DAVIS HIGH INCOME FUND, INC.
DAVIS TAX-FREE HIGH INCOME FUND, INC.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD MARCH 25, 1997
Enclosed are your Proxy Statement and Proxy for the special
meetings (the "Special Meetings") of the shareholders of Davis High
Income Fund, Inc. ("Davis High Income") and Davis TaxFree High Income
Fund, Inc. ("Davis Tax-Free")(each a "Fund" or collectively, the "Funds")
to be held at the office of the Funds, 124 East Marcy Street, Santa Fe, New
Mexico on Tuesday, March 25, 1997, at 9:30 a.m. Mountain Time, for the
following purposes and to transact such other business as may properly
come before the Special Meetings or any adjournment thereof:
1. To consider approval of a sub-advisory agreement with Davis
Selected Advisers-NY, Inc., an affiliate of the Adviser (the "Proposed
Sub-Advisory Arrangement") (Item 1 in the Proxy Statement);
2. To consider the election of Christian R. Sonne, LeRoy E.
Hoffberger and Jeremy H. Biggs as Directors of the Funds. (Item 2 in the
Proxy Statement).
These proposals are described in the attached Proxy Statement,
which should be read carefully. Only shareholders of record on February
21 , 1997 will be entitled to vote at the Special Meetings.
BY ORDER OF THE BOARD OF DIRECTORS
Eileen R. Street
March 3, 1997 Secretary
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON FEBRUARY
21, 1997 ARE ENTITLED TO VOTE AT THE SPECIAL MEETINGS. WHILE WE
WOULD LIKE VERY MUCH TO HAVE EACH OF YOU AT THE SPECIAL MEETINGS,
WE REALIZE THIS MAY NOT BE POSSIBLE. HOWEVER, WHETHER OR NOT YOU
ATTEND THE SPECIAL MEETINGS, YOUR VOTE IS IMPORTANT.
TO SECURE REPRESENTATION OF THE MOST SHARES POSSIBLE AND TO SAVE
THE EXPENSE OF FURTHER MAILINGS, PLEASE MARK YOUR PREFERENCES,
SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE. YOU
MAY REVOKE YOUR PROXY AT ANY TIME BEFORE THE SPECIAL MEETINGS OR
VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETINGS
DAVIS HIGH INCOME FUND, INC.
DAVIS TAX-FREE HIGH INCOME FUND, INC.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
______________________________
PROXY STATEMENT
March 3, 1997
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Davis High Income and
Davis Tax-Free High Income (the "Board"), to be used at the Special
Meetings of the shareholders of the Funds which will be held at 124 East
Marcy Street, Santa Fe, New Mexico on Tuesday, March 25, 1997 at 9:30
a.m. Mountain Time and at any adjournment thereof, for the purposes set
forth in the accompanying Notice.
This Proxy Statement and the accompanying Proxy are first being
sent to shareholders of the Funds on or about March 3, 1997. The expenses
of preparing, printing and mailing the Notice, Proxy Statement and Proxy
and of soliciting proxies and holding the Special Meetings will be borne by
Davis Selected Advisers, not the Funds.
Proxies are solicited by mail. Additional solicitations may be made
by telephone, telegraph or personal contact by officers of the Selected
Funds and by officers and employees of Davis Selected Advisers, (the
"Manager") or its general partner. In addition, Shareholders
Communications Corporation or any agent appointed by the Adviser may
assist in soliciting proxies for the meeting and will be paid a fee for such
assistance plus out-of-pocket expenses (any such fees or expenses will be
paid by Davis Selected Advisers; not the Funds). A Proxy which has been
executed and returned may be revoked by any shareholder prior to the
voting of the Proxy on any matter. Proxies may be revoked by voting in
person at the Special Meetings or by writing to the Secretary of the
Selected Funds at 124 East Marcy Street, Santa Fe, New Mexico 87501 at
any time before the Special Meetings.
Shares represented by Proxies that are executed and returned will be
voted on all matters presented at the Special Meetings in accordance with
the instructions contained therein. In the absence of any instructions,
such shares will be voted for the approval of the Proposed Sub-Advisory
Arrangement and for the election of Christian Sonne, LeRoy Hoffberger and
Jeremy Biggs as directors of the Funds. If a broker indicates on a proxy
that, as to certain shares, it does not have discretionary authority to vote
on a particular matter, those shares will not be considered present and
entitled to vote with respect to that matter. Abstentions will be treated
as present for quorum purposes but as not voted for purposes of
determining the approval of any matter submitted. Any adjournment will
be determined in a manner consistent with the shareholder votes on the
foregoing proposals.
As of the date of this Proxy Statement, the Board knows of no other
matters to be brought before the Special Meetings. If, however, other
matters are properly presented for consideration, Proxies not otherwise
limited will be voted in accordance with the judgment of the persons
named in the Proxy, acting pursuant to the discretionary authority
contained therein.
