SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 2-74216
POST-EFFECTIVE AMENDMENT NO. 21
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-3270
AMENDMENT NO. 22
DAVIS TAX-FREE HIGH INCOME FUND, INC.
(formerly, VENTURE MUNI (+) PLUS, INC.)
124 East Marcy Street
Santa Fe, New Mexico 87501
(1-505-820-3000)
Agent For Service: Sheldon R. Stein
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
(1-312-580-2014)
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b)
__X_ on February 1, 1996, pursuant to paragraph (b)
----------------
____ 60 days after filing pursuant to paragraph (a)
____ on , pursuant to paragraph (a)
of Rule 485
In accordance with Section 24(f) of the Investment Company Act of 1940
and Rule 24f-2 thereunder, Registrant has previously elected to register
an indefinite number of shares of its Common Stock. The 24f-2 Notice
was filed on or about November 9, 1995.
<PAGE>
FORM N-1A
DAVIS TAX-FREE HIGH INCOME FUND, INC.
POST-EFFECTIVE AMENDMENT NO. 21 TO REGISTRATION STATEMENT NO.
2-74216 UNDER THE SECURITIES ACT OF 1933 AND AMENDMENT NO. 22
UNDER THE INVESTMENT COMPANY ACT OF 1940 TO REGISTRATION
STATEMENT NO. 811-3270.
CROSS REFERENCE SHEET
---------------------
N-1A
Item No. Prospectus Caption or Placement
- ------- -------------------------------
1 Front Cover
2 Summary (includes expense table)
3 Financial Highlights; Performance Data
4 Summary; Investment Objective and Policies
5 Adviser, Sub-Adviser and Distributor; Method of Distribution;
Purchase of Shares; Summary
5A Mangement's Discussion of Fund Performance (contained
in 1995 Annual Report)
6 Summary; Shareholder Inquiries; Dividends and Distributions;
Federal Income Taxes; Fund Shares
7 Purchase of Shares; Exchange of Shares; Determining the
Price of Shares
8 Redemption of Shares
9 (Not Applicable)
Part B Caption or Placement
---------------------------
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Fundamental Investment Restrictions; Municipal Obligations;
Temporary Investments; Portfolio Transactions
14 Directors and Officers
15 Certain Shareholders of the Funds
16 Investment Advisory Services; Custodian; Auditors;
Determining the Price of Shares; Distribution of Fund Shares
17 Portfolio Transactions
18 *
19 Determining the Price of Shares; Reduction of Class A Sales
Charge
20 *
21 *
22 Performance Data
23 Financial Statements for the year ended September 30, 1995
are incorporated by reference from the 1995 Annual Report to
Shareholders.
____________________
* Included in Prospectus
<PAGE>
PROSPECTUS February 1, 1996
DAVIS TAX-FREE HIGH INCOME FUND, INC.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
Minimum Investment Plans Available
Initial Purchase $1,000 Exchange Privilege
Subsequent Investment $25 Automatic Investment Plan
Automatic Withdrawals Plan
Davis Tax-Free High Income Fund, Inc. (the "Fund") seeks to provide
current income free from federal income tax by investing in debt
obligations issued by state and local governments or their agencies or
instrumentalities ("municipal obligations"). The Fund may invest up to
100% of its assets in lower rated bonds, commonly known as "junk bonds,"
which entail greater risks, including default risks, than those found in
higher rated securities. Investors should carefully consider these risks
before investing. See "Investment Objectives and Policies."
The Fund offers two classes of shares, Class A and B, each having
different expense levels and sales charges. These alternatives permit you
to choose the method of purchasing shares that is most beneficial to you,
depending on the amount of the purchase, the length of time you expect to
hold the shares and other circumstances. Shares of a particular class may
be exchanged for shares of the same class offered by another Davis Fund.
See "Summary" and "Purchase of Shares" for more information.
This Prospectus concisely sets forth information about the Fund that
prospective investors should know before investing. It should be read
carefully and retained for future reference. A Statement of Additional
Information dated February 1, 1996, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. A copy of
this Statement and other information about the Fund may be obtained
without charge by writing to or calling the Fund at the above address or
telephone number.
____________________
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
SUMMARY
Fund Expenses. The following table is intended to assist you in
understanding the various costs and expenses that an investor in the Fund
will bear directly or indirectly. The information with respect to the
Fund's Class B shares is based on the Fund's fiscal year ended September
30, 1995. The information concerning "other expenses" with respect to
the Fund's Class A shares is estimated based on the first year such shares
are offered. You can refer to "Adviser and Distributor" and "Purchase of
Shares" for more information on transaction and operating expenses of the
Fund.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses Class A Class B
- -------------------------------- ------- -------
<S> <C> <C>
Maximum sales load imposed on purchases.......................... 4.75% None
Maximum sales load imposed on reinvested dividends............... None None
Deferred sales load (a declining percentage of the
lesser of the net asset value of the shares
redeemed or the total cost of such shares)
Redeemed during first year................................... None 4.00%
Redeemed during second or third year......................... None 3.00%
Redeemed during fourth or fifth year......................... None 2.00%
Redeemed during sixth year................................... None 1.00%
Redeemed after sixth year.................................... None None
Exchange Fee................................................... $5.00 $5.00
</TABLE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (as a percentage of average net assets)
- ---------------------------------------------------------------------
<S> <C> <C>
Management fees............................................. 0.75% 0.75%
12b-1 fees<F1>.............................................. 0.25% 0.96%
Other expenses.............................................. 0.43% 0.43%
Total Fund operating expenses.......................... 1.43% 2.14%
<FN>
<F1> The effect of a Rule 12b-1 plan is that long-term shareholders may pay
more than the maximum front-end sales charge permitted under applicable
rules of the National Association of Securities Dealers, Inc.
</FN>
</TABLE>
Example:
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return and (except as noted below) redemption at
the end of each time period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- -------
<S> <C> <C> <C> <C>
Class A................................................ $61 $91 $122 $211
Class B................................................ $52 $87 $125 N/A
Class B (assuming no redemption at end of period)...... $22 $67 $115 N/A
</TABLE>
The 5% rate used in the example is only for illustration and is not
intended to be indicative of the future performance of the Fund, which may
be more or less than the assumed rate. Future expenses may be more or
less than those shown.
The Fund. Davis Tax-Free High Income Fund, Inc. is an open-end,
diversified, management investment company incorporated in Maryland in
1981 and is registered under the Investment Company Act of 1940.
The Fund offers investors the choice between two classes of shares.
Class A shares may be purchased at a price equal to their net asset value
per share plus a front-end sales charge imposed at the time of purchase.
<PAGE>
Purchases of $1 million or more of Class A shares may be purchased at net
asset value. Class B shares may be purchased at net asset value, with no
front-end sales charge, but are subject to a contingent deferred sales
charge on most redemptions made within six years of purchase. These
alternatives permit an investor to choose the method of purchasing shares
that is most beneficial given the amount of the purchase, the length of
time the investor expects to hold the shares, and other circumstances.
Each class of shares pays a Rule 12b-1 distribution fee at an annual rate
not to exceed (i) for Class A shares, 0.25% of the Fund's aggregate average
daily net assets attributable to the Class A shares and (ii) for Class B
shares, 1.00% of the Fund's aggregate average daily net assets
attributable to the Class B shares. The purpose and function of the
deferred sales charge and distribution services fee with respect to the
Class B shares is the same as those of the front-end sales charge and
distribution services fee with respect to the Class A shares.
Each share of the Fund represents an identical interest in the
investment portfolio of the Fund. However, shares differ by class in
important respects. For example, Class B shares incur higher distribution
services fees and bear certain other expenses and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class A
shares. Class B shares will automatically convert to Class A shares eight
years after the end of the calendar month in which the shareholder's order
to purchase was accepted, in the circumstances and subject to the
qualifications described in this Prospectus. The per share net asset value
of the Class B shares generally will be lower than the per share net asset
value of the Class A shares, reflecting the daily expense accruals of
additional distribution fees and certain other expenses applicable to Class
B shares. It is expected, however, that the per share net asset value of
the classes, which differ by approximately the amount of the expense
accrual differential between the classes will tend to converge
immediately on the ex date of the dividends or distributions. The Board of
Directors may offer additional classes of shares in the future and may at
any time discontinue the offering of any class of shares. See "Purchase of
Shares--Alternative Purchase Arrangements".
Investment Objective. The Fund's investment objective is to provide
current income free from federal income tax by investing in municipal
obligations. The Fund may invest in bonds below investment grade ("junk
bonds"). Such securities are speculative and subject to greater market
fluctuations and risk of loss of income and principal than higher rated
bonds. There is no assurance that the investment objective of the Fund
will be achieved. See "Investment Objectives and Policies".
Investment Adviser, Sub-Adviser and Distributor. Davis Selected
Advisers, L.P., (the "Adviser") is the investment adviser and distributor
for the Fund. Stamper Capital & Investments, Inc. (the "Sub-Adviser") is
employed by the Adviser to provide day to day management of the Fund's
portfolio. See "Adviser, Sub-Adviser and Distributor".
Purchases, Exchanges and Redemptions. The Fund offers two classes
of shares, as described above. Initial and subsequent minimum
investments may be made in amounts equal to $1,000 and $25,
respectively. Shares may be exchanged under certain circumstances at net
asset value for the same class of shares of other funds managed and
distributed by the Adviser, with a $5 service fee for each exchange
payable to the Adviser. Accounts with a market value of less than $250
caused by shareholder redemptions are redeemable by the Fund. See
"Purchase of Shares," "Exchange of Shares" and "Redemption of
Shares".
Shareholder Services. Questions regarding the Fund or your account
may be directed to Davis Selected Advisers, L.P. at 1-800-279-0279 or to
your sales representative. Written inquiries may be directed to Davis
Selected Advisers, L.P., P.O. Box 1688, Santa Fe, NM 87504-1688. During
drastic market conditions, the Adviser may experience difficulty
accepting telephone redemptions or exchanges. If you are unable to
contact the Adviser at the above telephone number, you should call
1-505-820-3000 Monday through Friday between 8:00 a.m. and 4:00 p.m.
Mountain Time.
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides you with information about the
financial history of the Fund's shares. The table expresses the
information in terms of a single Class A or B share for the respective
periods presented and is supplementary information to the Fund's financial
statements which are included in the September 30, 1995 Annual Report
to Shareholders. Such Annual Report may be obtained by writing or calling
the Fund. The Fund's financial statements and financial highlights for the
five years ended September 30, 1995, have been audited by the Fund's
independent certified public accountants, whose opinion thereon is
contained in the Annual Report.
<PAGE>
<TABLE>
<CAPTION>
Class A _________________________________________Class B_________________________________
Ten
Months
Ended
September 30, Year ended September 30,
__________________________________________________________________________________
1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $8.90 $9.09 $9.65 $9.49 $9.41 $9.30 $9.58 $9.57 $9.30 $10.09 $9.73
_____ _____ _____ _____ _____ _____ _____ _____ _____ ______ _____
Income From Investment
- ----------------------
Operations
- ----------
Net Investment
Income............. .40 .48 .44 .54 .54 .67 .59 .55 .61 .66 .89
Net Gains or Losses
on Securities
(both realized and
unrealized)....... .30 .10 (.18) .29 .27 .22 (.09) .24 .51 (.59) .54
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total From Investment
Operations............ .70 .58 .26 .83 .81 .89 .50 .79 1.12 .07 1.43
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Less Distributions
- ------------------
Dividends (from net
investment
income)........... (.40) (.48) (.44) (.54) (.54) (.67) (.59) (.55) (.61) (.64) (.85)
Distribution in
excess of net
investment income. - (.01) (.07) (.10) (.12) (.11) (.12) (.12) (.12) (.12) (.12)
Tax Return of capital
distributions..... _ - (.03) (.03) (.07) _ (.07) (.11) (.08) (.07) (.04)
Distribution from
realized gains
from investment
transactions...... (.01) (.01) (.28) - - - - - (.04) - (.01)
Dividends from net
investment income-
taxable........... - - - - - - - - - (.03) (.05)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total Distributions... (.41) (.50) (.82) (.67) (.73) (.78) (.78) (.78) (.85) (.86) (1.07)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Net Asset Value,
End of Period....... $9.19 $9.17 $9.09 $9.65 $9.49 $9.41 $9.30 $9.58 $9.57 $9.30 $10.09
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total Return<F1>...... 7.93% 6.64% 2.81% 9.10% 8.89% 10.09% 5.37% 8.63% 12.54% .66% 13.83%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of
Period (000
omitted).......... 45,461 126,727 188,874 164,018 124,227 91,718 80,283 71,339 58,871 51,450 27,431
Ratio of Expenses to
Average Net
Assets............ 1.43%<F2> 2.14% 2.07% 2.26% 2.41% 2.41% 2.44% 2.39% 2.46% 2.42% 1.44%
Ratio of Net Income
to Average Net
Assets........... 5.95%<F2> 5.37% 4.59% 5.50% 5.53% 7.13% 6.08% 5.63% 6.36% 6.56% 8.04%
Portfolio Turnover
Rate.......... 127.80% 127.80% 113.46% 107.80% 47.31% 55.07% 28.77% 22.85% 33.72% 64.39% 53.35%
<FN>
<F1> Sales Charge are not reflected in calculation
<F2> Annualized
</FN>
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
General. The Fund's investment objective is to provide current
income free from federal income tax by investing in municipal obligations.
In seeking to achieve this investment objective, the Fund will normally
have at least 80% of its net assets invested in municipal obligations
without limitation as to quality ratings, maturity ranges or types of
issuers. The Sub-Adviser will select particular municipal obligations for
the Fund if, in its view after analysis, the increased yield offered,
regardless of published ratings, is sufficient to compensate for the level
of assumed risk. The Fund may invest up to 100% of its assets in high
yield, high risk obligations. See "High Yield, High Risk Debt Securities"
and "Portfolio Composition," below. The average maturity of the Fund's
portfolio will vary; however, it is anticipated that a significant portion of
the portfolio will be invested in long-term obligations of 20 years or
more since such securities generally produce higher yields than
shorter-term obligations. A more complete description of bond ratings is
contained in the Appendix. The Fund may invest in shares of investment
companies primarily investing in short-term municipal obligations, but
will not do so if it would cause more than 10% of its total assets to be
invested in such shares. Such other investment companies usually have
their own management costs or fees and the Fund's Adviser earns its
regular fee on such assets.
If you are subject to the Federal alternative minimum tax, you
should note that the Fund may invest up to 20% of its total assets in
municipal obligations issued to finance private activities. The interest
from these investments is a tax preference item for purposes of the
alternative minimum tax.
Municipal Obligations. Municipal obligations are bonds or notes
issued by a state or local governmental entity to obtain funds for various
public purposes or facilities such as airports, bridges, highways, housing,
hospitals, schools, streets, water and sewer systems, mass transit and
utility and power facilities. They are also used to refund outstanding
obligations or for general operating expenses. In addition, they may be
used for the construction or purchase of privately operated facilities
deemed to be of public purpose and benefit.
The two general classifications of municipal bonds are "general
obligation" bonds and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. They are usually paid from general
revenues of the issuing governmental entity. Revenue bonds are usually
payable only out of a specific revenue source rather than from general
revenues and ordinarily are not backed by the faith, credit or general
taxing power of the issuing governmental entity.
The Fund may invest in municipal bonds and certificates of
participation that constitute involvement in lease obligations or
installment purchase contract obligations (hereafter collectively called
"lease obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation.
<PAGE>
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, the disposition of the property in the event
of foreclosure might prove difficult. The Fund will seek to minimize these
risks by not investing more than 10% of its investment assets in lease
obligations that contain "non-appropriation" clauses.
Yields on municipal obligations are dependent on many factors,
including interest rate conditions, general conditions of the municipal
bond market, size of a particular offering, maturity of the obligation and
rating of the issue, if any. The value of outstanding obligations will vary
as a result of changing evaluations of the ability of their issuers (or other
revenue source) to meet the interest and principal payments, which can
also result in rating changes. Such values will also change in response to
changes in the interest rates payable on new issues. As discussed below,
portfolio values will also change in response to changes in the level of
interest rates.
Municipal obligations, like other marketable obligations, fluctuate in
price. Payments of interest and principal are dependent upon the ability
of the issuers (or other revenue source) to meet their obligations.
Payments on general obligation bonds are dependent on the tax base of the
issuing governmental entity. Payments on revenue bonds, unless
guaranteed by a taxing authority, are dependent upon the revenues from a
specific project or facility or payments from a private company which
operates the facility.
The principal and interest on revenue bonds for private facilities are
typically paid out of rents or other specified payments made to the
issuing governmental entity by the company using or operating the
facilities. The most common type of these obligations are industrial
revenue bonds and pollution control revenue bonds. Industrial revenue
bonds are issued by governmental entities to provide financing aid to
communities to locate privately operated industrial plants or community
facilities such as hospitals, hotels, business or residential complexes,
convention halls or sport complexes. Pollution control revenue bonds are
issued to provide funding for air, water and solids pollution control
systems for privately operated industrial or commercial facilities.
Sometimes, the funds for payment of such obligations come solely from
revenue generated by operation of the facility. Absent a guarantee by the
issuing governmental entity, revenue bonds for private facilities do not
represent a pledge of credit, general revenues or taxing powers of the
issuing governmental entity and the private company operating the
facility is the sole source of payment of the obligation. This type of
revenue bond frequently provides a higher rate of return than other
municipal obligations but may entail greater risk than an obligation which
is guaranteed by a governmental unit with taxing power. Federal income
tax laws place substantial limitations on industrial revenue bonds, and
particularly those "specified private activity bonds" issued after August
7, 1986. See "Federal Income Taxes." However, the Fund's management
does not believe that these limitations will impair the Fund's ability to
purchase or sell bonds in accordance with the Fund's objectives and
policies.
Subject to the restrictions described below, the Fund's portfolio
may be invested in new issue bonds and in bonds whose interest payments
are from revenues of similar projects (such as utilities or hospitals) or
whose issuers share the same geographic location. As a result, the Fund's
portfolio may be more susceptible to similar economic, political or
regulatory developments than would a portfolio of bonds with a greater
variety of issuers. This may result in greater market fluctuations in the
Fund's share price. The Fund may purchase up to 50% of the outstanding
debt obligations of an issuer. Some of the securities which the Fund may
hold may not have an established market and such lack of liquidity could
cause the Fund difficulty at times in selling these securities at favorable
prices.
The market value of fixed income securities will generally be
affected by changes in the level of rates. Increases in interest rates tend
to reduce the market value of fixed income investments and declines in interest
<PAGE>
rates tend to increase their value. Moreover, debt issues with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation or depreciation than securities with shorter
maturities. Fluctuations in the market value of the Fund's portfolio securities
subsequent to their acquisition will not affect cash income from such securities
but will be reflected in the Fund's net asset value. In addition, the future
earning power of an obligor and its ability to service debt may affect the
market price of higher yielding debt.
The average maturity and the mix of investments of the Fund will
vary as the Sub-Adviser seeks to provide a high level of income
considering the available alternatives in the market. Since interest rates
vary with changes in economic, market, political and other conditions,
there can be no assurance that historic interest rates are indicative of
rates which may prevail in the future. Since the values of securities in
the Fund fluctuate depending upon market factors, the credit of the obligor
and inversely with current interest rate levels, the net asset value of its
shares will fluctuate. Consequently, there can be no assurance that the
Fund's objectives can be achieved or that its shareholders will be
protected from the risk of loss inherent in security ownership. The
Sub-Adviser attempts to adjust investments as considered advisable in
view of prevailing or anticipated market conditions as perceived by the
Sub-Adviser. Portfolio securities may be purchased or sold in
anticipation of a rise or a decline in interest rates or a change in credit
quality.
There are market and investment risks with any security and the
value of an investment in the Fund will fluctuate over time. In seeking to
achieve its investment objective, the Fund will invest in fixed income
securities based on the Sub-Adviser's analysis without relying on any
published ratings. The Fund will invest in a particular security if, in the
Sub-Adviser's view, the increased yield offered, regardless of published
ratings, is sufficient to compensate for the assumed risk. Since
investments will be based upon the Sub-Adviser's analysis rather than on
the basis of published ratings, achievement of the Fund's goals may depend
more upon the abilities of the Sub-Adviser than would otherwise be the
case. Investments in lower rated or non-rated securities, while generally
providing greater income and opportunity for gain than investments in
higher rated securities, entail greater risk of loss of income and principal.
See "High Yield, High Risk Debt Securities" below for a discussion of
various risk factors related to high yield, high risk fixed income
securities.
High Yield, High Risk Debt Securities. As discussed above, the Fund
may invest in low rated securities offering high current income. Such
securities will ordinarily be in the lower rating categories of recognized
rating agencies, including securities rated BBB or lower by Standard &
Poor's Corporation ("S&P") or Baa or lower by Moody's Investors Service,
Inc. ("Moody's") or, if unrated, deemed by the Sub-Adviser to be of an
equivalent rating. These lower-rated securities are considered
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation and generally will involve
more credit risk than securities in the higher rating categories.
Securities rated BB or lower by S&P or Ba or lower by Moody's are below
investment grade and are referred to in the financial community as "junk
bonds". A brief description of the bond ratings of these two services is
contained herein under "Portfolio Composition." A more complete
description is contained in the Appendix.
The investment philosophy of the Fund with respect to high yield,
high risk bonds is based on the premise that over the long term a
diversified portfolio of high yield fixed income securities should, even
taking into account possible losses, provide a higher net return than that
achievable on a portfolio of higher rated securities. The Fund seeks to
achieve a high yield while reducing relative risk through (a)
diversification, (b) credit analysis of the obligors by the Sub-Adviser, and
(c) monitoring and seeking to anticipate changes and trends in the
economy and financial markets that might affect the prices of portfolio
securities. Ratings assigned by credit agencies do not evaluate market
risks. The Sub-Adviser's judgment as to the "reasonableness" of the risk
involved in any particular investment will be a function of its experience
in managing fixed income investments and its evaluation of general
economic and financial conditions. This includes analysis and evaluations
of a specific guaranteeing entity's business and management, cash flow,
earnings coverage of interest and dividends, ability to operate under
adverse economic conditions, fair market
<PAGE>
value of the obligor's assets;and of such other considerations as the
Sub-Adviser may deem appropriate. The Sub-Adviser, while seeking to maximize
current yield, will monitor current developments with respect to portfolio
securities, potential investments and broad trends in the economy.
Achievement of the Fund's investment objective will be more dependent upon the
Sub-Adviser's credit analysis than would be the case for funds
predominantly investing in higher rated bonds. In some circumstances,
defensive strategies may be implemented to preserve or enhance capital
even at the sacrifice of current yield. There is, however, no assurance
that the Fund's objectives will be achieved or that the Fund's approach to
risk management will protect the shareholders against loss.
The market values of such high yield, high risk municipal securities
tend to reflect individual developments of the guaranteeing entity
underlying the issue to a greater extent than do higher rated securities,
which react to a greater extent to fluctuations in the general level of
interest rates. Such securities also tend to be more sensitive to economic
and industry conditions than are higher rated securities. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis regarding individual lower rated bonds or the high yield market,
may depress the prices for such securities. Factors such as the
aforementioned which may adversely impact the market value of high
yield, high risk securities and could adversely impact the Fund's net asset
value.
