As filed with the Securities and Exchange Commission on July 13, 2001
Registration No. 2-29858
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
DAVIS NEW YORK VENTURE FUND, INC.
On behalf of its series DAVIS NEW YORK VENTURE FUND
(Exact Name of Registrant as Specified in Charter)
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706
(Address of Principal Executive Offices)
520-434-3771
(Registrant's Telephone Number)
Thomas D. Tays, Esq.
Vice President & General Counsel
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706
520-434-3771
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
Title of Securities Being Registered: for Class A, Class B, Class C and Class Y
shares of Davis New York Venture Fund
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for Davis New York Venture Fund, Inc., on behalf of its series
Davis Growth & Income Fund and Prospectus on behalf of its series Davis New
York Venture Fund.
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
FORM N-14
DAVIS NEW YORK VENTURE FUND, INC.
Cross Reference Sheet
Part A of Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of Document
- - -------------------------------------------------------------------------
1.(a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2.(a) *
(b) Table of Contents
3.(a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4.(a) Synopsis; Approval of the Reorganization; Comparison between Davis
Growth & Income Fund and Davis New York Venture Fund; Method of
Carrying Out the Reorganization; Additional Information
(b) Approval of the Reorganization - Capitalization Table
5 (a) Prospectus of Davis New York Venture Fund (see Part B);
Annual Report of Davis New York Venture Fund (see Part B); Semi-Annual
Report of Davis New York Venture Fund (see Part B); Statement of
Additional Information of Davis New York Venture Fund (see Part B);
Synopsis; Comparison Between Davis Growth & Income Fund and Davis New
York Venture Fund.
(b) *
(c) *
(d) *
(e) Additional Information
(f) Additional Information
6 (a) Prospectus of Davis Growth & Income Fund (see Part B); Annual Report of
Davis Growth & Income Fund (see Part B); Semi-Annual Report of Davis
Growth & Income Fund (see Part B); Statement of Additional Information
of Davis Growth & Income Fund(see Part B); Synopsis; Comparison
Between Davis Growth & Income Fund and Davis New York Venture Fund.
(b) Additional Information
(c) *
(d) *
7 (a) Introduction; Synopsis
(b) *
(c) Introduction; Synopsis; Comparison Between Davis Growth & Income Fund
and Davis New York Venture Fund.
8.(a) *
(b) *
9. *
Part B of Form N-14
Item No. Statement of Additional Information Heading
10 Cover Page
11 Table of Contents
12(a) Statement of Additional Information of Davis New York Venture Fund
(b)*
(c)*
13(a) Statement of Additional Information of Davis Growth & Income Fund
(b)*
(c)*
14 Shared Statement of Additional Information of Davis New York Venture
Fund and Davis Growth & Income Fund, Annual Report of Davis Growth &
Income Fund as of 07/31/00; Semi-Annual Report of Davis Growth & Income
Fund as of 01/31/01; Annual Report of Davis New York Venture Fund as of
07/31/00; Semi-Annual Report of Davis New York Venture Fund as of
01/31/01.
Part C of Form N-14
Item No. Other Information Heading
15. Indemnification
16. Exhibits
17. Undertakings
- ----------------
* Not Applicable or negative answer
DAVIS GROWTH & INCOME FUND
Proxy For Special Shareholders Meeting To Be Held __xx__, 2001
The undersigned shareholder of Davis Growth & Income Fund, does hereby appoint
Kenneth Eich, Sharra Reed and Thomas Tays, and each of them, as
attorneys-in-fact and proxies of the undersigned, with full power of
substitution, to attend the Special Meeting of Shareholders of Davis Growth &
Income Fund to be held at 3480 E. Britannia Drive, Suite 108, Tucson, Arizona
85706, at 9:00 a.m. Mountain Time on __xx__, 2001, or any adjournments thereof,
and to vote the shares held in the name of the undersigned on the record date
for said meeting on the Proposal specified below. Said attorneys-in-fact shall
vote in accordance with their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHICH RECOMMENDS A VOTE
"FOR" THE PROPOSAL BELOW. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
INDICATED BELOW OR "FOR" THE PROPOSAL IF NO CHOICE IS INDICATED.
Please mark your proxy, sign and date it below and return it promptly in the
accompanying envelope, which requires no postage if mailed in the United
States.
The Proposal:
To approve an Agreement and Plan of Reorganization between Davis New York
Venture Fund and Davis Growth & Income Fund, each an authorized series of Davis
New York Venture Fund, Inc., and the transactions contemplated thereby,
including: (a) the transfer of substantially all of the assets of Davis Growth
& Income Fund to Davis New York Venture Fund in exchange for Class A, Class B,
Class C and Class Y shares of Davis New York Venture Fund, (b) the distribution
of such shares of Davis New York Venture Fund to the corresponding Class A,
Class B, Class C and Class Y shareholders of Davis Growth & Income Fund in
liquidation of Davis Growth & Income Fund, and (c) the cancellation of the
outstanding shares of Davis Growth & Income Fund.
FOR______ AGAINST______ ABSTAIN_______
Dated: _________________________________, 2001
(Month) (Day)
- -----------------------------------------------
Signature(s)
- -----------------------------------------------
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS HEREON. When signing as
custodian, attorney, executor, administrator, trustee, etc., please give your
full title as such. All joint owners should sign this proxy. If the account is
registered in the name of a corporation, partnership or other entity, a duly
authorized individual must sign on its behalf and give his or her title.
Dear Davis Growth & Income Fund Shareholder:
As stewards of our shareholders' capital, we are constantly alert to
opportunities to better serve their needs and interests. I am writing to you
today to let you know about one of those opportunities--a positive change that
has been proposed for Davis Growth & Income Fund. After careful consideration,
the Board of Directors has determined that it would be in the best interest of
shareholders of Davis Growth & Income Fund to reorganize into Davis New York
Venture Fund. If the reorganization is approved by shareholders, upon closing
all shares of Davis Growth & Income Fund will be exchanged for shares of Davis
New York Venture Fund.
A special meeting of shareholders of Davis Growth & Income Fund is scheduled to
take place on __xx__, 2001 and we are asking for your participation.
You do not need to attend the meeting to participate. It is important that you
take a few minutes to read the enclosed material and vote your shares. You can
vote by mailing the enclosed proxy voting card in the postage-paid envelope.
Why does the Board of Directors recommend this change?
After careful review the Directors concluded that the proposed tax free
reorganization is in the best interests of shareholders. Both Davis Growth &
Income Fund and Davis New York Venture Fund use the Davis Investment Philosophy
to invest in the common stock of quality, overlooked growth companies at value
prices and to hold them for the long term. Both funds currently own many of the
same companies. Davis Growth & Income Fund has been in operation almost three
years, and over that time period Davis New York Venture Fund has delivered much
stronger investment performance. Because of its substantially larger asset
base, Davis New York Venture Fund has lower operating expenses. Although past
performance is not predictive of future results, shareholders of Davis Growth &
Income Fund would have an opportunity to become shareholders of a fund with a
better long-term performance history and lower operating expenses.
The Board also considered that the proposed reorganization would be a tax-free
reorganization, and there would be no sales charge imposed in effecting the
reorganization.
How Can Shareholders Vote their Shares?
Voting your shares is easy and will only take a few minutes. Mark your votes on
the enclosed proxy card, sign your name exactly as it appears on your latest
account statement. Be sure to date and mail your vote using the postage-paid
envelope provided.
If you have questions on any part of this document, please call Davis Funds
Shareholder Services at
1-800-279-2279. A customer service representative will be pleased to assist you
with any questions or instructions on how to vote your shares.
The information on these pages is only a summary. Before you vote, please read
the following proxy statement.
It's important to vote as soon as you can.
Sincerely,
Christopher C. Davis
President
__xx__, 2001
DAVIS GROWTH & INCOME FUND 2949 East
Elvira Road, Suite 101, Tucson, Arizona 85706
1.800.279.0279
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ___XX____, 2001
To the Shareholders of Davis Growth & Income Fund:
A Special Meeting of the Shareholders of Davis Growth & Income Fund, a series
of Davis New York Venture Fund, Inc., a registered management investment
company, is scheduled be held at 3480 East Britannia Drive Suite 108, Tucson,
Arizona 85706, at 9 a.m. Mountain Standard Time on ___xx___, 2001, or any
adjournments thereof (the "Meeting"), for the following purposes:
1. To approve an Agreement and Plan of Reorganization between Davis Growth &
Income Fund and Davis New York Venture Fund, each an authorized series of Davis
New York Venture Fund, Inc., and the transactions contemplated thereby,
including (a) the transfer of substantially all the assets of Davis Growth &
Income Fund to Davis New York Venture Fund in exchange for Class A, Class B,
Class C and Class Y shares of Davis New York Venture Fund, (b) the distribution
of such shares of Davis New York Venture Fund to the corresponding Class A,
Class B, Class C and Class Y shareholders of Davis Growth & Income Fund in
liquidation of Davis Growth & Income Fund , and (c) the cancellation of the
outstanding shares of Davis Growth & Income Fund (the "Proposal").
2. To act upon such other matters as may properly come before the Meeting.
Shareholders of record at the close of business on __xx__, 2001, are entitled
to notice of, and to vote at, the Meeting. The Proposal is more fully discussed
in the Proxy Statement and Prospectus. Please read it carefully before telling
us, through your proxy or in person, how you wish your shares to be voted. The
Board of Directors of Davis Growth & Income Fund, an authorized series of Davis
New York Venture Fund, Inc., recommends a vote in favor of the Proposal. WE
URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Thomas Tays, Secretary
__xx__, 2001
- - ----------------------------------------------------------------------
Shareholders who do not expect to attend the Meeting are requested to indicate
voting instructions on the enclosed proxy and to sign, date and return it in
the accompanying postage-paid envelope. To avoid unnecessary duplicate
mailings, we ask your cooperation in promptly mailing your proxy no matter how
large or small your holdings may be.
PROXY STATEMENT AND PROSPECTUS
__XX__, 2001
Relating to the acquisition of the assets of
DAVIS GROWTH & INCOME FUND
by and in exchange for
Class A, Class B, Class C and Class Y shares of
DAVIS NEW YORK VENTURE FUND
Both funds are authorized series of Davis New York Venture Fund, Inc.
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706
1-800-270-0279
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD __XX__, 2001
This Proxy Statement of Davis Growth & Income Fund solicits proxies from Davis
Growth & Income Fund shareholders ("Shareholders") to be voted at a special
meeting of Shareholders to approve the Agreement and Plan of Reorganization
(the "Reorganization Agreement") and the transactions contemplated thereby (the
"Reorganization") between Davis Growth & Income Fund and Davis New York Venture
Fund.
This Proxy Statement also constitutes a prospectus of Davis New York Venture
Fund included in a registration statement (the "Registration Statement") filed
by Davis New York Venture Fund, Inc., with the Securities and Exchange
Commission (the "SEC"). The Registration Statement registers Class A, Class B,
Class C and Class Y shares of Davis New York Venture Fund to be offered to
Shareholders pursuant to the Reorganization Agreement in exchange for the net
assets of Davis Growth & Income Fund.
This Proxy Statement and Prospectus sets forth information about Davis New York
Venture Fund and the Reorganization that shareholders of Davis Growth & Income
Fund should know before voting on the proposed Reorganization. A copy of the
most recent prospectus for Davis New York Venture Fund, dated December 1, 2000,
is enclosed and incorporated herein by reference. Shareholders owning Class A,
B, or C shares will receive a Class A, B, C prospectus. Shareholders owning
Class Y shares will receive a Class Y prospectus. A prospectus for Davis Growth
& Income Fund, dated December 1, 2000, and amended June 18, 2001, and a
Statement of Additional Information (Davis Growth & Income Fund and Davis New
York Venture Fund share a single Statement of Additional Information) dated
December 1, 2000, and amended July 23, 2001, have been filed with the SEC and
are available without charge by calling Davis Funds Shareholder Services at
1-800-279-0279.
1
A Statement of Additional Information relating to the Reorganization described
in this Proxy Statement and Prospectus, dated __xx__, 2001 ("Proxy/Prospectus
Statement of Additional Information") has been filed with the SEC as part of
the Registration Statement, and is incorporated herein by reference. You may
obtain a copy of the Proxy/Prospectus Statement of Additional Information
without charge by calling Davis Funds Shareholder Services at 1-800-279-0279.
The Proxy/Prospectus Statement of Additional Information includes the following
documents: (i) Davis New York Venture Fund's current prospectus for Class A, B
and C shares and current prospectus for Class Y shares; (ii) Davis Growth &
Income Fund's current prospectus for Class A, B and C shares and current
prospectus for Class Y shares; (iii) Davis New York Venture Fund's and Davis
Growth & Income Fund's shared Statement of Additional Information dated
December 1, 2001, as amended July 23, 2001; (iv) Davis New York Venture Fund
Annual Report as of July 31, 2000, and Semi-Annual Report as of January 31,
2001; and (v) Davis Growth & Income Fund Annual Report as of July 31, 2000, and
Semi-Annual Report as of January 31, 2001.
If Shareholders vote to approve the Reorganization Agreement, they would
receive, as of the Valuation Date (defined in the Proxy Statement and
Prospectus), shares of Davis New York Venture Fund equal in value to their
investment in the same Class of shares of Davis Growth & Income Fund. Davis
Growth & Income Fund then would be liquidated. Investors are advised to read
and retain this Proxy Statement and Prospectus for future reference.
Mutual fund shares 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 U.S. government
agency. Mutual fund shares involve investment risks including the possible loss
of principal.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED ON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated __xx__, 2001.
2
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
TOPIC PAGE
- ----- ----
Introduction.................................................................5
General.................................................................5
How To Vote.............................................................6
Costs of the Solicitation and the Reorganization........................7
Record Date; Vote Required; Share Information...........................9
Comparative Fee Tables.......................................................9
Synopsis....................................................................13
Purpose of the Meeting.................................................13
Parties to the Reorganization..........................................13
Shares to be Issued....................................................14
The Reorganization.....................................................14
Reasons for the Reorganization.........................................15
Tax Consequences of the Reorganization.................................15
Investment Objectives and Strategies; Other Fund Information ..........15
Management and Rule 12b-1 Distribution Plan Fees.......................15
Purchases, Exchanges and Redemptions...................................15
Principal Risk Factors......................................................18
Approval of the Reorganization (The Proposal)...............................20
Reasons for the Reorganization.........................................21
The Reorganization.....................................................22
Tax Aspects of the Reorganization......................................24
Capitalization Tables (Unaudited)......................................25
Comparison between Davis Growth & Income Fund
and Davis New York Venture Fund........................................25
Investment Objectives and Strategies...................................25
Principal Investments..................................................25
Other Investment Techniques and Strategies.............................27
Investment Restrictions................................................27
Description of Brokerage Practices.....................................27
Expense Ratios and Performance.........................................29
Shareholder Services...................................................30
Rights of Shareholders.................................................31
Organization and History...............................................32
Management and Distribution Arrangements...............................32
Purchase of Additional Shares..........................................34
Dividends and Distributions............................................34
Method of Carrying Out the Reorganization...................................35
Additional Information......................................................37
Financial Information..................................................37
Public Information.....................................................37
Other Business..............................................................38
3
EXHIBIT A - Other Investment Techniques and Strategies, ...................A-1
EXHIBIT B - Investment Restrictions, ......................................B-1
EXHIBIT C - Agreement and Plan of Reorganization by and between
Davis New York Venture Fund and Davis Growth & Income Fund,
each an authorized series of Davis New York Venture Fund, Inc., ......C-1
EXHIBIT D - Average Annual Total Returns for the Funds, ...................D-1
EXHIBIT E - Performance Graphs for Davis New York Venture Fund, ...........E-1
ENCLOSURES - Prospectus of Davis New York Venture Fund, December 1, 2000,
as amended July 23, 2001
4
PROXY STATEMENT AND PROSPECTUS
__XX__, 2001
Relating to the acquisition of the assets of
DAVIS GROWTH & INCOME FUND
by and in exchange for
Class A, Class B, Class C and Class Y shares of
DAVIS NEW YORK VENTURE FUND
Both funds are authorized series of Davis New York Venture Fund, Inc.
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706
1-800-270-0279
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD __XX__, 2001
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the shareholders of
Davis Growth & Income Fund, an authorized series of Davis New York Venture
Fund, Inc., a registered management investment company, in connection with the
solicitation by its Board of Directors (the "Board") of proxies to be voted at
the Special Meeting of Shareholders of Davis Growth & Income Fund to be held at
3480 East Britannia Drive Suite 108, Tucson Arizona 85706, at 9 a.m. Mountain
Standard Time on __xx__, 2001, or at any adjournments thereof ("Meeting"). It
is expected that the mailing of this Proxy Statement and Prospectus will
commence on or about __xx__, 2001.