Shareholders of record at the close of business on February 21, 1997
(the "Record Date") will be entitled to vote at the Meeting or any
adjournment thereof. The holders of a majority of the votes eligible to be
cast at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting. Each
outstanding dollar of net asset value per share is entitled to one vote. As
of the record date, there were 12,294,799.387 shares outstanding of
which 10,203234.214 shares are Class A with a net asset value of $4.80
per share, and 2,091565.173 Class B shares outstanding with a net asset
value of $4.77 per share of Davis High Income Fund. As of the record date,
there were 17,217,429.75 shares outstanding of which 5,468013.716
shares are Class A with a net asset value of $9.18 per share, and
11,749,416.038 Class B shares outstanding with a net asset value of
$9.16 per share of Davis Tax-Free High Income Fund.
ITEM 1: CONSIDERATION OF THE PROPOSED SUB-ADVISORY ARRANGEMENT
The Adviser and national distributor of the Funds is Davis Selected
Advisers, L.P, located at 124 East Marcy Street, Santa Fe, New Mexico
87501. Its sole General Partner is Venture Advisers, Inc. Shelby M.C.
Davis is the chief executive officer and controlling shareholder of the
General Partner.
Effective December 1, 1996, the Adviser entered into a
Sub-Advisory Agreement (the "Agreement") with Davis Selected Advisers
- - NY, Inc. ("DSA-NY"), an affiliate of the Adviser, under which DSA-NY
performs research and portfolio management functions for the Funds. The
Agreement is set forth in full as Exhibit A hereto. This arrangement will
not affect the Sub-Advisory Agreement between each of the Funds and
Stamper Capital & Investments, Inc. Stamper Capital & Investments will
continue to provide investment advisory services to the Fund and will
continue receiving fees from the Adviser for such services. Clark Stamper
will continue to provide portfolio management services for the Funds.
The Agreement was approved by the Board (including a majority of
the directors who are not parties to the Agreement, have no financial
interest in the Agreement and are not "interested persons" (as defined in
the Investment Company Act of 1940) of any party to the Agreement (the
"Independent Directors")) on July 1996. The continuation of the
Agreement beyond April 1, 1997 is subject to the affirmative vote of the
holders of the lesser of: (i) 67% or more of the shares of each Fund present
in person or represented by proxy at the Special Meetings if the holders of
more than 50% of the outstanding shares of each Fund entitled to vote are
present in person or represented by proxy or (ii) more than 50% of the
outstanding shares of each Fund entitled to vote at the Special Meetings.
Each Fund will vote separately with respect to the Proposed
Sub-Advisory Arrangement. In the event that the Proposed Sub-Advisory
Arrangement is not approved as to any Fund, it will continue until April 1,
1997 and the Board will take such action as they deem advisable under the
circumstances.
Under the Agreement, DSA-NY performs research and portfolio
management services as requested by the Adviser. DSA-NY is responsible
for complying with stated policies and applicable laws, including
compliance with the Adviser's Code of Ethics.
In lieu of a sub-advisory fee, the Adviser will pay DSA-NY all
reasonable direct and indirect costs associated with the maintenance of
an office and the performance of the terms of the Agreement. All
payments to DSA-NY will be made by the Adviser. Fees paid by the Funds
will not be affected in any way.
The Adviser is paid a fee based on each Funds' average daily net
assets at an annual rate as follows:
Davis High Income: 0.70% on average net assets up to $250 million, 0.60%
on the next $250 million of average net assets and 0.55% on average net
assets over $500 million.
Davis Tax-Free: 0.65% on the first $250 million, 0.60% on the next $250
million of average net assets and 0.55% on average net assets over $500
million.
If approved, the Agreement will initially remain in effect for a
period not exceeding two years. Thereafter, it continues in force
yeartoyear provided that such continuance is approved by each Fund's
Board of Directors, including a majority of the Independent Directors. The
Agreement will terminate in the event of its assignment (as defined in the
Investment Company Act of 1940) or in the event of the termination of the
investment advisory agreement with the Adviser. It may be terminated,
without penalty upon 60 days prior written notice by the Adviser by the
Board of Directors of a Fund, by majority vote of the shareholders or by
DSA-NY. It will automatically terminate as to a Fund upon the termination
of the Adviser's Advisory Agreement with the Fund.
Under the Sub-Advisory Agreement, DSA-NY will not be subject to
liability to the Funds or their shareholders for any act or omission in the
course of, or connected with, rendering services under the Proposed
Sub-Advisory Agreement, or for any losses that may be sustained in the
purchase, holding or sale of any security, barring willful misfeasance, bad
faith or gross negligence, or reckless disregard of obligations or duties.
DSA-NY, a wholly-owned subsidiary of the Adviser, is a registered
investment adviser organized in 1996. DSA-NY's offices are located in
New York, New York. The Adviser's offices are located in Santa Fe, New
Mexico. The Adviser and the Board believes it is advantageous to the Funds
to have this Agreement, which will enable the Adviser, through DSA-NY,
to attract additional, experienced personnel to perform services on behalf
of the Funds but who desire to remain in the vicinity of New York City.
The Boards of Directors of the other funds managed by the Manager (Davis
New York Venture, Inc., Davis Series, Inc., Davis International Series, Inc.,
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust) have approved identical agreements and the
shareholders of such funds, with the exception of Davis New York Venture
Fund, Inc., will be voting on the agreements at meetings held on the same
day as the Special Meetings. The shareholders of Davis New York Venture
Fund, Inc. voted to approve the Sub-Advisory Agreement on October 16,
1996. The proposal does not involve any changes in the investment
objectives or policies of the Fund.
