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<PAGE> PAGE 2
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<PAGE> PAGE 3
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SIGNATURE MICHAEL KROMM
TITLE SECRETARY
CLIPPER FUND/TM/
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 26, 1999
To Our Shareholders:
The Annual Meeting of Shareholders of Clipper Fund/TM/ will be
held on Friday, March 26, 1999 at 10:00 a.m., at the Peninsula
Beverly Hills, in the Verandah Room, at 9882 Little Santa Monica
Boulevard, 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, 1999; 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, 1999 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 17, 1999
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 26, 1999
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 26, 1999 at 10:00 a.m. at the Peninsula Beverly Hills,
in the Verandah Room, at 9882 Little Santa Monica Boulevard, 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, 1999 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 17, 1999.
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 a 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 16,581,137 shares of capital stock
outstanding as of January 31, 1999.
Proxy materials will be mailed to shareholders of record on or
about February 17, 1999. 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, 1999:
Number of
Shares Owned Percent
Name and Address of Record of Class
Charles Schwab & Co. Inc. (1) 3,699,992 22.4%
Attention: Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104
National Financial Services Corp. (2) 873,941 5.3%
P.O. Box 3908
Church Street Station
New York, N.Y. 10008
Merrill Lynch Group Employee Services (3) 846,998 5.1%
Merrill Lynch Trust Co. TTEF
FBO Qualified Retirement Plans
U/A 01/01/97
265 Davidson Ave, 4th Floor
Somerset, NJ 08873-4120
(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) National Financial Services Corp. is the nominee for many individual
shareholder accounts; the Fund is not aware of the size or identity of
any of the individual accounts.
(3) Merrill Lynch is the trustee for a company sponsored
retirement plan. The plan is the Bozell, Jacobs, Kenyon &
Eckhardt, Inc. Profit Sharing Retirement Plan, 800 Blackstone
Centre, 302 South 36th Street, Omaha, Nebraska, 68131.
PROPOSAL 1. ELECTION OF BOARD OF DIRECTORS
It is proposed that a Board of four (4) 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
is deemed an "interested person" of the Fund because he is an
officer of Pacific Financial Research, Inc. ("PFR" or the
"Investment Advisor") 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
beneficially owned
directly or Aggregate
indirectly on Percent 1998
Position(s) Position(s) January 31, of Compensation
Nominee Name with Fund held since Age 1999 Class from Fund
<S> <S> <C> <C> <C> <C> <C> <C>
James H. Director, 1983 56 190,745 (1) 1.2% $-0-
Gipson* Chairman
and President
F. Otis Director 1984 75 23,927 (3) (2) $5,000
Booth, Jr.
Norman B. Director 1984 67 18,341 (4) (2) $5,000
Williamson
Lawrence P. Director 1984 64 11,555 (5) (2) $5,000
McNamee
</TABLE>
(1) Of the 190,745 shares attributed to Mr. Gipson, 104,325 are
held by the Pacific Financial Research, Inc. Money Purchase Plan
and Trust (the "Plan"), 8,876 are held by the Pacific Financial
Research Employees Savings Plan (the "ESP"), 73,736 are held by
Mr. Gipson of which 3,779 shares are held in an IRA account and
3,808 are held by Mrs. Gipson in an IRA. The 104,325 shares held by
the Plan include 57,857 shares in which Mr. Gipson has a vested
interest, 14,382 shares, Mr. Sandler, Vice President, has a vested
interest, and 2,183 shares in which Michael Kromm, Secretary/Treasurer
of the Fund, has a vested interest. The 8,876 shares held by the ESP
include 1,243 shares in which Mr. Gipson has a vested interest, 1,303
shares in which Mr. Sandler has a vested interest and 969 shares in
which Mr. Kromm has a vested interest.
(2) The percentage of class is less than 1%.
(3) The 23,927 shares attributed to Mr. Booth are held, individually, by him.
(4) The 18,341 shares attributed to Mr. Williamson are held individually
by him in an IRA.
(5) Of the 11,555 shares attributed to Professor McNamee, 1,309
shares are held by him in an IRA and 10,246 shares are held in a trust.
Mr. Gipson has been President of PFR, an investment management
firm, since he founded it in 1980. Prior to 1980, he was a portfolio
manager with Batterymarch Financial Company and with other investment
management firms.
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.
Professor McNamee had been a Professor of Computer Science at UCLA
from 1966 until he retired in 1997.
Mr. Booth has been a private investor and rancher from 1973 to
the present.