An economic downturn or significant increase in interest rates is
likely to have a negative affect on the high yield, high risk bond market
and consequently on the value of these bonds. In an economic downturn,
issuers may not have sufficient revenues to meet their principal and
interest payment obligations.
The risk of loss due to default is significantly greater for the
holders of high yield, high risk bonds. The costs associated with
recovering principal and interest once a security has defaulted may
impact the return to holders of the security. If the Fund experiences
unexpectedly large net redemptions, it may be forced to sell such bonds
without regard to the investment merits of such sales. This could
decrease the Fund's net assets. Since some of the Fund's expenses are
fixed, this could also reduce the Fund's rate of return. The Fund has not
experienced this problem to date.
The Fund may have difficulty disposing of certain high yield, high
risk bonds because there may be a thin trading market for such bonds.
Because not all dealers maintain markets in all high yield, high risk bonds,
the Fund anticipates that such bonds could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid
secondary market may have an adverse impact on market price and the
Fund's ability to dispose of particular issues and may also make it more
difficult for the Fund to obtain accurate market quotations or valuations
for purposes of valuing the Fund's assets. The Fund has a policy of
utilizing a professional pricing service which has experience in pricing
such securities which are difficult to price so as to obtain prices
reflecting the market as accurately as possible. To the extent that the
Fund purchases illiquid or restricted bonds, it may incur special
securities registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties relating to such bonds.
Bonds may be subject to redemption or call provisions. If an issuer
exercises these provisions when investment rates are declining, the Fund
would be likely to replace the bond with a lower yielding bond, resulting
in a decreased return. Zero coupon and pay-in-kind bonds involve special
considerations. The market prices of these securities are generally more
volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a
greater degree than do securities paying interest currently that have
similar maturities and credit quality. There is the additional risk in that,
unlike bonds which pay interest in cash throughout the period to maturity,
the Fund will realize no cash until the cash payment date unless a portion
of such securities are sold. If the issuer defaults, the Fund may obtain no
return at all on its investment. Zero coupon bonds generate interest
income before receipt of actual cash payments. In
<PAGE>
order to distribute such income, the Fund may have to sell portfolio securities
under disadvantageous circumstances.
Portfolio Composition. The table below reflects the Fund's portfolio
composition by quality rating for the year ended September 30, 1995,
calculated on the basis of the average weighted ratings of all bonds held
during the year. The table reflects the percentage of total assets
represented by fixed income securities rated by Moody's or S&P, by
unrated fixed income securities and by other assets. The percentages
shown reflect the higher of the Moody's or S&P rating. Other assets may
include money market instruments, repurchase agreements, equity
securities, net payables and receivables and cash. The allocations in the
table are not necessarily representative of the composition of the Fund's
portfolio at other times. Portfolio quality ratings will change over time.
<TABLE>
Composition of the Fund's Portfolio by Quality Rating as a Percentage of
Total Assets at September 30, 1995
<CAPTION>
Fund's Assessment of General Definition
Moody's/S&P Rating Category Percentage Non-rated Securities of Bond Quality
- --------------------------- ---------- -------------------- ---------------
<C> <C> <C> <C>
Aaa/AAA........................... 17.80% 0.21% Highest quality
Aa/AA............................. 16.97% 0% High quality
A/A............................... 16.52% 0.73% Upper medium grade
Baa/BBB........................... 11.98% 6.17% Medium grade
Ba/BB............................. 6.66% 13.48% Some speculative elements
B/B............................... 2.11% 3.05% Speculative
Caa/CCC........................... 0% 0.47% More speculative
Ca, C/CC, C, D.................... 0% 0% Very speculative, may be in default
Not Rated......................... 24.11% 0% Not rated by Moody's or S&P
Short-term Investments............ 3.85% 0%
------ ------
100.00% 24.11%
</TABLE>
The description of each bond quality category set forth in the table
above is intended to be a general guide and not a definitive statement as
to how Moody's and S&P define such rating category. A more complete
description of the rating categories is set forth in the Appendix. The
ratings of Moody's and S&P represent their opinions as to the quality of
the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute
standards of quality. There is no assurance that a rating assigned
initially will not change. The Fund may retain a security whose rating has
changed or has become unrated.
Restricted and Illiquid Securities. The Fund may invest in restricted
securities, i.e., securities which, if sold, would cause the Fund to be
deemed an "underwriter" under the Securities Act of 1933 (the "1933
Act") or which are subject to contractual restrictions on resale. The
Fund's policy is to not purchase or hold illiquid securities (which may
include restricted securities) if more than 15% of the Fund's net assets
would then be illiquid. If at any time more than 15% of the Fund's net
assets are illiquid, steps will be taken as soon as practicable to reduce
the percentage of illiquid assets to 15% or less.
The restricted securities which the Fund may purchase include
securities which have not been registered under the 1933 Act but are
eligible for purchase and sale pursuant to Rule 144A ("Rule 144A
Securities"). This Rule permits certain qualified institutional buyers,
such as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. The Sub-Adviser, under
criteria established by the Fund's Board of Directors, will consider
whether Rule 144A Securities being purchased or held by the Fund are
illiquid and thus subject to the Fund's policy that it will not make an
investment causing more than 15% of its net assets to be invested in
illiquid securities. In making this determination, the Sub-Adviser will
consider the frequency of trades and quotes, the number of dealers and
<PAGE>
potential purchasers, dealer undertakings to make a market, and the
nature of the security and the market place trades (for example, the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A Securities will also be
monitored by the Sub-Adviser and, if as a result of changed conditions, it
is determined that a Rule 144A Security is no longer liquid, the Fund's
holding of illiquid securities will be reviewed to determine what, if any,
action is required in light of the policy limiting investments in such
securities. Investing in Rule 144A Securities could have the effect of
increasing the amount of the Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
Portfolio Transactions. The Sub-Adviser is responsible for the
placement of portfolio transactions, subject to the supervision of the
Board of Directors. The Fund may trade to some degree in securities for
the short-term and may sell securities to buy others with greater income
or profit potential or when it has realized a profit and the proceeds can be
more advantageously utilized. The Fund may also sell a security when the
Sub-Adviser believes such security will no longer continue to provide a
relatively high current yield or involves undue risk, or when the
Sub-Adviser deems it advisable to take a more defensive position or
return to a more aggressive stance. Because of the Fund's policies, the
Fund's portfolio turnover rate will vary. A higher portfolio turnover rate
could require the payment of larger amounts in brokerage commissions.
However, it is anticipated that most securities transactions will be
principal transactions, in which no brokerage commissions are incurred.
Research services and placement of orders by securities firms for shares
of the Fund may be taken into account as a factor in placing portfolio
transactions. The Fund's portfolio turnover rate is set forth in "Financial
Highlights".
"When Issued" Securities. Municipal obligations may at times be
purchased or sold on a delayed delivery basis or on a when-issued basis.
These transactions arise when securities are purchased or sold by the
Fund with payment and delivery taking place in the future. No payment is
made until delivery is made which may be up to 60 days after purchase. If
delivery of the obligation does not take place, no purchase will result and
the transaction will be terminated. Such transactions are considered to
involve more risk than immediate cash transactions. As a matter of
non-fundamental policy, any investment on a when issued or delay delivery
basis will not be made if such investment would cause more than 5% of
the value of the Fund's total assets to be invested in this type of
investment.
Borrowing. The Fund may borrow money from banks for temporary or
emergency purposes in an amount not exceeding 10% of the value of its
total assets (excluding the amount borrowed) and may pledge an amount
not exceeding 15% of its total assets (excluding the amount borrowed) to
secure such borrowing.
Fundamental and Non-Fundamental Policies. The Fund has adopted
certain investment restrictions which are described in the Statement of
Additional Information. These restrictions and the Fund's investment
objectives may not be changed unless authorized by a vote of the
shareholders. All other investment policies are non-fundamental and may
be changed without shareholder approval.
ADVISER, SUB-ADVISER AND DISTRIBUTOR
Davis Selected Advisers, L.P. (the "Adviser") whose principal office
is at 124 East Marcy Street, Santa Fe, New Mexico 87501, serves as the
investment adviser and distributor of the Fund. Venture Advisers, Inc. is
the Adviser's sole general partner. Shelby M.C. Davis is the controlling
shareholder of the general partner. Subject to the direction and
supervision of the Board of Directors, the Adviser manages the business
operations of the Fund. As discussed below, the Adviser has hired Stamper
Capital & Investments, Inc. as the Sub-adviser for the Fund. The Adviser
also acts as investment adviser and distributor for Davis High Income
Fund, Inc., Davis New York Venture Fund, Inc., Davis Series, Inc., Davis
International Series, Inc., (collectively with the
<PAGE>
Fund, the "Davis Funds"), Selected American Shares, Inc., Selected Special
Shares, Inc. and Selected Capital Preservation Trust.
The Fund pays the Adviser a fee at the annual rate of 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 over $500 million.
This fee is higher than that of most municipal bond funds. The Fund also
reimburses the Adviser for its costs of providing certain accounting and
financial reporting, shareholder services and compliance with state
securities laws.
Stamper Capital & Investments, Inc. (the "Sub-Adviser"), is the
Sub-Adviser for the Fund and manages the Fund's day to day investment
operations. The Fund pays no fees directly to the Sub-Adviser. The
Sub-Adviser will receive from the Adviser a fee equal to 30% of the fees
received by the Adviser from the Fund. All the fees paid to Stamper
Capital will be paid by the Adviser and not the Fund. The Sub-Adviser also
provides investment advisory services to employee benefit plans,
institutions, trust and individuals. The Sub-Adviser's offices are located
at 380 Foam Street, Suite 205, Monterey, CA 93940. B. Clark Stamper is
the controlling shareholder of the Sub-Adviser. The Adviser may acquire a
minority interest in the Sub-Adviser.
Portfolio Management. B. Clark Stamper has been the primary
portfolio manager of the Fund since June, 1990. He was a Senior Vice
President of the Adviser's General Partner and a Vice President of all of
the Davis Funds. He has been the portfolio manager of Davis High Income
Fund, Inc. (a high-yield corporate bond fund) since June, 1990. He was the
portfolio manager of the Davis Government Bond Fund (formerly, Bond
Fund) of Davis Series, Inc. (a U.S. Government Securities fund) from June,
1990 until April 30, 1995. He was the portfolio manager of Selected
Capital Preservation Trust's U.S. Government Income Fund from May 1,
1993 until April 30, 1995. From July, 1989, through June, 1990, Mr.
Stamper was a senior credit analyst at National Securities and Research
Corporation, and served as a portfolio manager for an institutional high
yield bond fund managed by an affiliate. Prior thereto he was an officer
and credit manager of Dial Capital Management, which managed high yield
funds for institutions.
Davis Selected Advisers, L.P., in its capacity as distributor, is
reimbursed by the Fund for some of its distribution expenses through
Distribution Plans which have been adopted with respect to each class of
shares and approved by the Fund's Board of Directors and the shareholders
of each class in accordance with Rule 12b-1 under the Investment
Company Act of 1940. See "Distribution Plans" below for more detail.
DISTRIBUTION PLANS
The Fund bears some of the costs of selling its shares under
Distribution Plans adopted with respect to its Class A and Class B shares
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Rule
12b-1 regulates the manner in which a mutual fund may assume costs of
distributing and promoting the sale of its shares.
Payments under the Class A Distribution Plan are limited to an
annual rate of 0.25% of the average daily net asset value of the Class A
shares. Such payments are made to reimburse the Adviser for the fees it
pays to its salespersons and other firms for selling Fund shares, servicing
shareholders and maintaining shareholder accounts. Normally, such fees
are at the annual rate of 0.25% of the average net asset value of the
accounts serviced and maintained on the books of the Fund. Payments
under the Class A Distribution Plan may also be used to reimburse the
Adviser for other distribution costs (excluding overhead) not covered in
any year by any portion of the sales charges the Adviser retains. See
"Purchase of Shares."
<PAGE>
Payments under the Class B Distribution Plan are limited to an
annual rate of 1% of the average daily net asset value of the Class B
shares. In accordance with current applicable rules, such payments are
also limited to 6.25% of gross sales of Class B shares plus interest at 1%
over the prime rate on any unpaid amounts. Up to 0.75% of the average
daily net assets is used to pay the Adviser a 4% commission on new sales
of Class B shares. Most or all of such commissions are reallowed to
salespersons and to firms responsible for such sales. No commissions are
paid by the Fund with respect to sales by the Adviser to officers,
directors and full-time employees of the Fund, the Adviser or the
Adviser's General Partner. Up to 0.25% of average net assets is used to
reimburse the Adviser for the payment of service and maintenance fees to
its salespersons and other firms for shareholder servicing and
maintenance of shareholder accounts.
If, due to the foregoing payment limitations, the Fund is unable to
pay the Adviser the 4% commission on new sales of Class B shares, the
Adviser intends, but is not obligated, to accept new orders for shares and
pay commissions in excess of the payments it receives from the Fund. The
Adviser intends to seek full payment from the Fund of any excess amounts
with interest at 1% over the prime rate at such future date when and to
the extent such payments on new sales would not be in excess of the
limitations. The Fund is not obligated to make such payments; the amount
(if any), timing and condition of any such payments are solely within the
discretion of the directors of the Fund who are not interested persons of
the Adviser or the Fund and have no direct or indirect financial interest in
the Class B Distribution Plan (the "Independent Directors"). If the Class B
Distribution Plan is terminated, the Adviser will ask the Independent
Directors to take whatever action they deem appropriate with regard to
the payment of any excess amounts. As of September 30, 1995, the
Adviser paid $2,767,373 in commissions with respect to the sale of Fund
shares for which the Adviser had not yet received reimbursement.
In addition, the Plans provide that the Adviser, in its sole
discretion, may utilize its own resources for distributing and promoting
sales of Fund shares, including any profits from its advisory fees.
Each of the Distribution Plans may be terminated at any time by vote
of the Independent Directors or by vote of a majority of the outstanding
voting shares of the respective class. Payments pursuant to a
Distribution Plan are included in the operating expenses of the class.
As described above, dealers or others may receive different levels
of compensation depending on which class of shares they sell. The
Adviser may make expense reimbursements for special training of a
dealer's registered representatives, advertising or equipment, or to defray
the expenses of dealer meetings. Any such amounts may be paid by the
Adviser from the fees it receives under the Class A and Class B
Distribution Plans.
Shares of the Fund may also be sold through banks or bank-affiliated
dealers. Any determination that such banks or bank-affiliated dealers are
prohibited from selling shares of the Fund under the Glass-Steagall Act
would have no material adverse effects on the Fund. State securities laws
may require such firms to be licensed as securities dealers in order to
sell shares of the Fund.
PURCHASE OF SHARES
General. You can purchase Class A or Class B shares of the Fund
from any dealer or other person having a sales agreement with the
Adviser.
There are three ways to make an initial investment in the Fund. One
way is to fill out the Application Form included in this Prospectus and
mail it to State Street Bank and Trust Company ("State Street") at the
<PAGE>
address on the Form. The dealer must also sign the Form. Your dealer or
sales representative will help you fill out the Form. You should enclose a
check (minimum $1,000) payable as indicated on the Form.
Another way to make an initial investment is to have your dealer
order and pay for the shares. In this case, you must pay your dealer. The
dealer can order the shares from the Adviser by telephone or wire. You
can also use this method for additional investments of at least $1,000.
The third way to purchase shares is by wire. Shares may be
purchased at any time by wiring federal funds directly to State Street.
Prior to an initial investment by wire, the shareholder should telephone
Davis Selected Advisers, L.P. at 1-800-279-0279 to advise them of the
investment and class of shares and to obtain an account number and
instructions. A completed Plan Adoption Agreement or Application Form
should be mailed to State Street after the initial wire purchase. To
assure proper credit, the wire instructions should be made as follows:
State Street Bank and Trust Company,
Boston, MA 02210
Attn.: Mutual Fund Services
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Shareholder Name,
Shareholder Account Number,
Federal Routing Number 011000028,
DDA Number 9904-947-0
After your initial investment, you can make additional investments
of at least $25. Simply mail a check payable to "State Street Bank and
Trust Company," c/o The Davis Funds, P.O. Box 8406, Boston, MA
02266-8406. The check should be accompanied by a form which State
Street will provide after each purchase. If you do not have a form, you
should tell State Street that you want to invest the check in shares of the
Fund. If you know your account number, you should also give it to State
Street.
The Fund does not issue certificates for Class A shares unless you
request a certificate each time you make a purchase. After December 1,
1994, certificates will not be issued for Class B shares. Instead, shares
purchased are automatically credited to an account maintained for you on
the books of the Fund by State Street. You receive a statement showing the
details of the transaction and any other transactions you had during the
current year each time you add to or withdraw from your account.
Alternative Purchase Arrangements. The Fund offers two classes of
shares. With certain exceptions described below, Class A shares are sold
with a front-end sales charge at the time of purchase and are not subject
to a sales charge when they are redeemed. Class B shares are sold
without a sales charge at the time of purchase, but are subject to a
deferred sales charge if they are redeemed within six years after
purchase. Class B shares will automatically convert to Class A shares at
the end of eight years after purchase.
Depending on the amount of the purchase and the anticipated length
of time of investment, investors may choose to purchase one class of
shares rather than the other. Investors who would rather pay the entire
cost of distribution at the time of investment, rather than spreading such
cost over time, might consider Class A shares. Other investors might
consider Class B shares, in which case 100% of the purchase price is
invested immediately. The Fund will not accept any purchase of Class B
shares in the amount of $250,000 or more per investor. Such purchase
must be made in Class A shares. See also "Distribution Plans" for more
information.
Class A Shares. Class A shares are sold at their net asset value plus
a sales charge. The amounts of the sales charges are shown in the
following table.
<PAGE>
<TABLE>
<CAPTION>
Customary
Sales Charge Charge as Concession to
as Approximate Your Dealer as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ------------------ ------------- ----------- --------------
<S> <C> <C> <C>
$ 99,999 or less 4-3/4% 5.0% 4%
$ 100,000 to $249,999 3-1/2% 3.6% 3%
$ 250,000 to $499,999 2-1/2% 2.6% 2%
$ 500,000 to $749,999 2% 2.0% 1-3/4%
$ 750,000 to $999,999 1% 1.0% 3/4 of 1%
$ 1,000,000 or more 0% 0.0% 0%<F1>
<FN>
<F1> On purchases of $1 million or more, the investor pays no front-end
sales charge or contingent deferred sales charge. However, the Adviser
may pay the financial service firm a commission during the first year
after purchase at an annual rate as follows:
Purchase Amount Commission
--------------- ----------
First $3,000,000....................... .75%
Next $2,000,000....................... .50%
Over $5,000,000....................... .25%
</FN>
</TABLE>
Such commission will be paid quarterly at the end of each fiscal quarter
for the first year after purchase. Where a commission is paid because of
purchases of $1 million or more, such payment will be made from 12b-1
distribution fees received from the Fund and, in cases where the limits of
the distribution plan in any year have been reached, from the distributor's
own resources.
There are a number of ways to reduce the sales charge on the
purchase of Class A shares, as set forth below.
(i) Family Purchases: Purchases made by an individual, such
individual's spouse and children under 21 are combined and treated as a
purchase of a single person.
(ii) Group Purchases: The purchases of an organized group, whether
or not incorporated, are combined and treated as the purchase of a single
person. The organization must have been organized for a purpose other
than to purchase shares of mutual funds.
(iii) Purchases under a Statement of Intention: By executing the
"Statement of Intention" included in the Application Form at the back of
the Prospectus, purchases of Class A shares of $100,000 or more made
over a 13-month period may be made at the applicable price for the
aggregate shares actually purchased during the period. Please see "Terms
and Conditions" at back of this prospectus.
(iv) Rights of Accumulation: If you notify your dealer or the
Adviser, you may include the Class A shares you already own (valued at
maximum offering price) in calculating the price applicable to your
current purchase.
(v) Combined Purchases with other Davis Funds: Purchases of Class
A shares of the Fund may be combined with your purchases of Class A
shares of other Davis Funds, including Davis New York Fund, Davis High
Income Fund, Inc. and all funds offered by Davis Series, Inc. (other than
Davis Government Money Market Fund), separately or under combined
Statements of Intention or rights of accumulation to determine the price
applicable to your purchases of Class A shares of the Fund.
(vi) Sales at Net Asset Value: The sales charge will not apply to:
(1) Class A shares purchased through the automatic reinvestment of
dividends and distributions (see "Dividends and Distributions"); (2) Class A
shares purchased by directors, officers and employees of any Fund
supervised and distributed by the
<PAGE>
Adviser or the Adviser's General Partner, including former directors and
officers and any spouse, child, parent, grandparent, brother or sister of all of
the foregoing, and any employee benefit or payroll deduction plan established by
or for such persons; (3) Class A shares purchased by any registered
representatives, principals and employees (and any spouse, child, parent,
grandparent, brother or sister) of securities dealers having a sales agreement
with the Adviser; (4) initial purchases of Class A shares totaling $250,000 or
more, made at any one time by banks, trust companies and other financial
institutions (collectively "Institutions") on behalf of one or more clients
for which such Institution acts in a fiduciary capacity; (5) initial
purchases of Class A shares totaling $250,000 or more by a registered
investment adviser on behalf of a client for which the adviser is
authorized to make investment decisions or otherwise acts in a fiduciary
capacity; (6) Class A shares purchased by persons participating in a "wrap
account" or similar fee-based program sponsored and maintained by a
registered broker-dealer approved by the Fund's Adviser; and (7) Class A
shares purchased by any state, county, city, department, authority or
similar agency prohibited by law from paying a sales charge. The Fund
may also issue Class A shares at net asset value incident to a merger with
or acquisition of assets of an investment company.
Class B Shares. Class B shares are offered at net asset value,
without a front-end sales charge. With certain exceptions described
below, the Fund imposes a deferred sales charge of 4% on shares redeemed
during the first year after purchase, 3% on shares redeemed during the
second or third year after purchase, 2% on shares redeemed during the
fourth or fifth year after purchase and 1% on shares redeemed during the
sixth year after purchase. However, on Class B shares of the Fund which
were (i) purchased prior to December 1, 1994 or (ii) acquired in exchange
from Class B shares of other Davis Funds which were purchased prior to
December 1, 1994, the Fund will impose a deferred sales charge of 4% on
shares redeemed during the first calendar year after purchase; 3% on
shares redeemed during the second calendar year after purchase; 2% on
shares redeemed during the third calendar year after purchase; and 1% on
shares redeemed during the fourth calendar year after purchase, and no
deferred sales charge is imposed on amounts redeemed after four calendar
years from purchase. Class B shares will be subject to a maximum Rule
12b-1 fee at the annual rate of 1% of the class's average daily net asset
value.