THE BOARD OF DIRECTORS RECOMMENDS
APPROVAL OF THE SUBADVISORY AGREEMENT
ITEM 2: ELECTION OF DIRECTORS
There are currently nine directors, all of whom will serve until
their respective successors are elected and qualify or until a director's
earlier death, resignation, retirement or removal. Martin H. Proyect
resigned from the Board effective October 15, 1996.
At this Meeting, shareholders are being asked to vote on the election
of three directors: Christian Sonne, LeRoy Hoffberger and Jeremy Biggs.
All of the other directors have already been elected by the shareholders.
Mr. Sonne has served as a director since July 31, 1995; Mr. Hoffberger
since March 18, 1991 and Mr. Biggs since July 31, 1995. Mr. Biggs has
been the Chairman of the Board since July 31, 1995.
Directors are elected by a plurality of votes of each Fund cast at the
meeting.
The following table sets forth certain information as to each of the
directors of the Funds. All directors hold similar positions with each of
the Funds. In addition, Mr. Davis is a Director of five other mutual funds
managed by the Adviser: Davis New York Venture Fund, Inc., Davis Series,
Inc., Davis International Series, Inc., Selected American Shares, Inc.,
Selected Special Shares, Inc. and Selected Capital Preservation Trust.
<TABLE>
Current Directors:
<CAPTION>
SHARES
Name, Date of Birth and Business OWNED AS % OF FUND
Experience During the Past 5 Years OF 2/21/97 OWNED
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
*Shelby M.C. Davis 03/20/37 DHIF= -0- -0-
Employee of Capital Ideas, Inc. (financial DTFHIF= -0- -0-
consulting firm); Director, Chief Executive
Officer and Chairman, Venture Advisers,
Inc.; Consultant to Fiduciary Trust
Company International; Director, Shelby
Cullom Davis Financial Consultants, Inc.;
Shareholder of 98% of Venture Advisers, Inc.
Wesley E. Bass, Jr. (8/21/31) DHIF= -0- -0-
President, Bass & Associates (Financial Consulting DTFHIF= -0- -0-
Firm); formerly, First Deputy City Treasurer, City
of Chicago, and Executive Vice President, Chicago
Title and Trust Company.
Marc P. Blum (9/9/42) DHIF= 1,956.314 0.019
Chief Executive Officer, World Total Return DTFHIF= 1,117.914 0.020
Fund, L.P. (a private investment fund);
Member, Gordon, Feinblatt,
Rothman, Hoffberger and Hollander,
LLC (attorneys); Director, Mid-Atlantic
Realty Trust.
Eugene M. Feinblatt (10/28/19) DHIF= 4,447.770 0.044
Of Counsel to Gordon, Feinblatt, Rothman, DTFHIF= 1332.729 0.024
Hoffberger and Hollander, LLC (attorneys).
Jerry D. Geist (5/23/34) DHIF= 6,172.455 0.060
Chairman, Santa Fe Center Enterprises; DTFHIF= 438.577 0.008
President and Chief Executive Officer,
Howard Energy International
Utilities; Directors, CH2M Hill, Inc.;
Retired Chairman and President, Public
Service Company of New Mexico.
D. James Guzy (3/7/36) DHIF= 47,912.353 0.470
Chairman, PLX Technology, Inc. (manufacturer DTFHIF= 1,153.526 0.021
of semi-conductor circuits); Director, Intel Corp.
(manufacturer of semi-conductor circuits), Cirrus
Logic Corp. (manufacturer of semi-conductor
circuits) and Alliance Technology Fund
(a mutual fund).
G. Bernard Hamilton (3/18/37) DHIF= 271.431 0.003
Managing General Partner, Avanti Partners, DTFHIF= 176.586 0.003
L.P.
Lawrence W. Levine (4/9/31) DHIF= 9,583.256 0.094
Partner, Bigham, Englar, Jones and Houston DTFHIF= 1,136.752 0.021
(attorneys); United States Counsel to Aerolineas
Argentina; Director of various private companies.
Edwin R. Werner (4/1/22) DHIF= 16,821.198 0.165
President, The Estate at North Hills New York; DTFHIF= 16,036.000 0.293
formerly, Chairman and CEO, Empire Blue Cross
and Blue Shield of New York.
Directors Being Considered for Election
Christian R. Sonne (5/6/36) DHIF= -0- -0-
General Partner of Tuxedo Park Associates (a land
holding and development firm); President and
Chief Executive Officer of Mulford Securities
Corporation (a private investment fund) until 1990;
formerly, Vice President of Goldman Sachs &
Company (investment banking).
LeRoy Hoffberger (6/8/25) DHIF= 271.431 0.003
Of Counsel to Gordon, Feinblatt, Rothman,
Hoffberger and Hollander, LLC
(attorneys); Chairman, Mid-Atlantic Realty
Trust; Director and President, CPC, Inc.