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. Messrs. McNamee and Booth
have been directors of the Fund since its commencement of operations
on February 19, 1984. Mr. Williamson was a director and
executive officer of the Fund since its organization and prior to
his retirement from PFR on December 31, 1990. He currently serves
as a director to 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. Sandler, age
44, Vice President, was initially elected as a Director of the
Fund in 1991. He resigned as a Director of the Fund on May 29,
1997, the day on which the Adviser, Pacific Financial Research
became affiliated with United Asset Management Corp. Mr. Kromm,
age 53, 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 (6 persons)
owned beneficially 252,238 shares of the Capital stock on January
31, 1999, approximately 1.5% of the outstanding shares. That
number consists of an aggregate of 104,325 shares held by the
Pacific Financial Research, Inc. Money Purchase Plan and Trust,
8,876 shares held by the Pacific Financial Research Employees
Savings Plan, 23,927 shares held by Mr. F. Otis Booth, Jr., as
described in the footnote to the table above, 77,544 shares held
by Mr. Gipson, as described in the footnote to the table above,
18,341 shares held by Mr. Williamson in an IRA plan, 2,510 shares
held by Mr. & Mrs. Kromm, of which 2,086 are held in an IRA plan
and 11,555 shares held by Professor McNamee, of which 1,309 shares
are held in IRA plans and 10,246 shares are held in Trust, and 5,161
shares are held by Mr. Sandler, of which 1,526 shares are held in IRA plans.
RENUMERATION 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 $15,000.
There were three Board of Director's meetings and one shareholder
meeting held in calendar year 1998. Each of the directors attended 100% of
those meetings except for Mr. Booth and Mr. Williamson who attended two
of the three 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.
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, 1999.
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, 1999.
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 SHAREHOLDERS
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 17, 1999
CLIPPER FUND, INC.
c/o NFDS, P.O. BOX 419152
Kansas City, Missouri 64141-6152
ANNUAL MEETING OF SHAREHOLDERS - MARCH 26, 1999
This proxy is being solicited on behalf of the Board of Directors. The
undersigned hereby appoints James H. Gipson, proxyholder, with full power
of substitution, to vote for the undersigned at the Annual Meeting of
Shareholders of Clipper Fund, Inc. to be held on March 26, 1999, and at
any adjournments thereof, with respect to the matters on the reverse side
hereof, which are more fully described in the Proxy Statement dated
February 17, 1999, receipt of which is acknowledged by the undersigned.
THIS PROXY WILL BE VOTED AS SPECIFIED, OR, IF NO SPECIFICATIONS IS MADE,
ACCORDING TO THE RECOMMENDATIONS OF MANAGEMENT IN THE PROXY STATEMENT.
UNLESS OTHERWISE SPECIFIED, THE PROXYHOLDER NAMED HEREON, OR HIS
SUBSTITUTES, MAY CAST AN EQUAL NUMBER OF VOTES FOR EACH NOMINEE FOR
DIRECTOR OR CUMULATE SUCH VOTES AND DISTRIBUTE THEM AMONG THE NOMINEES AT
THE DISCRETION OF SAID PROXYHOLDERS.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name is printed. Each joint tenant should sign.
Executors, administrators, trustees or guardians should give full titles
when signing. Please sign, date and return your Proxy promptly in the
enclosed envelope, which requires no postage if mailed in the United States.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------ -------------------------------
- ------------------------------ -------------------------------
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
Mark box at right if an address change or comment
has been noted on the reverse side of this card. [ ]
1. Election of Directors
The election of the nominees for Directors specified in the
Proxy Statement.
For All With- For All
Nominees hold Except
F. Otis Booth, Jr. Lawrence P. McNamee
James H. Gipson Norman B. Williamson
NOTE: If you do not wish your shares voted "For" a particulr nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s). Your shares will be voted for the remaining nominee(s).
For Against Abstain
2. Ratification of selection by Board of
Directors of Ernst & Young LLP as
independent auditors for the year ended
December 31, 1999.
3. Such other business as may properly come before the meeting or at any
adjournment thereof. As to such business the undersigned hereby confers
discretionary authority.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
--------------------- ------------------------
Shareholder sign here Co-owner sign here
Report of Independent Auditors
To the Shareholders and Board of Directors of Clipper Fund, Inc.
In planning and performing our audit of the financial statements
of Clipper Fund, Inc. for the year ended December 31, 1998, we considered its
internal control, including control activities 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, and not to provide assurance on the internal
control.
The management of Clipper Fund, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgements by management are required to
assess the expected benefits and related costs of controls. Generally,
controls that are relevant to an audit pertain to the entity's objective
of preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets
against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or
fraud may occur and not be detected. Also, projection of any
evaluation of internal control 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 internal control would not necessarily
disclose all matters in internal control 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 one or more of the
specific internal control components does not reduce to a
relatively low level the risk that errors or fraud 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 internal
control and its operation, including controls for safeguarding
securities, that we consider to be material weaknesses as defined
above at December 31, 1998.
The report is intended solely for the information and use of the
board of directors and management of Clipper Fund, Inc. and the
Securities and Exchange Commission and is not intended to be and
should not be used by anyone other than these specified parties.
ERNST & YOUNG LLP
Los Angeles, California
January 22, 1999