Class B shares that have been outstanding for eight years will
automatically convert to Class A shares without imposition of a front-end
sales charge or exchange fee. (Conversion of pre December 1, 1994 Class
B shares represented by stock certificates will require the return of the
stock certificates to the Fund's transfer agent). The Class B shares so
converted will no longer be subject to the higher expenses borne by Class
B shares. Because the net asset value per share of the Class A shares may
be higher or lower than that of the Class B shares at the time of
conversion, although the dollar value will be the same, a shareholder may
receive more or less Class A shares than the number of Class B shares
converted. Under a private Internal Revenue Service Ruling such a
conversion will not constitute a taxable event under the federal income
tax law. In the event that this ceases to be the case, the Board of
Directors will consider what action, if any, is appropriate and in the best
interests of the Class B shareholders.
Any contingent deferred sales charge imposed upon the redemption
of Class B shares is a percentage of the lesser of (i) the net asset value of
the shares redeemed or (ii) the original cost of such shares. No contingent
deferred sales charge is imposed when you redeem amounts derived from
(a) increases in the value of shares above the net cost of such shares or
(b) certain shares with respect to which the Fund did not pay a
commission on issuance, including shares acquired through reinvestment
of dividend income and capital gains distributions. Upon request for
redemption, shares not subject to the contingent deferred sales charge
will be redeemed first. Thereafter, shares held the longest will be the
first to be redeemed.
The contingent deferred sales charge will be waived as follows: (1)
on redemptions following a shareholder's death or disability, as defined in
Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"); (2) on taxable periodic distributions from a qualified retirement
plan or IRA upon
<PAGE>
retirement or attainment of age 59-1/2 (e.g. the applicable contingent deferred
sales charge, if any, is imposed upon a lump sum redemption at any age whether
or not it is taxable) or distribution necessary to make a tax-free return of
contributions to avoid tax penalty; (3) on redemptions made as tax-free returns
of contributions to avoid tax penalty; and (4) on redemptions pursuant to the
right of the Fund to liquidate a shareholder's account if the aggregate net
asset value of the shares held in such account falls below an established
minimum amount.
Automatic Investment Plan. Shareholders may arrange for automatic
monthly investing whereby State Street will be authorized to initiate a
debit to the shareholder's bank account of a specific amount (minimum
$25) each month which will be used to purchase Fund shares. For
institutions that are members of the Automated Clearing House system
(ACH), such purchases can be processed electronically on any day of the
month between the 3rd and 28th day of each month. After each automatic
investment, the shareholder will receive a transaction confirmation and
the debit should be reflected on the shareholder's next bank statement.
The plan may be terminated at any time by the shareholder. If you desire
to utilize this plan, you may use the appropriate designation on the
Application Form.
Dividend Diversification Program. You may also establish a dividend
diversification program which allows you to have all dividends and any
other distributions automatically invested in shares of one or more of the
Davis Funds subject to state securities law requirements and the
minimum investment requirements set forth below. You must receive a
current prospectus for a fund prior to investment. Shares will be
purchased at the chosen fund's net asset value on the dividend payment
date. A dividend diversification account must be in the same registration
as the distributing fund account and must be of the same class of shares.
All accounts established or utilized under this program must have a
minimum initial value of at least $250 and all subsequent investments
must be at least $25. This program can be amended or terminated at any
time, upon at least 60 days' notice. If you would like to participate in this
program, you may use the appropriate designation on the Application Form.
TELEPHONE PRIVILEGE
Unless you have provided in your application that the telephone
privilege is not to be available, the telephone privilege is automatically
available under certain circumstances for exchanging shares and for
redeeming shares. By exercising the telephone privilege to sell or
exchange shares, you agree that the Fund shall not be liable for following
telephone instructions reasonably believed to be genuine. Reasonable
procedures will be employed to confirm that such instructions are genuine
and if not employed, the Fund may be liable for unauthorized instructions.
Such procedures will include a request for personal identification
(account or social security number) and tape recording of the instructions.
You should be aware that during unusual market conditions we may have
difficulty in accepting telephone requests in which case you should
contact us by mail. See "Exchange of Shares - By Telephone", "Redemption
of Shares - By Telephone" and "Redemption of Shares - Expedited
Redemption Privilege".
EXCHANGE OF SHARES
General. You may exchange shares of the Fund for shares of the same
class of the other Davis Funds. This exchange privilege is a convenient
way to buy shares in other Davis Funds in order to respond to changes in
your goals or in market conditions. If such goals or market conditions
change, the Davis Funds offer a variety of investment objectives that
includes common stock funds, tax-exempt and corporate bond funds, and a
money market fund. However, the Fund is intended as a long-term
investment and is not intended for short-term trades. Shares of a
particular class of the Fund may be exchanged only for shares of the same
class of another Davis Fund. All of the Davis Funds offer Class A and
Class B shares. The shares to be received upon exchange must be legally
available for sale in your state. The net asset value of the initial shares
being acquired must be at least $1,000 unless such exchange is under the
Automatic Exchange Program described below.
<PAGE>
There is a $5 service charge payable to the Distributor for each exchange other
than an exchange under the Automatic Exchange Program.
Shares may be exchanged at relative net asset value without any
additional charge. However, if any shares being exchanged are subject to
an escrow or segregated account pursuant to the terms of a Statement of
Intention or a CDSC, such shares will be exchanged at relative net asset
value, but the escrow or segregated account will continue with respect to
the shares acquired in the exchange. In addition, the terms of any CDSC to
which any Class B shares are subject at the time of exchange will
continue to apply to any Class B shares acquired upon exchange.
Before you decide to make an exchange, you must obtain the current
prospectus of the desired fund. Call your broker or the Adviser for
information and a prospectus for any of the other Davis Funds registered
in your state. Read the prospectus carefully. If you decide to exchange
your shares, send State Street a written unconditional request for the
exchange and follow the instructions regarding delivery of share
certificates contained in the section on "Redemption of Shares". A
signature guarantee is not required for such an exchange. However, if
shares are also redeemed for cash in connection with the exchange
transaction, a signature guarantee may be required. See "Redemption of
Shares". Your dealer may charge an additional fee for handling an exercise
of the exchange privilege.
An exchange involves both a redemption and a purchase, and normally
both are done on the same day. However, in certain instances such as
where a large redemption is involved, the investment of redemption
proceeds into shares of other Davis Funds may take up to seven days. For
federal income tax purposes, exchanges are treated as a sale and purchase.
Therefore, there will usually be a recognizable capital gain or loss due to
an exchange.
The number of times a shareholder may exchange shares among the
Davis Funds within a specified period of time may be limited at the
discretion of the Adviser. Currently, more than three exchanges out of a
fund during a twelve month period are not permitted without the prior
written approval of the Adviser. The Fund reserves the right to terminate
or amend the exchange privilege at any time upon such notice as is
required by applicable regulatory authorities (currently 60 days).
By Telephone. You may exchange shares by telephone into accounts
with identical registrations. Please see the discussion of procedures in
respect to telephone instructions in the note under "Telephone Privilege"
which is also applicable to exchanges.
Automatic Exchange Program. The Fund also offers an automatic
monthly exchange program. All accounts established or utilized under this
program must have the same registration and a minimum initial value of
at least $250. All subsequent exchanges must have a value of at least
$25. Each month shares will be simultaneously redeemed and purchased at
the chosen fund's applicable offering price. If you would like to
participate in this program, you may use the appropriate designation on
the Application Form.
REDEMPTION OF SHARES
General. You can redeem, or sell back to the Fund, all or part of your
shares at any time. You can do this by sending a written request to State
Street Bank and Trust Company, c/o The Davis Funds, P.O. Box 8406,
Boston, MA 02266-8406, indicating how many of your shares or what
dollar amount you want to redeem. If more than one person owns the
shares to be redeemed, all of them must sign the request. The signatures
on the request must be the same as the way in which the shares are
registered.
<PAGE>
Sometimes State Street needs more documents to verify authority
to make a redemption. This usually happens when the owner is a
corporation, partnership or fiduciary (such as a trustee or the executor of
an estate) or if the person making the request is not the registered owner
of the shares.
If shares to be redeemed are represented by a certificate, the
certificate, signed by the owner or owners, must be sent to State Street
with the request.
For the protection of all shareholders, the Fund also requires that
signatures appearing on a share certificate, stock power or redemption
request where the proceeds would be more than $25,000 must be
guaranteed by a bank, credit union, savings association, securities
exchange, broker, dealer or other guarantor institution. The transfer agent
may reject a request from any of the foregoing eligible guarantors, if such
guarantor does not satisfy the transfer agent's written standards or
procedures or if such guarantor is not a member or participant of a
signature guarantee program. This provision also applies to exchanges
when there is also a redemption for cash. A signature guarantee on
redemption requests where the proceeds would be $25,000 or less is not
required, provided that such proceeds are being sent to the address of
record and, in order to ensure authenticity of an address change, such
address of record has not been changed within the last 30 days.
Redemption proceeds are normally paid to you within seven days
after State Street receives your proper redemption request. Payment for
redemptions can be suspended under certain emergency conditions
determined by the Securities and Exchange Commission or if the New York
Stock Exchange is closed for other than customary or holiday closings. If
any of the shares redeemed were just bought by you, payment to you may
be delayed until your purchase check has cleared (which usually takes up
to 15 days from the purchase date). You can avoid any such redemption
delay by paying for your shares with a certified or cashier's check or by
bank wire or federal funds.
Redemptions are ordinarily paid to you in cash. However, the Fund's
Board of Directors is authorized to decide that conditions exist making
cash payments undesirable, although the Board has never reached such a
decision. If the Board should decide to make payment in other than cash,
redemptions could be paid in securities, valued at the value used in
computing our net asset value. There would be brokerage costs incurred
by the shareholder in selling such redemption proceeds. We must,
however, redeem shares solely in cash up to the lesser of $250,000 or 1%
of the Fund's net asset value, whichever is smaller, during any 90-day
period for any one shareholder.
Expedited Redemption Privilege. Investors may designate on the
Expedited Redemption Privilege Form an account with any commercial
bank and have the cash proceeds from the redemption sent, by either wire
or electronically through the Automated Clearing House system (ACH), to a
pre-designated bank account. State Street will accept instructions to
redeem shares and make payment to a pre-designated commercial bank
account by (a) written request signed by the registered shareholder, (b)
telephone request by any Qualified Dealer to Davis Selected Advisers, L.P.
(1-800-279-0279), (c) by telegraphic request by the shareholder to State
Street. At the time of redemption, the shareholder must request that
federal funds be wired or transferred by ACH to the bank account
designated on the application. The redemption proceeds under this
procedure may not be directed to a savings bank, savings and loan or credit
union account except by arrangement with its correspondent bank or
unless such institution is a member of the Federal Reserve System. The
Adviser, in its discretion, may limit the amount that may be redeemed by
a shareholder in any day under the Expedited Redemption Privilege to
$25,000. There is a $5 charge by State Street for wire service, and
receiving banks may also charge for this service. Payment by ACH will
arrive usually at your bank two banking days after your call. Payments by
wire is usually credited to your bank account on the next business day
after your call. The Expedited Redemption Privilege may be terminated,
modified or suspended by the Company at any time. See "Telephone
Privilege".
<PAGE>
The name of the registered shareholder and corresponding Fund
account number must be supplied. The Expedited Redemption Privilege
Form provides for the appropriate information concerning the commercial
bank and account number. Changes in ownership, account number
(including the identity of your bank) or authorized signatories of the
pre-designated account may be made by written notice to State Street
with your signature and those of new owners or signers on the account
guaranteed by a commercial bank or trust company. Additional
documentation may be required to change the designated account where
shares are held by a corporation, partnership, executor, administrator,
trustee or guardian.
By Telephone. You can redeem shares by telephone and receive a
check by mail, but please keep in mind:
The check can only be issued for up to $25,000;
The check can only be issued to the registered owner (who must be an
individual);
The check can only be sent to the address of record; and
Your current address of record must have been on file for 30 days.
Automatic Withdrawals Plan. Under the Automatic Withdrawals
Plan, you can indicate to State Street how many dollars you would like to
receive each month or each quarter. Your account must have a value of at
least $10,000 to start a plan. Shares are redeemed so that you will
receive the payment you have requested approximately in the middle of the
month. Withdrawals involve redemption of shares and may produce gain or
loss for income tax purposes. Shares of the Fund initially acquired by
exchange from any of the other Davis Fund shares will remain subject to
an escrow or segregated account to which any of the exchanged shares
were subject. If you utilize this program using Class B shares, any
applicable contingent deferred sales charges will be imposed on such B
shares redeemed. Purchase of additional shares concurrent with
withdrawals may be disadvantageous to you owing to tax consequences. If
the amount you withdraw exceeds the dividends on your shares, your
account will suffer depletion. Your Automatic Withdrawals Plan may be
terminated by you at any time without charge or penalty. The Fund
reserves the right to terminate or modify the Automatic Withdrawals Plan
at any time. Call or write the Fund if you want further information on the
Automatic Withdrawals Plan.
Involuntary Redemptions. To relieve the Fund of the cost of
maintaining uneconomical accounts, the Fund may effect the redemption of
shares at net asset value in any account if the account, due to shareholder
redemptions, has a value of less than $250. At least 60 days prior to such
involuntary redemption, the Fund will mail a notice to the shareholder so
that an additional purchase may be effected to avoid such redemption.
Subsequent Repurchases. After some of or all your Class A or Class
B shares are redeemed or repurchased, you may decide to put back all or
part of your proceeds into the same Class of the Fund's shares. Any such
shares will be issued without sales charge at the net asset value next
determined after you have returned the amount of your proceeds. In
addition, any CDSC assessed on Class B shares will be returned to the
account. Class B shares will be deemed to have been purchased on the
original purchase date for purposes of calculating the CDSC and conversion
period. This can be done by sending the Fund or the Adviser a letter,
together with a check for the reinstatement amount. The letter must be
received, together with the payment, within 30 days after the redemption
or repurchase. You can only use this privilege once. See "Federal Income
Taxes".
DETERMINING THE PRICE OF SHARES
The net asset value per share is determined daily by dividing the
total value of investments and other assets, less any liabilities, by the
number of total outstanding shares. Fixed income securities may be
valued on the basis of prices provided by a pricing service when such
prices are believed to reflect the fair market value of such securities.
(Pricing services generally take into account institutional size trading in
similar groups of securities). Securities not priced in this manner will be
priced at the last published sales price if traded on that
<PAGE>
day and, if not traded, at the mean between the most recent quoted bid and asked
prices provided by investment dealers. The pricing service and valuation
procedures are reviewed and subject to approval by the Board of Directors.
Short-term securities maturing in 60 days or less will be valued at
amortized cost (unless the Board of Directors determines that amortized
cost would not represent a fair value). If there is a material difference in
the market value and amortized cost value of short-term securities,
market value will be used. Assets for which there are no quotations
available will be valued at a fair value as determined by the Board of
Directors.
The net asset value per share is determined as of the earlier of the
close of the exchange or 4:00 p.m. Eastern Time on each day the New York
Stock Exchange is open. The price per share for purchases or redemptions
made directly through State Street normally is such value next computed
after State Street receives the purchase order or redemption request. If
the purchase order or redemption request is placed with your dealer, then
the applicable price is normally computed as of 4:00 p.m. Eastern Time on
the day the dealer receives the order, provided that the dealer receives
the order before 4:00 p.m. Eastern Time. Otherwise, the applicable price
is the next determined net asset value. It is the responsibility of your
dealer to promptly forward purchase and redemption orders to the Adviser.
Note that in the case of redemptions and repurchases of shares owned by
corporations, trusts or estates, State Street may require additional
documents to effect the redemption and the applicable price will be
determined as of the close of the next computation following the receipt
of the required documentation. See "Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS
Income dividends are declared and distributed monthly and
distributions of net realized capital gains, if any, will normally be paid
annually. To provide stable distributions for its shareholders, the Fund at
times may continue to pay distributions based on expectations of future
investment results even though, as a result of temporary market
conditions or other factors, the Fund may have failed to achieve projected
investment results for a given period. In such cases, the Fund's
distributions may include a return of capital to shareholders.
Shareholders who reinvest their distributions are largely unaffected by
such returns of capital. In the case of shareholders who do not reinvest, a
return of capital is equivalent to a partial redemption of the shareholder's
investment. Because Class B shares incur higher distribution services
fees and bear certain other expenses, such shares will have a higher
expense ratio and will pay correspondingly lower dividends than Class A
shares.
You will receive quarterly confirmation statements for dividends
declared and shares purchased through reinvestment of dividends.
Dividends declared in December to shareholders of record in December, and
paid by the end of January of the subsequent year will be treated as
received by the shareholder in the earlier year. You will receive
confirmations after each purchase other than through dividend
reinvestment, and after each redemption. Information concerning
distributions will be mailed to shareholders annually. Distributions will
be classified in terms of non-taxable return of capital, federal
tax-exempt income and taxable income. Since some states may not tax
their residents on the portion of the Fund's distributions representing
income from governmental entities in such states, information about
state sources of tax-exempt distributions will also be reported annually.
All dividends and distributions are reinvested automatically in
additional shares at net asset value unless payment is requested in cash
on the payment date. Shareholders may elect to receive payment in cash
by designation on the Application. The payment method may be changed by
notice in writing to State Street. The notice is effective for the current
dividend or distribution if received at least 5 business days before the
record date. Notice received thereafter will be effective commencing
with the next dividend payment. For the protection of shareholders, upon
receipt by State Street of the second dividend check which has been
returned to State Street as undeliverable, undelivered dividends will be
invested in additional shares at the current net asset value and the
account designated as a dividend reinvestment account.
<PAGE>
FEDERAL INCOME TAXES
This section is not intended to be a full discussion of all the aspects
of the federal income tax law and its effects on the Fund and its
shareholders. Shareholders may be subject to state and local taxes on
distributions. Each investor should consult his own tax adviser regarding
the effects of federal, state and local tax laws on an investment in the
Fund.
The Fund intends to qualify, as it has since its inception, as a
regulated investment company under the Internal Revenue Code (the
"Code") and, if so qualified, will not be liable for federal income tax to the
extent its earnings are distributed. If for any calendar year the required
distribution of the Fund exceeds the amount distributed, an excise tax
equal to 4% of the excess will be imposed on the Fund. The Fund intends to
make distributions during each calendar year sufficient to prevent
imposition of the excise tax.
Dividends paid to shareholders from interest earned by the Fund
from municipal obligations and from exempt interest dividends received
by the Fund from investment companies investing in tax-exempt
securities are not includible in a shareholder's gross income for federal
income tax purposes, although a portion of such dividends may be subject
to the alternative minimum tax as discussed below. Distributions of net
interest income derived from other sources, if any, and of net short-term
capital gains realized by the Fund will be taxable to shareholders as
ordinary income. Net long-term capital gain distributions, if any, will be
taxable to shareholders as long-term capital gain regardless of how long
the shares of the Fund have been held. Distributions will be treated the
same for tax purposes whether received in cash or in additional shares of
the Fund.
Interest paid on "specified private activity bonds" issued after
August 7, 1986, as defined in the Code, although exempt from federal
income tax, will constitute a tax preference item for purposes of both the
individual and the corporate alternative minimum tax. If the Fund were to
own any such bonds, it is expected that a portion of the exempt income
distributed by the Fund would be treated as a preference item for
shareholders based upon the proportionate share of the interest from the
specified private activity bonds received by the Fund. In the case of a
corporate shareholder, the alternative minimum tax base may also include
a portion of all the other tax-exempt income. Corporate shareholders are
advised to consult their own tax advisers with respect to the corporate
alternative minimum tax.
A gain or loss for tax purposes may be realized on the redemption of
shares. If a shareholder realizes a loss on the sale or exchange of any
shares held for six months or less and during such period the shareholder
received any exempt-interest dividends, then such loss is disallowed to
the extent of the amount of the exempt-interest dividends. If a
shareholder realizes a loss on the sale or exchange of any shares held for
six months or less and during such period the shareholder received any
capital gains dividends, then such loss (to the extent it is allowed) is
treated as a long-term capital loss to the extent of such capital gain
dividends.
Interest on indebtedness incurred by shareholders to purchase or
carry shares of the Fund will not be deductible for federal income tax
purposes.
The Fund may not be an appropriate investment vehicle for entities
which are "substantial users" (or "related persons" thereto) of facilities
financed by "industrial development bonds" as such terms are defined in
the Internal Revenue Code. Such entities (or persons) should consult their
own tax advisers before investing.
FUND SHARES
Shares issued by the Fund are currently divided into two classes,
Class A and Class B shares. The Board of Directors may offer additional
classes in the future and may at any time discontinue the offering of any
class of shares. Each share, when issued and paid for in accordance with
the terms of the offering, is fully paid and non-assessable. Shares have
no preemptive or subscription rights and are freely transferable.
<PAGE>
Each share of the Fund represents an interest in the assets of the Fund and has
identical voting, dividend, liquidation and other rights and the same terms
and conditions as any other shares except that (i) each dollar of net asset
value per share is entitled to one vote irrespective of the class or
subclass thereof, (ii) the expenses related to a particular class, such as
those related to the distribution of each class and the transfer agency
expenses of each class are borne solely by each such class and (iii) each
class of shares votes separately with respect to provisions of the Rule
12b-1 Distribution Plan which pertains to a particular class and other
matters for which separate class voting is appropriate under applicable
law. Each fractional share has the same rights, in proportion, as a full
share. Shares do not have cumulative voting rights; therefore, the holders
of more than 50% of the voting power of the Fund can elect all of the
directors of the Fund.
In accordance with Maryland law and the Fund's By-laws, the Fund
does not hold regular annual shareholder meetings. Shareholder meetings
are held when they are required under the Investment Company Act of
1940 or when otherwise called for special purposes. Special shareholder
meetings may be called upon the written request of shareholders holding
at least 10% of the outstanding shares of the Fund.
PERFORMANCE DATA
From time to time, the Fund may advertise information regarding its
performance. Such information will include its "yield" and "total return."
The Fund may also publish its "tax equivalent yield" and its respective
"distribution rate," "annualized current distribution rate" and "tax
equivalent distribution rate." Distribution rates and tax equivalent
distribution rates may only be used in connection with sales literature
and stockholders communications preceded or accompanied by a
prospectus. Each of these performance figures is based upon historical
results and is not intended to indicate future performance, and, except for
"distribution rate," "annualized current distribution rate" and "tax
equivalent distribution rate" is standardized in accordance with
regulations of the Securities and Exchange Commission ("SEC"). All such
performance will be calculated separately for each class of shares.
"Yield" is computed by dividing the net investment income per share
(as defined in applicable SEC regulations) during a specified 30-day period
by the maximum offering price per share on the last day of such period.
Yield is an annualized figure, in that it assumes that the same level of net
investment income is generated over a one year period. The yield formula
annualizes net investment income by providing for semi-annual
compounding.
"Total return" refers to the Fund's average annual compounded rate
of return over a stated period that would equate an initial amount
invested at the beginning of the period to the ending redeemable value of
the investment. In the event the Fund advertises its total return, the
stated periods will generally be one year, five years and ten years, but the
Fund may also advertise total return for longer or shorter periods,
including the life of the Fund. The computation of total return assumes
reinvestment of all dividends and distributions, and deduction of all
charges and expenses.