(a real estate company); Director and Vice
President, Merchant Terminal Corporation;
formerly, Director of Equitable Bancorporation,
Equitable Bank and Maryland National Bank;
and formerly, Director and President,
O-W Fund, Inc. (a private investment fund).
*Jeremy Biggs (8/16/35) DHIF= -0- -0-
Consultant to the Adviser; Director, Van Eck
Funds; Vice Chairman, Head of Equity Research
Department, Chairman of the U.S. Investment
Policy Committee and member of the International
Investment Committee of Fiduciary Trust Company
International.
</TABLE>
Legend: DHIF-Davis High Income Fund, Inc.
DTFHIF- Davis Tas-Free High Income Fund, Inc.
The directors considered by the Funds to be "interested persons" of
the Funds, as defined in the Investment Company Act of 1940, are each
noted above by a single asterisk. Messrs. Davis and Biggs are "interested
persons" because of their positions with the Funds and their affiliations
with and stock ownership in the sole general partner of the Fund's Adviser.
The other directors are hereinafter referred to as the "Noninterested
Directors."
As of February 21, 1997, the Fund's directors and officers as a
group were deemed to beneficially own (i) 113,965.980 shares of Davis
High Income, constituting approximately 1.117% of such Fund; and
(ii)22,112.415 shares of Davis Tax-Free constituting approximately
0.404% of such Fund.
OTHER INFORMATION REGARDING DIRECTORS
Directors' Compensation Schedule
During the fiscal years ended September 30, 1996 and March 31,
1996, Davis Tax-Free High Income Fund and Davis High Income Fund,
respectively, paid to the non-interested directors the following
compensation:
<TABLE>
<CAPTION>
Davis Tax-Free Fiscal Year Davis Fiscal Year
High Income ended 9/30/96 High Income ended 3/31/96
Fund Total Complex Fund Total Complex
Name Compensation Compensation Compensation Compensation
- ---- -------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Wesley E. Bass 5,375 24,250 2,250 24,375
Marc P. Blum 5,150 23,550 2,100 23,600
Eugene M. Feinblatt 4,600 20,900 1,800 20,950
Jerry D. Geist 4,500 20,550 1,750 20,550
D. James Guzy 5,150 23,700 2,150 23,750
G. Bernard Hamilton 5,000 23,300 2,050 23,300
LeRoy E. Hoffberger 5,150 23,500 2,100 23,550
Laurence W. Levine 5,150 23,500 2,100 23,550
Christian R. Sonne 5,050 23,450 2,050 23,350
Edwin R. Werner 5,000 23,300 2,050 23,300
</TABLE>
Complex compensation is the aggregate compensation paid, for
services as a director, by all mutual funds with the same investment
adviser.
During the last fiscal year, the Board of Directors held four
meetings. The Board of Directors has an Audit Committee, whose current
members are Wesley E. Bass, Marc P. Blum, Eugene M. Feinblatt, D. James
Guzy, LeRoy E. Hoffberger, Laurence W. Levine, Christian R. Sonne. The
functions of the Committee include (i) making recommendations to the
Board of Directors as to which firm of independent public accountants
will be selected by the Board of Directors (subject to shareholder
ratification); (ii) meeting with the auditors and reviewing the methods,
scope and results of audits and the fees charged; and (iii) reviewing the
adequacy of the Fund's internal accounting procedures and controls. The
Audit Committee met once in the Fund's last fiscal year.
MISCELLANEOUS
Certain shareholders of the funds
Davis High Income:
As of the Record Date, Currie and Co., P.O. Box 3199, Church Street
Station, New York, NY 10008 held 721,206.080 shares of Davis High
Income Class A, constituting 7.07% of such Fund's total outstanding
shares. As of such date, National City Bank TTEE, FBO McKeesport Hospital
TR, P.O. Box 94777, Cleveland, OH 44101 held 901,071.800 shares of Davis
High Income Class A, constituting 8.83% of such Fund's total outstanding
shares.
Davis Tax-Free High Income:
As of the Record Date, Charles M. Manley, Lucinda M. Manley JT Ten,
3444 Pepperidge Dr., San Jose, CA, 95148 held 379,573.685 shares of
Davis Tax-Free High Income Class A, constituting 6.94% of such Fund's
total outstanding shares.
Shareholder meetings
The Funds are not required to hold annual shareholder meetings but
do hold special meetings as required or deemed desirable. Since regular
meetings of shareholders are not held, the anticipated date of the next
shareholder meetings cannot be provided. Any shareholder proposal which
may properly be included in the proxy solicitation material for a
shareholder meeting must be received by a Fund within a reasonable time
prior to the date proxy statements are mailed to shareholders.
Submission of a proposal, however, does not guarantee its inclusion for
consideration at a meeting since certain requirements under the federal
securities laws apply.
Other matters
The Boards know of no matters which are to be brought before the
1997 Special Meetings other than as set forth above. However, if any
other matters properly come before the 1997 Special Meetings, the
persons named in the enclosed form of proxy intend to vote such proxy
with their best judgment on such matters.
Shareholder report
A shareholder may, without charge, receive a copy of the Annual
Report of Davis High Income Fund, Inc. for the fiscal year ended March 31,
1996 or the Annual Report of Davis Tax-Free High Income Fund, Inc. for the
fiscal year ended September 30, 1996 by calling toll free
18002790279 or writing to the Funds at the address noted above.