At the Meeting, shareholders of Davis Growth & Income Fund will be asked to
approve an Agreement and Plan of Reorganization (the "Reorganization
Agreement") between Davis Growth & Income Fund and Davis New York Venture Fund,
each an authorized series of Davis New York Venture Fund, Inc., and the
transactions contemplated thereby (the "Reorganization"), including: (a) the
transfer of substantially all the assets of Davis Growth & Income Fund to Davis
New York Venture Fund in exchange for Class A, Class B, Class C and Class Y
shares of Davis New York Venture Fund, (b) the distribution of such shares of
Davis New York Venture Fund to the corresponding Class A, Class B, Class C and
Class Y shares shareholders of Davis Growth & Income Fund in liquidation of
Davis Growth & Income Fund, and (c) the cancellation of the outstanding shares
of Davis Growth & Income Fund. A copy of the Reorganization Agreement is
attached hereto as Exhibit C and is incorporated by reference herein.
5
Davis New York Venture Fund currently offers Class A, Class B, Class C and
Class Y shares. Class A shares generally are sold with a sales charge imposed
at the time of purchase. There is no initial sales charge on purchases of Class
B or Class C shares; however, a contingent deferred sales charge ("CDSC") may
be imposed, depending on when the shares are sold. Class Y shares are sold only
to certain institutional investors and without a sales charge. The Class A,
Class B, Class C and Class Y shares offered in this Proxy Statement and
Prospectus and issued pursuant to the Reorganization would be issued at net
asset value without a sales charge, and no contingent deferred sales charge
would be imposed on any Davis Growth & Income Fund shares exchanged in the
Reorganization. However, any contingent deferred sales charge that applies to
Davis Growth & Income Fund shares at the time of the Reorganization would
continue to apply to Davis New York Venture Fund shares received in the
Reorganization. Additional information with respect to the fees and expenses
charged by Davis New York Venture Fund is set forth herein, in the prospectus
of Davis New York Venture Fund accompanying this Proxy Statement and Prospectus
and in the Proxy/Prospectus Statement of Additional Information, both of which
are incorporated herein by reference.
How To Vote
Shareholders are requested to vote by mail. complete, date, sign and promptly
return the enclosed proxy card in the accompanying envelope. If you properly
execute and return your proxy card prior to the meeting, your shares will be
voted in accordance with the instructions marked on the proxy card. If no
instructions are marked on the proxy card, the proxies will be voted FOR the
reorganization described in this proxy statement.
The Directors do not intend to present any other business at the Meeting. If,
however, any other matters are properly brought before the Meeting, the persons
named in the accompanying form of proxy will vote thereon in accordance with
their judgment. If you object to our voting other matters on your behalf,
please tell us so in writing before the meeting.
You may revoke your proxy at any time prior to its exercise by voting in person
at the meeting or by submitting, before the meeting, written notice of
revocation or a later-dated proxy.
Shares owned of record by broker-dealers for the benefit of their customers
("street account shares") will be voted by the broker-dealer based on
instructions received from its customers. If no instructions are received, and
the broker-dealer does not have discretionary power to vote such street account
shares under applicable stock exchange rules, the shares represented thereby
would be considered to be present at the Meeting for purposes of determining
the quorum, but would have the same effect as a vote "against" the proposed
Reorganization. If a shareholder executes and returns a proxy but fails to
indicate how the votes should be cast, the proxy would be voted in favor of the
Reorganization.
6
Costs of the Solicitation and the Reorganization
IMPORTANT SERVICE PROVIDERS
ADVISER. Davis Selected Advisers, L.P.
SUB-ADVISER. Davis Selected Advisers - NY, Inc.
PRINCIPAL UNDERWRITER. Davis Distributors, LLC
INDEPENDENT ACCOUNTANTS. KPMG LLC
COUNSEL. D'Ancona & Pflaum
CUSTODIAN. State Street Bank
TRANSFER AGENT. Boston Financial Data Services
The address for Davis Selected Advisers, L.P., and Davis Distributors, LLC, is:
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706. The address for Davis
Selected Advisers - NY, Inc., is: 609 Fifth Avenue, New York, New York 10017.
Davis Growth & Income Fund has retained D.F. King & Co., Inc., a proxy
solicitation firm, to assist in the solicitation of proxies. The cost of these
services will depend upon the amount and types of services rendered. The
expenses of solicitation, and the costs of preparing, printing and mailing this
Proxy Statement and Prospectus, will be borne by Davis Growth & Income Fund.
Any documents such as existing prospectuses or annual reports that are included
in that mailing will be a cost of the particular fund issuing the document.
Davis Growth & Income Fund also will reimburse certain parties for their
expenses in forwarding proxy materials to beneficial owners of fund shares.
In addition to the solicitation of proxies by mail, proxies may be solicited by
officers of Davis Growth & Income Fund or officers and employees of Davis
Selected Advisers, L.P., (the "Adviser") or its affiliates, personally or by
telephone or other electronic means; any expenses so incurred would be borne by
the Adviser.
With respect to the Reorganization, the cost of printing and mailing the
proxies and proxy statements will be borne by Davis Growth & Income Fund. Any
documents, such as existing prospectuses or annual reports, that are included
in that mailing will be a cost of the Fund issuing the document. Any other
out-of-pocket expenses of Davis New York Venture Fund and Davis Growth & Income
Fund associated with this reorganization, including legal, accounting and
transfer agent expenses, will be borne by Davis Growth & Income Fund and Davis
New York Venture Fund, respectively, in the amounts so incurred by each, or, if
named collectively by both Funds, will be shared equally.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on __xx__, 2001, as the record date
("Record Date") for the determination of shareholders entitled to notice of,
and to vote at, the Meeting. The affirmative vote of a majority of Davis Growth
& Income Fund's outstanding voting power, is required to approve the proposed
Reorganization. The holder of each full share of Davis Growth & Income Fund
outstanding as of the close of business on the record date is entitled to one
vote for each dollar of net asset value and each fractional share is entitled
to a proportionate share of one vote for each dollar of net asset value on each
matter properly submitted at the meeting. Only shareholders of Davis Growth &
Income Fund will vote on the Reorganization. The vote of shareholders of Davis
New York Venture Fund is not being solicited.
7
At the close of business on the Record Date the following votes were
outstanding:
TOTAL VOTES OUTSTANDING
-----------------------
FUND NAME CLASS A CLASS B CLASS C CLASS Y TOTAL
- --------- ------- ------- ------- ------- -----
Davis New York
Venture Fund Xx Xx Xx Xx Xx
Davis Growth
& Income Fund Xx Xx Xx Xx Xx
The presence in person or by proxy of shareholders entitled to cast a majority
of the Davis Growth & Income Fund's votes at the Meeting constitutes a quorum
for the transaction of business at the Meeting. To the knowledge of Davis New
York Venture Fund and Davis Growth & Income Fund, only those persons listed in
the following table, own of record or beneficially 5% or more of any Class of
shares issued by either fund as of the Record Date.
SHAREHOLDERS OWNING MORE THAN 5% OF SHARES OF ANY CLASS
% OF CLASS NUMBER OF
NAME AND ADDRESS OF SHAREHOLDER OUTSTANDING SHARES OWNED
- ------------------------------- ----------- ------------
DAVIS NEW YORK VENTURE FUND - CLASS A SHARES
DAVIS NEW YORK VENTURE FUND - CLASS B SHARES
DAVIS NEW YORK VENTURE FUND - CLASS C SHARES
DAVIS NEW YORK VENTURE FUND - CLASS Y SHARES
DAVIS GROWTH & INCOME FUND - CLASS A SHARES
DAVIS GROWTH & INCOME FUND - CLASS B SHARES
DAVIS GROWTH & INCOME FUND - CLASS C SHARES
DAVIS GROWTH & INCOME FUND - CLASS Y SHARES
8
In addition, as of the Record Date, Officers and Directors owned the following
percentages of each Class of shares issued by the funds:
Class A Class B Class C Class Y
Davis New York Venture Fund * * * *
Davis Growth & Income Fund xx% * * *
* Indicates that officers and directors as a group owned less than 1% of the
outstanding shares of the indicated Class of shares.
COMPARATIVE FEE TABLES
Davis Growth & Income Fund and Davis New York Venture Fund each pay a variety
of expenses directly for management of their assets and business affairs,
distribution of their shares and other services. Those expenses are subtracted
from each fund's assets to calculate each fund's net asset value per share. All
shareholders therefore pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges and account transaction charges. The
following tables are provided to help you understand and compare the fees and
expenses related to owning shares of Davis Growth & Income Fund with the fees
and expenses related to owning shares of Davis New York Venture Fund. The pro
forma expenses of the surviving Davis New York Venture Fund show what the fees
and expenses are expected to be after giving effect to the Reorganization.
SHAREHOLDER FEES (CHARGES PAID DIRECTLY FROM A SHAREHOLDER'S INVESTMENT):*
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
------ ------ ------ ------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering
price) 4.75% None None None
Maximum Deferred Sales Charge (Load)
Imposed on Redemptions (as a
percentage of the lesser of the
net asset value of the shares
redeemed or the total cost
of such shares) 0.75% 4.00% 1.00% None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None None
Exchange Fee None None None None
* Both Davis Growth & Income Fund shareholders and Davis New York Venture
Fund shareholders pay the same direct expenses. There will be no
additional sales charges or deferred sales charges incurred due to the
reorganization.
9
FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS):
Shown following are the unaudited expenses for both funds for the 6-month
period ended January 31, 2001, and pro forma expense information (as an
estimate of operating expenses) for Davis New York Venture Fund after giving
effect to the Reorganization. Expenses may vary in future years. All amounts
shown are a percentage of net assets of each class of shares of the funds.
"Other expenses" include the transfer agent fees, custodial expenses and any
accounting and legal expenses either fund pays.
PRO FORMA DAVIS
NEW YORK
CLASS A OPERATING EXPENSES DAVIS GROWTH & DAVIS NEW YORK VENTURE FUND (POST
(% OF AVERAGE DAILY NET ASSETS) INCOME FUND VENTURE FUND REORGANIZATION)
- ------------------------------- ----------- ------------ ---------------
Management Fees 0.xx% 0.xx% 0.xx%
Distribution and Service (12b-1) Fees 0.xx% 0.xx% 0.xx%
Other Expenses 0.xx% 0.xx% 0.xx%
Total Annual Operating Expenses 0.xx% 0.xx% 0.xx%
PRO FORMA DAVIS
NEW YORK
CLASS A OPERATING EXPENSES DAVIS GROWTH & DAVIS NEW YORK VENTURE FUND (POST
(% OF AVERAGE DAILY NET ASSETS) INCOME FUND VENTURE FUND REORGANIZATION)
- ------------------------------- ----------- ------------ ---------------
Management Fees 0.xx% 0.xx% 0.xx%
Distribution and Service (12b-1) Fees 0.xx% 0.xx% 0.xx%
Other Expenses 0.xx% 0.xx% 0.xx%
Total Annual Operating Expenses 0.xx% 0.xx% 0.xx%
PRO FORMA DAVIS
NEW YORK
CLASS B OPERATING EXPENSES DAVIS GROWTH & DAVIS NEW YORK VENTURE FUND (POST
(% OF AVERAGE DAILY NET ASSETS) INCOME FUND VENTURE FUND REORGANIZATION)
- ------------------------------- ----------- ------------ ---------------
Management Fees 0.xx% 0.xx% 0.xx%
Distribution and Service (12b-1) Fees 0.xx% 0.xx% 0.xx%
Other Expenses 0.xx% 0.xx% 0.xx%
Total Annual Operating Expenses 0.xx% 0.xx% 0.xx%
PRO FORMA DAVIS
NEW YORK
CLASS C OPERATING EXPENSES DAVIS GROWTH & DAVIS NEW YORK VENTURE FUND (POST
(% OF AVERAGE DAILY NET ASSETS) INCOME FUND VENTURE FUND REORGANIZATION)
- ------------------------------- ----------- ------------ ---------------
Management Fees 0.xx% 0.xx% 0.xx%
Distribution and Service (12b-1) Fees 0.xx% 0.xx% 0.xx%
Other Expenses 0.xx% 0.xx% 0.xx%
Total Annual Operating Expenses 0.xx% 0.xx% 0.xx%
PRO FORMA DAVIS
NEW YORK
CLASS Y OPERATING EXPENSES DAVIS GROWTH & DAVIS NEW YORK VENTURE FUND (POST
(% OF AVERAGE DAILY NET ASSETS) INCOME FUND VENTURE FUND REORGANIZATION)
- ------------------------------- ----------- ------------ ---------------
Management Fees 0.xx% 0.xx% 0.xx%
Distribution and Service (12b-1) Fees 0.xx% 0.xx% 0.xx%
Other Expenses 0.xx% 0.xx% 0.xx%
Total Annual Operating Expenses 0.xx% 0.xx% 0.xx%
10
EXAMPLES:
The examples that follow are intended to help you compare the cost of investing
in each fund. These examples assume that you invest $10,000 in a class of
shares of Davis Growth & Income Fund, Davis New York Venture Fund or Davis New
York Venture Fund, after giving effect for the Reorganization for the time
periods indicated and assuming that you reinvest your dividends and
distributions.
The first example assumes that you redeem all shares at the end of those
periods. The second example assumes that you keep your shares. Both examples
also assume that your investment has a 5% return each year and that the class'
operating expenses remain the same as in the previous tables. Your actual costs
may be higher or lower because expenses would vary over time. Based on these
assumptions, the expenses would be as follows:
DAVIS GROWTH & INCOME FUND
SIX-MONTH PERIOD ENDING 01/31/01
IF YOU SELL YOUR SHARES IN... 1 YEAR 5 YEARS 10 YEARS
- ----------------------------- ------ ------- --------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
IF YOU STILL HOLD YOUR SHARES AFTER... 1 YEAR 5 YEARS 10 YEARS
- ----------------------------- ------ ------- --------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
* Class B shares' expenses for the 10-year period include two years of Class
A shares' expenses, since Class B shares automatically convert to Class A
shares after eight years.
DAVIS NEW YORK VENTURE FUND
SIX-MONTH PERIOD ENDING 01/31/01
IF YOU SELL YOUR SHARES IN... 1 YEAR 5 YEARS 10 YEARS
- ----------------------------- ------ ------- --------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
IF YOU STILL HOLD YOUR SHARES AFTER... 1 YEAR 5 YEARS 10 YEARS
- ----------------------------- ------ ------- --------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
11
* Class B shares' expenses for the 10-year period include two years of Class
A shares' expenses, since Class B shares automatically convert to Class A
shares after eight years.
PRO FORMA DAVIS NEW YORK VENTURE FUND (POST-REORGANIZATION)
SIX-MONTH PERIOD ENDING 01/31/01
IF YOU SELL YOUR SHARES IN... 1 YEAR 5 YEARS 10 YEARS
- ----------------------------- ------ ------- --------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
IF YOU STILL HOLD YOUR SHARES AFTER... 1 YEAR 5 YEARS 10 YEARS
- ----------------------------- ------ ------- --------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
* Class B shares' expenses for the 10-year period include two years of Class
A shares' expenses, since Class B shares automatically convert to Class A
shares after eight years.
In the examples where the shares are redeemed, expenses include the initial
sales charge for Class A and the applicable Class B or Class C contingent
deferred sales charge. In the examples where the shares are not redeemed, the
Class A expenses include the sales charge, but Class B and Class C expenses do
not include the contingent deferred sales charges.
SYNOPSIS
The following is a synopsis of certain information contained in or incorporated
by reference in this Proxy Statement and Prospectus and presents key
considerations for shareholders of Davis Growth & Income Fund to assist them in
determining whether to approve the Reorganization. This synopsis is only a
summary and is qualified in its entirety by the more detailed information
contained in or incorporated by reference in this Proxy Statement and
Prospectus and by the Reorganization Agreement, which is Exhibit C attached
hereto. Shareholders should carefully review this Proxy Statement and
Prospectus and the Reorganization Agreement in their entirety and, in
particular, the current prospectus of Davis New York Venture Fund that
accompanies this Proxy Statement and Prospectus and is incorporated herein by
reference.
Purpose of the Meeting
At the Meeting, shareholders of Davis Growth & Income Fund will be asked to
approve the Reorganization.
Parties to the Reorganization
Both Davis Growth & Income Fund and Davis New York Venture Fund are authorized
series of Davis New York Venture Fund, Inc., which was organized in 1968 as a
12
Maryland corporation. Both Davis Growth & Income Fund and Davis New York
Venture Fund are diversified, open-end mutual funds. Both funds are governed by
the same Articles of Incorporation and By-Laws and are under the direction of
their Board of Directors. Davis New York Venture Fund, Inc. is located at 2949
East Elvira Road, Suite 101, Tucson, Arizona 85706.
The Adviser serves as investment adviser for both funds and is located at 2949
East Elvira Road, Suite 101, Tucson, Arizona 85706. Christopher Davis and
Andrew Davis serve as portfolio managers of Davis Growth & Income Fund while
Christopher Davis and Kenneth Feinberg serve as portfolio managers of Davis New
York Venture Fund..