"Distribution rate" is determined by dividing the income dividends
per share for a stated period by the net asset value per share on the last
day of such period. "Tax equivalent distribution rate" is computed by
dividing the portion of the Fund's distribution rate (determined as
described above) which is tax-exempt, by one minus the stated federal
income tax rate, and adding to the resulting amount that portion, if any, of
the distribution rate which is not tax-exempt. All distribution rates
published are measures of the level of income dividends distributed during
a specified period. Thus, such rates differ from yield (which measures
income actually earned by the Fund) and total return (which measures
actual income, plus realized and unrealized gains or losses of the Fund's
investments). Consequently, distribution rates alone should not be
considered complete measures of performance.
<PAGE>
In addition, a table showing the performance of an assumed
investment of $10,000 may be used from time to time. The Fund may also
quote total return and aggregate total return performance data for various
other specified time periods. Such data will be calculated substantially
as described above, except that (1) the rates of return calculated will not
be average annual rates, but rather, actual annual, annualized or aggregate
rates of return and (2) sales charges will not be included with respect to
annual or annualized rates of return calculations. Aside from the impact
on the performance data calculations of including or excluding the sales
charges, actual annual or annualized total return data generally will be
lower than average annual total return data since the average annual rates
of return reflect compounding; aggregate total return data generally will
be higher than average annual total return data since the aggregate rates
of return reflect compounding over a longer period of time.
The Fund may quote information from publications such as The Wall
Street Journal, Money Magazine, Forbes, Barron's, Newsweek, Chicago
Tribune, The New York Times, U.S. News and World Report, USA Today,
Fortune, Investors Business Daily, Financial World, Smart Money, No-Load
Fund Investor and Kiplinger's and may cite information from Morningstar,
Value Line or the Investment Company Institute. The Fund may compare
its performance to the performance of mutual fund indexes as reported by
Lipper Analytical Services, Inc. ("Lipper") or CDA Investment Technologies,
Inc., two widely recognized independent mutual fund reporting services.
For more information on the Fund's performance, see "Performance
Data" in the Statement of Additional Information. Please remember that
performance information is based upon historical results and is not
necessarily indicative of future performance.
The Fund's 1995 Annual Report contains additional performance
information and is available upon request and without charge.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to Davis Selected Advisers,
L. P., by writing to P.O. Box 1688, Santa Fe, NM 87501-1688 or calling
1-800-279-0279.
APPENDIX
QUALITY RATINGS OF DEBT SECURITIES
Moody's Municipal and Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat larger than Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade-obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
<PAGE>
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e. they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any longer period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Standard & Poor's Corporate Bond Ratings
AAA - Debt rated 'AAA' has the highest rating assigned by Standard and
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB - Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'BBB-' rating.
B - Debt rated 'B' has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The 'B' rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied 'BB' or 'BB-' rating.
CCC - Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
<PAGE>
the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
'CCC' rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'B' or 'B_' rating.
CC - The rating 'CC' is typically applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C - The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC_' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI - The rating 'CI' is reserved for income bonds on which no interest is
being paid.
D - Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Moody's Municipal Note Ratings
MIG 1 -- The best quality, with strong protection provided by established
cash flows, superior liquidity support or demonstrated broad-based
access to the market for refinancing.
MIG 2 -- High quality, with margins of protection ample although not so
large as in the preceding group.
MIG 3 -- Favorable quality, with all security elements accounted for but
lacking the undeniable strength of the preceding grades. Liquidity and cash
flow protection may be narrow and market access for refinancing is likely
to be less well established.
Standard & Poor's Municipal Note Ratings
SP-1. Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are
given a (+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
SP-3. Speculative capacity to pay principal and interest.
Moody's Commercial Paper Ratings
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime-1 (superior capacity), Prime-2 (strong
capacity) and Prime-3 (acceptable capacity). In assigning ratings to an
issuer which represents that its commercial paper obligations are
supported by the credit of another entity or entities, Moody's evaluates
the financial strength of the indicated affiliated corporations,
commercial banks, insurance companies, foreign governments or other
entities, but only as one factor in the total rating assessment.
Standard & Poor's Commercial Paper Ratings
The S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into four categories, ranging from
'A' for the highest quality to 'D' for the lowest. Issues assigned an 'A'
rating are regarded as having the greatest capacity
<PAGE>
for timely payment. Within the 'A' category, the numbers 1, 2 and 3 indicate
relative degrees of safety. The addition of a plus sign to the category A-1
denotes that the issue is determined to possess overwhelming safety
characteristics.
TERMS AND CONDITIONS FOR A STATEMENT OF INTENTION (CLASS A SHARES ONLY)
TERMS OF ESCROW:
1. Out of my initial purchase (or subsequent purchases if necessary) 5%
of the dollar amount specified in this Statement will be held in escrow by
State Street in the form of shares (computed to the nearest full share at
the public offering price applicable to the initial purchase hereunder)
registered in my name. For example, if the minimum amount specified
under this statement is $100,000 and the public offering price applicable
to transactions of $100,000 is $10 a share, 500 shares (with a value of
$5,000) would be held in escrow.
2. In the event I should exchange some or all of my shares to those of
another mutual fund for which Davis Selected Advisers, L.P. acts as
adviser, according to the terms of this prospectus, I hereby authorize
State Street to escrow the applicable number of shares of the new fund,
until such time as this Statement is complete.
3. If my total purchases are at least equal to the intended purchases,
the shares in escrow will be delivered to me or to my order.
4. If my total purchases are less than the intended purchases, I will
remit to Davis Selected Advisers, L.P. the difference in the dollar amount
of sales charge actually paid by me and the sales charge which I would
have paid if the total purchase had been made at a single time. If
remittance is not made within 20 days after written request by Davis
Selected Advisers, L.P. or my dealer, State Street will redeem an
appropriate number of the escrowed shares in order to realize such
difference.
5.I hereby irrevocably constitute and appoint State Street
my attorney to surrender for redemption any or all escrowed shares with
full power of substitution in the premises.
6. Shares remaining after the redemption referred to in Paragraph
No. 4 will be credited to my account.
7. The duties of State Street are only such as are herein provided being
purely ministerial in nature, and it shall incur no liability whatever
except for willful misconduct or gross negligence so long as it has acted
in good faith. It shall be under no responsibility other than faithfully to
follow the instructions herein. It may consult with legal counsel and
shall be fully protected in any action taken in good faith in accordance
with advice from such counsel. It shall not be required to defend any legal
proceedings which may be instituted against it in respect of the subject
matter of this Agreement unless requested to do so and indemnified to its
satisfaction against the cost and expense of such defense.
8. If my total purchases are more than the intended purchases and such
total is sufficient to qualify for an additional quantity discount, a
retroactive price adjustment shall be made for all purchases made under
such Statement to reflect the quantity discount applicable to the
aggregate amount of such purchases during the thirteen-month period.
EXPEDITED REDEMPTION PRIVILEGE
/-/ If you wish the Expedited Redemption Privilege please check the box
to the left and complete the following information.
<PAGE>
I (we) hereby authorize State Street Bank and Trust Company, Davis
Selected Advisers, L. P., and/or the Davis Funds to act upon instructions
received by telephone or telegraph, believed by them to be genuine, and to
redeem shares in my (our) account in any of the Davis Funds and to wire
the proceeds of such redemption to the predesignated bank listed below. I
(we) hereby agree that neither State Street Bank and Trust Company, nor
Davis Selected Advisers, L. P. nor the Davis Funds nor any of their
officers or employees, will be liable for any loss, liability, cost or
expense for acting upon such instructions.
- ---------------------------------- ---------------------------------
Signature of Shareholder Signature of Co-Shareholder
- ---------------------------------- ---------------------------------
Name of Commercial Bank (Title of Account at Bank)
- ---------------------------------- ---------------------------------
(Street) (Account Number at Bank)
- ---------------------------------- --------------------------------
(City) (State) (Zip) (ABA/Transit Routing Number
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
Summary................................................................ 2
Financial Highlights................................................... 4
Investment Objectives and Policies..................................... 6
Adviser, Sub-Adviser and Distributor................................... 11
Distribution Plans..................................................... 12
Purchase of Shares..................................................... 13
Telephone Privilege.................................................... 17
Exchange of Shares..................................................... 17
Redemption of Shares................................................... 18
Determining the Price of Shares........................................ 20
Dividends and Distributions............................................ 21
Federal Income Taxes................................................... 21
Fund Shares............................................................ 22
Performance Data....................................................... 23
Shareholder Inquiries.................................................. 24
Appendix - Quality Ratings of Debt Securities.......................... 24
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
Davis Tax-Free High Income Fund, Inc.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
TABLE OF CONTENTS
Topic Page
Fundamental Investment Restrictions................................... 2
Municipal Obligations................................................. 3
Temporary Investments................................................. 4
Portfolio Transactions................................................ 4
Directors and Officers................................................ 5
Compensation Schedule................................................. 7
Certain Shareholders of the Fund...................................... 7
Investment Advisory Services.......................................... 7
Custodian............................................................. 8
Auditors.............................................................. 9
Determining the Price of Shares....................................... 9
Reduction of Class A Sales Charge..................................... 9
Distribution of Fund Shares........................................... 10
Performance Data...................................................... 11
Non-Standard Distribution Rates....................................... 12
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus dated February 1, 1996.
The Prospectus may be obtained from the Fund.
The Fund's September 30, 1995 Annual Report to shareholders
accompanies this Statement of Additional Information. The Financial
Statements appearing in these reports are incorporated herein by
reference.
<PAGE>
FUNDAMENTAL INVESTMENT RESTRICTIONS
The investment restrictions set forth below and the Fund's
investment objective set forth in the Prospectus may not be changed
without the approval of the holders of the lesser of (i) 67% of the eligible
votes, if the holders of more than 50% of the eligible votes are
represented or (ii) more than 50% of the eligible votes. All percentage
limitations set forth in these restrictions apply as of the time of an
investment without regard to later increases or decreases in the value of
securities or total or net assets.
1. The Fund may not invest in securities other than municipal
obligations and temporary investments, and may not make loans to others
except through such investments.
2. The Fund may not purchase or sell real estate (but this will not
prevent the Fund from investing in municipal obligations secured by real
estate or interests therein) or commodities or commodity contracts.
3. The Fund may not purchase more than 50% of the outstanding debt
obligations of any one issuer. For this purpose, all debt obligations of an
issuer are treated as a single class of securities. This restriction does
not apply to debt obligations issued, guaranteed or insured by the U.S.
Government, its agencies or instrumentalities ("U.S. Government
Securities").
4. The Fund may not make an investment that would cause more than 5%
of the value of its total assets to be invested in the securities (other
than U.S. Government Securities) of any one issuer. For this purpose, each
state or local governmental entity shall be deemed a separate "issuer,"
except that where the entity issuing a municipal obligation differs from
the entity whose revenues are the primary source of the payment of the
obligation, the entity whose revenues are the primary source of payment
shall be deemed the sole issuer with regard to that obligation.
5. The Fund may not make an investment that would cause 25% or more
of the value of its total assets to be invested in municipal obligations the
issuers of which are located in the same state. For this purpose, the
location of an issuer shall be deemed to be the location of the
governmental entity issuing the obligation, regardless of the location of
the entity whose revenues are the primary source of payment or the
location of the project or facility which may be the subject of the
obligation.
6. The Fund may not write or purchase put or call options.
7. The Fund may not make an investment that would cause 25% or more
of the value of its total assets to be invested in revenue bonds or notes
the payment for which comes from revenues from any one type of activity.
For this purpose, the term "type of activity" shall include, for example,
the following: (a) sewage treatment and disposal; (b) gas provision; (c)
electric power provision; (d) water provision; (e) mass transportation
systems; (f) housing; (g) hospitals; (h) street development and repair; (i)
toll roads; (j) airport facilities; and (k) educational facilities. This
restriction does not apply to general obligation bonds or notes or to
pollution control revenue bonds.
8. The Fund may not purchase securities of other registered investment
companies (as defined in the Investment Company Act of 1940), except (i)
shares of open-end investment companies investing primarily in municipal
obligations with remaining maturities of 13 months or less, provided that
such purchase does not cause the Fund to (a) have more than 5% of its
total assets invested in any one such company, (b) have more than 10% of
its total assets invested in the aggregate of such companies or (c) own
more than 3% of the total outstanding voting stock of any such company;
or (ii) as part of a merger, consolidation, reorganization or acquisition of
assets.
9. The Fund may not sell securities short or purchase securities on
margin, except for such short-term credits as are necessary for the
clearance of transactions.
10. The Fund may not, except for temporary defensive purposes, make an
investment in other than municipal obligations if such investment would
cause more than 20% of the value of the Fund's total assets to be invested
in securities other than municipal obligations.
11. The Fund may not borrow money except from banks as a temporary
measure for extraordinary or emergency purposes in amounts not
exceeding 10% of the value of the Fund's total assets (excluding the
<PAGE>
amount borrowed) at the time of such 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 its total assets
(excluding the amount borrowed) at the time of such borrowing.
12. The Fund may not buy or continue to hold securities if the directors
and officers 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 the people who
own that much or more own 5% of such securities.
13. The Fund does not engage in the underwriting of securities; however,
if the Fund sells "restricted" securities it may technically be considered
an "underwriter."
Non-Fundamental Policies. In addition to the foregoing restrictions,
the Fund has voluntarily undertaken with various states, for so long as the
Fund's shares are sold in such states, (1) not to invest more than 5% of its
total assets in securities of issuers (other than issuers of federal agency
obligations and municipal obligations) having a record of less than three
years of continuous operations, (2) not to invest in oil, gas or other
mineral explorations or development programs, and (3) not to invest more
than 5% of its net assets in warrants valued at the lower of cost or
market and no more than 2% of the value of its net assets in warrants not
listed on the New York Stock Exchange or American Stock Exchange, and
(4) not to invest in commodities, commodity contracts or arbitrage
transactions. These undertakings and all other non-fundamental policies
may be changed without shareholder approval.
MUNICIPAL OBLIGATIONS
Occasionally, an issuing state or local governmental entity may
guarantee the payment of a revenue bond obligation, backing payment with
its taxing power. Normally, revenue bonds are paid solely from a
particular revenue source. The revenue source may be earnings from a
public project such as tolls from roads or bridges, airport revenues,
earnings of publicly owned utilities or special excises such as special
improvement levies. The revenue source may also be a private company
which is utilizing a facility constructed through monies obtained through
a governmental agency or fund. There are two principal types of revenue
bonds for private facilities, industrial development bonds and pollution
control bonds. Occasionally, such bonds are also issued by governmental
entities to obtain funds for a privately operated general community
facility such as a hospital, convention hall or sports stadium.
Industrial development bonds are issued by a governmental entity to
obtain funds to finance a facility, typically an industrial plant or factory,
which is leased to or operated by a private (non-governmental) company.
State and local governments have the power in most states to permit the
issuance of industrial development bonds to provide financing aid to such
companies in order to encourage them to locate facilities within their
communities.
Pollution control bonds are issued to provide funding for air or
water pollution control systems for privately operated industrial or
commercial facilities.
As described under "Investment Objectives and Policies" in the
Prospectus, the Fund may invest in municipal bonds and/or certificates of
participation that constitute investments in lease obligations or
installment purchase contract obligations (hereafter collectively called
"lease obligations") of municipal authorities or entities. As further
described in the Prospectus, certain of the lease obligations contain
"non-appropriation" clauses. The Fund will seek to minimize the special
risks associated with such securities by not investing more than 10% of
its assets in lease obligations that contain such clauses.
Municipal notes include tax, revenue and bond anticipation
obligations or general or revenue obligations of shorter maturities than
municipal bonds, generally five years or less, which are issued to obtain
funds for various public purposes.
There are, in addition, a variety of hybrid and special types of
municipal obligations as well as numerous differences in security, quality
and risk both within and among the classifications described above.
Obligations of a special governmental authority may, for instance,
constitute a pledge of the full credit and taxing power of the authority,
and yet have somewhat less security than a general state or city
obligation in view of the limitations on the authority's taxing power
compared to the broader taxing power of a state or a city.
<PAGE.
Due to the increasing needs of state and local governments and their
widening view of public purpose, a variety of types of federal tax-exempt
financing obligations have been developed over the years and new types of
obligations may be expected in the future.
The ratings of Moody's Investors Services Inc. ("Moody's") and
Standard and Poor's Corporation ("S&P") represent their opinions as to the
quality of the municipal obligations which they undertake to rate. It
should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal bonds with the
same maturity, coupon and rating may have different yields while bonds of
the same maturity and coupon with different ratings may have the same
yield.
From time to time, proposals have been introduced in Congress for
the purposes of restricting or eliminating the federal income tax
exemption for interest on municipal obligations. Similar proposals may be
introduced in the future. If such a proposal were to be enacted, the
availability of municipal obligations for investment by the Fund and the
value of the Fund's portfolio would be affected. In such event, the Fund
would re-evaluate its investment objective and policies in view of such
developments.
TEMPORARY INVESTMENTS
At various times the Fund may hold cash or invest in securities
other than municipal obligations. Income from such securities may be
taxable as ordinary income. Such temporary investments may be made in
any of the following circumstances, provided that such an investment does
not cause over 20% of the value of the Fund's total assets to be so
invested: (1) when assets are allocated for settlement of purchases; (2)
when net cash inflow from sales of the Fund's shares or sales of portfolio
securities is of a size which does not allow for prompt investment in
attractively priced municipal obligations; or (3) when highly liquid assets
are needed to meet anticipated redemptions, dividends or other cash
needs.
In addition, during periods of adverse markets when it is deemed
advisable and practicable to take a temporary defensive position to
protect capital, the Fund may have more than 20% of its assets invested in
temporary investments and cash. While reserving this freedom to act for
defensive purposes, the Fund intends to limit its holdings of temporary
taxable investments and cash to meet the requirements for federal income
tax exemption on the dividends which the Fund pays from its municipal
obligation or other income exempt from federal income tax.
Although on occasion the Fund may purchase temporary investments,
it is the Fund's intention to be invested primarily in municipal obligations.
Temporary investments will be made only under the conditions specified
herein.
Temporary investments will be made exclusively in: (1) shares of
investment companies primarily investing in short-term instruments the
income of which is exempt from federal income tax (subject to certain
limitations as to the Fund's investments in other investment companies
set forth under "Investment Restrictions"); (2) U.S. Government Securities;
(3) commercial paper rated within the highest grade by either Moody's or
S&P (Prime-1 or A-1, respectively); (4) other short-term debt securities
issued or guaranteed by corporations having outstanding debt rated within
the two highest grades by Moody's (Aaa or Aa) or S&P (AAA or AA); (5)
certificates of deposit of domestic commercial banks subject to
regulation by the U.S. Government, or any of its agencies or
instrumentalities, with assets of $1 billion or more based on the most
recent published reports; or (6) repurchase agreements with domestic
banks or securities dealers involving any of the securities which the Fund
is permitted to hold. (Such agreements will involve the purchase of
securities subject to resale to the seller on a specified date within 7 days
of purchase at a specified price based on an agreed interest rate.) Rating
requirements apply as of the time of purchase.
PORTFOLIO TRANSACTIONS
Stamper Capital & Investments, Inc., (the "Sub-Adviser") makes
investment decisions and arranges for the placement of portfolio
transactions for the Fund, subject to review by the Board of Directors and
its Committee on Brokerage. In this regard, the Sub-Adviser will seek to
obtain the most favorable price and execution for the transaction given
the size and risk involved. In placing executions and paying any brokerage
commissions, the Sub-Adviser considers the dealer's financial
responsibility and reputation, range and quality of the services made
available to the Fund and the professional services rendered, including
execution, clearance procedures, wire service quotations and ability to
provide supplemental performance, statistical and other research information for
<PAGE>
consideration, analysis and evaluation by the Sub-Adviser's staff. In
accordance with this policy, brokerage transactions, if any, are not executed
solely on the basis of the lowest commission rate available. Research services
provided to the Sub-Adviser by or through dealers who effect portfolio
transactions for the Fund may be used in servicing other accounts managed by the
Sub-Adviser and, likewise, services provided by dealers used for transactions of
other accounts may be utilized by the Sub-Adviser in performing services for
the Fund. Subject to the requirements of best execution, the placement of
orders by securities firms for shares of the Fund may be taken into
account as a factor in the placement of portfolio transactions.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interests of the Fund as well as other fiduciary
accounts, the Sub-Adviser may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other
accounts in order to obtain the best net price and most favorable
execution. In such event, the allocation will be made by the Sub-Adviser
in the manner considered to be most equitable and consistent with its
fiduciary obligations to all such accounts, including the Fund. In some
instances, this procedure could adversely affect the Fund but the Board of
Directors deems that any disadvantage in the procedure is outweighed by
the increased selection available and the increased opportunity to engage
in volume transactions.
The Sub-Adviser believes that research from dealers is desirable,
although not essential, in carrying out its functions, in that such outside
research supplements the efforts of the Sub-Adviser by corroborating
data and enabling the Sub-Adviser to consider the views, information and
analyses of other research staffs. Such views, information and analyses
include such matters as communicating with persons having special
expertise on certain issuers, industries, areas of the economy and/or
securities prices, obtaining written materials on these or other areas
which might affect the economy and/or securities prices, obtaining
quotations on securities prices and obtaining information on the activities
of other institutional investors. The Sub-Adviser researches, at its own
expense, each security included in, or being considered for inclusion in,
the Fund's portfolio.
The Fund has paid no brokerage commissions since its inception.
Securities have generally been purchased or sold on a principal basis
without commissions. The price of such transactions may include a profit
for the dealer involved.
DIRECTORS AND OFFICERS
The names and addresses of the directors and officers of the Fund
are set forth below, together with their principal business affiliations
and occupations for the last five years. The asterisk following the names
of Martin H. Proyect, Shelby M.C. Davis and Jeremy H. Biggs indicates that
they are considered to be "interested persons" of the Fund, as defined in
the Investment Company Act. As indicated below, certain directors and
officers of the Fund hold similar positions with the following funds that
are also managed by the Adviser: Davis New York Venture Fund, Inc., Davis
High Income Fund, Inc., Davis Series, Inc. and Davis International Series,
Inc. (collectively the "Davis Funds").
Wesley E. Bass, Jr. (8/21/31), 710 Walden Road, Winnetka, IL 60093.
Director of the Fund and each of the Davis Funds except Davis
International Series, Inc.; President, Bass & Associates (Financial
Consulting Firm); formerly, First Deputy City Treasurer, City of Chicago,
and Executive Vice President, Chicago Title and Trust Company.
Jeremy H. Biggs, (8/16/35)* Two World Trade Center, 94th Floor, New
York, NY 10048. Chairman of the Fund and each of the Davis Funds;
Consultant to the Adviser. 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 (9/9/42), 233 East Redwood Street, Baltimore, MD 21202.
Director of the Fund and each of the Davis Funds except Davis
International Series, Inc.; Chief Executive Officer, World Total Return
Fund, L.P.; Member, Gordon, Feinblatt, Rothman, Hoffberger and Hollander,
LLC (attorneys); Director, Mid-Atlantic Realty Trust.
Shelby M.C. Davis, (3/20/37)* P.O. Box 205, Hobe Sound, FL 33455.
Director and President of the Fund and each of the Davis Funds;
Director/Trustee and Executive Vice President of Selected American
Shares, Inc., Selected Special Shares, Inc. and Selected Capital
Preservation Trust; Director, Chairman and Chief Executive Officer,
Venture Advisers, Inc.; Consultant to Fiduciary Trust Company
International; Director, Shelby Cullom Davis
<PAGE>
Financial Consultants, Inc.
