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<PAGE> PAGE 2
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<PAGE> PAGE 3
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SIGNATURE MICHAEL KROMM
TITLE SECRETARY/TREASURER
CLIPPER FUND/TM/
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 21, 1997
To Our Shareholders:
The Annual Meeting of Shareholders of Clipper Fund/TM/ will be
held on Friday, March 21, 1997 at 9:30 a.m., at the Regent Beverly
Wilshire, Champagne Room, 9500 Wilshire Blvd., Beverly Hills,
California. The purpose of the Annual Meeting is to consider and
vote upon the following matters, which are more fully described in
the accompanying Proxy Statement, which is incorporated into this
notice by reference:
1. Election of a Board of Directors;
2. Ratification of the selection by the Board of Directors of Ernst
& Young LLP as independent auditors for the Fund for the year
ending December 31, 1997; and
3. Such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on
January 31, 1997 as the record date for the determination of
shareholders entitled to vote at the Annual Meeting and to receive
notice thereof.
By Order of the Board of Directors
/s/
James Gipson
Chairman & President
February 18, 1997
IMPORTANT
SHAREHOLDERS ARE REQUESTED TO DATE, FILL IN, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED
IF MAILED WITHIN THE UNITED STATES.
CLIPPER FUND/TM/
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 21, 1997
This Proxy Statement is furnished in connection with a solicitation
of proxies by the Board of Directors of Clipper Fund/TM/ (the
"Fund") for use at the Annual Meeting of Shareholders of the Fund,
to be held on Friday, March 21, 1997 at 9:30 a.m. at the Regent
Beverly Wilshire, Champagne Room, 9500 Wilshire Blvd., Beverly
Hills, California, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. Shareholders of record at
the close of business on January 31, 1997 will be entitled to
receive notice of and to vote at the meeting. This proxy statement
will be mailed to shareholders on or about February 18, 1997.
Each share of capital stock is entitled to one vote, except
that shareholders are entitled to cumulate votes for the election
of directors. Thus, each shareholder entitled to vote for directors
will be able to give one candidate that number of votes which is
equal to six (the number of directors to be elected) multiplied by
the number of shares that the shareholder holds, or be able to
distribute that number of votes among two or more candidates in
such manner as the shareholder sees fit. Cumulative voting will be
provided to all shareholders only if a shareholder at the meeting
and prior to the election of directors gives notice of his
intention to cumulate votes.
The required quorum for the transaction of business at the
Meeting is the presence in person or by proxy of a majority of the
shares entitled to vote at the meeting of shareholders.
Shares represented by executed and unrevoked proxies will be
voted in accordance with the specifications made thereon, or, if no
specification is made, according to the recommendations of the
Board of Directors in this Proxy Statement. If the enclosed form of
proxy is executed and returned, it nevertheless may be revoked by
giving another proxy or by a writing delivered to the Fund. This
revocation must show the shareholder's name and account number and
must be received prior to the voting at the meeting to be
effective. In addition, a shareholder attending the meeting in
person, who wishes to do so, may vote by ballot at the meeting,
thereby canceling any proxy previously given. The Fund had
8,366,203 shares of capital stock outstanding as of January 31,
1997.
Proxy materials will be mailed to shareholders of record on or
about February 18, 1997. Copies of the Fund's most recent Annual
and/or Semi-Annual report may be obtained from the Fund at no
charge by writing or telephoning the Fund at its principal
executive offices at Suite 800, 9601 Wilshire Boulevard, Beverly
Hills, CA 90210, telephone (800) 776-5033 Attention: Michele
Smith.
PRINCIPAL SHAREHOLDERS
The following is information about persons known to the Fund to own
beneficially five percent or more of the outstanding shares of the
capital stock of the Fund as of January 31, 1997:
Number of
Shares Owned Percent
Name and Address of Record of Class
Charles Schwab & Co. Inc. (1) 1,598,600 19.1%
Attention: Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104
Hewitt Associates (2) 501,179 6.0%
100 Half Day Road
Lincolnshire, Illinois 60069
(1) Charles Schwab & Co. Inc. is the nominee account for many
individual shareholder accounts; the Fund is not aware of the
size or identity of any of the individual accounts.
(2) Hewitt Associates is the trustee for four company sponsored
retirement plans. The plans are: Hewitt Associates Money
Purchase Plan, Deferred Compensation Trust, HR10 Trust and
Pension Plan. All four plans have the same address.