Shares to be Issued
Shareholders of Davis Growth & Income Fund who own Class A, Class B, Class C or
Class Y shares would receive Class A, Class B, Class C or Class Y shares,
respectively, of Davis New York Venture Fund in exchange for their Davis Growth
& Income Fund shares. The voting rights of shares of each fund are discussed
below in "Rights of Shareholders."
The Reorganization
The Reorganization Agreement provides for the transfer of substantially all the
assets of Davis Growth & Income Fund to Davis New York Venture Fund in exchange
for Class A, Class B, Class C or Class Y shares of Davis New York Venture Fund.
The aggregate net asset value of Davis New York Venture Fund issued in the
Reorganization would equal the value of the assets of Davis Growth & Income
Fund received by Davis New York Venture Fund. In conjunction with the Closing
(as defined below) of the Reorganization, presently scheduled for __xx__, 2001,
Davis Growth & Income Fund would distribute the shares of Davis New York
Venture Fund received by Davis Growth & Income Fund on the Closing Date (as
defined below) to holders of Class A, Class B, Class C or Class Y shares of
Davis Growth & Income Fund, respectively. As a result of the Reorganization,
Class A, Class B, Class C or Class Y Davis Growth & Income Fund shareholders
would receive the number of full and fractional Class A, Class B, Class C or
Class Y Davis New York Venture Fund shares that equals in value their
respective pro rata interests in the assets transferred to Davis New York
Venture Fund as of the Valuation Date (as defined below).
The Board of Directors of Davis New York Venture Fund, Inc., oversees both
Davis Growth & Income Fund and Davis New York Venture Fund. The Board has
determined that participation in the transaction is in the best interests of
Davis Growth & Income Fund and that the interests of existing Davis Growth &
Income Fund shareholders would not be diluted as a result of the
Reorganization. For the reasons set forth below under "Approval or Disapproval
of the Reorganization - Reasons for the Reorganization," the Board, including
the directors who are not "interested persons" of Davis New York Venture Fund,
Inc. (the "Independent Directors"), as that term is defined in the Investment
Company Act of 1940 as amended ("1940 Act"), has concluded that the
13
Reorganization is in the best interests of Davis Growth & Income Fund and its
shareholders and recommends approval of the Reorganization by Davis Growth &
Income Fund shareholders. The Board of Directors also found that participation
in the transaction is in the best interests of Davis New York Venture Fund and
that the interests of existing Davis New York Venture Fund shareholders would
not be diluted as a result of the Reorganization. If the Reorganization is not
approved, Davis Growth & Income Fund would continue in existence and the Board
would determine whether to pursue alternative actions.
Reasons for the Reorganization
On June 12, 2001, the Adviser proposed to the Board that Davis Growth & Income
Fund be merged into Davis New York Venture Fund as a means of improving
investment performance and reducing operating expenses. Shareholders of Davis
Growth & Income Fund would become shareholders of a substantially larger fund
advised by the same investment adviser with a similar emphasis of investing in
the common stock of quality, overlooked growth companies at value prices and
holding them for the long term. The Board also considered the fact that Davis
New York Venture Fund has enjoyed better investment performance and has lower
overall operating expenses. The Board also considered that the Reorganization
would be a tax-free reorganization, and there would be no sales charge imposed
in effecting the Reorganization. In addition, due to the relatively moderate
costs of the reorganization, the Board concluded that neither fund would
experience dilution as a result of the Reorganization.
Tax Consequences of the Reorganization
In the opinion of KPMG LLP, tax adviser for both funds, the Reorganization
would qualify as a tax-free reorganization for federal income tax purposes. As
a result, it is expected that no gain or loss would be recognized by either
fund, or by the shareholders of either fund, as a result of the Reorganization
for federal income tax purposes. For further information about the tax
consequences of the Reorganization, see "Approval of the Reorganization - Tax
Aspects of the Reorganization" below.
Investment Objectives and Strategies; Other Fund Information
Davis New York Venture Fund's investment objective is growth of capital. The
fund invests principally in common stock of U.S. companies with market
capitalizations of at least $5 billion. Davis New York Venture Fund's portfolio
managers seek to purchase common stock of quality, overlooked growth companies
at value prices and to hold them for the long term.
Davis Growth & Income Fund's investment objectives are capital growth and
income. Ordinarily, most of the fund's assets are invested in the common stock
of quality, overlooked growing companies purchased at value prices. Davis
Growth & Income Fund also invests a portion of its portfolio in real estate
securities and convertible securities.
14
While the two funds do not have identical investment objectives, both funds are
managed using the Davis Investment Philosophy, both have identical fundamental
investment policies, and both hold many of the same securities. As of January
31, 2001, Davis New York Venture Fund had invested 92.10% of its total assets
in common stock (including 0.58% in real estate securities) and 0.22% in
preferred stock. As of January 31, 2001, Davis Growth & Income Fund had
invested 85.89% of its total assets in common stock (including 11.63% in real
estate securities), 6.96% in preferred stock and 1.78% in convertible bonds. In
the current market environment, current income has not been a significant
contributor to Davis Growth & Income Fund's investment performance.
Management and Rule 12b-1 Distribution Plan Fees
Both funds obtain investment management services from the Adviser pursuant to
the terms of a single management agreement with separate fee schedules for each
fund. The management fee payable to the Adviser is computed on the net asset
value of each fund as of the close of business each day and is payable monthly.
The Davis New York Venture Fund pays the Adviser a fee at an annual rate based
on average net assets, as follows: 0.75% on the first $250 million; 0.65% on
the next $250 million; 0.55% on the next $2.5 billion; 0.54% on the next $1
billion; 0.53% on the next $1 billion; 0.52% on the next $1 billion; 0.51% on
the next $1 billion; and 0.50% of average net assets in excess of $7 billion.
Davis New York Venture Fund's management fee for the fiscal year ended July 31,
2000 was 0.52% of average annual net assets for each class of shares.
The Davis Growth & Income Fund pays the Adviser a fee at an annual rate based
on average net assets, as follows: 0.75% on the first $250 million; 0.65% on
the next $250 million; 0.55% on total net assets over $500 million. Davis
Growth & Income Fund's management fee for the fiscal year ended July 31, 2000
was 0.75% of average annual net assets for each class of shares.
The effective management fee for Davis New York Venture Fund is lower than the
effective management fee for Davis Growth & Income Fund because of Davis New
York Venture Fund's substantially larger net assets and the existence of
additional break-points that reduce the effective fee as net assets increase.
Both funds have adopted the same Rule 12b-1 Distribution Plans for Class A
shares. The Rule 12b-1 Distribution Plan provides for the reimbursement to
Davis Distributors, LLC ("the Distributor") for a portion of its costs incurred
in connection with the personal service and maintenance of accounts that hold
Class A shares of the respective funds. Under the plan, payment is made
quarterly at an annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the respective funds. The Distributor currently
uses those fees primarily to compensate dealers, brokers, banks and other
financial institutions quarterly for providing personal service and maintenance
of accounts of their customers that hold Class A shares of the respective
funds.
15
Both funds have adopted the same Rule 12b-1 Distribution Plans for Class B and
Class C shares. The Class B and Class C plans for provide for the Distributor
to be compensated for its services at a rate not to exceed 1.25%. The funds
each paid rates which did not exceed 1.00% in fiscal year ended July 31, 2000:
(i) to pay the Distributor commissions in respect of shares 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; and (ii) to enable the Distributor
to pay or to have paid to others who sell the Company's shares a maintenance or
service fee. The Rule 12b-1 Distribution Plans for Class B and Class C shares
are intended to compensate and reimburse the Distributor for its services and
costs in connection with the distribution of Class B and Class C shares and the
personal service and maintenance of shareholder accounts. All fee amounts are
computed on the average annual net assets of the class determined as of the
close of each regular business day of each fund.
Purchases, Exchanges and Redemptions
Both funds are part of the Davis Funds complex of mutual funds. The procedures
for purchases, exchanges and redemptions of shares of the funds are identical.
Shares of either fund may be exchanged for shares of the same class of other
Davis Funds.
Both funds have a maximum initial sales charge of 4.75% on Class A shares,
which is decreased for larger purchases. Investors who purchase $1 million or
more of Class A shares pay no initial sales charge but may have to pay a sales
charge of up to 1.00% if the shares are sold within the first year after
purchase. Class B shares of the funds are sold without a front-end sales charge
but may be subject to a contingent deferred sales charge ("CDSC") on redemption
depending on the length of time the shares are held. The CDSC begins at 4% for
shares sold in the first year and declines to 1% in the sixth year and is
eliminated after the sixth year. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are redeemed
within the first year after purchase, a CDSC of 1.0% would be deducted.
Class A, Class B, Class C and Class Y shares of Davis New York Venture Fund
received in the Reorganization would be issued at net asset value and without a
sales charge. Also, no CDSC would be imposed on any Davis Growth & Income Fund
shares exchanged for Davis New York Venture Fund shares as a result of the
Reorganization. However, any CDSC and associated holding period that previously
applied to Davis Growth & Income Fund shares would continue to apply to Davis
New York Venture Fund shares received in the Reorganization. Services available
to shareholders of either fund include the purchase and redemption of shares
through Davis Direct Access (an automated telephone system), telephone
redemptions and exchanges by telephone into the same Class of shares in other
Davis Funds and reinvestment privileges. Please see "Shareholder Services" and
each fund's prospectus for further information.
16
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Davis New
York Venture Fund, shareholders of Davis Growth & Income Fund should carefully
consider the following risk factors, the other information set forth in this
Proxy Statement and Prospectus and the more complete description of risk
factors set forth in the documents incorporated by reference herein, including
the prospectuses of the funds and their shared Statement of Additional
Information.
The funds have different stated investment objectives but operate with similar
investment philosophies, fundamental investment policies, and hold many of the
same securities. There are differences between the two funds: Davis New York
Venture Fund invests virtually all of its assets in the common stock of U.S.
companies, investing a small percentage in foreign companies and short-term
debt securities. Davis Growth & Income Fund invests most of its assets in the
common stock of U.S. companies (including many of the same companies purchased
by Davis New York Venture Fund) but also can make significant investments in
real estate securities, convertible securities and bonds.
Although Davis Growth & Income Fund has additional specific investment risks
due to its greater range of principal investments, the overall risk of owning
Davis Growth & Income fund is not necessarily greater than the overall risk of
owning Davis New York Venture Fund.
All investments have risks to some degree. Both funds' investments are subject
to changes in their value. These risks mean that you can lose money by
investing in either fund. When you redeem your shares, they may be worth more
or less than what you paid for them. There is no assurance that either fund
would achieve its investment objectives.
RISKS OF INVESTING IN EQUITY SECURITIES. Because both funds invest the majority
of their assets in the common stock of U.S. companies, the main investment
risks of the funds are substantially similar, consisting primarily of market
risk and company risk. Market risk is the risk that the market value of shares
of common stock will change rapidly and unpredictably as a result of political
or economic events having little or nothing to do with the performance of the
companies the funds invest in. Company risk is the risk that the market values
of a common stock will vary with the success or failure of the company issuing
the stock. As a result, the success of the companies in which the funds invest
largely determines the funds' long-term performance.
RISKS OF INVESTING IN REAL ESTATE SECURITIES, CONVERTIBLE SECURITIES AND BONDS
AND OTHER DEBT SECURITIES. Because Davis Growth & Income Fund can invest a
substantial portion of its assets in real estate securities, convertible
securities and bonds and other debt securities, its primary risks (in addition
to the market risk and company risk of all equity securities) also include the
risks of investing in real estate and debt securities.
REAL ESTATE SECURITIES. Real estate securities are susceptible to the many
risks associated with the direct ownership of real estate, including: (i)
declines in property values--
17
because of changes in the economy of the surrounding area or because a
particular region has become less appealing to tenants; (ii) increases in
property taxes, operating expenses, interest rates or competition; (iii)
overbuilding; (iv) changes in zoning laws; and (v) losses from casualty or
condemnation.
In addition, since many real-estate securities are common stock, they present
the risks that we discuss under the heading "Risks of Investing in Equity
Securities"
Many real estate debt securities are assigned ratings by agencies that evaluate
the quality of publicly offered debt. Davis Growth & Income Fund may buy some
real estate securities that have low ratings. These securities are called
"high-yield, high-risk" debt because they present more risk than so-called
"investment-grade" securities. For information about high-yield, high-risk
debt, please see Exhibit A.
CONVERTIBLE SECURITIES. Convertible securities are securities that can be
converted into or exchanged for other securities. The most common types of
convertible securities are bonds and preferred stock that the holder can
exchange for common stock of the same issuer. Convertible securities have
characteristics of both equity and debt, so they present the risks of common
stock ownership as well as the risks that traditional lenders face. The debt
component of a convertible security poses three types of risk: (i) Interest
rate risk. If a security pays a fixed interest rate, and market rates increase,
the value of the fixed-rate security should decline; (ii) Rating risk. If a
rating agency gives a debt security a low rating, the value of the security
would decline because investors would demand a higher rate of return; and (iii)
Credit risk. Like any borrower, the issuer of a debt security may be unable to
make its payments. Many convertible bonds are considered "high-yield, high-risk
debt," and present more risk than securities with higher ratings. For
information about high-yield, high-risk debt, please see Exhibit A.
BONDS AND OTHER DEBT SECURITIES. The prices (and market value) of debt
securities fluctuate primarily in response to interest rate risk, rating risk
and credit risk described above in "Convertible Securities." Davis Growth &
Income Fund may invest in both convertible bonds and in traditional bonds
without any conversion features.
APPROVAL OF THE REORGANIZATION
(THE PROPOSAL)
Reasons for the Reorganization
At a meeting of the Board of Directors held June 12, 2001, the Board considered
whether to approve the proposed Reorganization and reviewed and discussed with
the Adviser and independent legal counsel the materials provided by the Adviser
relevant to the proposed Reorganization. Included in the materials was
information with respect to the funds' respective investment objectives and
policies, management fees, distribution fees and other operating expenses,
historical performance and asset size.
18
The Board reviewed information demonstrating that Davis Growth & Income Fund is
a smaller fund with net assets of approximately $81 million as of April 30,
2001. In comparison, Davis New York Venture Fund had approximately $22 billion
in net assets as of April 30, 2001, achieving an increase in net assets of
approximately 35% in 2000. After the Reorganization, the shareholders of Davis
Growth & Income Fund would become shareholders of a much larger fund.
The Board noted that, due to its larger asset base and breakpoints in the
management fee schedule, Davis New York Venture Fund's management fee and
overall operating expenses are significantly lower than Davis Growth & Income
Fund's management fee and overall operating expenses. The Board considered that
Davis New York Venture Fund's performance is substantially better than Davis
Growth & Income Fund's performance over comparable periods.
The Board considered the fact that both funds investment primarily in common
stock issued by large capitalization U.S. companies. Davis Growth & Income Fund
also makes significant investments in real estate securities and convertible
securities, and may make investments in bonds. The Board also considered that
the procedures for purchases, exchanges and redemptions of shares of both funds
are identical and that both funds offer the same investor services and options.
The Board also considered the terms and conditions of the Reorganization,
including the fact that there would be no sales charge imposed in effecting the
Reorganization and that the Reorganization is expected to be a tax-free
reorganization. The Board concluded that participation in the transaction is in
the best interests of the funds and that the Reorganization would not result in
a dilution of the interests of existing shareholders of either fund.
After consideration of the above factors, and such other factors and
information as the Board deemed relevant, the Board, including the Independent
Directors, approved the Reorganization and the Reorganization Agreement and
voted to recommend its approval to the shareholders of Davis Growth & Income
Fund.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as Exhibit C
to this Proxy Statement and Prospectus) contemplates a reorganization under
which: (i) all of the assets of Davis Growth & Income Fund (other than the cash
reserve described below (the "Cash Reserve")) would be transferred to Davis New
York Venture Fund in exchange for Class A, Class B, Class C or Class Y shares
of Davis New York Venture Fund; (ii) Davis New York Venture Fund shares would
be distributed among the shareholders of Davis Growth & Income Fund in
liquidation of Davis Growth & Income Fund; and (iii) the outstanding shares of
Davis Growth & Income Fund would be canceled. Davis New York Venture Fund would
not assume any of Davis Growth & Income Fund's liabilities except
19
for portfolio securities purchased that have not settled and outstanding
shareholder redemption and dividend checks.
The result of effectuating the Reorganization would be that: (i) Davis New York
Venture Fund would add to its gross assets all of the assets (net of any
liability for portfolio securities purchased but not settled and outstanding
shareholder redemption and dividend checks) of Davis Growth & Income Fund other
than the Cash Reserve; and (ii) the shareholders of Davis Growth & Income Fund
as of the close of business on the Closing Date would become holders of Class
A, Class B, Class C or Class Y shares of Davis New York Venture Fund.