EXHIBIT A
Re: SubAdvisory Agreement for Davis High Income Fund, Inc.
This is to confirm that Davis Selected Advisers, L.P. (the "Adviser") is
retaining Davis Selected Advisers - NY, Inc. ("DSA-NY") as investment
subadviser for the portfolio of Davis High Income Fund, Inc. (the "Fund").
The terms and conditions of your retention are as follows:
1. DSA-NY shall act as an investment subadviser for the Fund and will
provide such investment management and research services as the Adviser
shall request subject to the general supervision of the Board of Directors
of the Fund, Davis Selected Advisers, L.P. (the "Adviser") and to any
applicable provisions as in effect from time to time of (a) the Articles of
Incorporation and Bylaws of the Fund, (b) the prospectus, statement of
additional information and other information set forth in the Fund's
registration documents under the Securities Act of 1933 and the
Investment Company Act of 1940 ("1940 Act"), including any supplements
thereto, (c) the Investment Advisory Agreement between the Adviser and
the Fund (the "Investment Advisory Agreement"), the Adviser's and the
Fund's Code of Ethics and (d) any additional policies or guidelines
established by the Fund's Board of Directors or the Adviser. DSA-NY
acknowledges receipt of copies of the above documents as in effect on the
date of acceptance of this letter. The Adviser agrees that it will promptly
deliver to DSA-NY any amendments, changes or additions of or to these
documents.
2. DSA-NY agrees that all securities transactions will conform to (a) the
stated objectives and policies of the Fund, (b) the brokerage policies set
forth in the Investment Advisory Agreement (which are hereby
incorporated by reference herein) and the registration documents, and (c)
those investment and brokerage policies or guidelines directed by the
Board of Directors of the Fund, any committee thereof and the Adviser.
3. DSA-NY shall be an independent contractor. Unless otherwise expressly
provided or authorized hereunder, or by the Board of Directors of the Fund,
DSA-NY shall have no authority to represent the Fund or the Adviser in any
way or otherwise be an agent of the Adviser or the Fund, except with
regard to the execution of securities transactions on behalf of the Fund
with registered broker/dealers, including broker/dealers affiliated with
the Adviser, provided transactions with affiliated broker/dealers comply
with Rule 17e1 of the 1940 Act.
4. DSA-NY shall provide the Adviser with any reports, analyses or other
documentation the Adviser requests including those related to placement
of security transactions, its administrative responsibilities and its
responsibility to monitor compliance with stated investment objectives,
policies and limitations and the investment performance of the Fund.
DSA-NY agrees, directly or through an agent, to provide daily information
in respect to any portfolio transactions of the Fund to the Adviser. DSA-NY
agrees to provide all documentation reasonably required by the Adviser to
maintain the Fund's accounting records in accordance with the 1940 Act
and the Investment Advisers Act of 1940 and the regulations issued
thereunder, and to preserve copies of all documents and records related to
asset transactions, positions and valuations related to the Fund in the
manner and for the periods prescribed by such regulations. DSA-NY further
agrees that all documents and records it maintains relating to the Fund,
are the property of the Fund and will be surrendered to the Adviser or the
Fund upon the request of either. DSA-NY agrees to provide information and
to allow inspection of such documents and records at reasonable times by
any authorized representative of the Adviser, the Fund's Board of
Directors or any committee thereof, the Fund's independent public
accountants or appropriate regulatory authorities. DSA-NY shall provide to
the Adviser a copy of its Form ADV as filed with the SEC and as amended
from time to time and a written list of persons DSA-NY has authorized to
give written and/or oral instructions to the Adviser and the Fund
custodian.
5. DSA-NY agrees to make its personnel who are engaged in activities on
behalf of the Fund available at reasonable times for consultations with
the Adviser's personnel and the Fund's Board of Directors or any
committee thereof, including attendance at their meetings, wherever
situated. In addition, personnel of DSA-NY, at the request of the Adviser,
will attend other meetings to be scheduled at mutually convenient times.
6. DSA-NY agrees to provide all office facilities, equipment and
personnel needed for carrying out its duties hereunder at its own expense.
In addition, DSA-NY shall, if requested by the Adviser or the Fund, employ at
its own expense and subject to the prior written approval of the Adviser
which approval shall not be unreasonably withheld (i) a public auditing
firm, (ii) attorneys and (iii) such other professional staff as in the sole
discretion of the Adviser are necessary to assure the fulfillment of the
terms and conditions of this agreement.
7. It is agreed that DSA-NY's services are not to be deemed exclusive and
DSA-NY shall be free to render similar services or other services to
others provided that (i) its services hereunder are not impaired and are
not in violation of federal or state securities laws and (ii) that it shall
not provide services to any registered investment company other than the
Fund or other investment companies managed by the Adviser without the
Adviser's prior express written permission.
8. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties hereunder, DSA-NY, its
officers, directors and employees shall not be subject to liability for any
act or omission in the cause of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or sale of any security. In the event of any claim, arbitration, suit, or
administrative proceedings in which DSA-NY or the Adviser is a party and
in which it is finally determined that there is liability or wrongdoing by
only one of us, the party liable or found to be the wrongdoer shall pay for
all liability and expenses of such claim or proceeding including reasonable
attorneys' fees. If it is determined that there is liability or wrongdoing by
both or none of us, then each shall pay their own liability and expenses. In
the event of any settlement of any such claim, arbitration, suit or
proceeding before final determination by a court or arbitrator(s), the
liability and expenses shall be assumed as agreed between the parties, but
if there is no agreement within thirty (30) days of such settlement, then
the assumption of liability and expenses shall be settled by arbitration, in
accordance with the then applicable rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator shall be
final and binding and may be entered in any court having jurisdiction. The
parties shall pay for their own costs and expenses in respect to any such
arbitration and such costs may be included in the arbitrator's award.
9. As investment subadviser, DSA-NY understands that it will be
responsible for complying with all provisions of applicable law, including
the 1940 Act, the Investment Advisers Act of 1940, and the Insider
Trading and Securities Fraud Enforcement Act of 1988 and all rules and
regulations thereunder. DSA-NY agrees to adopt and comply with the "Code
of Ethics of and for Davis Selected Advisers, L.P. and the Companies For
Which It Acts As Investment Adviser" as in effect from time to time and
to keep in effect a policy and supervisory procedures designed to prevent
insider trading.
10. The parties acknowledge that DSA-NY is controlled by or under
common control with the Adviser. The Adviser shall pay DSA-NY all
reasonable direct and indirect costs associated with the maintenance of
an office and the performance of the terms of this Agreement. The
Adviser shall also reimburse expenses expressly approved for
reimbursement by the Adviser. Payment for DSA-NY's services and
reimbursement of expenses approved by the Adviser shall be made
monthly, in arrears, by the 15th day of the following month.
11. This Agreement shall become effective on the later of December 1,
1996 or the first business day after the date this Agreement is approved
in accordance with the 1940 Act (provided that it is reflected in an
effective posteffective amendment under the Securities Act of 1933 and
the 1940 Act). Unless sooner terminated as hereunder provided, it shall
initially remain in effect for a period not exceeding two years.
Thereafter, subject to the termination provisions herein, this Agreement
shall continue in force from year to year thereafter, but only as long as
such continuance is specifically approved at least annually in the manner
required by the 1940 Act; provided, however, that if the continuation of
this Agreement is not approved, DSA-NY may continue to serve in the
manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
12. This Agreement shall automatically terminate immediately in the
event of its assignment (except as otherwise permitted by the 1940 Act
or rules thereunder) or in the event of the termination of the Investment
Advisory Agreement. This Agreement may be terminated without payment
of any penalty at any time (a) upon sixty (60) days' written notice to
DSA-NY by the Adviser or upon such sixty (60) days' written notice to
DSA-NY by the Fund pursuant to action by its Board of Directors or by the
vote of a majority of the outstanding voting securities of the Fund, or (b)
upon sixty (60) days' written notice by DSA-NY to the Adviser. The terms
"assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth in the 1940 Act and the rules and
regulations thereunder. Termination of this Agreement shall not affect
DSA-NY's right to receive payments on any unpaid balance of the
compensation earned and reimbursable expenses incurred prior to such
termination. Upon receipt of notification of termination as provided above
DSA-NY shall immediately cease all activities in connection with the Fund
except as otherwise directed by the Adviser.
13. DSA-NY agrees that it shall abide by the terms of the agreement of the
Adviser with the Fund as to the names of the Fund and the Adviser and
shall not use the name of the Adviser or the Fund without the prior
written consent of the Adviser or the Fund.
14. If any provisions of this Agreement shall be held or made invalid by a
court decision, statute or rule or otherwise, the remainder shall not be
thereby affected.
15. This Agreement shall be construed according to the laws of the State
of New Mexico. It may be executed in counterparts each of which shall be
deemed an original and all of which together shall constitute one and the
same agreement.
If the foregoing terms and conditions are acceptable to you, please
acknowledge in the space provided. Upon your acceptance, the retention
and the mutual obligations in respect thereto shall be effective as
provided herein.
Sincerely,
Davis Selected Advisers, L.P.
By Venture Advisers, Inc.,
General Partner
By: --------------------------------
Its:--------------------------------
Accepted and Approved this 1st day of December, 1996
Davis Selected Advisers - NY, Inc.
By:--------------------------------
Its:--------------------------------
Re: SubAdvisory Agreement for Davis Tax-Free High Income Fund, Inc.
This is to confirm that Davis Selected Advisers, L.P. (the "Adviser") is
retaining Davis Selected Advisers - NY, Inc. ("DSA-NY") as investment
subadviser for the portfolio of Davis Tax-Free High Income Fund, Inc.
(the "Fund").