PROPOSAL 1. ELECTION OF BOARD OF DIRECTORS
It is proposed that a Board of six (6) directors be elected, each
director to hold office indefinitely or until the next annual
meeting of shareholders and until his or her successor is elected
and qualified. It is the intention of the proxy holders named in
the accompanying form of proxy to vote such proxy for the election
of the persons listed below unless shareholders specifically
indicated in their proxies their desire to withhold authority to
vote for such persons. Unless otherwise specified, proxy holders
(or their substitutes) may cast an equal number of votes for each
nominee for director or accumulate such votes and distribute them
among the nominees at the discretion of said proxy holders. The
Board of Directors does not contemplate that any nominee will be
unable to serve as a director for any reason, but if that should
occur prior to the meeting, the proxy holders reserve the right to
substitute another person or persons of their choice as nominee or
nominees.
Each nominee who is deemed an "interested" person of the Fund,
as defined in the 1940 Act, is indicated by an asterisk. Mr.
Gipson and Mr.Sandler are each deemed an "interested" person of the
Fund because each is an officer of Pacific Financial Research, Inc.
("PFR" or the "Investment Adviser") and is an officer of the Fund.
Each person listed below has consented to being named in this Proxy
Statement and has indicated a willingness to serve as a director if
elected.
<TABLE>
<CAPTION>
Shares of Capital Stock
of the Fund Total 1996
beneficially owned Compensation
directly or Aggregate from Fund
indirectly on Percent 1996 and
Position(s) Position(s) January 31, of Compensation Fund
Nominee Name with Fund held since Age 1997 Class from Fund Complex(5)
<S> <C> <C> <C> <C> <C> <C>
James H. Director, 1983 55 134,535(1) 1.6% $-0- $-0-
Gipson* Chairman
and President
Michael C. Director 1991 42 1,095(1) (2) $-0- $-0-
Sandler* and
Vice President
Susan M. Director 1984 41 9,372 (2) $5,000 $10,000
Bernfeld
Norman B. Director 1984 65 13,158 (2) $5,000 $10,000
Williamson
Lawrence P. Director 1984 62 8,334(3) (2) $5,000 $10,000
McNamee
F. Otis Director 1984 73 37,613(4) (2) $5,000 $10,000
Booth, Jr.
</TABLE>
(1) Of the 134,535 shares attributed to Mr. Gipson, 74,334 are held
by the Pacific Financial Research, Inc. Money Purchase Plan and
Trust (the "Plan"), 4,569 are held by the Pacific Financial
Research Employees Savings Plan (the "ESP"), 52,899 are held by Mr.
Gipson of which 2,711 shares are held in an IRA account and 2,732
are held by Mrs. Gipson in an IRA. The 74,334 shares held by the
Plan include 9,478 shares in which Mr. Sandler has a vested
interest, 40,772 shares in which Mr. Gipson has a vested interest
and 1,503 shares in which Michael Kromm, Secretary/Treasurer of the
Fund, has a vested interest. The 4,569 shares held by the ESP
include 419 shares in which Mr. Sandler has a vested interest, 503
shares in which Mr. Gipson has a vested interest and 630 shares in
which Mr. Kromm has a vested interest.
(2) The percentage of class is less than 1%.
(3) The shares attributed to Mr. McNamee are held, jointly and
individually, by Mr. and Mrs. Lawrence P. McNamee.
(4) The shares attributed to Mr. Booth are held, individually, by
Mr. and Mrs. F. Otis Booth, Jr. and in trusts for their children,
Ashley Brittingham and Scott Brittingham. Both Mr. and Mrs. Booth
are trustees of these trusts.
(5) Total 1996 Compensation From Fund and Fund Complex consists of
compensation and fees paid to directors and trustees by all of the
Pacific Financial Research Funds: Clipper Fund, Inc. and Schooner
Fund./(R)/
Mr. Gipson has been President of PFR, an investment
management firm, since he founded it in 1980, and holds a similar
position with and is a Trustee of the Schooner Fund,/(R)/ a
registered investment company. Prior to 1980, he was a portfolio
manager with Batterymarch Financial Company and with other
investment management firms. Mr. Gipson holds 48,435 shares of the
Schooner Fund./(R)/
Mr. Sandler has been with PFR since 1984. He currently
serves as Vice President and Portfolio Manager of PFR. Prior to
that, he was a Vice President with Enterprise Systems and a Manager
of Asset Redeployment for International Harvester. Mr. Sandler
holds no shares in the Schooner Fund./(R)/
Ms. Bernfeld was in charge of operations for PFR from 1981
to 1994. She is a Trustee of the Schooner Fund,/(R)/ a registered
investment company. Prior to that, she was an accountant with
Kendall and Warner, independent certified public accountants. Ms.