Shareholders of Davis Growth & Income Fund who vote their Class A, Class B,
Class C or Class Y shares in favor of the Reorganization would be electing in
effect to exchange their shares of Davis Growth & Income Fund (at net asset
value on the Valuation Date referred to below under "Method of Carrying Out the
Reorganization Plan," calculated after subtracting the Cash Reserve) for Class
A, Class B, Class C or Class Y shares of Davis New York Venture Fund at net
asset value without sales charge and without recognition of taxable gain or
loss for federal income tax purposes (see "Tax Aspects of the Reorganization"
below). The Cash Reserve is that amount retained by Davis Growth & Income Fund
that is deemed sufficient in the discretion of the Board of Directors of Davis
Growth & Income Fund for the payment of: (a) Davis Growth & Income Fund's
expenses of liquidation, and (b) its liabilities, other than those assumed by
Davis New York Venture Fund.
Davis Growth & Income Fund and Davis New York Venture Fund would bear all of
their respective expenses associated with the Reorganization, as set forth
under "Costs of the Solicitation and the Reorganization" above. Liabilities as
of the date of the transfer of assets would consist primarily of accrued but
unpaid normal operating expenses of Davis Growth & Income Fund, excluding the
cost of any portfolio securities purchased but not yet settled and outstanding
shareholder redemption and dividend checks. See "Method of Carrying Out the
Reorganization Plan" that follows.
The Reorganization Agreement provides for coordination between the funds as to
their respective portfolios so that, after the closing, Davis New York Venture
Fund would be in compliance with all of its investment policies and
restrictions. Davis Growth & Income Fund would recognize a capital gain or loss
on any sales made prior to the Reorganization pursuant to this paragraph. While
any such coordination may increase the taxable distribution to Davis Growth &
Income Fund shareholders described below, any such coordination is intended to
be consistent with a tax-free organization for federal income tax purposes.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the Reorganization
Agreement, Davis Growth & Income Fund would pay a dividend or distribution,
which, together with all previous dividends or distributions, would have the
effect of distributing to Davis
20
Growth & Income Fund's shareholders all of Davis Growth & Income Fund's
investment company taxable income for tax years ending on or prior to the
Closing Date (computed without regard to any deduction for dividends paid) and
all of its net capital gain, if any, realized in tax years ending on or prior
to the Closing Date (after reduction for any available capital loss
carry-forward). Such dividends and distributions would be included in the
taxable income of Davis Growth & Income Fund's shareholders as ordinary income
and capital gain, respectively.
The exchange of the assets of Davis Growth & Income Fund for Class A, Class B,
Class C or Class Y shares of Davis New York Venture Fund and the assumption by
Davis New York Venture Fund of certain liabilities of Davis Growth & Income
Fund is intended to qualify for federal income tax purposes as a tax-free
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"). Davis Growth & Income Fund has made a number of
representations to KPMG LLP, its tax adviser, including (the full set of
representations are included in the tax opinion, which is incorporated herein
and has been filed with the SEC as part of Form N-14), that to the best of its
knowledge, there is no plan or intention by any Davis Growth & Income Fund
shareholder who owns 5% or more of Davis Growth & Income Fund's outstanding
shares, and, to Davis Growth & Income Fund's best knowledge, there is no plan
or intention on the part of the remaining Davis Growth & Income Fund
shareholders, to redeem, sell, exchange or otherwise dispose of a number of
Davis New York Venture Fund Class A, Class B, Class C or Class Y shares
received in the transaction that would reduce Davis Growth & Income Fund
shareholders' ownership of Davis New York Venture Fund shares to a number of
shares having a value, as of the Closing Date, of less than 50% of the value of
all the formerly outstanding Davis Growth & Income Fund shares as of the same
date. Davis New York Venture Fund and Davis Growth & Income Fund each have
represented to KPMG LLP that, as of the Closing Date, it would qualify as a
regulated investment company or would meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Davis New York Venture
Fund and Davis Growth & Income Fund would receive the opinion of KPMG LLP to
the effect that, based on the Reorganization Agreement, representations made by
both funds, existing provisions of the Code, Treasury Regulations issued
thereunder, current Revenue Rulings, Revenue Procedures and court decisions,
for federal income tax purposes:
(1) The acquisition by Davis New York Venture Fund of substantially all of the
assets of Davis Growth & Income Fund, solely in exchange for the voting shares
of Davis New York Venture Fund and the assumption of the identified liabilities
of Davis Growth & Income Fund by Davis New York Venture Fund, followed by the
distribution by Davis Growth & Income Fund of the shares of Davis New York
Venture Fund in complete liquidation to the shareholders of Davis Growth &
Income Fund in exchange for their Davis Growth & Income Fund shares, will
constitute a reorganization within the meaning of Section 368(a)(1)(C) of the
Code. Davis Growth & Income Fund and Davis New York Venture Fund will each be a
"party to a reorganization" within the meaning of Section 368(b) of the Code.
21
(2) Davis Growth & Income Fund's shareholders will not recognize gain or loss
on their receipt of solely voting shares of Davis New York Venture Fund in
exchange for the voting shares of Davis Growth & Income Fund pursuant to the
Transaction in accordance with Section 354(a)(1) of the Code.
(3) Davis Growth & Income Fund will not recognize gain or loss on the transfer
of all of its assets to Davis New York Venture Fund solely in exchange for
voting shares of Davis New York Venture Fund and the assumption by Davis New
York Venture Fund of Davis Growth & Income Fund liabilities pursuant to the
Transaction in accordance with Sections 361(a) and 357(a) of the Code.
(4) Davis Growth & Income Fund will not recognize gain or loss on its
distribution of voting shares of Davis New York Venture Fund to its
shareholders pursuant to the liquidation of Davis Growth & Income Fund in
accordance with Section 361(c) of the Code.
(5) Davis New York Venture Fund will not recognize gain or loss on its
acquisition of all of the assets of Davis Growth & Income Fund solely in
exchange for voting shares of Davis New York Venture Fund and the assumption by
Davis New York Venture Fund of Davis Growth & Income Fund's liabilities in
accordance with Section 1032(a) of the Code.
(6) The basis of the voting shares of Davis New York Venture Fund received by
Davis Growth & Income Fund's shareholders pursuant to the Transaction will
equal the basis of the voting shares of Davis Growth & Income Fund surrendered
in exchange therefor in accordance with Section 358(a)(1) of the Code.
(7) The holding period of the voting shares of Davis New York Venture Fund
received by a Davis Growth & Income Fund shareholder pursuant to the
Transaction will include the period that the shareholder held the voting shares
of Davis Growth & Income Fund exchanged therefor, provided that the shareholder
held such shares as a capital asset on the date of the Transaction in
accordance with Section 1223(1) of the Code.
(8) Davis New York Venture Fund's basis in the assets of Davis Growth & Income
Fund received pursuant to the Transaction will equal Davis Growth & Income
Fund's basis in the assets immediately before the Transaction in accordance
with Section 362(b) of the Code.
(9) Davis New York Venture Fund's holding period in Davis Growth & Income Fund
assets received pursuant to the Transaction will include the period during
which Davis Growth & Income Fund held the assets in accordance with Section
1223(2) of the Code.
(10) Davis New York Venture Fund will succeed to and take into account the
items of Davis Growth & Income Fund described in Section 381(c) of the Code,
including the earnings and profits, or deficit in earnings and profits, of
Davis Growth & Income Fund
22
as of the date of the Transaction. Davis New York Venture Fund will take these
items into account subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and applicable Regulations
thereunder.
Capitalization Tables (Unaudited)
The tables below set forth the capitalization of Davis Growth & Income Fund and
Davis New York Venture Fund and indicates the pro forma combined capitalization
as of January 31, 2001, as if the Reorganization had occurred on that date.
SHARES NET ASSET
DAVIS GROWTH & INCOME FUND NET ASSETS OUTSTANDING VALUE PER SHARE
- -------------------------- ---------- ----------- ---------------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
SHARES NET ASSET
DAVIS NEW YORK VENTURE FUND NET ASSETS OUTSTANDING VALUE PER SHARE
- --------------------------- ---------- ----------- ---------------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
DAVIS NEW YORK VENTURE FUND
(PRO FORMA AFTER SHARES NET ASSET
REORGANIZATION) NET ASSETS OUTSTANDING VALUE PER SHARE
- --------------- ---------- ----------- ---------------
CLASS A SHARES $xxx $xxx $xxx
CLASS B SHARES $xxx $xxx $xxx
CLASS C SHARES $xxx $xxx $xxx
CLASS Y SHARES $xxx $xxx $xxx
The above tables reflect the issuance of xxx Class A shares, xxx Class B
shares, xxx Class C shares and xxx Class Y shares of Davis New York Venture
Fund in a tax-free exchange for the net assets of Davis Growth & Income Fund,
aggregating $xxx. The pro forma ratios of expenses to average net assets of
Class A, Class B, Class C and Class Y shares of the surviving Davis New York
Venture Fund are set forth above in the section entitled "Comparative Fee
Tables."
COMPARISON BETWEEN
DAVIS GROWTH & INCOME FUND
AND
DAVIS NEW YORK VENTURE FUND
Information about Davis Growth & Income Fund and Davis New York Venture Fund is
presented below. In considering whether to approve the Reorganization,
shareholders of Davis Growth & Income Fund should consider the differences in
investment objectives, and risks of the funds. Additional information about
Davis New York Venture Fund is set
23
forth in its prospectus, accompanying this Proxy Statement and Prospectus and
incorporated herein by reference, and additional information about both funds
is set forth in documents that may be obtained on request by calling Davis
Funds Shareholder Services at 1-800-279-0279 or by visiting the offices of the
SEC (see "Additional Information - Public Information").
Investment Objectives and Strategies
Davis New York Venture Fund's investment objective is growth of capital. The
fund invests principally in common stock of U.S. companies with market
capitalization of at least $5 billion. Davis New York Venture Fund's portfolio
managers seek to purchase common stock of quality, overlooked growth companies
at value prices and to hold it for the long term.
Davis Growth & Income Fund's investment objectives are capital growth and
income. Ordinarily, most of the fund's assets are invested in the common stock
of quality, overlooked growing companies at value prices. Davis Growth & Income
Fund also invests a portion of its portfolio in real estate securities and
convertible securities to diversify its portfolio and earn current income.
Davis Growth & Income also may invest in bonds, although historically it has
not done so.
Both funds are managed using the Davis Investment Philosophy, both have
identical fundamental investment policies, and both hold many of the same
securities.
Principal Investments
As of January 31, 2001, Davis New York Venture Fund had invested 92.10% of its
total assets in common stock (including 0.58% in real estate securities) and
0.22% in preferred stock. As of January 31, 2001, Davis Growth & Income Fund
had invested 85.89% of its total assets in common stock (including 11.63% in
real estate securities), 6.96% in preferred stock and 1.78% in convertible
bonds.
Each fund's prospectus, and their shared Statement of Additional Information,
contains additional information about the funds' principal investments,
including the risks.
EQUITY SECURITIES. Both funds invest a majority of their assets in a
diversified portfolio of common stock issued by large capitalization U.S.
companies. Equity securities represent an ownership position in a company.
These securities may include, without limitation, common stocks, preferred
stocks and securities with equity conversion or purchase rights. The funds
usually purchase common stocks. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The funds' results would be related to the overall market
for these securities. There is no limit on the percentage of its assets that
the funds may invest in equity securities. The Adviser searches for
high-quality, growing companies selling at value prices. Both funds can buy
securities issued by domestic or foreign companies; however,
24
they emphasize investments in stocks of U.S. companies. The principal risks of
investing in equity securities are discussed in the preceding section,
"Principal Risk Factors."
REAL ESTATE SECURITIES. While both funds may invest in convertible securities,
Davis Growth & Income Fund usually invests a larger portion of its assets in
real estate securities than does Davis New York Venture Fund. Real estate
securities are issued by companies that are "principally engaged" in the real
estate industry. A company is "principally engaged" in the real estate industry
if it owns real estate or real estate-related assets that constitute at least
50% of the value of all of its assets, or if it derives at least 50% of its
revenues or net profits from owning, financing, developing, managing or selling
real estate, or from offering products or services that are related to real
estate. Issuers of real estate securities include real estate investment trusts
(known as "REITs"), brokers, developers, lenders and companies with substantial
real estate holdings such as paper, lumber, hotel and entertainment companies.
Most of Davis Growth & Income Fund's real estate securities are, and
historically have been, interests in REITs. REITs pool investors' funds to make
real estate-related investments, such as buying interests in income-producing
property or making loans to real-estate developers. Neither fund invests
directly in real estate. The principal risks of investing in real estate
securities are discussed in the preceding "Principal Risk Factors."
CONVERTIBLE SECURITIES. While both funds may invest in convertible securities,
Davis Growth & Income Fund usually invests a larger portion of its assets in
convertible securities than does Davis New York Venture Fund. Convertible
securities are securities that can be converted into or exchanged for other
securities. The most common types of convertible securities are bonds and
preferred stock that the holder can exchange for common stock of the same
issuer. The principal risks of investing in convertible securities are
discussed in "Principal Risk Factors" above.
BONDS AND OTHER DEBT SECURITIES. While both funds may invest in bonds and other
debt securities, historically, neither fund has invested a significant portion
of its assets in bonds or other debt securities (other than temporarily
investing cash in short-term debt securities such as repurchase agreements or
treasury bills). Issuers such as corporations and federal, state and local
governments sell bonds and other debt securities to borrow money. Some debt
securities (often referred to as "coupon bonds") give the holder current
income. Like the borrower on an ordinary loan, the issuer of a coupon bond
makes periodic interest payments to the holders (i.e., the lenders), and agrees
to repay the principal amount borrowed (the price of the bond) when the
security matures. Other debt securities (referred to as "zero-coupon bonds") do
not require periodic interest payments, but have the equivalent of a balloon
interest payment when the security matures. In other words, when a zero-coupon
bond matures, the issuer pays the holder more money than the issuer borrowed.
Some of the bonds and other debt securities (including convertible bonds) that
the funds may invest in may be "high-yield, high-risk" debt securities
(sometimes referred to as "junk bonds"). A description of high-yield, high-risk
debt securities and the principal risks of investing in bonds and other debt
securities (including high-yield, high-risk debt securities) are discussed in
"Principal Risk Factors" and in Exhibit A.
25
Other Investment Techniques and Strategies
As detailed in Exhibit A, both Davis Growth & Income Fund and Davis New York
Venture Fund have identical flexibility to pursue other investment techniques
and strategies. In seeking their investment objectives, the funds may from time
to time use the types of investment strategies and investments that are
described in Exhibit A. They are not required to use all of these strategies at
all times and at times may not use them. Each fund's prospectus and their
shared Statement of Additional Information contain additional information about
the funds' principal investments, including the risks.
Investment Restrictions
As detailed in Exhibit B, both Davis Growth & Income Fund and Davis New York
Venture Fund have identical fundamental and non-fundamental investment
restrictions. The funds operate in accordance with the investment objectives,
policies and restrictions described in their prospectuses and their shared
Statement of Additional Information.
Description of Brokerage Practices
The brokerage practices of the funds are the same. Brokerage for the funds is
allocated subject to the provisions of the funds' investment advisory agreement
and the Adviser's internal procedures and rules.
The Adviser and Davis Selected Advisers - NY, Inc. ("Sub-Adviser"), a wholly
owned subsidiary of the Adviser, are responsible for the placement of portfolio
transactions, subject to the supervision of the Board of Directors. Both funds
have adopted a policy of seeking to place portfolio transactions with brokers
or dealers who would execute transactions as efficiently as possible and at the
most favorable price. Subject to this policy, research services, payment of
bona fide fund expenses and placement of orders by securities firms for fund
shares may be taken into account as factors in placement of portfolio
transactions. In seeking the funds' investment objectives, the funds may trade
to some degree in securities for the short term if the Adviser or Sub-Adviser
believes that such trading is advisable.
A full description of the funds' brokerage practices is included in the fund's
joint statement of additional information which has been incorporated herein by
reference and is available without charge by calling Davis Funds Shareholder
Services at 1-800-279-0279.
Expense Ratios and Performance
The table below details the ratio of expenses to average annual net assets for
Class A, Class B, Class C and Class Y shares of Davis Growth & Income Fund for
the fiscal year ended July 31, 2000. Additional expense information is set
forth in "Comparative Fee Tables" above and in Davis Growth & Income Fund's and
Davis New York Venture
26
Fund's Annual Reports, dated as of July 31, 2000, and Semi-Annual Reports,
dated January 31, 2001. The performance of the funds for the 1-, 3-, 5- and
10-year periods, or life of the fund, as applicable, ended May 31, 2001, is set
forth in Exhibit D. In addition, Davis New York Venture Fund's performance
since inception is compared to the Standard & Poor's 500 Index, a broad-based
market index, in Exhibit E.