Eugene M. Feinblatt (10/28/19), 233 East Redwood
Street, Baltimore, MD 21202. Director of the Fund and each of the Davis Funds
except Davis International Series, Inc.; of Counsel, Gordon, Feinblatt, Rothman,
Hoffberger and Hollander, LLC (attorneys).
Jerry D. Geist (5/23/34), 6201 Uptown Blvd. NE, Suite 207, Albuquerque,
NM 87110. Director of the Fund and each of the Davis Funds except Davis
International Series, Inc.; Chairman, Santa Fe Center Enterprises;
President and CEO, Howard Energy International Utilities; Director,
CH2M-Hill, Inc.; Retired Chairman and President, Public Service Company
of New Mexico.
D. James Guzy (3/7/36), 508 Tasman Drive, Sunnyvale, CA 94089.
Director of the Fund and each of the Davis Funds except Davis
International Series, Inc.; Chairman, PLX Technology, Inc. (manufacturer of
semi-conductor circuits); Director, Intel Corp. (a manufacturer
semi-conductor circuits), Cirrus Logic Corp. (a manufacturer of
semi-conductor circuits) and Alliance Technology Fund (a mutual fund).
G. Bernard Hamilton (3/18/37), P.O. Box 544, Richmond, VA 23204-0544.
Director of the Fund and each of the Davis Funds except Davis
International Series, Inc.; Managing General Partner, Avanti
Partners, L.P.
LeRoy E. Hoffberger (6/8/25), The Exchange - Suite 215, 1112 Kenilworth
Drive, Towson, MD 21204. Director of the Fund and each of the Davis
Funds except Davis International Series, Inc.; Counsel to Gordon,
Feinblatt, Rothman, Hoffberger and Hollander, LLC (attorneys); Chairman,
Mid-Atlantic Realty Trust; Director, BTR Realty, Inc.; Director and
President of CPC, Inc. (a real estate company); Director and Vice
President, Merchant Terminal Corporation; formerly Director, Equitable
Bancorporation, Equitable Bank and Maryland National Bank; formerly,
Director and President, O-W Fund, Inc. (a private investment fund).
Laurence W. Levine (4/9/31), c/o Bigham, Englar, Jones & Houston, 14 Wall
Street, 21st., Floor, New York, NY 10005-2140. Director of the Fund and
each of the Davis Funds except Davis International Series, Inc.; Partner,
Bigham, Englar, Jones and Houston (attorneys); United States Counsel to
Aerolineas Argentina; Director, various private companies.
Martin H. Proyect (10/24/32),* P.O. Box 80176, Las Vegas, NV
89180-0176. Director of the Fund and each of the Davis Funds;
Director/Trustee and President of Selected American Shares, Inc.,
Selected Special Shares, Inc. and Selected Capital Preservation
Trust.
Christian R. Sonne (5/6/36), P.O. Box 777, Tuxedo Park, NY 10987.
Director of the Fund and each of the Davis Funds except Davis
International Series, Inc.; General Partner of Tuxedo Park Associates (a
land holding and development firm); President and Chief Executive Officer
of Mulford Securities Corporation (private investment fund) until 1990;
formerly, Vice President of Goldman Sachs & Company (investment
bankers).
Edwin R. Werner (4/1/22), 207 Gosling Hill Drive, Manhasset,
NY 11030. Director of the Fund and each of the Davis Funds except
Davis International Series, Inc.; President, The Estates at North
Hills New York; Formerly, Chairman and CEO, Empire Blue Cross and
Blue Shield of New York.
Carl R. Luff, (4/30/54) 124 East Marcy Street, Santa Fe, NM 87501. Vice
President, Treasurer and Assistant Secretary of the Fund and each of the
Davis Funds and Selected American Shares, Inc., Selected Special Shares,
Inc. and Selected Capital Preservation Trust; Director, Co-President and
Treasurer, Venture Advisers, Inc.
Raymond O. Padilla (2/22/51), 124 East Marcy Street, Santa Fe, NM 87501.
Vice President, Secretary and Assistant Treasurer of the Fund and each of
the Davis Funds; Vice President and Assistant Secretary of Selected
American Shares, Inc., Selected Special Shares, Inc. and Selected Capital
Preservation Trust; Senior Vice President, Venture Advisers, Inc.
Carolyn H. Spolidoro (11/19/52), 124 East Marcy Street, Santa Fe, NM
87501. Vice President of the Fund and each of the Davis Funds; Vice
President, Venture Advisers, Inc.
Andrew A. Davis (6/25/63), 124 East Marcy Street, Santa Fe, NM 87501.
Vice President of the Fund and each of the Davis Funds; Director and
Co-President, Venture Advisers, Inc.; formerly, Vice President and head of
convertible security research, PaineWebber, Incorporated.
<PAGE>
Christopher C. Davis (7/13/65), 70 Pine Street, 43rd Floor, New York, NY
10270-0108. Vice President of the Fund and each of the Davis Funds
except Davis International Series, Inc.; Director, Venture Advisers, Inc.
Eileen R. Street (3/11/62), 124 East Marcy Street, Santa Fe, NM 87501.
Assistant Treasurer and Assistant Secretary of the Fund and each of the
Davis Funds, Selected American Shares, Inc., Selected Special Shares, Inc.
and Selected Capital Preservation Trust; Senior Vice President, Venture
Advisers, Inc.
Sheldon R. Stein (11/29/28), 30 North LaSalle Street, Suite 2900,
Chicago, IL 60602. Assistant Secretary of the Fund and each of the Davis
Funds, Selected American Shares, Inc., Selected Special Shares, Inc. and
Selected Capital Preservation Trust; Partner, D'Ancona & Pflaum, the
Fund's legal counsel.
Arthur Don (9/24/53), 30 North LaSalle Street, Suite 2900, Chicago, IL
60602. Assistant Secretary of the Fund and each of the Davis Funds,
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Partner, D'Ancona & Pflaum, the Fund's legal
counsel.
The Fund does not pay salaries to any of its officers. The Adviser
performs certain services on behalf of the Fund and is reimbursed by the
Fund for the costs of providing these services. See "Investment Advisory
Services."
COMPENSATION SCHEDULE
During the fiscal year ended September 30, 1995, the compensation
paid to the directors who are not considered to be interested persons of
the Fund was as follows:
<TABLE>
<CAPTION>
Aggregate Fund Total Fund
Name Compensation Complex Compensation<F1>
- ---- ------------ --------------------
<S> <C> <C>
Wesley E. Bass $5,500 $24,375
Marc P. Blum 5,200 23,600
Eugene M. Feinblatt 5,200 23,700
Jerry D. Geist 5,000 23,050
D. James Guzy 5,200 23,600
G. Bernard Hamilton 5,000 23,200
LeRoy E. Hoffberger 5,200 23,550
Laurence W. Levine 5,200 23,550
Christian R. Sonne<F2> 1,250 11,200
Edwin R. Werner 4,500 20,700
<FN>
<F1> Complex compensation is the aggregate compensation paid, for services
as a Director, by all mutual funds with the same investment adviser.
<F2> Mr. Sonne became a director of the Fund as of July 31, 1995. Until that
time, he was a Director only of Davis New York Venture Fund, Inc.
</FN>
</TABLE>
CERTAIN SHAREHOLDERS OF THE FUND
As of December 29, 1995 there were 4,902,587.902 Class A shares
of the Fund outstanding and the directors and officers of the Fund, as a
group, owned 21,737.927 Class A shares, or approximately .044% of the
Fund's outstanding Class A shares. As of such date there were
13,533,396.880 Class B shares of the Fund outstanding. The directors and
officers of the Fund do not presently own or intend to own any Class B
shares of this Fund. There were no persons known by the Fund to be a
record owner of more than 5% of either Class of the Fund.
INVESTMENT ADVISORY SERVICES
Davis Selected Advisers, L.P. serves as investment adviser for the
Fund pursuant to an Advisory Agreement adopted in accordance with the
requirements of the Investment Company Act of 1940. Pursuant to the
Advisory Agreement, the Adviser, subject to the general supervision of
the Fund's Board of Directors, provides management and investment
advice, and furnishes statistical, executive and clerical personnel,
bookkeeping, office space, and equipment necessary to carry out its
investment advisory functions and such corporate managerial duties
<PAGE>
as are requested by the Board of Directors of the Fund. The Fund bears all
expenses other than those specifically assumed by the Adviser under the
Agreement, including preparation of its tax returns, financial reports to
regulatory authorities, dividend determinations and transaction and
accounting matters related to its custodian bank, transfer agency,
custodial and shareholder services, and qualification of its shares under
federal and state laws.
For the Adviser's services, the Fund pays the Adviser a monthly fee
at the annual rate as follows: 0.75% on average net assets up to $250
million, 0.65% on the next $250 million of average net assets and 0.55% on
average net assets over $500 million. The aggregate advisory fees paid by
the Fund to the Adviser for the fiscal years ended September 30, 1995,
1994, and 1993 were $1,360,042, $1,335,905, and $1,062,943,
respectively.
Effective October 1, 1995, Stamper Capital & Investments, Inc.,
serves as the Fund's Sub-Adviser under a Sub-Advisory Agreement with
the Adviser. The Fund pays no fees directly to the Sub-Adviser. The
Sub-Adviser manages the day to day investment operations of the Fund,
subject to the Adviser's overall supervision. For its services, the
Sub-Adviser receives a fee from the Adviser equal to 30% of the fees
received by the Adviser from the Fund.
Under the Advisory Agreement, if expenses borne by the Fund in any
fiscal year (including the advisory fee, but excluding interest, taxes,
brokerage fees and payments under a Rule 12b-1 Distribution Plan and,
where permitted, extraordinary expenses) exceeds limitations imposed by
applicable state securities laws or regulations, the Adviser must
reimburse the Fund for any such excess at least annually, up to the amount
of its advisory fee. These expense limitations may be raised or lowered
from time to time.
The reimbursable costs for certain accounting and administrative
services for the fiscal years ended September 30, 1995, 1994 and 1993
were $37,998, $30,996, and $28,496, respectively. The reimbursable
costs for qualifying the Fund's shares for sale with state agencies for
such periods were $10,002, $8,004 and $8,004, respectively. The
reimbursable costs for providing shareholder services for such periods
were $17,914, $17,616, and $15,134, respectively.
The Advisory Agreement also makes provisions for portfolio
transactions and brokerage policies of the Fund which are discussed above
under "Portfolio Transactions."
In accordance with the provisions of the Investment Company Act,
the Advisory Agreement will terminate automatically upon assignment
and is subject to cancellation upon 60 days' written notice by the Fund's
Board of Directors, the vote of the holders of a majority of the Fund's
outstanding shares or the Adviser. The continuance of the Agreement
must be approved at least annually by the Fund's Board of Directors or by
the vote of holders of a majority of the outstanding shares of the Fund. In
addition, any new agreement or the continuation of the existing agreement
must be approved by a majority of directors who are not parties to the
agreement or interested persons of any such party.
The Advisory Agreement provides that the Adviser in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties, will not be liable for any act or omission in the cause of, or
connected with rendering service under the Agreement or for any losses
that may be sustained in the purchase, holding or sale of any security.
The Adviser and Sub-Adviser have adopted a Code of Ethics which
regulates the personal securities transactions of the Adviser's investment
personnel and other employees and affiliates with access to information
regarding securities transactions of the Fund. Both Code of Ethics require
investment personnel to disclose personal securities holdings upon
commencement of employment and all subsequent trading activity to the
Adviser's Compliance Officer. Investment personnel are prohibited from
engaging in any securities transactions, including the purchase of
securities in a private offering, without the prior consent of the
Compliance Officer. Additionally, such personnel are prohibited from
purchasing securities in an initial public offering and are prohibited from
trading in any securities (i) for which the Fund has a pending buy or sell
order, (ii) which the Fund is considering buying or selling, or (iii) which
the Fund purchased or sold within seven calendar days.
CUSTODIAN
The Custodian of the Fund's assets is State Street Bank and Trust
Company, c/o The Davis Funds
<PAGE>
(formerly, The Venture Funds), P.O. Box 8406, Boston, MA 02266-8406. The
Custodian maintains all of the instruments representing the investments of the
Fund and all cash. The Custodian delivers securities against payment upon sale
and pays for securities against delivery upon purchase. The Custodian also
remits Fund assets in payment of Fund expenses, pursuant to instructions of
officers or resolutions of the Board of Directors.
AUDITORS
The Fund's auditors are Tait, Weller & Baker, Two Penn Center, Suite
700, Philadelphia, PA 19102-1707. The audit includes examination of
annual financial statements furnished to shareholders and filed with the
Securities and Exchange Commission, consultation on financial accounting
and reporting matters, and meeting with the Audit Committee of the Board
of Directors. In addition, the auditors review federal and state income tax
returns and related forms.
DETERMINING THE PRICE OF SHARES
The Fund does not price its shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange is closed. Such
days currently include New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
REDUCTION OF CLASS A SALES CHARGES
There are a number of ways to reduce the sales charge imposed on
the purchase of the Fund's Class A shares, as described below. These
reductions are based upon the fact that there is less sales effort and
expense involved in respect to purchases by affiliated persons and
purchases made in large quantities.
Family or Group Purchases. Certain purchases made by or for more
than one person may be considered to constitute a single purchase,
including (i) purchases for family members, including spouses and children
under 21 and (ii) purchases made by an organized group of persons,
whether incorporated or not, if the group has a purpose other than buying
shares of mutual funds. For further information on group purchase
reductions, contact the Adviser or your dealer.
Statements of Intention. Another way to reduce the sales charge is
by signing a Statement of Intention. A Statement is included in the
Application Form included in the Prospectus. Please read it carefully
before completing it.
If you enter into a Statement of Intention you (or any "single
purchaser") may state that you intend to invest at least $100,000 in the
Fund's Class A shares over a 13-month period. The amount you say you
intend to invest may include Class A shares which you already own, valued
at the offering price, at the end of the period covered by the Statement. A
Statement may be backdated up to 90 days to include purchases made
during that period, but the total period covered by the Statement may not
exceed 13 months.
Shares having a value of 5% of the amount you state you intend to
invest will be held "in escrow" to make sure that any additional sales
charges are paid. If any of the Fund's shares are in escrow pursuant to a
Statement and such shares are exchanged for shares of another Davis Fund,
the escrow will continue with respect to the acquired shares.
No additional sales charge will be payable if you invest the amount
you have indicated. Each purchase under a Statement will be made as if
you were buying at one time the total amount indicated. For example, if
you indicate that you intend to invest $100,000, you will pay a sales
charge of 3-1/2% on each purchase.
If you buy additional amounts during the period to qualify for an even
lower sales charge, you will be charged such lower charge. For example,
if you indicate that you intend to invest $100,000 and actually invest
$250,000, you will, by retroactive adjustment, pay a sales charge of
2-1/2%.
If during the 13-month period you invest less than the amount you
have indicated, you will pay an additional sales charge. For example, if
you state that you intend to invest $250,000 and actually invest only
$100,000, you will, by retroactive adjustment, pay a sales charge of
3-1/2%. The sales charge you actually pay will be the same as if you had
purchased the shares in a single purchase.
A Statement does not bind you to buy, nor does it bind the Adviser to
sell, the shares covered by the Statement.
<PAGE>
Rights of Accumulation. Another way to reduce the sales charge is
under a right of accumulation. This means that the larger purchase
entitled to a lower sales charge need not be in dollars invested at one
time. The larger purchases that you (or any "single purchaser") make at
any one time can be determined by adding to the amount of a current
purchase the value of Fund shares (at offering price) already owned by you.
For example, if you owned $100,000 worth (at offering price) of the
Fund's Class A shares and invest $5,000 in additional shares, the sales
charge on that $5,000 investment would be 3-1/2%, not 4-3/4%.
If you claim this right of accumulation, you or your dealer must so
notify the Adviser (or State Street, if the investment is mailed to State
Street) when the purchase is made. Enough information must be given to
verify that you are entitled to such right.
Combined Purchases with other Davis Funds. Your ownership or
purchase of Class A shares of certain other Funds advised and distributed
by the Adviser, including Davis High Income Fund, Inc., Davis New York
Venture Fund, Inc., Davis International Series, Inc. and Davis Series, Inc.
(collectively with the Fund, the "Davis Funds") may also reduce your sales
charges in connection with the purchase of the Fund's Class A shares. This
applies to all three situations for reduction of sales charges discussed
above.
If a "single purchaser" decides to buy the Fund's Class A shares as
well as Class A shares of any of the other Davis Funds (other than shares
of Davis Government Money Market Fund formerly, Government Money
Market Fund) at the same time, these purchases will be considered a
single purchase for the purpose of calculating the sales charge. For
example, a single purchaser can invest at the same time $100,000 in the
Fund's Class A shares and $150,000 in the Class A shares of Davis High
Income Fund, Inc. and pay a sales charge of 2-1/2%, not 3-1/2%.
Similarly, a Statement of Intention for the Fund's Class A shares and
for the Class A shares of the other Davis Funds (other than Davis
Government Money Market Fund) may be aggregated. In this connection, the
Fund's Class A shares and the Class A shares of the other Davis Funds
which you already own, valued at the current offering price at the end of
the period covered by your Statement of Intention, may be included in the
amount you have stated you intend to invest pursuant to your Statement.
Lastly, the right of accumulation applies also to the Class A shares
of the other Davis Funds (other than Davis Government Money Market Fund)
which you own. Thus, the amount of current purchases of the Fund's Class
A shares which you make may be added to the value of the Class A shares
of the other Davis Funds (valued at their current offering price) already
owned by you in determining the applicable sales charge. For example, if
you owned $100,000 worth of shares of Davis High Income Fund, Inc. and
Davis Series, Inc. Financial Value Fund and Davis Convertible Securities
Fund (valued at the applicable current offering price) and invest $5,000 in
the Fund's shares, the sales charge on your investment would be 3-1/2%,
not 4-3/4%.
In all the above instances where you wish to claim this right of
combining the Fund's shares you own of the other Davis Funds you or your
dealer must notify the Adviser (or State Street, if the investment is
mailed to State Street) of the pertinent facts. Enough information must
be given to permit verification as to whether you are entitled to a
reduction in sales charges.
Issuance of Shares at Net Asset Value. There are many situations
where the sales charge will not apply to the purchase of Class A shares,
as discussed in the Prospectus. In addition, the Fund occasionally may be
provided with an opportunity to purchase substantially all the assets of a
public or private investment company or to merge another such company
into the Fund. This offers the Fund the opportunity to obtain significant
assets. No dealer concession is involved. It is industry practice to effect
such transactions at net asset value as it would adversely affect the
Fund's ability to do such transactions if the Fund had to impose a sales
charge.
DISTRIBUTION OF FUND SHARES
The Adviser acts as principal underwriter of the Fund's shares on a
continuing basis pursuant to a Distributing Agreement. Pursuant to such
Distributing Agreement, the Adviser, in its capacity as distributor, pays
for all expenses in connection with the preparation, printing and
distribution of advertising and sales literature for use in offering the
Fund's shares to the public, including reports to shareholders to the extent
they are used as sales literature. The Adviser also pays for prospectuses
in excess of those which the Fund must file with the Securities and
Exchange Commission or those forwarded to existing shareholders. The
continuation and assignment
<PAGE>
provisions of the Distributing Agreement are the same as those of the Advisory
Agreement. In addition, the Fund has adopted distribution plans with respect to
each class of its shares pursuant to Rule 12b-1 under the Investment
Company Act (the "Distribution Plans"). Payments under the Class A
Distribution Plan are limited to an annual rate of 0.25% of the average
daily net asset value of the Class A shares. Payments under the Class B
Distribution Plan are limited to an annual rate of 1.00% of the average
daily net asset value of the Class B shares.
To the extent that any investment advisory fees paid by the Company
may be deemed to be indirectly financing any activity which is primarily
intended to result in the sale of shares of the Company within the meaning
of Rule 12b-1, the payments of such fees are authorized under the Plans.
The Distribution Plans continue annually so long as they are
approved in the manner provided by Rule 12b-1 or unless earlier
terminated by vote of the majority of the Fund's Independent Directors or
a majority of the outstanding shares. The Adviser is required to furnish
quarterly written reports to the Board of Directors detailing the amounts
expended under the Distribution Plans. The Distribution Plans may be
amended provided that all such amendments comply with the applicable
requirements then in effect under Rule 12b-1. Presently, Rule 12b-1
requires, among other procedures, that it be continued only if a majority
of the Independent Directors approve continuation at least annually and
that amendments materially increasing the amount to be spent for
distribution be approved by the Independent Directors and the
shareholders. As long as the Distribution Plans are in effect, the Fund
must commit the selection and nomination of candidates for new
Independent Directors to the sole discretion of the existing Independent
Directors.
During the fiscal years ended September 30, 1995, 1994 and 1993,
the Distributor earned commissions of $643,155, $2,385,580 and
$2,127,047, respectively under the class B Distribution Plan. During the
fiscal year ended September 30, 1995, the Distributor reallowed $633,786
to qualified dealers responsible for the sale and maintenance of Fund
shares.
PERFORMANCE DATA
Yield. Yield is computed in accordance with a standardized method
prescribed by the rules of the Securities and Exchange Commission and is
calculated separately for each class. Yield is a measure of the net
investment income per share (as defined) earned over a specified 30-day
period expressed as a percentage of the maximum offering price of the
Fund's shares at the end of the period. Based upon the 30-day period ended
September 30, 1995 the yield for the Fund's Class B shares was 6.33%.
Such yield figure was determined by dividing the net investment income
per share earned during the specified 30-day period by the maximum
offering price per share on the last day of the period, according to the
following formula:
Yield = 2 [(a - b + 1) 6 -1]
-----
cd
a = dividends and interest earned during the period.
b = expenses accrued for the period.
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
Tax Equivalent Yield. Tax equivalent yield is the yield that a taxable
investment must generate in order to equal a Fund's yield for an investor
in a stated federal income tax bracket. The Fund's tax equivalent yield is
computed separately for each class in accordance with the standardized
method prescribed by the Securities and Exchange Commission, by dividing
that portion of such Fund's yield (computed as described above) that is tax
exempt by one minus the stated federal income tax rate, and adding the
resulting number to that portion, if any, of the Fund's yield that is not tax
exempt.
Total Return. Total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in the Fund's portfolio. The
Fund's total return figures are computed separately for each class in
accordance with the standardized method prescribed by the Securities and
Exchange Commission by determining the average annual compounded rates
of return over the periods indicated in the advertisement that would
equate the initial amount invested to the ending
<PAGE>
redeemable value, according to the following formula:
P(1+T)^n = ERV
Where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period
This calculation (i) assumes all dividends and distributions are reinvested
at net asset value on the appropriate reinvestment dates as described in
the Prospectus, and (ii) deducts (a) the maximum front-end or applicable
contingent deferred sales charge from the hypothetical initial $1,000
investment for the one year calculation, and (b) all recurring fees, such as
advisory fees, charged as expenses to all shareholder accounts.
