Government Money Market Fund, which both invest in U.S. Government
Securities, or to investments made by Davis Real Estate Fund in real estate
investment trusts ("REITs").
4
<PAGE>
6. Other Registered Investment Companies. The Funds may not buy securities of
other registered investment companies, except that Funds other than Davis
Government Bond Fund and Davis Government Money Market Fund may invest in
shares of investment companies investing primarily in foreign securities,
provided that such purchase does not cause a Fund to: (a) have more than 5%
of the value of its total assets invested in any one such company; (b) have
more than 10% of the value of its total assets invested in the aggregate of
all such companies; or (c) own more than 3% of the total outstanding voting
stock of any such company. All Funds may acquire securities of other
registered companies as a part of a merger, consolidation, reorganization
or acquisition of assets.
7. Purchases on Margin, Short Sales. The Funds may not purchase securities on
margin, make short sales of securities or maintain a short position, except
that: (i) all Funds except Davis Growth Opportunity Fund and Davis
Government Money Market Fund may engage in such investments when at the
time of sale a Fund has, by reason of its ownership of other securities,
the right to obtain securities equivalent in kind and amount to the
securities sold without payment of additional consideration, and such other
securities are retained so long as the Fund is in a short position; and
(ii) these restrictions do not apply to transactions with respect to
foreign currencies for hedging purposes.
8. Investing for Control. The Funds may not invest for the purpose of
exercising control or management of other companies.
9. Borrowing Money, Pledging Assets. The Funds, other than Davis Government
Money Market Fund, may not borrow money except from banks for extraordinary
or emergency purposes in amounts not exceeding 10% of the value of a Fund's
total assets (excluding the amount borrowed) at the time of such borrowing.
The Funds may not pledge or hypothecate any of their assets, except in
connection with permitted borrowing in amounts not exceeding 15% of the
value of a Fund's total assets (excluding the amount borrowed) at the time
of such borrowing. These restrictions do not apply to the use of margin
deposits in connection with transactions in foreign currencies for hedging
purposes. Davis Government Money Market Fund may not borrow, except from
banks for extraordinary emergency purposes in amounts not exceeding 25% of
the value of its total assets (including the amount borrowed), and may
pledge or hypothecate assets not exceeding 10% of the value of its net
assets (including any amount borrowed) in connection with such borrowing.
Both limits are calculated as of the time of such borrowing.
10. Affiliated Ownership. The Funds may not buy or continue to hold securities
if any officers or directors of the Company, the Adviser, or the Adviser's
General Partner own too many of the same securities. This would happen if
any of these individuals own 1/2 of 1% or more of the securities and all
such individuals who own that much or more own 5% of such securities.
11. Underwriting Securities. The Funds do not engage in the underwriting of
securities; however, the Funds may technically be considered "underwriters"
if they sell restricted securities.
12. Loans. The Funds may not make loans except through the purchase of debt
obligations (including entering into repurchase agreements) in accordance
with the Fund's investment objectives and policies.
13. Concentration.
(a) Concentration, Davis Growth Opportunity Fund and Davis Government Bond
Fund. Neither Davis Growth Opportunity Fund nor Davis Government Bond Fund
may purchase the securities of issuers conducting their principal business
activities in the same industry, if immediately after such purchase the
value of a Fund's investments in such industry would exceed 25% of the
value of its total assets, provided that (a) as to utility companies, the
gas, electric, water and telephone businesses will be considered separate
industries, and as to finance companies, personal credit and business
credit will be considered separate industries, and (b) there is no
limitation with respect to or arising out of investments in U.S. Government
Securities and repurchase agreements with respect thereto, certificates of
deposit or the like, bankers' acceptances and bank repurchase agreements.