The terms and conditions of your retention are as follows:
1. DSA-NY shall act as an investment subadviser for the Fund and will
provide such investment management and research services as the Adviser
shall request subject to the general supervision of the Board of Directors
of the Fund, Davis Selected Advisers, L.P. (the "Adviser") and to any
applicable provisions as in effect from time to time of (a) the Articles of
Incorporation and Bylaws of the Fund, (b) the prospectus, statement of
additional information and other information set forth in the Fund's
registration documents under the Securities Act of 1933 and the
Investment Company Act of 1940 ("1940 Act"), including any supplements
thereto, (c) the Investment Advisory Agreement between the Adviser and
the Fund (the "Investment Advisory Agreement"), the Adviser's and the
Fund's Code of Ethics and (d) any additional policies or guidelines
established by the Fund's Board of Directors or the Adviser. DSA-NY
acknowledges receipt of copies of the above documents as in effect on the
date of acceptance of this letter. The Adviser agrees that it will promptly
deliver to DSA-NY any amendments, changes or additions of or to these
documents.
2. DSA-NY agrees that all securities transactions will conform to (a) the
stated objectives and policies of the Fund, (b) the brokerage policies set
forth in the Investment Advisory Agreement (which are hereby
incorporated by reference herein) and the registration documents, and (c)
those investment and brokerage policies or guidelines directed by the
Board of Directors of the Fund, any committee thereof and the Adviser.
3. DSA-NY shall be an independent contractor. Unless otherwise expressly
provided or authorized hereunder, or by the Board of Directors of the Fund,
DSA-NY shall have no authority to represent the Fund or the Adviser in any
way or otherwise be an agent of the Adviser or the Fund, except with
regard to the execution of securities transactions on behalf of the Fund
with registered broker/dealers, including broker/dealers affiliated with
the Adviser, provided transactions with affiliated broker/dealers comply
with Rule 17e1 of the 1940 Act.
4. DSA-NY shall provide the Adviser with any reports, analyses or other
documentation the Adviser requests including those related to placement
of security transactions, its administrative responsibilities and its
responsibility to monitor compliance with stated investment objectives,
policies and limitations and the investment performance of the Fund.
DSA-NY agrees, directly or through an agent, to provide daily information
in respect to any portfolio transactions of the Fund to the Adviser. DSA-NY
agrees to provide all documentation reasonably required by the Adviser to
maintain the Fund's accounting records in accordance with the 1940 Act
and the Investment Advisers Act of 1940 and the regulations issued
thereunder, and to preserve copies of all documents and records related to
asset transactions, positions and valuations related to the Fund in the
manner and for the periods prescribed by such regulations. DSA-NY further
agrees that all documents and records it maintains relating to the Fund,
are the property of the Fund and will be surrendered to the Adviser or the
Fund upon the request of either. DSA-NY agrees to provide information and
to allow inspection of such documents and records at reasonable times by
any authorized representative of the Adviser, the Fund's Board of
Directors or any committee thereof, the Fund's independent public
accountants or appropriate regulatory authorities. DSA-NY shall provide to
the Adviser a copy of its Form ADV as filed with the SEC and as amended
from time to time and a written list of persons DSA-NY has authorized to
give written and/or oral instructions to the Adviser and the Fund
custodian.
5. DSA-NY agrees to make its personnel who are engaged in activities on
behalf of the Fund available at reasonable times for consultations with
the Adviser's personnel and the Fund's Board of Directors or any
committee thereof, including attendance at their meetings, wherever
situated. In addition, personnel of DSA-NY, at the request of the Adviser,
will attend other meetings to be scheduled at mutually convenient times.
6. DSA-NY agrees to provide all office facilities, equipment and personnel
needed for carrying out its duties hereunder at its own expense. In
addition, DSA-NY shall, if requested by the Adviser or the Fund, employ at
its own expense and subject to the prior written approval of the Adviser
which approval shall not be unreasonably withheld (i) a public auditing
firm, (ii) attorneys and (iii) such other professional staff as in the sole
discretion of the Adviser are necessary to assure the fulfillment of the
terms and conditions of this agreement.
7. It is agreed that DSA-NY's services are not to be deemed exclusive and
DSA-NY shall be free to render similar services or other services to
others provided that (i) its services hereunder are not impaired and are
not in violation of federal or state securities laws and (ii) that it shall
not provide services to any registered investment company other than the
Fund or other investment companies managed by the Adviser without the
Adviser's prior express written permission.
8. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties hereunder, DSA-NY, its
officers, directors and employees shall not be subject to liability for any
act or omission in the cause of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or sale of any security. In the event of any claim, arbitration, suit, or
administrative proceedings in which DSA-NY or the Adviser is a party and
in which it is finally determined that there is liability or wrongdoing by
only one of us, the party liable or found to be the wrongdoer shall pay for
all liability and expenses of such claim or proceeding including reasonable
attorneys' fees. If it is determined that there is liability or wrongdoing by
both or none of us, then each shall pay their own liability and expenses. In
the event of any settlement of any such claim, arbitration, suit or
proceeding before final determination by a court or arbitrator(s), the
liability and expenses shall be assumed as agreed between the parties, but
if there is no agreement within thirty (30) days of such settlement, then
the assumption of liability and expenses shall be settled by arbitration, in
accordance with the then applicable rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator shall be
final and binding and may be entered in any court having jurisdiction. The
parties shall pay for their own costs and expenses in respect to any such
arbitration and such costs may be included in the arbitrator's award.