RATIO OF EXPENSES
FISCAL YEAR ENDED DAVIS GROWTH & DAVIS NEW YORK
JULY 31, 2000 INCOME FUND VENTURE FUND
- ------------- ----------- ------------
CLASS A SHARES $xxx $xxx
CLASS B SHARES $xxx $xxx
CLASS C SHARES $xxx $xxx
CLASS Y SHARES $xxx $xxx
Set forth in Davis New York Venture Fund's prospectus accompanying this Proxy
Statement and Prospectus and incorporated by reference herein, under "Past
Performance," are the following past performance information: (i) a bar chart
detailing annual total returns of Class A shares of Davis New York Venture Fund
as of December 31 for the last ten calendar years; and (ii) a table detailing
how the average annual total returns of the fund's Class A, Class B, Class C or
Class Y shares compare to those of the S&P 500 Index, an unmanaged index of
equity securities that is a measure of the general domestic stock market.
Additional information with respect to Davis New York Venture Fund's
performance during the past fiscal year, including a discussion of factors that
materially affected its performance and relevant market conditions, is set
forth in Davis New York Venture Fund's Annual Report dated as of July 31, 2000,
and Semi-Annual Report as of January 31, 2001, which are included in the
Proxy/Prospectus Statement of Additional Information and incorporated herein by
reference.
Shareholder Services
The policies of Davis Growth & Income Fund and Davis New York Venture Fund with
respect to minimum initial investments and subsequent investments by its
shareholders are the same. Both Davis Growth & Income Fund and Davis New York
Venture Fund offer the following privileges: (i) Rights of Accumulation; (ii)
Letters of Intent; (iii) reinvestment of dividends and distributions at net
asset value; (iv) net asset value purchases by certain individuals and
entities; (v) Automatic Investment Plan; (vi) Automatic Exchange Program, (vii)
Automatic Withdrawal Plan; (viii) Davis Direct Access; (ix) exchanges of shares
for shares of the same class of certain other funds at net asset value; and (x)
redemptions via Federal Funds wire.
Shareholders may purchase shares by calling the funds directly, through Davis
Direct Access (an automated telephone system), and through the Internet.
Exchanges also can be made by telephone, or automatically through Davis Direct
Access or through the Davis Funds Web site, www.davisfunds.com. Shares of
either fund may be exchanged for shares of other Davis Funds of the same Class
at net asset value per share. Shareholders of the funds may redeem their shares
by written request, by telephone request or on the Davis Funds Web site.
Shareholders also may redeem shares automatically by telephone by
27
using Davis Direct Access. Shareholders of the funds also may have the Transfer
Agent send redemption proceeds by Federal Funds wire to a designated commercial
bank that is a member of the Federal Reserve wire system. Shareholders of the
funds have up to 60 days to reinvest redemption proceeds of shares that they
redeem without being charged a sales charge, and any deferred sales charge paid
on the original sale would be returned to the shareholder's account. This
"Subsequent Repurchase Privilege" may be used only once. The funds may redeem
accounts valued at less than $250 if the account has fallen below such stated
amount as a result of a redemption or exchange.
Rights of Shareholders
The shares of each fund, including shares of each class, entitle the holder to
one vote for each dollar of net asset value and each fractional share is
entitled to a proportionate share of one vote for each dollar of net asset
value on the election of Directors, and on all other matters submitted to
shareholders of the fund. Each share of the funds represents an interest in the
funds proportionately equal to the interest of each other share of the same
class. Shareholders of both funds vote together in the aggregate, on certain
matters at shareholder meetings, such as the election of Directors and
ratification of appointment of auditors. Shareholders of a particular series or
class vote separately on proposals that affect that series or class, and
shareholders of a series or class that are not affected by that matter are not
entitled to vote on the proposal. For example, only shareholders of a series,
such as Davis New York Venture Fund, vote exclusively on any material amendment
to the management agreement with respect to only that series. Only shareholders
of a class of shares vote on certain amendments to the Rule 12b-1 Distribution
Plans if the amendments affect only that class. The Board is authorized to
create new series and classes of series. The Board may reclassify unissued
shares of Davis New York Venture Fund, Inc., into additional series or classes
of shares. The Board also may divide or combine the shares of a class into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in each fund. Shares do not have
cumulative voting rights or preemptive or subscription rights. Shares may be
voted in person or by proxy.
All Classes of shares of a fund participate equally in the fund's dividends and
distributions and in the fund's net assets on liquidation, after taking into
account the different expenses paid by each Class. Distributions and dividends
for each Class of shares of the respective funds would be different, and Class
B and Class C dividends and distributions are usually lower than those of Class
A and Class Y.
It is not contemplated that either fund would hold regular annual meetings of
shareholders. Shareholders of Davis Growth & Income Fund do not have rights of
appraisal as a result of the transactions contemplated by the Reorganization
Agreement under the 1940 Act or Maryland law. However, they have the right at
any time prior to the consummation of such transaction to redeem their shares
at net asset value, less any applicable contingent deferred sales charge.
28
Both Davis Growth & Income Fund and Davis New York Venture Fund are authorized
series of Davis New York Venture Fund, Inc., which is organized as a Maryland
corporation. As a general matter, shareholders of a corporation would not be
liable to the corporation or its creditors with respect to their interests in
the corporation as long as their shares have been paid for and the requisite
corporate formalities have been observed, both in the organization of the
corporation and in the conduct of its business.
Organization and History
Davis New York Venture Fund, Inc., was organized as a diversified, open-end
mutual fund in 1968 as a Maryland corporation and was called New York Venture
Fund, Inc., until 1995, when the name was changed to Davis New York Venture
Fund, Inc. Davis Growth & Income Fund was organized as a separate authorized
series of Davis New York Venture Fund, Inc., in 1998.
The Adviser acts as investment adviser to both funds and the portfolio managers
of the funds are employed by the Adviser. The same directors and officers of
the funds oversee the Adviser and the portfolio managers.
Management and Distribution Arrangements
The Adviser, located at 2949 East Elvira Road, Suite 101, Tucson, Arizona
85706, serves as the investment adviser to both Davis Growth & Income Fund and
Davis New York Venture Fund. The Adviser serves both funds pursuant to a single
management agreement, the only variation being a different fee schedule for
each fund. The monthly management fee payable to the Adviser by each fund is
set forth under "Synopsis - Management and Rule 12b-1 Distribution Plan Fees."
The Rule 12b-1 Distribution Plan fees paid by the funds with respect to Class
A, Class B and Class C shares also are set forth above under "Synopsis -
Management and Rule 12b-1 Distribution Plan Fees."
Davis New York Venture Fund, Inc.'s management agreement with the Adviser
provides that the Adviser, subject to the general supervision of the Board of
Directors, would provide management and investment advice and would furnish the
statistical, executive and clerical personnel, bookkeeping, office space and
equipment necessary to carry out its investment advisory functions and such
corporate managerial duties as are requested by the Board of Directors. The
funds pay for all expenses of their operations not specifically assumed by the
Adviser. The Board of Directors may arrange for the Adviser to perform any of
the corporate management services necessary or advisable for the operation of
the funds or contract with another person to perform them. In the absence of
willful misfeasance, bad faith or gross negligence or reckless disregard of its
obligations and duties, the Adviser would not be subject to liability to the
funds or any shareholder of the funds for any act or omission in the course of,
or in connection with, rendering services thereunder or for any losses that may
be sustained in the purchase, holding or sale of any security.
29
The management fee paid by Davis Growth & Income Fund for the fiscal year ended
July 31, 2000, was $718,634. The management fee paid by Davis New York Venture
Fund for the fiscal year ended July 31, 2000, was $86,433,009.
The Adviser's principal office is at 2949 East Elvira Road, Suite 101, Tucson,
Arizona 85706. The Adviser has been a registered investment adviser since 1968
and, as of December 31, 2000, managed approximately $40 billion in assets,
including those of the Davis Funds. The Adviser serves as investment adviser
for Davis New York Venture Fund, Inc., the other Davis Funds, other registered
investment companies, private accounts, offshore funds, a hedge fund and
managed money/wrap accounts. Davis Investments, LLC, is the Adviser's sole
general partner. Christopher C. Davis is Chief Executive Officer of the Adviser
and, as the sole member of the general partner, controls the Adviser. Davis
Distributors, LLC, a subsidiary of the Adviser, serves as the distributor or
principal underwriter of the funds. Davis Selected Advisers - NY, Inc.
("Sub-Adviser"), a wholly owned subsidiary of the Adviser, performs investment
management, research and other services for the funds.
Davis Distributors, LLC ("Distributor"), 2949 East Elvira Road, Suite 101,
Tucson, Arizona 85706, also a wholly owned subsidiary of the Adviser, acts as
principal underwriter of the funds' shares on a continuing basis, pursuant to a
Distributing Agreement. By the terms of the Distributing Agreement, the
Distributor pays for all expenses in connection with the preparation, printing
and distribution of advertising and sales literature for use in offering the
funds' shares to the public, including reports to shareholders to the extent
that they are used as sales literature. The Distributor also pays for the
preparation and printing of prospectuses other than those forwarded to existing
shareholders.
For the fiscal year ended July 31, 2000, the Distributor received the following
amounts in total sales charges (which the funds do not pay) on the sale of
Class A shares:
DAVIS NEW YORK VENTURE FUND
Amount received: $17,519,570
Amount reallowed to dealers: $14,891,483
DAVIS GROWTH & INCOME FUND
Amount received: $47,940
Amount reallowed to dealers: $40,444
For the fiscal year ended July 31, 2000, the Distributor received compensation
on redemptions and repurchases of shares in the following amounts:
DAVIS NEW YORK VENTURE FUND
Class A shares $78,689
Class B shares $11,373,959
Class C shares $827,331
30
DAVIS GROWTH & INCOME FUND
Class A shares N/A
Class B shares $153,139
Class C shares $5,515
For additional information about distribution of the funds' shares and the
payments made by the funds to the Distributor in connection with such
activities, please refer the funds' shared Statement of Additional Information.
Purchase of Additional Shares
Class A shares of both funds generally may be purchased with an initial sales
charge of 4.75% for purchases of less than $100,000. The sales charge of 4.75%
is reduced for purchases of Class A shares of $100,000 or more. For purchases
of $1 million or more there usually is no initial sales charge; however, if
those shares are redeemed within the first year of purchase, a contingent
deferred sales charge may be deducted from the redemption proceeds. Class B
shares of the funds are sold at net asset value without an initial sales
charge. If Class B shares are redeemed within six years of their purchase, a
contingent deferred sales charge may be deducted of up to 4%, depending on how
long such shares had been held. Class C shares may be purchased without an
initial sales charge, but if sold within one year of purchase, a contingent
deferred sales charge of 1% may be deducted.
Davis Growth & Income Fund shareholders will not pay any additional initial
sales charge or contingent deferred sales charge on Davis New York Venture Fund
Class A, Class B and Class C shares which they receive in the reorganization
However, if any Davis Growth & Income Fund shares are subject to a contingent
deferred sales charge at the time of the reorganization, the Davis New York
Venture Fund shares received in the reorganization will continue to be subject
to the same contingent deferred sales charge and holding period.
Shareholders wishing to purchase additional shares would be subject to the
usual initial sales charge or contingent deferred sales charge on Davis New
York Venture Fund shares Future dividends and capital gain distributions of
Davis New York Venture Fund, if any, may be reinvested without sales charge.
The contingent deferred sales charge for each class of shares for both funds is
the same. Any Davis Growth & Income Fund shareholder who is entitled to a
reduced sales charge on additional purchases by reason of a Letter of Intent or
Right of Accumulation based on holdings of shares of Davis Growth & Income Fund
would continue to be entitled to a reduced sales charge on any future purchase
of shares of Davis New York Venture Fund.
Dividends and Distributions
Both funds intend to declare dividends separately for each class of shares from
net investment income. Davis Growth & Income Fund generally pays dividends (if
any) once
31
a quarter while Davis New York Venture Fund pays dividends (if any) once a
year. Dividend dates are selected by the Board of Directors.
Neither fund pays a fixed dividend rate and neither fund can guarantee that it
will pay any dividends or distributions. If dividends and distributions are
paid, however, Class Y and A shares will generally pay higher dividends than
Class B or C shares, which have higher operating expenses.
Both funds may realize capital gains on the sale of portfolio securities. If
they do, they may make distributions out of any net short-term or long-term
capital gains, usually in December of each year. The funds may make
supplemental distributions of dividends and capital gains following the end of
their fiscal year. There can be no assurance that either fund would pay any
capital gains distributions in a particular year.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent on the approval of the Reorganization by the
shareholders of Davis Growth & Income Fund and the receipt of the opinions and
certificates set forth in the Reorganization Agreement and the occurrence of
the events described in the Reorganization Agreement. Under the Reorganization
Agreement, all the assets of Davis Growth & Income Fund, excluding the Cash
Reserve, would be delivered to Davis New York Venture Fund in exchange for
Class A, Class B, Class C shares and Class Y shares of Davis New York Venture
Fund. The Cash Reserve to be retained by Davis Growth & Income Fund would be
sufficient in the discretion of the Board for the payment of Davis Growth &
Income Fund's liabilities and Davis Growth & Income Fund's expenses of
liquidation.
Assuming the shareholders of Davis Growth & Income Fund approve the
Reorganization, the actual exchange of assets is expected to take place on
__xx__, 2001, or as soon thereafter as is practicable (the "Closing Date") on
the basis of net asset values as of the close of business on the business day
preceding the Closing Date (the "Valuation Date"). Under the Reorganization
Agreement: (i) all redemptions of shares of Davis Growth & Income Fund shall be
permanently suspended at the close of business on the Valuation Date; (ii) only
redemptions received in proper form on or prior to the close of business on
that date shall be fulfilled by it; and (iii) redemption requests received by
Davis Growth & Income Fund after that date would be treated as requests for
redemptions of Class A, Class B, Class C shares and Class Y shares of Davis New
York Venture Fund to be distributed to the shareholders requesting redemption.
The exchange of assets for shares would be done on the basis of the per share
net asset value of the Class A, Class B, Class C and Class Y shares of Davis
New York Venture Fund, and the value of the assets of Davis Growth & Income
Fund to be transferred as of the close of business on the Valuation Date,
valued in the manner used by Davis New York Venture Fund in the valuation of
assets.
32
Davis New York Venture Fund is not assuming any of the liabilities of Davis
Growth & Income Fund, except for portfolio securities purchased that have not
settled and outstanding shareholder redemption and dividend checks. The net
asset value of the shares transferred by Davis New York Venture Fund to Davis
Growth & Income Fund would be the same as the value of the assets received by
Davis New York Venture Fund. For example, if, on the Valuation Date, Davis
Growth & Income Fund were to have securities with a market value of $95 million
and cash in the amount of $10 million (of which $5 million was to be retained
by it as the Cash Reserve), the value of the assets that would be transferred
to Davis New York Venture Fund would be $100 million. If the net asset value
per share of Davis New York Venture Fund were $10 per share at the close of
business on the Valuation Date, the number of shares to be issued would be 10
million ($100 million / $10). These 10 million shares of Davis New York Venture
Fund would be distributed to the former shareholders of Davis Growth & Income
Fund. This example is given for illustration purposes only and does not bear
any relationship to the dollar amounts or shares expected to be involved in the
Reorganization.
In conjunction with the Closing Date, Davis Growth & Income Fund would
distribute on a pro rata basis to its shareholders of record on the Valuation
Date the Class A, Class B, Class C and Class Y shares of Davis New York Venture
Fund received by Davis Growth & Income Fund at the closing, in liquidation of
the outstanding shares of Davis Growth & Income Fund, and the outstanding
shares of Davis Growth & Income Fund would be canceled. To assist Davis Growth
& Income Fund in this distribution, Davis New York Venture Fund would, in
accordance with a shareholder list supplied by Davis Growth & Income Fund,
cause its transfer agent to credit and confirm an appropriate number of shares
of Davis New York Venture Fund to each shareholder of Davis Growth & Income
Fund. Neither fund currently issues written certificates; all shares are issued
only in book-entry form. After the Reorganization, it would be necessary for
any shareholders holding written certificates (in the past the funds issued
written certificates) to surrender such certificates in order to redeem,
transfer, pledge or exchange any shares of Davis New York Venture Fund.
Under the Reorganization Agreement, within one year after the Closing Date,
Davis Growth & Income Fund shall: (a) either pay or make provision for all of
its debts and taxes, and (b) either: (i) transfer any remaining amount of the
Cash Reserve to Davis New York Venture Fund, if such remaining amount is not
material (as defined below); or (ii) distribute such remaining amount to the
shareholders of Davis Growth & Income Fund who were such on the Valuation Date.