5
<PAGE>
(b) Concentration, Davis Financial Fund. Davis Financial Fund may not
invest less than 25% of its total assets (except investments for temporary
defensive periods) in companies principally engaged in each of the banking
and financial services industries. Companies in the banking industry
include U.S. and foreign commercial and industrial banking and savings
institutions (including their parent holding companies). Companies in the
financial services industry include commercial and industrial finance
companies, diversified financial services companies, investment banks,
securities brokerage firms and investment advisory companies, leasing
companies and insurance and insurance holding companies.
Except for companies in the industries identified above, Davis Financial
Fund may not purchase the securities of issuers conducting their principal
business activities in the same industry if immediately after such purchase
the value of the Davis Financial Fund's investments in such industry would
constitute 25% or more of the value of the Fund's total assets, provided
that (a) as to utility companies, the gas, electric, water and telephone
businesses will be considered separate industries, and (b) there is no
limitation with respect to or arising out of investments in U.S. Government
Securities and repurchase agreements fully collateralized by such
government securities.
(c) Concentration, Davis Convertible Securities Fund. Davis Convertible
Securities Fund may not purchase the securities of issuers conducting their
principal business activities in the same industry if immediately after
such purchase the value of the Davis Convertible Securities Fund's
investments in such industry would constitute 25% or more of the value of
the Fund's total assets, provided that (a) as to utility companies, the
gas, electric, water and telephone businesses will be considered separate
industries, and (b) there is no limitation with respect to or arising out
of investments in U.S. Government Securities and repurchase agreements
fully collateralized by such government securities.
(d) Concentration, Davis Real Estate Fund. Davis Real Estate Fund may not
purchase the securities of issuers conducting their principal business
activities in the same industry if immediately after such purchase the
value of the Fund's investments in such industry would constitute 25% or
more of the value of the Fund's total assets, provided that (a) as to
utility companies, the gas, electric, water and telephone businesses will
be considered separate industries, and (b) there is no limitation with
respect to or arising out of investments in U.S. Government Securities and
repurchase agreements fully collateralized by such government securities,
or investments in securities of companies in the real estate industry or
that own significant amounts of real estate or have products or services
relating to the real estate industry.
FUNDAMENTAL INVESTMENT RESTRICTIONS APPLICABLE ONLY TO SPECIFIC DAVIS SERIES
FUNDS
1. Arbitrage. Neither Davis Growth Opportunity Fund nor Davis Government Bond
Fund may engage in arbitrage transactions.
2. Maturity. Davis Government Money Market Fund may not purchase any security
that has a maturity date exceeding that prescribed in Rule 2a-7 under the
Investment Company Act of 1940.
3. Restricted Securities. Davis Government Money Market Fund may not invest in
restricted securities; provided, however, that this restriction shall not
apply to repurchase agreements.
4. Oil, Gas, Minerals. Davis Government Money Market Fund may not invest in
oil, gas or other mineral exportations or development programs.
6
<PAGE>
FORM OF PROXY CARD
EACH FUND WILL HAVE A UNIQUE PROXY CARD
ALLOWING VOTING ON INDIVIDUAL PROPOSALS
AS LISTED IN THE PROXY STATEMENT ON PAGE 2.
DAVIS NEW YORK VENTURE FUND (a series
of Davis New York Venture Fund, Inc.)
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF DAVIS NEW YORK VENTURE FUND, INC.
The undersigned, revoking previous proxies for such shares, hereby appoints
Kenneth Eich, Sharra Reed, and Thomas Tays, or any of them, attorneys of the
undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
December 1, 2000 at 3480 East Britannia Drive, Tucson, Arizona 85706 on,
commencing at 10 a.m. Pacific Time, and at any and all adjournment(s) thereof.