The average annual total return figures for the Fund's Class A shares
during the period beginning December 1, 1994 (commencement of public
offering of shares) and ended September 30, 1995 was 3.44%.
The average annual total return figures for the Fund's Class B shares
during the one, five and ten year periods ended September 30, 1995 were
3.64%, 7.33% and 7.79%, respectively.
NON-STANDARD DISTRIBUTION RATES
Distribution Rates. Distribution rates are computed by dividing the
income dividends for a stated period by the maximum offering price on the
last day of such period. During 1995, the amount of income dividends used
to compute historical distribution rates will be annualized for a
twelve-month period. For the year ended September 30, 1995, the
historical distribution rate with respect to the Fund's Class B shares was
5.51%.
Annualized Current Distribution Rates. Annualized current
distribution rates are computed by multiplying income dividends for a
specified month by twelve and dividing the resulting figure by the
maximum offering price on the last day of the specified period. The
annualized current distribution rate with respect to the Fund's Class B
shares for the one month period ended September 30, 1995 was 5.23%.
Tax Equivalent Distribution Rate. Tax equivalent distribution rate is
computed by dividing that portion of the annualized current distribution
rate (computed as described above) which is tax-exempt by one minus the
stated federal income tax rate, and adding the resulting figure to that
portion, if any, of the annualized current distribution rate which is not
tax-exempt. Based upon the maximum federal income tax rate of 39.6%
and the annualized current distribution rate for the month ended
September 30, 1995, the tax equivalent distribution rate with respect to
the Fund's Class B shares was 8.66%.
<PAGE>
FORM N-1A
DAVIS TAX-FREE INCOME FUND, INC.
(formerly, VENTURE MUNI (+) PLUS, INC.)
POST-EFFECTIVE AMENDMENT NO. 21 UNDER THE SECURITIES
ACT OF 1933
REGISTRATION STATEMENT No. 2-74216
AND
AMENDMENT NO. 22 UNDER THE INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-3270
PART C
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
(i) Financial Highlights
(Supplementary Information)
Included in Part B by incorporation from the 1995 Annual Report:
(i) Schedule of Investments at September 30, 1995.
(ii) Statement of Assets & Liabilities at September 30, 1995.
(iii) Statement of Operations for the year ended September 30, 1995.
(iv) Statement of Changes in Net Asset for the years ended September
30, 1995 and 1994.
(v) Notes to Financial Statements.
(vi) Financial Highlights.
(vii) Report of Independent Certified Public Accountants.
(b) Exhibits:
(1) Articles of Incorporation.
(2) Amended and Restated Bylaws.
(3) Not applicable.
(4) Not applicable.
(5)(a) Advisory Agreement.
<PAGE>
(5)(b) Sub-Advisory Agreement between Selected/Venture Advisers,
L.P. and Stamper Capital & Investments, Inc., incorporated by
reference to Exhibit No. 5 (b) of Registrant's Post-Effective
Amendment No. 21, File No. 2-74216.
(6) Distributor's Agreement.
(7) Not applicable.
(8) Custodian Agreement and Transfer, Dividend Disbursing and Plan
Agent Agreement, incorporated by reference to Exhibit No. 8 of
Registrant's Pre-Effective Amendment No. 1, File No. 2-74216
(9) Agreement Regarding Joint Insured Bond, effective February 1,
1995.
(10) Opinion and Consent of Counsel (Reavis & McGrath), incorporated
by reference to Exhibit No. 10 of Registrant's Pre-Effective
Amendment No. 1., File No. 2-74216.
(11) Consent of Auditors.
(12) Financial Statements, included in Statement of Additional
Information.
(13) Not applicable.
(14) Not applicable.
(15)(a) Distribution Plan for Class A shares.
(15)(b) Distribution Plan for Class B shares.
(16) Sample Computation of Yield and Average Annual Total Return,
incorporated by reference to Exhibit 16 of Registrant's
Post-Effective Amendment No. 11, File No. 2-74216.
(17) Powers of Attorney, incorporated by reference to Exhibit 17 of
Registrant's Post-Effective Amendment No. 21, File No. 2-74216.
(18) Plan pursuant to Rule 18f-3, incorporated by reference to
Exhibit 18 of Registrant's Post-Effective Amendment No. 21, File
No.2-74216.
Item 25. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
Not applicable
Item 26. Number of Holders of Securities
-------------------------------
Title of Class Number of Record Holders
Common Stock as of December 29, 1995
------------ -----------------------
Davis Tax-Free High Income
Fund, Inc. Class A 1,593
Davis Tax-Free High Income
Fund, Inc. Class B 3,471
<PAGE>
Item 27. Indemnification
---------------
Exhibits Nos. 1, 5 and 6 to Registrant's Post-Effective Amendment
No. 16 are incorporated by reference.
Provisions of the Maryland General Corporation Law are set forth in
Item 4 of Part II of Registrant's Pre-Effective Amendment No. 1, which is
incorporated by reference.
On February 18, 1988 the indemnification provisions of the Maryland
General Corporation Law (the "Law") were amended to permit, among other
things, corporations to indemnify directors and officers unless it is
proved that the individual (1) acted in bad faith or with active and
deliberate dishonesty, (2) actually received an improper personal benefit
in money, property or services, or (3) in the case of a criminal proceeding,
had reasonable cause to believe that his act or omission was unlawful. The
Law was also amended to permit corporations to indemnify directors and
officers for amounts paid in settlement of stockholders' derivative suits.
In addition, the Registrant's directors and officers are covered under
a policy to indemnify them for loss (subject to certain deductibles)
including costs of defense incurred by reason of alleged errors or
omissions, neglect or breach of duty. The policy has a number of
exclusions including alleged acts, errors, or omissions which are finally
adjudicated or established to be deliberate, dishonest, malicious or
fraudulent or to constitute willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties in respect to any
registered investment company. This coverage is incidental to a general
policy carried by the Registrant's adviser.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The Investment Adviser of the Registrant, Davis Selected Advisers,
L.P. (formerly, Selected/Venture Advisers, L.P.), is also the investment
adviser for Davis High Income Fund, Inc. (formerly, Venture Income (+)
Plus, Inc.), Davis New York Venture Fund, Inc. (formerly, New York Venture
Fund, Inc.), Davis Series, Inc. (formerly, Retirement Planning Funds of
America, Inc.), Davis International Series, Inc. (formerly, Venture Series,
Inc.), Selected American Shares, Inc., Selected Special Shares, Inc. and
Selected Capital Preservation Trust. It also may engage as an investment
adviser for accounts other than mutual funds, although this is not
presently business of a substantial nature.
Shelby M.C. Davis is Director, Chairman and Chief Exective Officer
and principal owner of Venture Advisers, Inc. (the "General Partner"), and
is a Director of Shelby Cullom Davis Financial Consultants, Inc., 70 Pine
Street, New York, New York 10270, ("SCDFC"). Carl R. Luff is a Director,
Co-President and Secretary of the General Partner.
Item 29. Principal Underwriters
----------------------
(a) Davis Selected Advisers, L.P., the principal underwriter for the
Registrant, also acts as principal underwriter for Davis High Income Fund,
Inc., Davis New York Venture Fund, Inc., Davis Series, Inc., Davis
International Series, Inc., Selected American Shares, Inc., Selected
Special Shares, Inc. and Capital Preservation Trust.
(b) Management of the general partner of the Principal Underwriter
<PAGE>
<TABLE>
<CAPTION> Positions and
Name and Principal Positions and Offices with Offices with
Business Address General Partner of Underwriter Registrant
- ---------------- ------------------------------ ----------
<S> <C> <C>
Shelby M.C. Davis Director, Chairman and Director and President
P.O. Box 205 and Chief Executive Officer
Hobe Sound, FL 33455
Carl R. Luff Director, Co-President Vice President,
124 East Marcy Street President and Treasurer Treasurer and Assistant
Santa Fe, NM 87501 Secretary
Raymond O. Padilla Senior Vice President Vice President,
124 East Marcy Street Secretary and
Santa Fe, NM 87501 Assistant Treasurer
Andrew A. Davis Co-President Vice President
124 East Marcy Street
Santa Fe, NM 87501
Christopher C. Davis Director Vice President
609 5th Avenue, 11th FL.
New York, NY 10017
Eileen R. Street Senior Vice President Assistant Treasurer and
124 East Marcy Street Assistant Secretary
Santa Fe, NM 87501
Carolyn H. Spolidoro Vice President Vice President
124 East Marcy Street
Santa Fe, NM 87501
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
Accounts and records are maintained at the offices of Davis
Selected Advisers, L.P., 124 East Marcy Street, Santa Fe, New Mexico
87501, and the Registrant's custodian and transfer agent, State Street
Bank and Trust Company, 470 Atlantic Avenue, Boston, Massachusetts
02210.
Item 31. Management Services
------------------
Not applicable
Item 32. Undertakings
--------------
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SIGNATURES
----------
Registrant certifies that this Amendment meets all of the
requirements for effectiveness pursuant to Rule 485(b).
Pursuant to the requirements of the Securities Act of 1933 and/or
the Investment Company Act of 1940, the Registrant has caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois on
the 8th day of January, 1996.
DAVIS TAX-FREE HIGH INCOME FUND, INC.
*By: /s/ Sheldon R. Stein
--------------------------------
Sheldon R. Stein,
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Shelby M.C. Davis* Chief Executive Officer January 8, 1996
Shelby M.C. Davis & Director
Carl R. Luff* Principal Financial January 8, 1996
Carl R. Luff and Accounting Officer
*Sheldon Stein signs this document on behalf of the Registrant and
each of the foregoing officers pursuant to the Powers of Attorney filed as
Exhibit 17 to Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A.
/s/ Sheldon R. Stein
--------------------------------
Sheldon R. Stein,
Attorney-in-Fact
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Wesley E. Bass, Jr.* Director January 8, 1996
- -----------------------------
Wesley E. Bass, Jr.
Marc P. Blum* Director January 8, 1996
- -----------------------------
Marc P. Blum
Eugene M. Feinblatt* Director January 8, 1996
- -----------------------------
Eugene M. Feinblatt
Jerry D. Geist* Director January 8, 1996
- -----------------------------
Jerry D. Geist
D. James Guzy* Director January 8, 1996
D. James Guzy
G. Bernard Hamilton* Director January 8, 1996
- -----------------------------
G. Bernard Hamilton
LeRoy E. Hoffberger* Director January 8, 1996
- -----------------------------
LeRoy E. Hoffberger
Laurence W. Levine* Director January 8, 1996
Laurence W. Levine
Martin H. Proyect* Director January 8, 1996
Martin H. Proyect
Edwin R. Werner* Director January 8, 1996
- -----------------------------
Edwin R. Werner
*Sheldon Stein signs this document on behalf of each of the
foregoing persons pursuant to the Powers of Attorney filed as Exhibit 17
to Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A.
/s/ Sheldon Stein
------------------------
Sheldon Stein,
Attorney-in-Fact
EHIBIT (1)
UNOFFICIAL FORM
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
DAVIS TAX-FREE HIGH INCOME FUND, INC.
(TO BE EFFECTIVE AS OF OCTOBER 1, 1995)
FIRST: Incorporators: The original incorporators were Martin H.
Proyect, Nell W. Proyect, and Karen A. Kelty.
SECOND: Name. The name of the Corporation (hereinafter called the
"Corporation") is Davis Tax-Free High Income Fund, Inc.
THIRD: Purpose. The purpose for which the Corporation is formed is
to engage in, conduct, operate and carry on the business of an open-end
management investment company under the Investment Company Act of
1940 (including any amendment thereof or other applicable Act of
Congress hereafter enacted) (herein-after called the "1940 Act"), and to
do any and all acts or things as are necessary, convenient, appropriate,
incidental or customary in connection therewith.
FOURTH: Principal Office and Resident Agent. The post office
address of the place at which the principal office of the Corporation in the
State of Maryland will be located at 32 South Street, Baltimore, Maryland
21202.
The Corporation's registered agent is The Corporation Trust
Incorporated whose post office address is 32 South Street, Baltimore,
Maryland 21202. Said registered agent is a corporation of the State of
Maryland.
FIFTH: Capitalization. (a) The total number of shares of capital
stock which the Corporation shall have authority to issue is
1,000,000,000 shares of capital stock of the par value of $.01, having an
aggregate par value of $10,000,000. Without limiting the power of the
Board of Directors as set forth in paragraph (b) of this Article FIFTH,
350,000,000 shares are classified as Class A Common Stock, 350,000,000
shares are classified as Class B Common Stock and 100,000,000 shares
are classified as Class C Common Stock,
The Class A Common Stock, Class B Common Stock and Class C
Common Stock shall represent investment in the same pool of assets and
shall have the same preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption except as set forth in the Articles of
Incorporation of the Corporation and as set forth below:
(i) Expenses related to the distribution of each class of stock and
such other expenses as may be permitted by rule or order of the Securities
and Exchange Commission and as the Board of Directors shall deem
appropriate shall be borne solely by each class, and the bearing of such
expenses shall be appropriately reflected (in the manner determined by
the Board of Directors) in the net asset value, dividends, distribution and
liquidation rights of the shares of such Class;
(ii) The Class A Common Stock may be subject to a front-end load
and a Rule 12b-1 service and distribution fee as determined by the Board
of Directors from time to time prior to issuance of such stock;
(iii) The Class B Common Stock may be subject to a contingent
deferred sales charge and a Rule 12b-1 service and distribution fee as
<PAGE>
determined by the Board of Directors from time to time prior to issuance
of such stock and shall be converted to Class A Common Stock at the end
of eight (8) years after purchase or such earlier period as determined by
the Board of Directors giving effect to reciprocal exchange privileges;
(iv) The Class C Common Stock may be sold without a front-end
sales load or contingent sales charge and may be subject to a Rule 12b-1
service and distribution fee as determined by the Board of Directors from
time to time prior to issuance of such stock.
(v) Each class shall vote separately on matters pertaining only to
that class, as the Board of Directors shall from time to time determine.
(vi) Nothing herein shall prohibit the imposition of a redemption fee
or exchange fee upon any Class.
(b) For purposes of establishing classes or subclasses of stock with
different investment objectives, types of investments or distribution
methods, costs or charges, the Board of Directors may classify or
reclassify any unissued stock from time to time by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of the stock. Without limiting the generality of the foregoing,
the Board of Directors may, from time to time, (i) classify or reclassify
any unissued shares of stock into classes having "assets belonging to"
such class, as described in Paragraph (c)(i) of this Article, (ii) divide any
class having "assets belonging to" such class into subclasses with
different distribution methods, costs or charges and classify or reclassify
any unissued shares of such subclass, and (iii) name and change the name
of any class or subclass of outstanding or unissued stock.
(c) Subject to the authority granted to the Board of Directors of the
Corporation in subparagraph (b) of this Article FIFTH, each class of stock
of the Corporation now outstanding and each class of stock hereafter
designated by the Directors as a class which shall have assets belonging
to such class shall have the following described powers, preferences and
rights and the qualifications, limitations and restrictions thereof shall be
as follows:
(i) All consideration received by the Corporation for the issue or
sale of shares of a particular class, together with all income, earnings,
profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any assets derived from any
reinvestment of such proceeds, in whatever form the same may be, are
herein referred to as "assets belonging to" such class.
(ii) The assets belonging to a particular class of stock shall be
charged with the liabilities (including, in the discretion of the Board of
Directors or its delegate, accrued expenses and reserves) incurred in
respect of such class, and such class shall also be charged with its share
of any general liabilities of the Corporation not incurred in respect of any
particular class, such general liabilities to be allocated in proportion to
the net asset value of the respective classes. The allocation of such
liabilities to any subclass shall be determined by the Board of Directors
or its delegate. The determination of the Board of Directors or its
delegate shall be final and conclusive as to the amount of assets and
liabilities, including accrued expenses and reserves, which are to be
allocated to one or more particular
<PAGE>
classes or subclasses. The power to make such determinations may be delegated
by the Board of Directors from time to time to one or more of the directors and
officers of the Corporation, or to an agent of the corporation appointed for
such purpose.
(iii) In the event of the liquidation or dissolution of the Corporation
(for whatever reason), shareholders of each class shall be entitled to
receive as a class, out of the assets of the Corporation available for
distribution to shareholders the assets belonging to such class; and the
assets so distributable to the shareholders of any class shall be
distributed among such shareholders in proportion to the relative
aggregate net asset values of the shares held by such shareholders. In the
event that there are any general assets available for distribution not
belonging to any particular class, any distribution thereof shall be made
to the holders of all such classes in proportion to the net asset value of
the respective classes.
(iv) The voting rights of the shares of each class shall be as set
forth in subparagraph (d) of this Article FIFTH.
(v) The relative rights of the shares of each class to be redeemed or
repurchased shall be as set forth in Article SEVENTH.
(vi) The relative rights of the shares of each class to receive
dividends shall be as set forth in Article NINTH.
(d) Subject to the requirements of the Investment Company Act of
1940, at any meeting of the shareholders, each shareholder shall have one
vote for each dollar of net asset value per share for each share held
irrespective of the class or subclass thereof. On any matter submitted to
a vote of shareholders, all shares of the Corporation then issued and
outstanding and entitled to vote shall be voted in the aggregate and not by
class or subclass except to the extent class or subclass voting is required
as to any matter by the laws of the State of Maryland, the Investment
Company Act of 1940 or any Regulation thereunder or by the Board of
Directors.
(e) Fractional shares shall carry proportionately all the rights of a
whole share.
SIXTH: Preemptive Rights. No holder of any of the stock of the
Corporation shall as such holder have any preemptive or other right to
purchase or subscribe for any stock which the Corporation may issue or
sell, whether or not exchangeable for any other stock of the Corporation,
and whether out of the number of shares authorized by the Articles of
Incorporation as originally filed or by any amendment thereof or out of
shares of the stock of the Corporation acquired by it after the issue
thereof, other than such, if any, as the Board of Directors in its discretion
may from time to time determine to offer, or authorize to be offered, for
subscription to stockholders of the Corporation, and then only at such
price or prices and upon such terms as the Board of Directors from time to
time, in its discretion, may determine.
SEVENTH: Redemption. (a) Each holder of the stock of the
Corporation shall be entitled at any time to require the Corporation, to the
extent that the Corporation shall have any surplus available for such
purpose and out of such surplus, to purchase all or any part of the shares
of the stock standing in the name of such holder on the books of the
Corporation at the net asset value of such shares; provided, however, that
the Corporation may suspend such right of redemption or postpone
payment for such shares pursuant to the
<PAGE>
1940 Act or any rule, regulation
or order thereunder. The procedures and requirements for redemption
shall be determined by the Corporation or its duly authorized agent.
(b) Any redemptions or purchases of shares by the Corporation of
any class of the Corporation's stock shall be made solely from assets
belonging to such class.
(c) The Corporation, without the vote or consent of the stockholders
of the Corporation, may redeem all shares of stock in any stockholder's
account in which the value of such shares is less than $250, or such other
minimum amount as the Board of Directors may from time to time
establish, in its discretion; provided, that any such redemption is at a
price determined in accordance with the Corporation's then current
prospectus.
EIGHTH: Number of Directors. The number of directors of the
corporation shall be thirteen. However, the By-Laws of the Corporation
may from time to time fix the number of directors at a number other than
thirteen and may authorize the Board of Directors, by vote of a majority of
the entire Board of Directors, to increase or decrease the number of
directors fixed by these Articles or by the By-Laws. The By-Laws of the
corporation may divide the Directors of the Corporation into classes and
prescribe the tenure of office of the several classes, but no class shall be
elected for a period shorter than that from the time of the election
following the division into classes until the next annual meeting and
thereafter for a period shorter than the interval between annual meetings
or for a period longer than five years, and the term of office of at least
one class shall expire each year.
NINTH: Board of Directors. The following powers are expressly and
exclusively vested in the Board of Directors of the Corporation and may be
exercised without the approval of the stockholders of the Corporation.
(a) To make, alter, amend and repeal the By-Laws of the
Corporation.
(b)To declare and provide for the distribution of dividends and to
determine the amount, source, method and time thereof, except that
distributions from assets belonging to a particular class of stock shall be
distributed only to the holders of shares of such class.
(c)To authorize and provide for the issuance and sale of shares of
the stock of the Corporation;
(d)To authorize the purchase by the Corporation, either directly
or through an agent, of shares of its stock, in the open market or
otherwise, at prices not in excess of the net asset value of such shares.
TENTH: Net Asset Value, Other Determinations. The net asset value
of shares of capital stock of the Corporation shall be determined by or
pursuant to the direction of the Board of Directors of the Corporation. Any
determination made in good faith by or on behalf of the Board of Directors
or pursuant to its delegation or direction, as to the amount of the assets,
debts, obligations or liabilities of the Corporation, as to the net asset
value, bid price or asked price of the shares of the Corporation, as to the
value of any asset or assets of the Corporation, or as to any other matter
relating to the issue, sale, redemption, purchase, acquisition or
disposition of the shares of the Corporation, shall be final and conclusive
and shall be binding upon the Corporation and all holders of shares issued
by it, and the shares of the Corporation shall be issued and sold on the
condition and understanding that any and all such determinations shall be
binding as aforesaid.
ELEVENTH: Indemnification. Subject to the provisions of the
Investment Company Act of 1940, as amended, the Corporation shall
indemnify and advance expenses to a director or officer of the Corporation
in connection with any proceeding to the fullest extent permitted by and
in accordance with Section 2-418 of the Maryland General
<PAGE>
Corporation Law, as amended from time to time (the "Indemnification Section").
Subject to the provisions of the Investment Company Act of 1940, as
amended, with respect to an employee or agent, other than a director or
officer of the Corporation, the Corporation may, as determined by and in
the discretion of the Board of Directors of the Corporation, indemnify and
advance expenses to such employee or agent in connection with a
proceeding to the extent permitted by and in accordance with the
Indemnification Section. As used in this Article Eleventh, any word or
words that are defined in the Indemnification Section shall have the same
meaning as provid-ed in the Indemnification Section. The indemnification
and advancement of expenses provided or authorized by these Articles
shall not be deemed exclusive of any other rights to which a director,
officer, employee or agent of the Corporation may be entitled.
TWELFTH. Exculpation. Subject to the provisions of the Investment
Company Act of 1940, as amended, no director or officer of the
Corporation shall be liable to the Corporation or its stockholders for
money damages, except (i) to the extent that it is proved that such
director or officer actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in
money, property or services actually received, or (ii) to the extent that a
judgment or other final adjudication adverse to such director or officer is
entered in a proceeding based on a finding in the proceeding that such
director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding.
THIRTEENTH. Majority Vote. Notwithstanding any provision of the
General Corporation Law of the State of Maryland requiring that any action
be taken or authorized by the affirmative vote of the holders of a
designated proportion greater than a majority of votes entitled to be cast,
such action shall be effective and valid if taken or authorized by the
affirmative vote of the holders of a majority of the total number of votes
entitled to vote thereon. When shares are voted by individual class or
subclass, any such action shall be effective and valid if taken or
authorized by the affirmative vote of the holders of a majority of the
total number of votes entitled to vote thereon.