Such remaining amount shall be deemed to be material if the amount to be
distributed, after deducting the estimated expenses of the distribution, equals
or exceeds one cent per share of the number of Davis Growth & Income Fund
shares outstanding on the Valuation Date. If the remaining Cash Reserve is
distributed to former Davis Growth & Income Fund shareholders, such
distribution would be considered a return of capital for federal income tax
purposes, reducing the tax basis of the shares received in the reorganization
should it be approved. If the Cash Reserve is insufficient to satisfy any of
Davis Growth & Income Fund's liabilities, the Adviser would assume
responsibility to satisfy any such liability. Within one year after the Closing
Date, Davis Growth & Income Fund would complete its liquidation.
33
Under the Reorganization Agreement, either Davis Growth & Income Fund or Davis
New York Venture Fund generally may abandon and terminate the Reorganization
Agreement without liability to the other party. See Exhibit C attached hereto.
In the event that the Reorganization is not consummated for any reason, the
Board would consider and may submit to the shareholders of Davis Growth &
Income Fund other alternatives.
ADDITIONAL INFORMATION
Financial Information
The Reorganization would be accounted for by Davis New York Venture Fund (the
surviving fund) in its financial statements similar to a pooling without
restatement. Further financial information as to Davis Growth & Income Fund is
contained in its latest Annual and Semi-Annual Reports, dated July 31, 2000,
and January 31, 2001, respectively, which are available without charge from
Davis Funds Shareholder Services (1-800-279-0279), and both of which are
included in the Proxy/Prospectus Statement of Additional Information. Recent
financial information for Davis New York Venture Fund is contained in its
Annual and Semi-Annual Reports as of July 31, 2000, and January 31, 2001,
respectively, which are available from Davis Funds Shareholder Services and
both of which are included in the Proxy/Prospectus Statement of Additional
Information.
Public Information
Additional information about Davis Growth & Income Fund and Davis New York
Venture Fund is available, as applicable, in the Proxy/Prospectus Statement of
Additional Information, which includes the following documents: (i) Davis New
York Venture Fund current prospectus for Class A, B and C shares and current
prospectus for Class Y shares; (ii) Davis Growth & Income Fund's current
prospectus for Class A, B and C shares and current prospectus for Class Y
shares; (iii) Davis New York Venture Fund and Davis Growth & Income Fund shared
Statement of Additional Information dated December 1, 2001 and amended July 23,
2001; (iv) Davis New York Venture Fund Annual Report as of July 31, 2000, and
Semi-Annual Report as of January 31, 2001; and (v) Davis Growth & Income Fund
Annual Report as of July 31, 2000, and Semi-Annual Report as of January 31,
2001. The Proxy/Prospectus Statement of Additional Information, or any of these
documents, may be obtained without charge by calling Davis Funds Shareholder
Services at 1 800-279-0279.
Additional information about the following matters is contained in the
Proxy/Prospectus Statement of Additional Information: the organization and
operation of Davis New York Venture Fund and Davis Growth & Income Fund; more
information on investment policies, practices and risks; information about the
funds' board, officers and portfolio managers and their responsibilities; a
further description of the services provided by the
34
funds' investment adviser, distributor and transfer and shareholder servicing
agent; dividend policies; tax matters; an explanation of the method of
determining the offering price of the shares and/or contingent deferred sales
charges of shares of Davis New York Venture Fund and Davis Growth & Income
Fund; purchase, redemption and exchange programs; the different expenses paid
by each class of shares; and distribution arrangements.
Davis Growth & Income Fund and Davis New York Venture Fund are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, file reports and other information with the SEC.
Proxy material, reports and other information about Davis Growth & Income Fund
and Davis New York Venture Fund are of public record. You also can obtain
copies of the Statements of Additional Information and other fund documents and
reports by visiting the SEC's Public Reference Room in Washington, D.C.
(1-202-942-8090) or the EDGAR database on the SEC's Web site, www.sec.gov.
Copies may be obtained after payment of a duplicating fee by electronic request
at the SEC's e-mail address, publicinfo@sec.gov, or by writing to the SEC's
Public Reference Section, Washington, D.C. 20549-0102.
OTHER BUSINESS
Management of Davis Growth & Income Fund knows of no business other than the
matters specified in the preceding text to be presented at the Meeting. Since
matters not known at the time of the solicitation may come before the Meeting,
the proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote this proxy in accordance with their
judgment on such matters.
By Order of the Board of Directors
Thomas Tays, Secretary
__xx__, 2001
LIST OF APPENDICES
EXHIBIT A - Other Investment Techniques and Strategies, A-1 ................xx
EXHIBIT B - Investment Restrictions, B-1 ...................................xx
EXHIBIT C - Agreement and Plan of Reorganization
by and between Davis New York Venture Fund
and Davis Growth & Income Fund, each an authorized
series of Davis New York Venture Fund, Inc., C-1 ...............xx
EXHIBIT D - Average Annual Total Returns for the Funds, D-1 ................xx
35
EXHIBIT E - Performance Graphs for Davis New York Venture Fund, E-1 ........xx
ENCLOSURES - Prospectus of Davis New York Venture Fund, December 1, 2000 ...xx
36
EXHIBIT A
DAVIS NEW YORK VENTURE FUND
AND
DAVIS GROWTH & INCOME FUND
OTHER INVESTMENT TECHNIQUES AND STRATEGIES
As detailed in this Exhibit, both Davis Growth & Income Fund and Davis New York
Venture Fund have identical flexibility to pursue other investment techniques
and strategies. In seeking their investment objectives, the funds may from time
to time use the types of investment strategies and investments which are
described below. They are not required to use all of these strategies at all
times and at times may not use them. Each funds' prospectus, and their shared
Statement of Additional Information, contain additional information about the
funds' principal investments, including the risks.
Additional Information About High-Yield, High-Risk Debt Securities. There are
several agencies that evaluate and rate debt securities. Two of the most
prominent are Standard & Poor's and Moody's Investors Service. In evaluating
the quality of a debt instrument, rating agencies look at factors such as the
issuer's current financial condition and business prospects, the value of any
collateral that secures the debt and the issuer's history of paying other debt.
Each agency has its own system for "grading" debt. Standard & Poor's has 11
ratings, ranging from D for securities that are in default to AAA for
securities that are almost certain to be repaid. Moody's Investors Service has
nine ratings, with C being the lowest and Aaa being the highest. A security is
called "investment-grade" if a respected agency assigns it a favorable credit
rating. In contrast, a debt security is considered "high-yield, high-risk" if
it is rated BB or lower by Standard and Poor's, or Ba or lower by Moody's
Investors Service.
Securities with these low ratings are also referred to as "junk bonds." Many
institutional investors, such as pension plans and municipal governments, are
only permitted to buy investment-grade debt.
Risks of High-Yield, High-Risk Debt Securities. The four principal risks of
owning high-yield, high-risk debt securities (sometimes referred to as "junk
bonds") are: (i) Overburdened issuers. Many issuers only resort to offering
junk bonds when they cannot get financing from more traditional sources, such
as banks. These issuers are unlikely to have a cushion from which to make their
payments when their earnings are poor or when the economy in general is in
decline. Davis Growth & Income Fund would not purchase junk bonds that are in
default at the time of purchase, but there is no guarantee that issuers always
would be able to make their payments; (ii) Priority. Issuers of high-yield,
high-risk securities are likely to have a substantial amount of other debt.
Most, if not all, of this other debt would be "senior" to the junk bonds; an
issuer must be current on its senior obligations before it can pay bondholders.
In addition, some of the other debt may be secured by the issuer's primary
operating assets. If the issuer defaults on those obligations, the lenders may
seize their collateral--possibly forcing the issuer out of business and into
bankruptcy; (iii) Difficult to resell. Many investors simply do not want
junk bonds, and others are prohibited from buying them; and (iv) Volatile
prices. Prices of high-yield, high-risk debt securities are more volatile than
prices of higher rated securities. In periods of economic difficulty or rising
interest rates, prices of junk bonds decline more than prices of
investment-grade securities.
Short-Term Investments. Both funds temporarily invest cash in short-term
investments. The funds may temporarily and without limitation hold high-grade
short-term money market instruments, cash and cash equivalents, including
repurchase agreements. The funds may also invest in other investment companies
(or companies exempted under section 3(c)(7) of the 1940 Act) which themselves
primarily invest in temporary defensive investments. Investments in other
investment companies are limited by the 1940 Act. The funds use short-term
investments to earn interest and maintain flexibility while the Adviser
evaluates long-term opportunities. The funds also may use short-term
investments for temporary defensive purposes; Short-term investments are
generally considered to be a low risk investment; issuers are generally stable,
and the time period between the security's purchase and the payoff date is
relatively short, offering little chance for conditions to deteriorate.
Repurchase agreements involve an agreement to purchase a security and to sell
that security back to the original owner at an agreed-upon price. The resale
price reflects the purchase price plus an agreed-upon incremental amount, which
is unrelated to the coupon rate or maturity of the purchased security. The
repurchase obligation of the seller is, in effect, secured by the underlying
securities. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the funds could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in the value
of the collateral during the period while the funds seek to enforce their
rights thereto; (b) possible loss of all or a part of the income during this
period; and (c) expenses of enforcing their rights.
The funds will enter into repurchase agreements only when the seller agrees
that the value of the underlying securities, including accrued interest (if
any), will at all times be equal to or exceed the value of the repurchase
agreement. The funds may enter into tri-party repurchase agreements in which a
third party custodian bank ensures the timely and accurate exchange of cash and
collateral. The majority of these transactions run from day to day and delivery
pursuant to the resale typically occurs within one to seven days of the
purchase. The funds normally will not enter into repurchase agreements maturing
in more than seven days.
Foreign Securities. Foreign securities are either issued by foreign companies
or are principally traded in foreign markets ("foreign securities"). Foreign
securities include equity securities, real estate securities, convertible
securities and bonds. Investments in foreign securities may be made through the
purchase of individual securities on recognized exchanges and developed
over-the-counter markets, through American Depository Receipts ("ADRs") or
Global Depository Receipts ("GDRs") covering such securities, and through
U.S.-registered investment companies investing primarily in
foreign securities. When the funds invest in foreign securities, their
operating expenses are likely to be higher than that of an investment company
investing exclusively in U.S. securities, since the custodial and certain other
expenses are expected to be higher.
Investments in foreign securities may involve a higher degree of risk than
investments in domestic issuers. Foreign securities are often denominated in
foreign currencies, which means that their value will be affected by changes in
exchange rates, as well as by other factors that affect securities prices.
There is generally less publicly available information about foreign securities
and securities markets, and there may be less government regulation and
supervision of foreign issuers and securities markets. Foreign securities and
markets may also be affected by political and economic instabilities, and may
be more volatile and less liquid than domestic securities and markets.
Investment risks may include expropriation or nationalization of assets,
confiscatory taxation, exchange controls and limitations on the use or transfer
of assets, and significant withholding taxes. Foreign economies may differ from
the United States favorably or unfavorably with respect to inflation rates,
balance of payments, capital reinvestment, gross national product expansion and
other relevant indicators. The Funds may attempt to reduce exposure to market
and currency fluctuations by trading in currency futures contracts or options
on futures contracts for hedging purposes only.
Hedging Foreign Currency Risks. To attempt to reduce exposure to currency
fluctuations, the funds may trade in forward foreign currency exchange
contracts (forward contracts), currency futures contracts and options thereon
and securities indexed to foreign securities. These techniques are not always
effective and their use may expose the funds to other risks, such as liquidity
and counterparty risk. The Adviser or Sub-Adviser exercises its professional
judgement as to whether the reduction in currency risk justifies the expense
and exposure to liquidity and counterparty risk. In past years, the Adviser and
Sub-Adviser have typically not used these techniques to any significant extent.
These techniques may be used to lock in an exchange rate in connection with
transactions in securities denominated or traded in foreign currencies, to
hedge the currency risk in foreign securities held by the funds and to hedge a
currency risk involved in an anticipated purchase of foreign securities.
Cross-hedging may also be utilized, that is, entering into a hedge transaction
with respect to a foreign currency different from the one in which a trade is
to be made or in which a portfolio security is principally traded. There is no
limitation on the amount of assets that may be committed to currency hedging.
However, the funds will not engage in a futures transaction if it would cause
the aggregate of initial margin deposits and premiums paid on outstanding
options on futures contracts to exceed 5% of the value of their total assets
(excluding in calculating such 5% any in-the-money amount of any option).
Currency hedging transactions may be utilized as a tool to reduce currency
fluctuation risks due to a current or anticipated position in foreign
securities. The successful use of currency hedging transactions usually depends
on the Adviser's or the Sub-Adviser's ability to forecast interest rate and
currency exchange rate movements. Should interest or exchange rates move in an
unexpected manner, the anticipated benefits of futures contracts, options or
forward contracts may not be achieved or losses may be realized and thus the
funds could be in a worse position
than if such strategies had not been used. Unlike many exchange-traded futures
contracts, there are no daily price fluctuation limits with respect to options
on currencies and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of such instruments and
movements in the price of the securities and currencies hedged or used for
cover will not be perfect and could produce unanticipated losses. Unanticipated
changes in currency prices may result in poorer overall performance for the
funds than if they had not entered into such contracts. When taking a position
in an anticipatory hedge (when the funds purchase a futures contract or other
similar instrument to gain market exposure in anticipation of purchasing the
underlying securities at a later date), the funds are required to set aside
cash or high-grade liquid securities to fully secure the obligation.
A forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. Such a contract gives the funds
a position in a negotiated, currently non-regulated market. A fund may enter
into a forward contract, for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security ("transaction hedge").
Additionally, when the Adviser or Sub-Adviser believes that a foreign currency
may suffer a substantial decline against the U.S. dollar, either fund may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the fund's portfolio securities
denominated in such foreign currency. When the Adviser or Sub-Adviser believes
that the U.S. dollar may suffer a substantial decline against a foreign
currency, either fund may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount in anticipation of purchasing
foreign traded securities ("position hedge"). In this situation the funds may,
in the alternative, enter into a forward contract with respect to a different
foreign currency for a fixed U.S. dollar amount ("cross hedge"). This may be
done, for example, where the Adviser or Sub-Adviser believes that the U.S.
dollar value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the fund are denominated.
The funds may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the funds
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a
foreign currency may constitute an effective hedge against fluctuations in
exchange rates although, in the event of rate movements adverse to a fund's
position, it may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written or purchased by
the funds are traded on U.S. and foreign exchanges or over-the-counter.
Currently, a significant portion or all of the value of an over-the-counter
option may be treated as an illiquid investment and subject to the
restriction on such investments as long as the SEC requires that
over-the-counter options be treated as illiquid. Generally, the funds would
utilize options traded on exchanges where the options are standardized.
The funds may enter into contracts for the purchase or sale for future delivery
of foreign currencies ("currency futures contracts") and may purchase and write
put and call options to buy or sell currency futures contracts. A "sale" of a
currency futures contract means the acquisition of a contractual obligation to
deliver the foreign currencies called for by the contract at a specified price
on a specified date. A "purchase" of a currency futures contract means the
incurring of a contractual obligation to acquire the foreign currencies called
for by the contract at a specified price on a specified date. Options on
currency futures contracts to be purchased by the funds will be traded on U.S.
or foreign exchanges or over-the-counter.
The funds may also purchase securities (debt securities or deposits) which have
their coupon rate or value at maturity determined by reference to the value of
one or more foreign currencies. These strategies will be used for hedging
purposes only. The funds will hold securities or other options or futures
positions whose values are expected to offset their obligations under the hedge
strategies. Neither fund will enter into a currency hedging position that
exposes the fund to an obligation to another party unless it owns either (i) an
offsetting position in securities, options or futures positions, or (ii) cash,
receivables and short-term debt securities with a value sufficient to cover its
potential obligations. The funds will comply with requirements established by
the SEC with respect to coverage of options and futures strategies by mutual
funds, and, if so required, will set aside liquid securities in a segregated
account with their custodian bank in the amount prescribed. The funds'
custodian will maintain the value of such segregated account equal to the
prescribed amount by adding or removing additional liquid securities to account
for fluctuations in the value of securities held in such account. Securities
held in a segregated account cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with similar securities.
The funds' ability to dispose of their positions in futures contracts, options
and forward contracts will depend on the availability of liquid markets in such
instruments. Markets in options and futures with respect to currencies are
still developing. It is impossible to predict the amount of trading interest
that may exist in various types of futures contracts, options and forward
contracts. If a secondary market does not exist with respect to an option
purchased or written by the funds over-the-counter, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option) with
the result that (i) an option purchased by the funds would have to be exercised
in order for the funds to realize any profit, and (ii) the funds may not be
able to sell currencies covering an option written by the funds until the
option expires or it delivers the underlying futures currency upon exercise.
Therefore, no assurance can be given that the funds will be able to utilize
these instruments effectively for the purposes set forth above. The funds'
ability to engage in currency hedging transactions may be limited by tax
considerations.