Bernfeld holds no shares of the Schooner Fund./(R)/
Mr. Williamson had been a Vice President and Portfolio
Manager with PFR since 1983 prior to his retirement December 31,
1990. From 1980 to 1983, he was self-employed as an investment
manager. Prior to that, he was Assistant Treasurer and Manager of
Pension Trust Administration for FMC Corporation. He is also a
Trustee of the Schooner Fund,/(R)/ a registered investment company.
Mr. Williamson holds no shares in the Schooner Fund./(R)/
Professor McNamee has been a Professor of Computer Science
at UCLA since 1966. He is also a Trustee of the Schooner Fund,/(R)/
a registered investment company. Professor McNamee holds no shares
in the Schooner Fund./(R)/
Mr. Booth has been a private investor and rancher from
1973 to the present. He is also a Trustee of the Schooner
Fund,/(R)/ a registered investment company. Mr. Booth holds 4,751
shares of the Schooner Fund./(R)/
Over the last two years no nominee for director has had
any material interest in a material transaction, or a proposed
material transaction, to which PFR or the Fund was or is to be a
party. During the last two years no nominee has been indebted to
the Fund. No nominee has been a party adverse to the Fund in any
material pending legal proceedings. In addition, no nominee has
been the subject of any adverse securities-related judgments or
orders.
The Fund's Board of Directors has no standing audit,
nominating or compensation committee or any committee performing
similar functions. The Directors who are not "interested persons"
of PFR serve as a de facto audit committee.
Mr. Gipson has been a director and executive officer of
the Fund since its organization, in December 1983. Mr. Sandler was
initially elected as a director of the Fund in 1991. Messrs.
McNamee and Booth have been directors of Fund since its
commencement of operations on February 19, 1984. Mr. Williamson
was a director and executive officer of the Fund since its
organization prior to his retirement from PFR on December 30, 1990.
He currently serves as a director to the Fund. Ms. Bernfeld was a
director and executive officer of the Fund since its organization
prior to her retirement from PFR on September 30, 1994. She
currently serves as a director of the Fund. Mr. Gipson, Mr. Sandler
and Mr. Kromm, the Fund's executive officers, are elected annually
by the Board of Directors, and serve at the Board's pleasure. Mr.
Kromm, age 51, has been with PFR since 1990 and is presently its
Operations Manager. He has been Secretary since 1992 and Treasurer
since 1994.
All directors and officers of the Fund as a group (7
persons) owned beneficially 205,858 shares of the Capital stock on
January 31, 1997, approximately 2.5% of the outstanding shares.
That number consists of an aggregate of 74,334 shares held by the
Pacific Financial Research, Inc. Money Purchase Plan and Trust,
4,596 shares held by the Pacific Financial Research Employees
Savings Plan, 37,613 shares held by Mr. and Mrs. F. Otis Booth,
Jr., as described in the footnote to the table above, 134,935
shares held by Mr. Gipson, as described in the footnote to the
table above, 9,372 shares held by Ms. Bernfeld in an IRA plan,
1,095 shares held by Mr. & Mrs. Sandler in IRA plans, 13,158 shares
held by Mr. Williamson in an IRA plan, 1,750 shares held by Mr. &
Mrs. Kromm, of which 1,452 are held in an IRA plan and 8,334 shares
held by Mr. McNamee, of which 4,494 shares are held in IRA plans,
2,403 shares are held in trust with Mrs. McNamee and 939 shares are
held in IRA plans for Mrs. McNamee.
REMUNERATION OF DIRECTORS, OFFICERS AND OTHERS
Officers and directors of the Fund who are also officers,
directors, shareholders, employees or otherwise "interested
persons" of the Investment Adviser receive no remuneration from the
Fund. Each other director receives an annual fee of $5,000. During
the Fund's last fiscal year, three of the four directors who were
not "interested persons" of the Investment Adviser received
combined fees and no expenses totalling $20,000. There were three
Board of Directors meetings held in calendar year 1996. Each of the
directors attended 100% of those meetings with the exception of Mr.
Booth who attended 33% of those meetings and Mr. Williamson who
attended 67% of the meetings. The Fund has no bonus, profit-sharing,
pension or retirement plan.
RECOMMENDATION AND REQUIRED VOTE
THE BOARD OF DIRECTORS, INCLUDING ALL "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ELECTION OF THE NOMINEES
AS DIRECTORS OF THE FUND.
In the election of directors, the nominees receiving the highest
number of votes, up to the number of directors to be elected, will
be elected directors.