9. As investment subadviser, DSA-NY understands that it will be
responsible for complying with all provisions of applicable law, including
the 1940 Act, the Investment Advisers Act of 1940, and the Insider
Trading and Securities Fraud Enforcement Act of 1988 and all rules and
regulations thereunder. DSA-NY agrees to adopt and comply with the "Code
of Ethics of and for Davis Selected Advisers, L.P. and the Companies For
Which It Acts As Investment Adviser" as in effect from time to time and
to keep in effect a policy and supervisory procedures designed to prevent
insider trading.
10. The parties acknowledge that DSA-NY is controlled by or under
common control with the Adviser. The Adviser shall pay DSA-NY all
reasonable direct and indirect costs associated with the maintenance of
an office and the performance of the terms of this Agreement. The
Adviser shall also reimburse expenses expressly approved for
reimbursement by the Adviser. Payment for DSA-NY's services and
reimbursement of expenses approved by the Adviser shall be made
monthly, in arrears, by the 15th day of the following month.
11. This Agreement shall become effective on the later of December 1,
1996 or the first business day after the date this Agreement is approved
in accordance with the 1940 Act (provided that it is reflected in an
effective posteffective amendment under the Securities Act of 1933 and
the 1940 Act). Unless sooner terminated as hereunder provided, it shall
initially remain in effect for a period not exceeding two years.
Thereafter, subject to the termination provisions herein, this Agreement
shall continue in force from year to year thereafter, but only as long as
such continuance is specifically approved at least annually in the manner
required by the 1940 Act; provided, however, that if the continuation of
this Agreement is not approved, DSA-NY may continue to serve in the
manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
12. This Agreement shall automatically terminate immediately in the
event of its assignment (except as otherwise permitted by the 1940 Act
or rules thereunder) or in the event of the termination of the Investment
Advisory Agreement. This Agreement may be terminated without payment
of any penalty at any time (a) upon sixty (60) days' written notice to
DSA-NY by the Adviser or upon such sixty (60) days' written notice to
DSA-NY by the Fund pursuant to action by its Board of Directors or by the
vote of a majority of the outstanding voting securities of the Fund, or (b)
upon sixty (60) days' written notice by DSA-NY to the Adviser. The terms
"assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth in the 1940 Act and the rules and
regulations thereunder. Termination of this Agreement shall not affect
DSA-NY's right to receive payments on any unpaid balance of the
compensation earned and reimbursable expenses incurred prior to such
termination. Upon receipt of notification of termination as provided above
DSA-NY shall immediately cease all activities in connection with the Fund
except as otherwise directed by the Adviser.
13. DSA-NY agrees that it shall abide by the terms of the agreement of the
Adviser with the Fund as to the names of the Fund and the Adviser and
shall not use the name of the Adviser or the Fund without the prior
written consent of the Adviser or the Fund.
14. If any provisions of this Agreement shall be held or made invalid by a
court decision, statute or rule or otherwise, the remainder shall not be
thereby affected.
15. This Agreement shall be construed according to the laws of the State
of New Mexico. It may be executed in counterparts each of which shall be
deemed an original and all of which together shall constitute one and the
same agreement.
If the foregoing terms and conditions are acceptable to you, please
acknowledge in the space provided. Upon your acceptance, the retention
and the mutual obligations in respect thereto shall be effective as
provided herein.
Sincerely,
Davis Selected Advisers, L.P.
By Venture Advisers, Inc.,
General Partner
By:--------------------------------
Its:--------------------------------
Accepted and Approved this 1st day of December, 1996
Davis Selected Advisers - NY, Inc.
By:--------------------------------
Its:-------------------------------
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Proxy Solicited on Behalf of the Board of Directors
The undersigned acknowledges receipt of the Proxy Statement and
hereby appoints Carl Luff, Eileen Street, Andrew Davis and each of them,
the proxies of the undersigned with full power of substitution to vote at
the Special Meeting of Shareholders of Davis Tax-Free High Income Fund,
Inc. to be held at 124 East Marcy Street, Santa Fe, New Mexico on
Thursday, March 25, 1997 at 9:30 A.M. Mountain time, and at any
adjournments thereof, all of said fund's shares the undersigned is entitled
to vote as follows:
This proxy will be voted as specified herein. If no specification is
made, it will be voted FOR the proposals.
1. PROPOSED SUB-ADVISORY AGREEMENT.
FOR AGAINST ABSTAIN
2. ELECTION OF CHRISTIAN R. SONNE, LeROY E.
HOFFBERGER AND JEREMY H. BIGGS
FOR AGAINST ABSTAIN
TO VALIDATE YOUR PROXY, THIS CARD MUST BE PROPERLY SIGNED AND
DATED ON REVERSE SIDE AND RETURNED.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD, USING THE
ENCLOSED ENVELOPE.
Date:_____________________________, 1997
________________________________________
Signature
________________________________________
Signature
NOTE: Signature(s)
should match name(s) as printed on
this proxy. If shares are held in
name of custodian for a minor or as
trustee, executor, or administrator,
this proxy must be signed by such
custodian, trustee, executor or
administrator, as the case may be.
Please indicate such fiduciary title.