FOURTEENTH: Amendments The Corporation reserves the right from
time to time to amend, alter, change, add to, or repeal any provision
contained in these Restated and Amended Articles of Incorporation in the
manner now or hereafter prescribed or permitted by statute, including any
amendment which alters the contract rights, as expressly set forth in
these Restated and Amended Articles of Incorporation, of any outstanding
stock, and all rights conferred on stockholders and others herein are
granted subject to this reservation.
FIFTEENTH: Titles. The titles contained in these Restated and
Amended Articles of Incorporation are for convenience only and shall not
affect the interpretation of any of the provisions hereof.
IN WITNESS WHEREOF, DAVIS TAX-FREE HIGH INCOME FUND, INC., has
caused these presents to be signed in its name and on its behalf by its
Chairman of the Board of Directors and attested by its Secretary this 1st
day of April, 1993.
Attest:
DAVIS TAX-FREE HIGH INCOME FUND, INC.
/S/ RAYMOND O. PADILLA /S/ MARTIN H. PROYECT
Raymond O. Padilla, Martin H. Proyect, Chairman of the Board
Secretary
EXHIBIT (2)
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AMENDED AND RESTATED BYLAWS
October 17, 1994
VENTURE MUNI (+) PLUS, INC.
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<PAGE>
IN EFFECT AS OF
October 17, 1994
AMENDED AND RESTATED BYLAWS OF
VENTURE MUNI (+) PLUS, INC.
ARTICLE I
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STOCKHOLDERS
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SECTION 1. Place of Meeting. All meetings of the stockholders shall
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be held at the principal office of the Corporation in the State of Maryland
or at such other place within or without the State of Maryland as may
from time to time be designated by the Board of Directors and stated in
the notice of meeting.
SECTION 2. Annual Meetings. An annual meeting of stockholders
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shall be held in December, 1990. Thereafter annual meetings shall not be
required to be held in any year in which the election of Directors is not
required to be acted upon under the Investment Company Act of 1940. An
annual meeting shall be held in accordance with the Investment Company
Act of 1940 in the event that less than a majority of the Directors then in
office were elected by the vote of stockholders. Any annual meeting may
be called (i) by the Board of Directors, or (ii) if required by the Investment
Company Act of 1940, by the Chief Executive Officer solely for the
purposes of electing Directors and considering the ratification of the
independent public accountant selected by the Board of Directors to audit
the financial statements of the Corporation. Annual meetings called by the
Chief Executive Officer may consider other business which is proposed by
the Chief Executive Officer and properly brought before such meetings;
provided, however, that specific matters other than election of Directors
and ratification of selection of accountants may be placed on the agenda
of the meeting solely with the approval of a majority of the entire Board
of Directors.
SECTION 3. Special Meetings. Special meeting of stockholders
----------------
may be called by the Chief Executive Officer or the Board of Directors, and
shall be called upon the written request of stockholders holding at least
ten percent (10%) of the outstanding shares of stock. A request by
stockholders for a meeting shall state the purpose of the meeting and the
matters proposed to be acted upon. Unless requested by stockholders
entitled to cast a
<PAGE>
majority of all the votes entitled to be cast at the meeting, a special meeting
need not be called to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding 12 months. Whenever ten or more stockholders of record who have been
such for at least six months preceding the date of application, and who hold in
the aggregate shares constituting at least one percent (1%) of the outstanding
shares of stock, shall apply to the Directors in writing, stating that they
wish to communicate with other stockholders with a view to obtaining
signatures to a request for a meeting to consider removal of a director
and accompanied by a form of the communication and request that they
wish to transmit, the Directors shall, within five business days after
receipt of such application, inform such applicants as to the approximate
cost of mailing to the stockholders of record the proposed communication
and form of request. Upon the written request of such applicants,
accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, as determined by the Directors, the
Directors shall, with reasonable promptness, mail such material to all
stockholders of record at their addresses as recorded on the books of the
Corporation. Notwithstanding the foregoing, the Directors may refuse to
mail such material on the basis and in accordance with the procedures for
refusing to mail such material set forth in the last two paragraphs of
Section 16 (c) of the Investment Company Act of 1940, or any substitute
or replacement provision therefor.
SECTION 4. Notice of Meetings of Stockholders. Not less than ten
----------------------------------
days' and not more than ninety days' written or printed notice of every
meeting of stockholders, stating the time and place thereof (and the
general nature of the business proposed to be transacted at any special or
extraordinary meeting), shall be given to each stockholder entitled to vote
thereat and each other stockholder entitled to notice of the meeting by
leaving the same with him or at his residence or usual place of business
or by mailing it, postage prepaid, and addressed to him or at his address
as it appears upon the books of the Corporation.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by
proxy or to any stockholder who, in writing executed and filed with
records of the meeting, either before or after the holding thereof, waives
such notice.
<PAGE>
SECTION 5. Closing of Transfer Books and Record Dates. The Board
of Directors may fix the time, not exceeding twenty days preceding the
date of any meeting of stockholders, any vote at a meeting, any dividend
payment date or any date for the allotment of rights, during which the
books of the Corporation shall be closed against transfers of stock. If
such books are closed for the purpose of determining stockholders entitled
to notice of or to vote at a meeting of stockholders, such books shall be
closed for at least ten days immediately preceding such meeting. In lieu of
providing for the closing of the books against transfers of stock as
aforesaid, the Board of Directors may fix, in advance, a date, not
exceeding sixty days and not less than ten days preceding the date of any
meeting of stockholders, and not exceeding sixty days preceding any
dividend payment date or any date for the allotment of rights, as a record
date for the determination of the stockholders entitled to notice of or to
vote at such meeting, or entitled to receive such dividends or rights, as
the case may be; and only stockholders of record on such date shall be
entitled to notice of and to vote at such meeting or to receive such
dividends or rights, as the case may be.
SECTION 6. Quorum, Adjournment of Meetings. The presence in
person or by proxy of the holders of record of a majority of the votes
entitled to be cast shall constitute a quorum at all meetings of the
stockholders. If at any meeting of the stockholders there shall be less
than a quorum present, the stockholders present at such meeting may,
without further notice, adjourn the same from time to time until a quorum
shall attend, but no business shall be transacted at any such adjourned
meeting except such as might have been lawfully transacted had the
meeting not been adjourned.
SECTION 7. Voting and Inspectors. At all meetings of stockholders
every stockholder of record entitled to vote shall be entitled to one vote
for each dollar of net asset value per share standing in the stockholder's
name on the books of the Corporation (and such stockholders of record
holding fractional shares, if any, shall have proportionate voting rights).
All elections shall be had and all questions decided by a majority of
the votes cast at a duly constituted meeting, except as otherwise provided
in the Articles of Incorporation or in these Bylaws or by specific
statutory provision superseding the restrictions and limitations contained
in the Articles of Incorporation or in these Bylaws.
<PAGE>
At any election of Directors, the Board of Directors prior thereto
may, or if they have not so acted, the Chairman of the meeting may, and
upon the request of the holders of ten percent (10%) of the votes entitled
to be cast at such election shall, appoint at least one inspector of election
who shall first subscribe an oath or affirmation to execute faithfully the
duties of inspector at such election with strict impartiality and according
to the best of their ability, and shall after the election make a certificate
of the result of the vote taken. No candidate for the office of Director
shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken
upon any election or matter, and such vote shall be taken upon the request
of the holders of ten percent (10%) of the votes entitled to be cast on such
election or such matter.
SECTION 8. Conduct of Stockholders' Meetings. The meetings of the
---------------------------------
stockholders shall be presided over by the President or, if he shall not be
present, by a Vice President or, if neither the President nor any Vice
President is present, by a chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as Secretary of such
meeting or, if he is not present, an Assistant Secretary shall so act; if
neither the Secretary nor an Assistant Secretary is present, then the
meeting shall elect its Secretary.
SECTION 9. Concerning Validity of Proxies, Ballots, Etc. At every
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meeting of the stockholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the secretary
of the meeting, who shall decide all questions touching the qualification
of voters, the validity of the proxies, and the acceptance or rejection of
votes, unless inspectors of election shall have been appointed as provided
in Section 7, in which event such inspectors of election shall decide all
such questions.
SECTION 10. Consents. Whenever stockholders are required or
--------
permitted to take any action by vote, such action may be taken without a
meeting if the following are filed with the records of stockholders
meetings: (a) an unanimous written consent which sets forth the action
and is signed by each stockholder entitled to vote on the matter, and (b) a
written waiver of any right to dissent signed by each stockholder entitled
to notice of the meeting but not entitled to vote at it.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number, Vacancies and Tenure. The Directors may, at
----------------------------
any time when the stockholders are not assembled in meeting, establish,
increase or decrease the number of seats on the Board of Directors by
majority vote of the entire Board of Directors; provided, that the number
of Directors shall never be less than three (3) nor more than fifteen (15).
The number of Directors may not be decreased so as to affect the term of
any incumbent Director. Except as hereinafter provided, (i) if the number
of Directors is increased, the additional Directors to fill the vacancies
thus created may be elected by majority vote of the entire Board of
Directors, and (ii) any vacancy occurring for any other cause may be filled
by a majority of the remaining Directors, even if such majority is less
than a quorum. No vacancy may be filled for any cause whatsoever unless,
immediately after the filling of such vacancy, at least two-thirds of the
entire Board of Directors shall have been elected by the stockholders of
the Corporation. A Director shall hold office until the next annual meeting
of stockholders and until his successor is elected and qualified, or until
such Director's earlier death, resignation, retirement or removal;
provided, however, that if a Director was not elected to office by a vote of
stockholders, the term of such Director shall, in any event, end as of the
date of the next annual meeting of stockholders which is required to be
held pursuant to Article I, Section 1 of these Bylaws following such
Director's election to office. Such a Director may be a candidate for
election to office at such annual meeting and, if elected at such meeting,
shall serve for the indefinite term specified above.
SECTION 2. Mandatory Retirement of Directors. A Director shall
---------------------------------
retire from the Board of Directors and cease being a Director at the close
of business on the last day of the calendar year in which the Director
attains age seventy-two (72), except that any person who was a Director
on July 1, 1994, and on that date was at least sixty-nine (69) years of age
shall continue to serve as a director at the discretion of the Nominating
Committee of the Board of Directors.
SECTION 3. Removal. At any meeting of stockholders, duly
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called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from
<PAGE>
office and may elect a successor or successors to fill any resulting vacancies
for the unexpired terms of removed directors.
SECTION 4. Place of Meeting. The Directors may hold their
----------------
meetings, have one or more offices, and keep the books of the Corporation
outside the State of Maryland, at any office or offices of the Corporation
or at any other place as they may from time to time by resolution
determine, or in the case of meetings, as they may from time to time by
resolution determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
SECTION 5. Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held at such time and on such notice, if any, as the
Directors may from time to time determine.
The annual meeting of the Board of Directors shall be held as soon as
practicable after the annual meeting of the stockholders for the election
of Directors.
SECTION 6. Special Meetings. Special meetings of the Board of
----------------
Directors may be held from time to time upon call of the President or two
or more of the Directors, by oral or telegraphic or written notice duly
served on or sent or mailed to each Director not less than one day before
such meeting. No notice need be given to any Director who attends in
person or to any Director who, in writing executed and filed with the
records of the meeting either before or after the holding thereof, waives
such notice. Such notice or waiver of notice need not state the purpose or
purposes of such meeting.
SECTION 7. Quorum. One-third of the Directors then in office shall
constitute a quorum for the transaction of business, provided that a
quorum shall in no case be less than two Directors. If at any meeting of
the Board there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum shall
have been obtained. The act of the majority of the Directors present at
any meeting at which there is a quorum shall be the act of the Directors,
except as may be otherwise specifically provided by statute, by the
Articles of Incorporation or by these Bylaws.
<PAGE>
SECTION 8. Executive Committee. The Board of Directors may, by
-------------------
the affirmative vote of a majority of the entire Board, elect from the
Directors an Executive Committee to consist of such number of Directors,
but not less than two, as the Board may from time to time determine. The
Board of Directors by such affirmative vote shall have power at any time
to change the members of such Committee and may fill vacancies in the
Committee by election from the Directors. When the Board of Directors is
not in session, the Executive Committee shall have and may exercise any
or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation (including the power to authorize
the seal of the Corporation to be affixed to all papers which may require
it) except as provided by law and except the power to increase or decrease
the size of, or fill vacancies on, the Board, to remove or appoint executive
officers or to dissolve or change the permanent membership of the
Executive Committee, and the power to make or amend
the Bylaws of the Corporation. The Executive Committee may fix its own
rules of procedure, and may meet, when and as provided by such rules or by
resolution of the Board of Directors, but in every case the presence of a
majority shall be necessary to constitute a quorum. In the absence of any
member of the Executive Committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member
of the Board of Directors to act in the place of such absent member.
SECTION 9. Other Committees. The Board of Directors, by the
----------------
affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members,
but not less than two, and shall have and may exercise such powers as the
Board may determine in the resolution appointing them. A majority of all
members of any such committee may determine its action, and fix the
time and place of its meetings, unless the Board of Directors shall
otherwise provide. The Board of Directors shall have power at any time to
change the members and powers of any such committee, to fill vacancies,
and to discharge any such committee.
SECTION 10. Informal Action by Directors and Committees. Any
-------------------------------------------
action required or permitted to be taken at any meeting of the Board of
Directors or any committee thereof may be taken without a meeting, if a
written consent to such action is signed by all members of the Board, or
of such committee, as the case may be, and if such consent is filed with
the minutes of proceedings of the Board, or of such committee, as the case
may be.
<PAGE>
SECTION 11. Compensation of Directors. No Director shall receive
-------------------------
any stated salary or fees from the Corporation for his services as such
Director if such Director is, otherwise than by reason of being such
Director, affiliated (as such term is defined by the Investment Company
Act of 1940) with the Corporation or with any investment adviser or
principal underwriter of the Corporation. Except as provided in the
preceding sentence, Directors shall be entitled to receive such
compensation from the Corporation for their services as may from time to
time be voted by the Board of Directors.
ARTICLE III
-----------
OFFICERS
--------
SECTION 1. Executive Officers. The executive officers of the
------------------
Corporation shall be chosen by the Board of Directors as soon as may be
practicable after the annual meeting of the stockholders. If an annual
meeting is not required to be held, such officers shall be chosen by the
Board of Directors as soon as may be practicable after the close of the
fiscal year of the Corporation, or at any other time as the Chairman shall
determine. These shall include a President, one or more Vice Presidents
(the number thereof to be determined by the Board of Directors), a
Secretary and a Treasurer. The Board of Directors or the Executive
Committee may also in its discretion appoint a Chairman of the Board of
Directors, Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and perform
such duties as the Board or the Executive Committee may determine. The
Board of Directors may fill any vacancy which may occur in any office.
Two or more offices, except those of President and Vice President, may be
held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity, if such instrument is
required by law or these Bylaws to be executed, acknowledged or verified
by two or more officers.
SECTION 2. Term of Office. The term of office of all officers shall
--------------
be one year and until their respective successors are chosen and qualify,
subject, however, to the provision for removal contained in the Articles of
Incorporation. Any officer may be removed from office at any time with
or without cause by the vote of a majority of the entire Board of
Directors, if the Board of Directors in its judgment finds that the best
interests of the Corporation are served thereby.
<PAGE>
SECTION 3. Powers and Duties. The officers of the Corporation shall
-----------------
have such powers and duties as generally pertain to their respective
offices, as well as such powers and duties as may from time to time be
conferred by the Board of Directors or the Executive Committee.
ARTICLE IV
----------
CAPITAL STOCK
-------------
SECTION 1. Certificate of Shares. A stockholder of Class A Shares of
---------------------
any series shall upon request be entitled to a certificate for full shares of
stock in such form not inconsistent with law as the Board of Directors
shall determine. No certificates will be issued to evidence ownership of
any other Class of shares.
SECTION 2. Transfer of Shares. Shares of the Corporation shall be
------------------
transferable on the books of the Corporation by the holder thereof in
person or by his duly authorized attorney or legal representative, upon
surrender and cancellation of certificates for the same number of shares,
duly endorsed or accompanied by proper instruments of assignment and
transfer, with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require.
SECTION 3. Stock Ledgers. The stock ledgers of the Corporation,
-------------
containing the names and addresses of the stockholders and the number of
shares held by them respectively, shall be kept at the principal offices of
the Corporation or, if the Corporation employs a transfer agent, at the
offices of the Transfer Agent of the Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Board of
--------------------------------------
Directors or the Executive Committee may determine the conditions upon
which a new certificate of stock of the Corporation of any class may be
issued in place of a certificate which is alleged to have been lost, stolen
or destroyed; and may, in their discretion, require the owner of such
certificate or his legal representative to give bond, with sufficient surety
to the Corporation and each Transfer Agent, if any, to indemnify it and
each Transfer Agent against any and all loss or claims which may arise by
reason of the issue of a new certificate in the place of the one so lost,
stolen or destroyed.
<PAGE>
ARTICLE V
---------
CORPORATE SEAL
--------------
The Board of Directors shall provide a suitable corporate seal, in
such form and bearing such inscriptions as it may determine.
ARTICLE VI
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed by the Board of
Directors.
ARTICLE VII
-----------
INDEMNIFICATION
---------------
Each director and officer (and his heirs, executors and
administrators) shall be indemnified by the Corporation to the extent set
forth in the Articles of Incorporation.
ARTICLE VIII
------------
AMENDMENT OF BYLAWS
-------------------
The Bylaws of the Corporation may be altered, amended, added to or
repealed by the stockholders or by majority vote of the entire Board of
Directors; but any such alteration, amendment, addition or repeal of the
Bylaws by action of the Board of Directors may be altered or repealed by
the stockholders.
EXHIBIT (5) (A)
VENTURE MUNI (+) PLUS, INC.
NEW ADVISORY AGREEMENT
April 15, 1993
Venture Advisers, L.P.
124 East Marcy Street
Santa Fe, NM 87501
Dear Sirs:
We herewith confirm our agreement with you as follows:
1. We desire to employ the capital of Venture Muni (+) Plus, Inc. (the
"Company") by investing and reinvesting the same in securit-ies 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. 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 compensa-tion of all such persons.
We understand that, during the con-tinuance of this agreement, officers of
your firm will, if elected, serve as directors of our corporation and as its
prin-cipal officers.
3. You are to have complete and exclusive authority to develop and
handle for us any business of the type above men-tioned 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
portfo-lio 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. 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. 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 verifica-tions related thereto, and interfacing with our
auditors; (v) verifica-tion of our security ledger and preparation and
main-tenance of other corporate books and records; (vi) brokerage fees
and commissions; (vii) stockholders' and Directors' meetings; (viii)
corporate reports and proxy materials, including their prepara-tion,
printing and distribution; (ix) fees of disinter-ested Directors; (x) taxes
and interest expenses; (xi) reports to government authorities including all
expenses and costs relating to such reports and
<PAGE>
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 reinvest-ment 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. 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:
VALUE OF AVERAGE DAILY NET ASSETS
MONTHLY RATE OF THE FUND DURING THE MONTH
- ------------ ----------------------------
1/12 of .750% of ............................ First $250 Million
1/12 of .650% of ............................ Next $250 Million
1/12 of .550% of ............................ In Excess of $500 Million
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 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. (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 re-search 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
discre-tion (as defined in Section 3(a)(35) of the 1934 Act) and to cause
us to pay a commission for effecting a securities transac-tion 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 re-quired 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 demon-strat-ing 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 com-parable 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
Direc-tors 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 perform-ing 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 transac-tions, 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.
<PAGE>
8. 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
"Venture" in our corporate title. If for any reason you no longer act as our
investment adviser, we shall remove the name "Venture" from our
corporate title upon demand made by you.
9. All of our expenses shall be paid by us except for those you
specifically agree to assume under this Agreement. If the total expense
payable by us for any fiscal year (inclusive of all fees payable under this
agreement but exclusive of interest, taxes, brokerage fees and payments
under any Rule 12b-1 distribu-tion plan) shall exceed the most restrictive
applicable expense limitation prescribed by any statute or regulatory
authority of any jurisdiction in which our shares are qualified for offer
and sale, you will pay or refund to us the amount by which such expenses
exceed the amount so computed.
10. 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) April 15, 1993,
or (ii) the date this Agreement has been approved as required by the
Invest-ment Company Act of 1940. As of such effective date, this
Agreement shall supersede all prior investment advisory agree-ments
between the parties. This Agree-ment may be terminated at any time,
without the payment of any penal-ty, 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).
11. As of the date of this Agreement, the Company has only one
series of shares ("Fund"). 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 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,
VENTURE MUNI (+) PLUS, INC.
By: __________________________________
Chairman
Its: _________________________________
Accepted as of the day and year first above written.
VENTURE ADVISERS, L.P.
By: VENTURE ADVISERS, INC., General Partner
By: _________________________________
Its: Senior Vice President
_________________________________
EXHIBIT (6)
VENTURE MUNI (+) PLUS, INC.
DISTRIBUTING AGREEMENT
AGREEMENT dated as of April 15, 1993 between Venture Muni (+)
Plus, Inc., a Maryland corporation, hereinafter called the "Company", and
VENTURE ADVISERS, L.P., a Colorado limited partnership, hereinafter
called the "Distributor".
W I T N E S S E T H:
1. Appointment of Fund Distributor. The Company hereby appoints the
-------------------------------
Distributor as the exclusive distributor to sell as principal and not as
agent shares of capital stock of the Company during the term of this
Agreement.
2. Sales of Capital Stock. The Company agrees to sell and deliver to
----------------------
the Distributor, upon the terms set forth herein, such fully-paid and
non-assessable shares of capital stock of the Company ("Shares") then
effectively registered for continuous offering under the Securities Act of
1933 (the "Act") as Distributor shall order from the Company, but only to
the extent that the Distributor shall have received purchase orders
therefor. All orders from the Distributor shall be subject to confirmation
by the Company, and the Company authorizes the Distributor to reject any
purchase order.
The Distributor as principal may sell and distribute any Shares so
purchased, through dealers or otherwise, in such manner not inconsistent
with law and all applicable rules and regulations, including those of any
applicable self-regulatory organizations, and the provisions of this
Agreement, as the Distributor may from time to time determine. The
Distributor agrees to use its best efforts to effect sales of Shares, but
does not undertake to sell any specific number of Shares thereof.
The Distributor may in its discretion sell the Shares to such
registered and qualified retail dealers as it may select. In making
agreements with its dealers or others for sale of the Shares, the
Distributor shall act only as principal and in no sense as agent for the
Company.
3. Sales by Distributor - Offering Price. All Shares, whether
-------------------------------------
purchased from the Company or otherwise, shall be offered for sale and
sold by the Distributor at a price per share (hereinafter called the
"Offering Price") in accordance with the provisions of the current
prospectus applicable to such offer and sale. Any sales charge and any
reduction or elimination thereof shall be determined by the Distributor in
a manner not inconsistent with law and all applicable rules and
regulations and the provisions of this Agreement, and the Company agrees
to amend its current prospectus to the extent necessary from time to time
to reflect any such determination. The Company will cause such net asset
value to be determined with such frequency and as of such times and will
cause the Offering Price to be effective for such periods as are set forth
in the current prospectus of the Company. The Company will cause such
determinations to be furnished to the Distributor as often as they are
made and shall make available to the Distributor upon request the
computations underlying any such determination.