The Investment Adviser
The Investment Adviser, located at 9601 Wilshire Boulevard, Beverly
Hills, California 90210, currently serves as investment adviser to
the Fund under the terms of the Investment Advisory Contract
entered into as of April 1, 1990 (the "Contract" ).
PROPOSAL 2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The 1940 Act requires that the Fund's independent auditors be
selected by a majority of those directors who are not "interested
persons" (as defined in the 1940 Act) of the Fund or the
Investment Adviser; that such selection be submitted for
ratification or rejection at the Annual Meeting of Shareholders;
and that the employment of such independent auditors be conditioned
on the right of the Fund, by vote of a majority of its outstanding
securities at any meeting called for that purpose, to terminate
such employment forthwith without penalty. The Board of Directors
of the Fund, including those directors who are not "interested
persons" of the Fund or the Investment Adviser, have approved the
selection of Ernst & Young LLP as independent auditors for the
calendar year ending December 31, 1997.
Accordingly, such selection of Ernst & Young LLP as
independent auditors of the Fund is submitted to shareholders for
ratification or rejection. To the knowledge of the Fund and the
Investment Adviser, apart from its fees received as independent
auditors, neither the firm of Ernst & Young LLP nor any of its
partners has a direct, or material indirect, financial interest in
the Fund or the Investment Adviser or affiliates of the Investment
Adviser.
A representative of Ernst & Young LLP is expected to be
present at the meeting, will have the opportunity to make a
statement, and will be available to respond to appropriate
questions.
RECOMMENDATION AND REQUIRED VOTE
THE BOARD OF DIRECTORS, INCLUDING ALL "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE FUND.
In order to ratify the selection of Auditors, the affirmative vote
of the holders of a majority of the aggregate shares of the Fund
represented and entitled to vote at the meeting is required.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may
come before the meeting. However, should any such matters properly
come before the meeting, it is the intention of the proxy holders
named in the accompanying form of proxy to vote the proxy in
accordance with their judgment on such matters. Votes withheld from
any nominee for director are counted for purposes of determining
the presence or absence of a quorum for the transaction of
business, but have no other legal effect in the election of
directors under California law. Abstentions and broker non-votes
will also be counted for purposes of determining the presence or
absence of a quorum for the transaction of business.
The Fund will bear the cost of soliciting proxies. In
addition to the use of the mails, proxies may be solicited
personally by telephone and the Fund may pay persons holding shares
of the Fund in their names or those of their nominees for their
expenses in sending soliciting material to their principals.
Proposals of shareholders intended to be presented at the
next annual meeting of the Fund must be received by the Fund for
inclusion in the Fund's proxy statement relating to that meeting at
the principal executive offices of the Fund at 9601 Wilshire
Boulevard, Suite 800, Beverly Hills, California 90210, not later
than December 31, 1997.
NOTICE TO BANKS, BROKERS/DEALERS AND VOTING
TRUSTEES AND THEIR NOMINEES
Please advise the Fund, in care of National Financial Data
Services, Inc., P.O. Box 5229, Kansas City, Missouri 64120, whether
other persons are the beneficial owners of the shares for which
proxies are being solicited from you and, if so, the number of
copies of the Proxy Statement, other soliciting material and Annual
Report you wish to receive in order to supply copies to the
beneficial owners of shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. ALL SHARE-
HOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY
BALLOT IN THE ENCLOSED STAMPED ENVELOPE. IF YOU PLAN TO ATTEND THE
MEETING, YOU MAY CHANGE YOUR VOTE, IF DESIRED, AT THAT TIME.
FEBRUARY 18, 1997
The Board of Directors
Clipper Fund, Inc.
In planning and performing our audit of the financial statements
of Clipper Fund, Inc. for the year ended December 31, 1996, we
considered its internal control structure, including procedures
for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on the internal control
structure.
The management of the Fund is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgements by management are
required to assess the expected benefits and related costs of
internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that
assets are safeguarded against loss from unauthorized use or
disposition and that transactions are executed in accordance with
management's authorization and recorded properly to permit
preparation of financial statements in conformity with generally
accepted accounting principles.
Because of inherent limitations in any internal control
structure, errors or irregularities may occur and not be
detected. Also, projection of any evaluation of the structure to
future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the
effectiveness of the design and operations may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control
structure that might be material weaknesses under standards
established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the
design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and
not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted
no matters involving the internal control structure, including
procedures for safeguarding securities, that we consider to be
material weaknesses as defined above as of December 31, 1996.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
ERNST & YOUNG LLP
Los Angeles, California
January 24, 1997