The funds' transactions in forward contracts, options on foreign currencies and
currency futures contracts will be subject to special tax rules under the
Internal Revenue Code that, among other things, may affect the character of any
gains or losses of the funds as ordinary or capital and the timing and amount
of any income or loss to the funds. This in turn could affect the character,
timing and amount of distributions by the funds to shareholders. The funds may
be limited in their foreign currency transactions by tax considerations.
Certain foreign currency exchange contracts in which the funds may invest are
treated as "Section 1256 contracts" under the Internal Revenue Code. In
general, the Internal Revenue Code treats gains or losses relating to Section
1256 contracts as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from Section 1256 contracts
that are forward contracts generally are treated as ordinary income of loss. In
addition, Section 1256 contracts held by the funds at the end of each taxable
year are "marked-to-market" and unrealized gains or losses are treated as
though they were realized. These contracts also may be marked-to-market for
purposes of determining the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to the
Internal Revenue Code. An election can by made by a fund to exempt those
transactions from this marked-to-market treatment.
Certain forward contracts the fund enters into may result in "straddles" for
federal income tax purposes. The straddle rules may affect the character and
timing of gains (or losses) recognized by a fund on straddle positions.
Generally, a loss sustained on the disposition of a position making up a
straddle is allowed only to the extent that the loss exceeds any unrecognized
gains in the offsetting positions and making up the straddle. A disallowed loss
is generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Currency gains and losses are offset against market gains and losses on each
trade before determining a net "Section 988" gain or loss under the Internal
Revenue Code for that trade, which may increase or decrease the amount of a
fund's investment income available for distribution to its shareholders.
Restricted and Illiquid Securities. The funds may invest in restricted
securities which, are subject to contractual restrictions on resale. The funds'
policy is to not purchase or hold illiquid securities (which may include
restricted securities) if more than 15% of the funds' net assets would then be
illiquid.
The restricted securities which the funds may purchase include securities which
have not been registered under the Securities Act of 1933 ("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 funds, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Adviser or Sub-Adviser, under criteria
established by the funds' Board of Directors, will consider whether Rule 144A
Securities being purchased or held by the funds are illiquid and thus subject
to the funds' policy limiting investments in illiquid securities. In making
this determination, the Adviser or Sub-Adviser will consider the frequency of
trades and
quotes, the number of dealers and 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 Adviser and Sub-Adviser and, if as a result of
changed conditions it is determined that a Rule 144A Security is no longer
liquid, the funds' 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 investments in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
Borrowing. The funds may borrow money for temporary or emergency purposes.
Neither fund will borrow money with the intent of leveraging its investments.
Borrowing activities are strictly limited as described in the section entitled
"Investment Restrictions." Borrowing may be useful in a number of situations,
such as to meet unanticipated redemptions without selling portfolio securities
at disadvantageous prices. However, borrowing money to meet redemptions or
other purposes would have the effect of temporarily leveraging a fund's assets
and potentially exposing the fund to leveraged losses.
Lending Portfolio Securities. The funds may lend their portfolio securities to
certain types of eligible borrowers approved by the Board of Directors. The
funds may engage in securities lending to earn additional income or to raise
cash for liquidity purposes. The funds must receive collateral for a loan.
Under current applicable regulatory requirements (which are subject to change),
on each business day the loan collateral must be at least equal to the value of
the loaned securities. The collateral must consist of cash, bank letters of
credit, securities of the U.S. government or its agencies or instrumentalities,
or other cash equivalents in which a fund is permitted to invest.
Lending activities are strictly limited as described in the section entitled
"Investment Restrictions". Lending money or securities involves the risk that a
fund may suffer a loss if a borrower does not repay a loan when due. To manage
this risk the funds deal only with counter-parties they believe to be
creditworthy and require that the counter-party deposit collateral with the
funds.
When they loan securities, the funds still own the securities, receive amounts
equal to the dividends or interest on loaned securities, and are subject to
gains or losses on those securities. The funds also receive one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and/or (c)
interest on any short-term debt instruments purchased with such loan
collateral. Either type of interest may be shared with the borrower. The fund
may also pay reasonable finder's, custodian and administrative fees in
connection with these loans. The terms of the funds' loans must meet applicable
tests under the Internal Revenue Code and must permit the funds to reacquire
loaned securities on five days' notice or in time to vote on any important
matter.
Call Options. For income purposes, the funds may write covered call options on
their portfolio securities and purchase call options in closing transactions.
The funds may suffer an opportunity loss if the value of the underlying
security should rise above the strike price of the call option before the
option expires.
A covered call option gives the purchaser of the option the right to buy the
underlying security at the price specified in the option (the "exercise price")
at any time until the option expires, generally within three to nine months, in
return for the payment to the writer upon the issuance of the option of an
amount called the "premium." A commission may be charged in connection with the
writing of the option. The premium received for writing a call option is
determined by the option markets. The premium paid plus the exercise price will
always be greater than the market price of the underlying securities at the
time the option is written. By writing a covered call option, a fund foregoes,
in exchange for the premium, the opportunity to profit from an increase in the
market value of the underlying security above the exercise price, if the option
is exercised. The call obligation is terminated upon exercise of the call
option, expiration of the call or when the fund effects a closing purchase
transaction. A closing purchase transaction is one in which the writer
purchases another call option in the same underlying security (identical as to
exercise price, expiration date and number of shares). The writer thereby
terminates its obligation and substitutes the second writer as the obligor to
the original option purchaser. A closing purchase transaction would normally
involve payment of a brokerage commission. During the remaining term of the
option, if a fund cannot enter into a closing purchase transaction, that fund
would lose the opportunity for realizing any gain over and above the premium
through sale of the underlying security, and if the security is declining in
price that fund would continue to experience such decline.
EXHIBIT B
DAVIS NEW YORK VENTURE FUND
AND
DAVIS GROWTH & INCOME FUND
INVESTMENT RESTRICTIONS
As detailed in this Exhibit, both Davis Growth & Income Fund and Davis New York
Venture Fund have identical fundamental and non-fundamental investment
restrictions. The funds operate in accordance with the investment objectives,
policies and restrictions described in their prospectuses and their shared
Statement of Additional Information.
The funds have adopted the fundamental investment policies set forth below,
which may not be changed without a shareholder vote. Where necessary, an
explanation beneath a fundamental policy describes the fund's practices with
respect to that policy, as allowed by current law. If the law governing a
policy changes, the fund's practices may change accordingly without a
shareholder vote.
The fundamental investment restrictions set forth below 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.
Except for the fundamental investment policies regarding illiquid securities
and borrowing, all percentage restrictions apply as of the time of an
investment without regard to any later fluctuations in the value of portfolio
securities or other assets. All references to the assets of the fund are in
terms of current market value.
(1) Diversification. The fund may not make any investment that is inconsistent
with its classification as a diversified investment company under the 1940
Act.
Further Explanation of Diversification Policy. To remain classified as a
diversified investment company under the 1940 Act, the fund must conform with
the following: With respect to 75% of its total assets, a diversified
investment company may not invest more than 5% of its total assets, determined
at market or other fair value at the time of purchase, in the securities of any
one issuer, or invest in more than 10% of the outstanding voting securities of
any one issuer, determined at the time of purchase. These limitations do not
apply to investments in securities issued or guaranteed by the United States
("U.S.") government or its agencies or instrumentalities.
(2) Concentration. The fund may not concentrate its investments in the
securities of issuers primarily engaged in any particular industry.
Further Explanation of Concentration Policy. The fund may not invest 25% or
more of its total assets, taken at market value, in the securities of issuers
primarily engaged in any particular industry (other than securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities). The
fund generally uses BLP Equity Economic Sectors ("BLP Code") as published by
Bloomberg L.P. to determine industry classification. The Adviser may
re-classify a company if it believes that the BLP Code on a specific company
does not accurately describe the company.
(3) Issuing Senior Securities. The fund may not issue senior securities,
except as permitted under applicable law, including the 1940 Act and
published SEC staff positions.
Further Explanation of Issuing Senior Securities. The fund may not issue senior
securities nor sell short more than 5% of its total assets, except as provided
by the 1940 Act and any rules, regulations or orders issued thereunder. This
limitation does not apply to selling short against the box. The 1940 Act
defines a "Senior Security" as any bond, debenture, note or similar obligation
constituting a security and evidencing indebtedness.
(4) Borrowing. The fund may not borrow money, except to the extent permitted
by applicable law, including the 1940 Act and published SEC staff
positions.
Further Explanation of Borrowing Policy. The fund may borrow from banks and
enter into reverse repurchase agreements in an amount up to 33 1/3% of its
total assets, taken at market value. The fund may also borrow up to an
additional 5% of its total assets from banks or others. The fund may borrow
only as a temporary measure for extraordinary or emergency purposes such as the
redemption of fund shares. The fund may purchase additional securities so long
as borrowings do not exceed 5% of its total assets. The fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities. In the event that market fluctuations cause borrowing
to exceed the limits stated above, the Adviser would act to remedy the
situation as promptly as possible (normally within 3 business days), although
it is not required to dispose of portfolio holdings immediately if the fund
would suffer losses as a result.
(5) Underwriting. The fund may not underwrite securities of other issuers
except to the extent permitted by applicable law, including the 1940 Act
and published SEC staff positions.
Further Explanation of Underwriting Policy. The fund may not underwrite
securities of other issuers, except insofar as the fund may be deemed to be an
underwriter in connection with the disposition of its portfolio securities.
(6) Investments in Commodities and Real Estate. The fund may not purchase or
sell commodities or real estate, except to the extent permitted by
applicable law, including the 1940 Act and published SEC staff positions.
Further Explanation of Policy Restricting Investments in Commodities and Real
Estate. The fund may purchase or sell financial futures contracts, options on
financial futures contracts, currency contracts, and options on currency
contracts as described in its prospectus and Statement of Additional
Information. The fund may not purchase or sell real estate, except that the
fund may invest in securities that are directly or indirectly secured by real
estate, or securities issued by issuers that invest in real estate.
(7) Making Loans. The fund may not make loans to other persons, except as
allowed by applicable law, including the 1940 Act and published SEC staff
positions.
Further Explanation of Lending Policy. The acquisition of investment securities
or other investment instruments is not deemed to be the making of a loan.
To generate income and offset expenses, the fund may lend portfolio securities
to broker-dealers and other financial institutions that the Adviser believes to
be creditworthy in an amount up to 33 1/3% of its total assets, taken at market
value. While securities are on loan, the borrower will pay the fund any income
accruing on the security. The fund may invest any collateral it receives in
additional portfolio securities, such as U.S. Treasury notes, certificates of
deposit, other high-grade, short-term obligations or interest-bearing cash
equivalents. The fund is still subject to gains or losses due to changes in the
market value of securities that it has lent.
When the fund lends its securities, it will require the borrower to give the
fund collateral in cash or government securities. The fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The fund may pay reasonable fees in connection with such loans.
Non-Fundamental Restrictions
In addition to the foregoing restrictions, each fund has adopted the following
non-fundamental policies that may be changed without shareholder approval:
1. Illiquid Securities. The fund may not purchase illiquid securities if more
than 15% of the value of the fund's total assets would be invested in such
securities.
2. High-Yield, High-Risk Securities. The fund will not purchase debt
securities rated BB or Ba or lower if the securities are in default at the
time of purchase or if such purchase would then cause more than 35% of the
fund's net assets to be invested in such lower-rated securities.
3. Options. The fund will not purchase an option if the purchase would cause
the total premiums (at market) of all options then owned to exceed 5% of
the fund's total assets. The fund will not sell covered calls if the
transaction would cause the total premiums (at market) of all covered
calls then written to exceed 25% of the fund's total assets.
4. Futures Contracts. The fund will not engage in a futures transaction if
the transaction would cause the nominal value of futures contracts then
purchased or sold to exceed 25% of the fund's total assets.
5. Borrowing. Pursuant to the fundamental policy stated above, the fund is
allowed to borrow in an amount up to 33 1/3% of its total assets, taken at
market value. The board of directors will be notified in the event
borrowings exceed 10% of the fund's total assets.
6. Short Selling. The fund will not sell any security short if it would cause
more than 5% of its total assets, taken at market value, to be sold short.
Exhibit C
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of __xx___,
2001 is made by Davis New York Venture Fund, Inc. a Maryland Corporation (the
"Corporation") on behalf of its series, Davis Growth & Income Fund, and its
series, Davis New York Venture Fund.
W I T N E S S E T H:
WHEREAS, the Corporation is an open-end investment company of the management
type, and the two funds (the "Funds") are series of the Corporation; and
WHEREAS, the parties hereto desire to provide for the reorganization pursuant
to Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"), of Davis Growth & Income Fund through the (1) acquisition by Davis New
York Venture Fund of substantially all of the assets of Davis Growth & Income
Fund in exchange for the voting shares of beneficial interest ("shares") of
Davis New York Venture Fund, (2) the assumption by Davis New York Venture Fund
of certain liabilities of Davis Growth & Income Fund, and (3) Class A, Class B,
Class C and Class Y shares of Davis New York Venture Fund are to be distributed
by Davis Growth & Income Fund pro rata to its respective shareholders of Class
A, Class B, Class C and Class Y shares, in complete liquidation of Davis Growth
& Income Fund and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree as follows:
1. Reorganization. The Corporation, on behalf of itself and the Funds, hereby
adopts this Agreement and Plan of Reorganization (the "Agreement") pursuant to
Section 368(a)(1) of the Code as follows: The reorganization will be comprised
of the acquisition by Davis New York Venture Fund of substantially all of the
assets of Davis Growth & Income Fund in exchange for shares of Davis New York
Venture Fund and the assumption by Davis New York Venture Fund of certain
liabilities of Davis Growth & Income Fund, followed by the distribution of such
Class A, Class B, Class C and Class Y shares of Davis New York Venture Fund to
the respective Class A, Class B, Class C and Class Y shareholders of Davis
Growth & Income Fund in exchange for their Class A, Class B, Class C and Class
Y shares of Davis Growth & Income Fund, all upon and subject to the terms of
the Agreement hereinafter set forth.
The share transfer books of Davis Growth & Income Fund will be permanently
closed at the close of business on the Valuation Date (which shall be the
business day preceding the Closing Date, as later defined), and only redemption
requests received in proper form on or prior to the close of business on the
Valuation Date shall be honored by Davis Growth & Income Fund; redemption
requests received by Davis Growth & Income Fund after that date shall be
treated as requests for the redemption of the shares of Davis New York Venture
Fund to be distributed to the shareholder in question as provided in Section 6
hereof.
2. Shareholder Meeting and Proxy Statement/Prospectus. A meeting of the
shareholders of Davis Growth & Income Fund shall be called for the purpose of
acting upon and authorizing the transactions contemplated in this Agreement.
Davis New York Venture Fund agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act which shall contain a preliminary
form of proxy statement and prospectus contemplated by Rule 145 under the 1933
Act (the "Proxy Statement and Prospectus"). Each Fund agrees that it will use
its best efforts to have such Registration Statement declared effective and to
supply such information concerning itself for inclusion in the Proxy Statement
and Prospectus as may be necessary or desirable in this connection.
3. Transfer of Assets. On the Closing Date (as hereinafter defined), all of the
assets of Davis Growth & Income Fund on that date, excluding a cash reserve
(the "Cash Reserve") to be retained for the benefit of Davis Growth & Income
Fund, sufficient in its discretion for the payment of the expenses of Davis
Growth & Income Fund's dissolution and its liabilities, but not in excess of
the amount contemplated by Section 11.E. hereof, shall be delivered as provided
in Section 9 to Davis New York Venture Fund, in exchange for and against
delivery to Davis Growth & Income Fund on the Closing Date of a number of Class
A, Class B, Class C and Class Y shares of Davis New York Venture Fund, having
an aggregate net asset value equal to the value of the assets of Davis Growth &
Income Fund so transferred and delivered.
4. Calculation of Net Asset Value, Declaration of Dividends. (a) The net asset
value of Class A, Class B, Class C and Class Y shares of Davis New York Venture
Fund and the value of the assets of Davis Growth & Income Fund to be
transferred shall in each case be determined as of the close of business of The
New York Stock Exchange on the Valuation Date. The computation of the net asset
value of the Class A, Class B, Class C and Class Y shares of Davis New York
Venture Fund and the Class A, Class B, Class C and Class Y shares of Davis
Growth & Income Fund and the valuation of the assets of Davis Growth & Income
Fund to be transferred to Davis New York Venture Fund, shall be done in the
manner used by the Corporation as of the Valuation Date, in accordance with
established valuation procedures and current prospectuses.
(b) Davis Growth & Income Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to Davis Growth & Income
Fund's shareholders all of Davis Growth & Income Fund's investment company
taxable income for taxable years ending on or prior to the Closing Date
(computed without regard to any dividends paid) and all of its net capital
gain, if any, realized in taxable years ending on or prior to the Closing Date
(after reduction for any capital loss carry-forward).