Anything to the contrary herein notwithstanding, the Company may
suspend the Offering Price currently in effect and may decline to accept
or confirm any orders for, or to make any sales of, any Shares to the
Distributor under this Agreement until such time as it shall deem it
advisable to accept and confirm such orders and to make such sales.
During any period during which the Offering Price currently in effect shall
be suspended or during which the Company shall decline to accept or
confirm any such orders or make any such sales, the Company shall be
under no obligation to confirm or accept any such orders or make any such
sales at any price.
<PAGE>
4. Payment. At or prior to the time of delivery by the Company to, or
-------
on the order of the Distributor of any Shares, the Distributor will pay or
cause to be paid to the Company or to its order an amount equal to the
Offering Price of such shares at which such order had been confirmed, less
the sales charge, if any, included thereon as aforesaid. The Distributor
agrees to cause to be remitted to the Company for the benefit of the
Company or to its order all such funds promptly after receipt thereof.
5. Delivery of Share Certificates. Delivery of certificates for Shares
------------------------------
shall be made as promptly as practicable after receipt by the Company of
the purchase price therefor and written request by the Distributor for
such certificates. Such certificates shall be registered in such names and
amounts as the Distributor may specify to the Company in writing.
6. Compensation of Distributor. Any sales charges and any
---------------------------
compensation to be paid the Distributor out of any Distribution Plan
described in 7(e) below shall constitute the entire compensation of the
Distributor. Out of such sales charge the Distributor may allow
concessions to dealers as the Distributor shall from time to time
determine.
7. Allocation of Expenses. The Company shall pay all expenses
----------------------
connected with (i) the organization of the Company or any Fund thereof and
(ii) the offering of Shares, including without limitation all expenses of:
(a) Registering Shares for offer or sale under the federal
securities laws, except for prospectus printing costs as set forth below;
and
(b) Reports required by and under the federal securities laws;
and
(c) Issuance of Shares, including cost of stock certificates,
issue taxes (if any) and fees of legal counsel and of the transfer agent;
and
(d) Registering or qualifying Shares for offer or sale under the
securities laws of any state or other jurisdiction in which the Distributor
may arrange for the sale of the Shares; and
(e) Any Distribution Plan adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act")
providing for any payments by the Company or any Fund thereof.
The Distributor will pay, or promptly reimburse the Company for, all
expenses in connection with:
(a) Preparing, printing and distributing advertising and sales
literature for use in offering the Shares to the public, including the cost
of printing copies of the prospectus and the additional cost of printing
reports to stockholders other than copies thereof required for distribution
to stockholders or for filing with any securities authorities; and
(b) The registration or qualification of the Distributor as a
dealer or broker under state or federal laws.
Transfer taxes, if any, which may be payable in connection with the
issue and delivery of certificates in a name or names other than the name
of the Distributor will not be borne by the Company and the Distributor
agrees to indemnify and hold the Company harmless against any such
transfer taxes. Any other taxes in connection with the sale of Shares
pursuant to this Agreement will be borne by the Company.
<PAGE>
8. Company to Furnish Information. The Company shall furnish the
------------------------------
Distributor for use in connection with the sale of the Shares such
information with respect to the Company and the Shares as the Distributor
may reasonably request, including copies of documents filed with or
furnished to any federal or state securities authorities or sent to its
stockholders.
9. Representations and Agreements with Respect to Registration Statement
---------------------------------------------------------------------
and Prospectus.
---------------
(a) As used in this Agreement, the term "registration
statement" shall include any registration statement with respect to the
Shares which is effective under the Act including any amendment thereto,
and the term "prospectus" shall include any prospectus and statement of
additional information filed as part of such registration statement.
(b) The Company represents that the registration statement
and prospectus will conform in all material respects to the Act and the
rules and regulations thereunder and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided that this representation will not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Distributor
expressly for use in the registration statement or prospectus.
(c) The Company agrees to advise the Distributor promptly:
(i) of any request of the Securities and Exchange
Commission for amendments to the registration statement or prospectus
or for additional information;
(ii) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness of
the registration statement or prospectus or the initiation of any
proceedings for that purpose;
(iii) of the happening of any event which makes untrue
any statement, or which requires the making of any change, in the
registration statement or prospectus in order to make the statements
therein not misleading; and
(iv) of all actions of the Securities and Exchange
Commission with respect to any amendments to the registration
statement or prospectus which may from time to time be filed with the
Securities and Exchange Commission under the Act.
10. Indemnification. The Company agrees to indemnify, defend and
---------------
hold the Distributor, its officers and directors and any person who
controls the Distributor within the meaning of Section 15 of the Act, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which the Distributor, its officers, directors or any such
controlling person may incur under the Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a material
fact contained in the registration statement or prospectus relating to the
Company or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary to make
the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any
such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information
furnished in writing by the Distributor to the Company for use in the
registration statement or prospectus relating to the Company; provided,
however, that this indemnity agreement, to the extent that it might
require indemnity for liability arising under the Act of any person who is
also an officer or director of the Company or who controls the Company
within the meaning of Section 15 of the Act, shall not inure to the benefit
of such officer, director or controlling person unless a court of
<PAGE>
competent jurisdiction shall determine, or it shall have been determined by
controlling precedent, that such result would not be against public policy
as expressed in the Act; and further provided, that in no event shall
anything contained herein be so construed as to protect the Distributor
against any liability to the Company or to its security holders to which
the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of its
duties, or by reason of its reckless disregard of its obligations under this
Agreement. The Company's agreement to indemnify the Distributor, its
officers and directors and any such controlling person as aforesaid is
expressly conditioned upon the Company being promptly notified of any
action brought against the Distributor, its officers or directors, or any
such controlling person, such notification to be given by letter or
telegram addressed to the Company at its principal business office. The
Company agrees to promptly notify the Distributor of the commencement
of any litigation or proceedings against it or any of its officers or
directors in connection with the issue and sale of any Shares.
The Distributor agrees to indemnify, defend and hold the Company,
its officers and directors and any person who controls the Company, if
any, within the meaning of Section 15 of the Act free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
the Company, its directors or officers or any such controlling person may
incur under the Act or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Company, its
directors or officers or such controlling person resulting from such
claims or demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished in writing
by the Distributor to the Company for use in the Company's registration
statement or prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such information not
misleading or shall arise out of or be based on any false or misleading or
allegedly false or misleading sales literature relating to the Company and
prepared by the Distributor. The Distributor's agreement to indemnify the
Company, its directors and officers, and any such controlling person as
aforesaid is expressly conditioned upon the Distributor being promptly
notified of any action brought against the Company, its officers or
directors or any such controlling person, such notification being given to
the Distributor at its principal business office.
11. Compliance with Securities Laws. The Company represents that
-------------------------------
it is registered as an open-end diversified management investment
company under the Investment Company Act of 1940, and agrees that it
will comply with all of the provisions of such Act and of the rules and
regulations thereunder. The Company and the Distributor each agree to
comply with all of the applicable terms and provisions of the Investment
Company Act of 1940, the Securities Act of 1933 and, subject to the
following provisions of this paragraph 11, all applicable state securities
("Blue Sky") laws. The Distributor agrees to comply with all of the
applicable terms and provisions of the Securities Exchange Act of 1934.
The Company will cooperate with the Distributor (to the extent of
supplying all necessary documents, exhibits and information), and will
execute and permit to be filed with the proper public bodies, such
applications (including amendments and renewals thereof), instruments,
papers and exhibits as may be appropriate to enable the Shares to be
offered for sale under the laws of such states as the Distributor shall
reasonably determine, and will cooperate with the Distributor in the
presentation of said applications (including amendments and renewals
thereof), to the end that Shares may be qualified in such states under the
respective Blue Sky laws thereof; provided that the Company shall not be
required to amend its Articles of Incorporation or By-Laws to comply with
the laws of any state, to maintain an office in any state, to change the
terms of the offering of Shares in any state from the terms set forth in
its registration statement and prospectus, to qualify as a foreign
corporation in any state or to consent to service of process in any state
other than with respect to claims arising out of Shares. The Distributor
will furnish to the Company any information known to the Distributor
which is necessary or desirable in the preparation of the Company's
registration statement and prospectus and any amendments or
supplements thereto.
<PAGE>
12. Effect on Distribution Plan or Distribution Plan and Agreement.
--------------------------------------------------------------
Any Distribution Plan or Distribution Plan and Agreement in effect on the
effective date of this Agreement which has been adopted in accordance
with Rule 12b-1 under the 1940 Act shall remain in effect and any
reference therein to a Distributing Agreement or other underwriting
agreement between the parties as of any date prior thereto shall be
deemed to be a reference to this Agreement.
13. Effective Period; Termination. This Agreement shall become
-----------------------------
effective for an initial period of not more than two years from the date of
its execution, and shall continue in full force and effect continuously
thereafter provided that such continuance is approved at least annually as
required by the 1940 Act. This Agreement shall automatically terminate
in the event of its assignment (as defined by the 1940 Act). In addition,
this Agreement may be terminated at any time, without penalty, by either
party on not more than sixty days' nor less than thirty days' written notice
delivered or mailed by registered mail, postage prepaid, to the other party.
IN WITNESS WHEREOF, Venture Muni (+) Plus, Inc. and Venture
Advisers, L.P. have caused this instrument to be signed in several
counterparts, each of which shall be an original and which together shall
constitute one and the same Agreement, by an officer or officers
thereunto duly authorized, as of the day and year first above written.
VENTURE MUNI (+) PLUS, INC.
By: -------------------------------
Its: Chairman
-----------------------------
VENTURE ADVISERS, L.P.
By: -------------------------------
Its: Senior Vice President
-----------------------------
EXHIBIT 9
AGREEMENT REGARDING JOINT INSURED BOND
AGREEMENT made as of the 12th day of December, 1994, among New
York Venture Fund, Inc. ("NYVF"), Venture Income (+) Plus, Inc. ("VIP"),
Venture Muni (+) Plus, Inc. ("VMP"), Retirement Planning Funds of America,
Inc. ("RPFA"), Selected American Shares, Inc. ("SAS"), Selected Special
Shares, Inc. ("SSS"), Selected Capital Preservation Trust ("SCPT") and
Venture Worldwide Series, Inc. (VWS). NYVF, VIP, VMP, RPFA and VWS are
sometimes herein referred to collectively as the "Venture Funds" and SAS,
SSS and SCPT are sometimes herein referred to collectively as the
"Selected Funds". The Venture Funds and the Selected Funds are
investment companies registered under the Investment Company Act of
1940 ("Act") and are sometimes herein referred to individually as an
"Insured" and collectively as the "Insureds."
WITNESSETH:
WHEREAS, the Venture Funds and the Selected Funds are insured
under an Investment Company Blanket Bond No. 8700611101B issued by
ICI Mutual Insurance Company (the "Bond") in order to comply with Rule
17g-1 under the Act with respect to the bonding of officers and employees
of registered investment companies; and
WHEREAS, VWS would like to participate under such Bond in order to
likewise comply with Rule 17g-1; and
WHEREAS, the Boards of Directors and Trustees of each of the
Venture Funds, the Selected Funds and VWS have adopted resolutions
authorizing joint fidelity bond coverage among all such Funds under the
Bond and such Funds now desire to establish their respective rights under
the Bond.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. In the event that any recovery is received under the Bond as a
result of a loss sustained by more than one Insured under the Bond, each
Insured sustaining such loss shall receive an equitable and proportionate
share of the recovery, but each Insured's recovery shall at least equal the
amount that such Insured would have received had it provided and
maintained a single insured bond with the minimum coverage required by
paragraph (d) (1) of said Rule 17g-1. Any Insured which, under the terms
of the Bond, is authorized to make, adjust, receive and enforce payment of
claims
<PAGE>
thereunder for any other Insured (a) agrees that it shall promptly
make, adjust, receive and enforce payment of the other Insured's claims
under the Bond upon notification by the other Insured that such other
Insured has a claim under the Bond, and (b) agrees that it shall remit any
such payments in a manner that assures that each Insured shall receive its
proper share of any joint payment under the Bond as set forth in this
Agreement.
2. This Agreement shall be binding upon and shall inure to the
benefit of any successor of an Insured or any entity into which any of the
Insured may be merged or with which any of the Insureds may be
consolidated.
3. Each Insured shall pay that proportion of each premium for the
Bond which is approved by the directors or trustees of such Insured. In
the event that any additional person or entity is named as an Insured under
the Bond and becomes an Insured under this Agreement, the portion of
premiums paid by each Insured shall be reapportioned to take into account
such new Insured.
4. If the Bond limits are increased or any other modifications are
made in the Bond at the direction of the Board of Directors or Board of
Trustees of the Insureds which require the payment of an additional
premium at any time other than as of the regular premium date of the
Bond, such increase shall be shared proportionately by the Insureds in the
manner described above.
5. Any investment company registered under the Act for which
Selected/Venture Advisers, L.P., or any company controlling, controlled by
or with which Selected/Venture Advisers, L.P. is under common control,
shall act as manager, investment adviser or principal underwriter, may
hereafter join in this Agreement and be a party hereto upon:
(i) being listed as a named Insured under the Bond, and
(ii) executing and delivering a letter to the other named Insureds
under the Bond agreeing to be a party to this Agreement.
6. This Agreement shall take effect on February 1, 1995, and shall
supersede and replace (a) the Agreement of February 1, 1994.
7. This Agreement may be executed in one or more counterparts each
of which shall be deemed to be an original and which collectively shall be
deemed to be one document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers, thereunto duly authorized, all
as of the day and year first above written.
<PAGE>
<TABLE>
<CAPTION>
NEW YORK VENTURE FUND, INC. SELECTED AMERICAN SHARES, INC.
<C> <C>
By________________________________________ By____________________________
Martin H. Proyect, Chairman Martin H. Proyect, Chief
Executive Officer
Attest: Attest:
By________________________________________ By__________________________
Raymond O. Padilla, Secretary Louis R. Proyect, Secretary
VENTURE INCOME (+) PLUS, INC. SELECTED SPECIAL SHARES, INC.
By________________________________________ By____________________________
Martin H. Proyect, Chairman Martin H. Proyect, Chief
Executive Officer
Attest: Attest:
By________________________________________ By____________________________
Raymond O. Padilla, Secretary Louis R. Proyect, Secretary
VENTURE MUNI (+) PLUS, INC. SELECTED CAPITAL PRESERVATION TRUST
By________________________________________ By___________________________
Martin H. Proyect, Chairman Martin H. Proyect, Chief
Executive Officer
Attest: Attest:
By________________________________________ By____________________________
Raymond O. Padilla, Secretary Louis R. Proyect, Secretary
RETIREMENT PLANNING FUNDS VENTURE WORLDWIDE SERIES,
OF AMERICA, INC. INC.
By________________________________________ By____________________________
Martin H. Proyect, Chairman Martin H. Proyect, Chairman
Attest:
By________________________________________ By____________________________
Raymond O. Padilla, Secretary Raymond O. Padilla,Secretar
</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement,
(Form N-1A), and related Statement of Additional Information of Davis
Tax-Free High Income Fund, Inc. and to the inclusion of our report dated
November 3, 1995 to the Shareholders and Board of Directors of Davis Tax-Free
High Income Fund, Inc.
/s/ Tait, Weller & Baker
------------------------
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 23, 1996
Exhibit (15) (a)
VENTURE FUNDS
MASTER RULE 12b-1 DISTRIBUTION PLAN
FOR CLASS A SHARES
The Plan:
- --------
1. Purpose. The Company shall finance the distribution of its Class
A shares pursuant to Rule 12b-1 under the Investment Company Act of
1940 ("Act") according to the terms of this Distribution Plan (the "Plan").
2. Fees. Amounts, not exceeding in the aggregate a maximum annual
amount equal to 0.25% of the averages of the daily net asset values of the
Class A shares of the Company during each fiscal year of the Company,
may be paid quarterly by the Company to the Distributor out of the assets
attributable to such shares at any time after the effective date of the
Plan to: (i) reimburse the Distributor for fees paid to its salespersons and
to other firms which offer and sell the Company's shares at such intervals
as the Distributor may determine, for the sale of the Company's shares and
the continuing servicing of shareholders of the Company towards
augmentation of Company shares in accounts of shareholders of the
Company and (ii) reimburse the Distributor its other distribution
expenses, after application of the Distributor's portion of sales charges
incurred in connection with the distribution of Company shares, excluding
overhead expense and including expenses of promotion, sales seminars,
wholesaling, advertising, and sales literature. For this purpose sales
literature shall not include reports sent to shareholders regulatory bodies
which are paid for by the Company.
To the extent that any investment advisory fees paid by the
Company may be deemed to be indirectly financing any activity which is
primarily intended to result in the sale of shares of the Company within
the meaning of Rule 12b-1, the payments of such fees are authorized under
this Plan.
3. Required Approvals and Term. Subject to paragraph 8, the Plan
shall not take effect until it has been approved by the vote of at least a
majority (as defined in the Act) of the outstanding Class A shares of the
Company. In addition, the Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority
of both (i) the Board of Directors of the Company and (ii) those directors
of the Company who are not "interested persons" of the Company as
defined in the Act and who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it ("Independent
Directors"), cast in person at a meeting called or the purpose of voting on
the Plan or such Agreements. Unless sooner terminated pursuant to the
terms hereof, the Plan shall continue in effect for a period of one year
from its effective date, and thereafter shall continue in effect so long as
such continuance is specifically approved at least annually in the manner
provided for by Rule 12b-1 under the Act.
4. Periodic Reports. Any person authorized to direct the disposition
of monies paid or payable by the Company pursuant to the Plan or any
related agreement shall provide to the Company's Board of Directors, and
the Board of Directors shall review at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures
were made.
5. Termination. Subject to paragraph 8, the Plan may be terminated
at any time by a vote of a majority of the Independent Directors, or by
vote of a majority vote of the outstanding Class A shares.
6. Related Agreements. Any agreement related to the Plan shall be
in writing, and shall provide:
(i) That such agreement may be terminated at any time, without
payment of penalty, by vote of a majority of the Independent Directors or
by a majority vote of the Class A shares on not more than 60 days written
notice to any other party to the agreement; and
<PAGE>
(ii) That such agreement shall terminate automatically in the event
of its assignment.
7. Amendments. The Plan may not be amended to increase
materially the amount of distribution expenses provided for in paragraph 2
unless such amendment is approved in the manner provided in paragraph 3,
and no material amendment to the Plan shall be made unless approved by
the Board of Directors and the Independent Directors.
8. Special Procedures For Series Company. If the Company is or
becomes a series company (as defined in Rule 18f-2 under the Act), then
the Plan shall not take effect as to the Class A shares of any series and no
amendment may be effected to increase materially the amount of
distribution expenses as to the Class A shares of any series until it has
been approved as to the Class A shares of such series by the Board of
Directors, the Independent Directors and the Class A shareholders of such
series in the manner provided in paragraph 3; and no material amendment
to the Plan in respect to such shares shall be made unless approved as to
such shares by the Board of Directors and Independent Directors. The Plan
may be terminated as to any series at any time by vote of a majority of
the Independent Directors by majority vote of the Class A shareholders of
the series.
Exhibit (15) (b)
VENTURE FUNDS
MASTER RULE 12b-1 DISTRIBUTION PLAN
FOR CLASS B SHARES
The Plan:
- --------
1. Purpose. The Company shall finance the distribution of its Class
B shares pursuant to Rule 12b-1 under the Investment Company Act of
1940 ("Act") according to the terms of this Distribution Plan (the "Plan").
2. Fees. Amounts, not exceeding in the aggregate a maximum
amount equal to the lesser of (a) .3125% of the averages of the daily net
asset values of the Company or (b) the maximum amount provided by an
applicable rule or regulation of the National Association of Securities
Dealers, Inc. during each fiscal quarter of the Company elapsed after the
inception of the Plan may be paid by the Company to the Distributor at any
time after the inception of the Plan in order: (i) to pay the Distributor
commissions in respect of shares of the Company previously sold at any
time after the inception of the Plan, all or any part of which may be or
may have been reallowed or otherwise paid to others by the Distributor in
respect of or in furtherance of sales of shares of the Company after the
inception of the Plan; and (ii) to enable the Distributor to pay or to have
paid to others who sell the Company's shares a maintenance or service
fees, at such intervals as the Distributor may determine, in respect of
that Company's shares previously sold by any such others at any time after
the inception of the Plan and remaining outstanding during the period in
respect of which such fee is or has been paid.
To the extent that any investment advisory fees paid by the Company
may be deemed to be indirectly financing any activity which is primarily
intended to result in the sale of shares of the Company within the meaning
of rule 12b-1, the payments of such fees are authorized under this Plan.
3. Required Approvals and Term. Subject to paragraph 8, the Plan
shall not take effect as to the Company until it has been approved by a
vote of at least a majority (as defined in the Act) of the outstanding Class
B shares of the Company. In addition, the Plan shall not take effect until
it has been approved, together with any related agreements, by votes of
the majority of both (i) the Board of Directors of the Company and (ii)
those directors of the Company who are not "interested persons" of the
Company as defined in the Act and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the
"Independent Directors"), cast in person at a meeting called for the
purpose of voting on the Plan or such agreements. Unless sooner
terminated pursuant to the terms hereof, the Plan shall continue in effect
for a period of one year from its effective date, and thereafter shall
continue in effect so long as such continuance is specifically approved at
least annually in the manner provided for by Rule 12b-1 under the Act.
4. Periodic Reports. Any person authorized to direct the disposition
of monies paid or payable by the Company pursuant to the Plan or any
related agreement shall provide to the Company's Board of Directors, and
the Board of Directors shall review at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures
were made.
5. Termination. Subject to paragraph 8, the Plan may be terminated
at any time by a vote of a majority of the Independent Directors, or by a
majority vote of the Company's outstanding Class B shares.
6. Related Agreements. Any agreement related to the Plan shall be
in writing, and shall provide:
(i) That such agreement may be terminated at any time, without
payment of penalty, by vote of a majority of the Independent Directors or
by a majority vote of the Company's outstanding Class B shares on not
more than 60 days written notice to any other party to the agreement; and
<PAGE>
(ii) That such agreement shall terminate automatically in the event
of its assignment.
7. Amendments. The Plan may not be amended to increase
materially the amount of distribution expenses provided for in paragraph 2
unless such amendment is approved in the manner proved in paragraph 3,
and no material amendment to the Plan shall be made unless approved by
the Board of Directors and the Independent Directors.
8. Special Procedures For Series Company. If the Company is or
becomes a series company (as defined in Rule 18f-2 under the Act), then
the Plan shall not take effect as to the Class B shares of any series and no
amendment may be effected to increase materially the amount of
distribution expenses as to the Class B shares of any series until it has
been approved as to the Class B shares of such series by the Board of
Directors, the Independent Directors and the Class B shareholders of such
series in the manner provided in paragraph 3; and no material amendment
to the Plan in respect to such shares shall be made unless approved as to
such shares by the Board of Directors and Independent Directors. The Plan
may be terminated as to any series at any time by vote of a majority of
the Independent Directors or by majority vote of the Class B shareholders
of the series.