Receipt of the Notice of and Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-xxx-xxxx or
through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
The Board of Directors recommends a vote FOR the election of Directors and all
other proposals. IF NO SPECIFICATION IS MADE, YOUR SHARES WILL BE VOTED FOR THE
ELECTION OF ALL DIRECTORS AND ALL OTHER PROPOSALS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PROPOSAL 1: VOTE ON DIRECTORS
Nominees for the Board of Directors :
01) Wesley E. Bass, 02) Jeremy H. Biggs, Jr., 03) Marc P. Blum,
04) Andrew A. Davis, 05) Christopher C. Davis, 06) Jerry D. Geist,
07) D. James Guzy, 08) G. Bernard Hamilton, 09) Laurence W. Levine,
10) Christian R. Sonne, and 11) Marsha Williams
:
FOR WITHHOLD FOR ALL To Withhold authority to vote, mark "For All Except"
ALL ALL EXCEPT And write the nominee's number on the line below.
[ ] [ ] [ ] ----------------------------------------------------
PROPOSAL 2: TO APPROVE ADVISORY AND SUB-ADVISORY AGREEMENTS
ADVISORY AGREEMENT WITH DAVIS SELECTED ADVISERS, L.P.
<PAGE>
For Against Abstain
[ ] [ ] [ ]
SUB-ADVISORY AGREEMENT WITH DAVIS SELECTED ADVISERS - NY, INC.
For Against Abstain
[ ] [ ] [ ]
PROPOSAL 3 TO CONSIDER CHANGING OR ELIMINATING CERTAIN INVESTMENT POLICIES.
To vote for all applicable elements of Proposal 3.
For Against Abstain
[ ] [ ] [ ]
STOP HERE UNLESS YOU WOULD LIKE TO VOTE ON EACH APPLICABLE ELEMENT OF PROPOSAL 3
(A) Diversification
For Against Abstain
[ ] [ ] [ ]
(B) Concentration
For Against Abstain
[ ] [ ] [ ]
(C) Senior Securities
For Against Abstain
[ ] [ ] [ ]
(D) Borrowing
For Against Abstain
[ ] [ ] [ ]
(E) Underwriting
For Against Abstain
[ ] [ ] [ ]
(F) Commodities and Real Estate
For Against Abstain
[ ] [ ] [ ]
<PAGE>
(G) Making Loans
For Against Abstain
[ ] [ ] [ ]
(H) Unseasoned Issuers
For Against Abstain
[ ] [ ] [ ]
(I) Options
For Against Abstain
[ ] [ ] [ ]
(J) Other Investment Companies
For Against Abstain
[ ] [ ] [ ]
(K) Short Selling, Margin, and Arbitrage
For Against Abstain
[ ] [ ] [ ]
(L) Investing for Control
For Against Abstain
[ ] [ ] [ ]
(M) Affiliated Ownership
For Against Abstain
[ ] [ ] [ ]
(N) Illiquid Securities
For Against Abstain
[ ] [ ] [ ]
(O) Investment Objective
For Against Abstain
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS. IF SIGNING IS BY ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE
THAN ONE NAME APPEARS, ALL MUST SIGN.
<PAGE>
---------------------------------- ------ ------------------------ -----
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
<PAGE>
(Date)
Dear Financial Adviser:
Included in a proxy statement being mailed to all shareholders of Davis Funds
are two proposals that we wanted to explain further to you.
For shareholders in Davis New York Venture Fund, we are requesting that certain
of the investment restrictions be broadened. The most significant relates to our
status as a diversified fund. While we would maintain this status, we would
replace the current 5% restriction which prevents portfolio managers from adding
to a holding if it already represents more than 5% of the Fund's assets. In its
place, this 5% restriction would apply to 75% of the portfolio and portfolio
managers would be allowed to add to 5% or greater positions as long as the sum
of these does not exceed 25%.
For shareholders in all Davis Funds, they will be requested to vote on a change
in control of the investment adviser, Davis Selected Advisers, L.P. ("DSA"). In
essence, a company controlled by Shelby M.C. Davis will transfer to a company
controlled by Christopher Davis the general partnership shares of DSA. While
minor from an economic standpoint, this transfer will result in a change of
control as defined by the Investment Company Act of 1940 and requires
shareholder approval.
We thank you for your continued support.
Sincerely,
Christopher C. Davis