5. Closing. The closing (the "Closing") shall be at the offices of Davis
Selected Advisers, L.P. (the "Agent"), 2949 East Elvira Road, Suite 101,
Tucson, Arizona 85706 at 9:00 A.M. Eastern Standard Time on __xx__, 2001 or at
such other time or place as the Corporation may designate or as provided below
(the "Closing Date"). In the event that on the Valuation Date either Fund or
the Corporation has, pursuant to the Investment Company Act of 1940, as amended
(the "Act"), or any rule, regulation or order thereunder, suspended the
redemption of its shares or postponed payment therefore, the Closing Date shall
be postponed until the first business day after the date when any such
suspension or postponement has ceased; provided, however, that if such
suspension shall continue for a period of 60 days beyond the Valuation Date,
then the Corporation shall be permitted to terminate this Agreement.
6. Distribution of Davis New York Venture Fund Shares, Shareholder List. (a) In
conjunction with the Closing, Davis Growth & Income Fund shall distribute on a
pro rata basis to the shareholders of Davis Growth & Income Fund as of the
Valuation Date Class A, Class B, Class C and Class Y shares of Davis New York
Venture Fund received by Davis Growth & Income Fund on the Closing Date in
exchange for the assets of Davis Growth & Income Fund in complete liquidation
of Davis Growth & Income Fund. For the purpose of the distribution by Davis
Growth & Income Fund of Class A, Class B, Class C and Class Y shares of Davis
New York Venture Fund to Davis Growth & Income Fund's shareholders, Davis New
York Venture Fund will promptly cause its transfer agent to: (a) credit an
appropriate number of Class A, Class B, Class C and Class Y shares of Davis New
York Venture Fund on the books of Davis New York Venture Fund to each Class A,
Class B, Class C and Class Y shareholder of Davis Growth & Income Fund in
accordance with a list (the "Shareholder List") of Davis Growth & Income Fund
shareholders received from Davis Growth & Income Fund; and (b) confirm an
appropriate number of Class A, Class B, Class C and Class Y shares of Davis New
York Venture Fund to each Class A, Class B, Class C and Class Y shareholder of
Davis Growth & Income Fund.
(b) The Shareholder List shall indicate, as of the close of business on the
Valuation Date, the name and address of each shareholder of Davis Growth &
Income Fund, indicating his or her share balance. Davis Growth & Income Fund
agrees to supply the Shareholder List to Davis New York Venture Fund not later
than the Closing Date.
7. Cash Reserve. Within one year after the Closing Date, the Corporation shall
(a) either pay or make provision for payment of all of the liabilities and
taxes of the Davis Growth & Income Fund from the Cash Reserve, and (b) either
(i) transfer any remaining amount of the Cash Reserve to Davis New York
Venture Fund, if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined below) or (ii)
distribute such remaining amount pro rata to the shareholders of Davis Growth &
Income Fund on the Valuation Date. Such remaining amount shall be deemed to be
material if the amount to be distributed, after deduction of the estimated
expenses of the distribution, equals or exceeds one cent per share of Davis
Growth & Income Fund outstanding on the Valuation Date.
8. Coordination of Investment Portfolios. Prior to the Closing Date, there
shall be coordination between the respective Funds as to their respective
portfolios so that, after the Closing, Davis New York Venture Fund will be in
compliance with all of its investment policies and restrictions. At the
Closing, Davis Growth & Income Fund shall deliver to Davis New York Venture
Fund a list setting forth the securities then owned by Davis Growth & Income
Fund, and setting forth the respective federal income tax basis thereof.
9. Ownership of Portfolio Securities. Portfolio securities or written evidence
acceptable to Davis New York Venture Fund of record ownership thereof by The
Depository Trust Company or through the Federal Reserve Book Entry System or
any other depository approved by Davis Growth & Income Fund shall be endorsed
and delivered, or transferred by appropriate transfer or assignment documents,
by Davis Growth & Income Fund on the Closing Date to Davis New York Venture
Fund, or at its direction, to its custodian bank, in proper form for transfer
in such condition as to constitute good delivery thereof in accordance with the
custom of brokers and shall be accompanied by all necessary state transfer
stamps, if any. The cash delivered shall be in the form of certified or bank
cashiers' checks or by bank wire or intra-bank transfer payable to the order of
Davis New York Venture Fund for the account of Davis New York Venture Fund.
Class A, Class B, Class C and Class Y shares of Davis New York Venture Fund
representing the number of Class A, Class B, Class C and Class Y shares of
Davis New York Venture Fund being delivered against the assets of Davis Growth
& Income Fund, registered in the name of Davis Growth & Income Fund, shall be
transferred to Davis Growth & Income Fund on the Closing Date. Such shares
shall thereupon be assigned by Davis Growth & Income Fund to its shareholders
so that the shares of Davis New York Venture Fund may be distributed as
provided in Section 6.
If, at the Closing Date, Davis Growth & Income Fund is unable to make delivery
under this Section 9 to Davis New York Venture Fund of any of its portfolio
securities or cash for the reason that any of such securities purchased by
Davis Growth & Income Fund, or the cash proceeds of a sale of portfolio
securities, prior to the Closing Date have not yet been delivered to it or
Davis Growth & Income Fund's custodian, then the delivery requirements of this
Section 9 with respect to said undelivered securities or cash will be waived
and Davis Growth & Income Fund will deliver to Davis New York Venture Growth &
Income Fund by or on the Closing Date with respect to said undelivered
securities or cash executed copies of an agreement or agreements of assignment
in a form reasonably satisfactory to Davis New York Venture Fund, together with
such other documents, including a due bill or due bills and brokers'
confirmation slips as may reasonably be required by Davis New York Venture
Fund.
10. Expenses. Davis New York Venture Fund shall not assume the liabilities of
Davis Growth & Income Fund, except for portfolio securities purchased which
have not settled and for shareholder redemption and dividend checks
outstanding. Davis Growth & Income Fund will, nevertheless, use its best
efforts to discharge all known liabilities, so far as may be possible, prior to
the Closing Date. The cost of printing and mailing the proxies and proxy
statements will be borne by Davis Growth & Income Fund. Any documents, such as
existing prospectuses or annual reports, that are included in that mailing will
be a cost of the Fund issuing the document. Any other out-of-pocket expenses of
Davis New York Venture Fund and Davis Growth & Income Fund associated with this
reorganization, including legal, accounting and transfer agent expenses, will
be borne by Davis Growth & Income Fund and Davis New York Venture Fund,
respectively, in the amounts so incurred by each, or, if named collectively by
both Funds, will be shared equally.
11. Conditions of Davis New York Venture Fund. The obligations of Davis New
York Venture Fund hereunder shall be subject to the following conditions:
A. The Board of Directors of the Corporation shall have authorized the
execution of the Agreement, and the shareholders of Davis Growth & Income Fund
shall have approved the Agreement and the transactions contemplated hereby, and
Davis Growth & Income Fund shall have furnished to Davis New York Venture Fund
copies of resolutions to that effect certified by the Secretary or the
Assistant Secretary of the Corporation; such shareholder approval shall have
been by the affirmative vote required by the Maryland General Corporation Law
and its charter documents at a meeting for which proxies have been solicited.
B. Davis Growth & Income Fund shall have received an opinion of counsel to the
Corporation, dated the Closing Date, to the effect that (i) Davis Growth &
Income Fund is an authorized series of Davis New York Venture Fund, Inc., a
corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland with full corporate powers to carry on its
business as then being conducted and to enter into and perform the Agreement;
and (ii) that all corporate action necessary to make the Agreement, according
to its terms, valid, binding and enforceable on Davis Growth & Income Fund and
to authorize effectively the transactions contemplated by the Agreement have
been taken by Davis Growth & Income Fund.
C. The representations and warranties of Davis Growth & Income Fund contained
herein shall be true and correct at and as of the Closing Date, and Davis New
York Venture Fund shall have been furnished with a certificate of the President
or a Vice President of the Corporation, dated the Closing Date, to that effect.
D. On the Closing Date, Davis Growth & Income Fund shall have furnished to
Davis New York Venture Fund a certificate of the Treasurer or Assistant
Treasurer of Davis Growth & Income Fund as to the amount of the capital loss
carry-over and net unrealized appreciation or depreciation, if any, with
respect to Davis Growth & Income Fund as of the Closing Date, and as to other
financial matters which may be reasonably requested on behalf of Davis New York
Venture Fund.
E. The Cash Reserve shall not exceed 10% of the value of the net assets, nor
30% in value of the gross assets, of Davis Growth & Income Fund at the close of
business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by the Corporation, on behalf of
Davis New York Venture Fund, under the Securities Act of 1933, as amended (the
"1933 Act"), shall have become effective under the 1933 Act.
G. On the Closing Date, Davis New York Venture Fund shall have received a
letter of an executive officer of Davis Selected Advisers, L.P. acceptable to
Davis New York Venture Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of the Closing
Date there were any material, actual or contingent liabilities of Davis Growth
& Income Fund arising out of litigation brought against Davis Growth & Income
Fund or claims asserted against it, or pending or to the best of his or her
knowledge threatened claims or litigation not reflected in or apparent from the
most recent audited financial statements and footnotes thereto of Davis Growth
& Income Fund delivered to Davis New York Venture Fund. Such letter may also
include such additional statements relating to the scope of the review
conducted by such person and his or her responsibilities and liabilities as are
not unreasonable under the circumstances.
H. Davis New York Venture Fund shall have received an opinion, dated the
Closing Date, to the same effect as contemplated by Section 12.E. of this
Agreement.
I. Davis New York Venture Fund shall have received at the Closing all of the
assets of Davis Growth & Income Fund to be conveyed hereunder, which assets
shall be free and clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever.
12. Conditions of Davis Growth & Income Fund. The obligations of Davis Growth &
Income Fund hereunder shall be subject to the following conditions:
A. The Board of Directors of the Corporation shall have authorized the
execution of the Agreement, and the transactions contemplated thereby, and
Davis New York Venture Fund shall have furnished to Davis Growth & Income Fund
copies of resolutions to that effect certified by the Secretary or the
Assistant Secretary of the Corporation.
B. Davis Growth & Income Fund's shareholders shall have approved the Agreement
and the transactions contemplated hereby, by an affirmative vote required by
the Maryland General Corporation Law and its charter documents, and Davis
Growth & Income Fund shall have furnished Davis New York Venture Fund copies of
resolutions to that effect certified by the Secretary or an Assistant Secretary
of the Corporation.
C. Davis Growth & Income Fund shall have received an opinion of counsel to the
Corporation, dated the Closing Date, to the effect that (i) Davis New York
Venture Fund is an authorized series of Davis New York Venture Fund, Inc., a
corporation organized, validly existing and in good standing under the laws of
the State of Maryland with full powers to carry on its business as then being
conducted and to enter into and perform the Agreement; (ii) all corporate
action necessary to make the Agreement, according to its terms, valid, binding
and enforceable upon Davis New York Venture Fund and to authorize effectively
the transactions contemplated by the Agreement have been taken by Davis New
York Venture Fund, and (iii) the shares of Davis New York Venture Fund to be
issued hereunder are duly authorized and when issued will be validly issued,
fully-paid and non-assessable.
D. The representations and warranties of Davis New York Venture Fund contained
herein shall be true and correct at and as of the Closing Date, and Davis
Growth & Income Fund shall have been furnished with a certificate of the
President or a Vice President of the Corporation to that effect dated the
Closing Date.
E. Davis Growth & Income Fund shall have received an opinion of a nationally
recognized accounting firm, the Corporation's legal counsel, or other legal
counsel reasonably acceptable to the Corporation's officers, to the effect that
the federal tax consequences of the transaction, if carried out in the manner
outlined in the Agreement and in accordance with (i) Davis Growth & Income
Fund's representation that to Davis Growth & Income Fund's best knowledge,
there is no plan or intention by any Davis Growth & Income Fund shareholder to
redeem, sell, exchange or otherwise dispose of a number of Davis New York
Venture Fund shares received in the transaction that would reduce Davis Growth
& Income Fund shareholders' ownership of Davis New York Venture Fund shares to
a number of shares having a value, as of the Closing Date, of less than 50% of
the value of all of the formerly outstanding Davis Growth & Income Fund shares
as of the same date, and (ii) the representation by each of Davis Growth &
Income Fund and Davis New York Venture Fund that, as of the Closing Date, Davis
Growth & Income Fund and Davis New York Venture Fund will qualify as regulated
investment companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code, will be substantially as follows:
i. The transactions contemplated by the Agreement will qualify as a
tax-free "reorganization" within the meaning of Section 368(a)(1) of the
Code, and under the regulations promulgated thereunder.
ii. Davis Growth & Income Fund and Davis New York Venture Fund will each
qualify as a "party to a reorganization" within the meaning of Section
368(b)(2) of the Code.
iii. No gain or loss will be recognized by the shareholders of Davis
Growth & Income Fund upon the distribution of Class A, Class B, Class C
and Class Y shares of beneficial interest in Davis New York Venture Fund
to the shareholders of Davis Growth & Income Fund pursuant to Section 354
of the Code.
iv. Under Section 361(a) of the Code, no gain or loss will be recognized
by Davis Growth & Income Fund by reason of the transfer of substantially
all its assets in exchange for Class A, Class B, Class C and Class Y
shares of Davis New York Venture Fund.
v. Under Section 1032 of the Code, no gain or loss will be recognized by
Davis New York Venture Fund by reason of the transfer of substantially all
of Davis Growth & Income Fund's assets in exchange for Class A, Class B,
Class C and Class Y shares of Davis New York Venture Fund and Davis New
York Venture Fund's assumption of certain liabilities of Davis Growth &
Income Fund.
vi. The shareholders of Davis Growth & Income Fund will have the same tax
basis and holding period for the Class A, Class B, Class C and Class Y
shares of beneficial interest in Davis New York Venture Fund that they
receive as they had for Davis Growth & Income Fund shares that they
previously held, pursuant to Section 358(a) and 1223(1), respectively, of
the Code.
vii. The securities transferred by Davis Growth & Income Fund to Davis New
York Venture Fund will have the same tax basis and holding period in the
hands of Davis New York Venture Fund as they had for Davis Growth & Income
Fund, pursuant to Section 362(b) and 1223(1), respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value of the net assets, nor
30% in value of the gross assets, of Davis Growth & Income Fund at the close of
business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by the Corporation, on behalf of
Davis New York Venture Fund, under the 1933 Act, containing a preliminary form
of the Proxy Statement and Prospectus, shall have become effective under the
1933 Act.
H. On the Closing Date, Davis Growth & Income Fund shall have received a letter
of an executive officer of Davis Selected Advisers, L.P. acceptable to Davis
Growth & Income Fund, stating that nothing has come to his or her attention
which in his or her judgment would indicate that as of the Closing Date there
were any material, actual or contingent liabilities of Davis New York Venture
Fund arising out of litigation brought against Davis New York Venture Fund or
claims asserted against it, or pending or, to the best of his or her knowledge,
threatened claims or litigation not reflected in or apparent by the most recent
audited financial statements and footnotes thereto of Davis New York Venture
Fund delivered to Davis Growth & Income Fund. Such letter may also include such
additional statements relating to the scope of the review conducted by such
person and his or her responsibilities and liabilities as are not unreasonable
under the circumstances.
I. Davis Growth & Income Fund shall acknowledge receipt of the Class A, Class
B, Class C and Class Y shares of Davis New York Venture Fund.
13. Representations of Davis Growth & Income Fund. Davis Growth & Income Fund
hereby represents and warrants that:
A. The financial statements of Davis Growth & Income Fund as of July 31, 2001
(audited), will present fairly the financial position, results of operations,
and changes in net assets of Davis Growth & Income Fund as of that date, in
conformity with generally accepted accounting principles applied on a basis
consistent with the preceding year; and that from July 31, 2001, through the
Closing Date there will not be any material adverse change in the business or
financial condition of Davis Growth & Income Fund, it being agreed that a
decrease in the size of Davis Growth & Income Fund due to a diminution in the
value of its portfolio and/or redemption of its shares shall not be considered
a material adverse change;
B. Contingent upon approval of the Agreement and the transactions contemplated
thereby by Davis Growth & Income Fund's shareholders, Davis Growth & Income
Fund has authority to transfer all of the assets of Davis Growth & Income Fund
to be conveyed hereunder free and clear of all liens, encumbrances, security
interests, restrictions and limitations whatsoever;
C. The Davis Growth & Income Fund Prospectus, as amended and supplemented,
contained in the Corporation's Registration Statement under the 1933 Act, as
amended, is true, correct and complete, conforms to the requirements of the
1933 Act and does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading;
D. There is no material contingent liability of Davis Growth & Income Fund and
no material claim and no material legal, administrative or other proceedings
pending or, to the knowledge of Davis Growth & Income Fund, threatened against
Davis Growth & Income Fund, not reflected in such Prospectus;
E. Except for the Agreement, there are no material contracts outstanding to
which the Corporation, on behalf of Davis Growth & Income Fund, is a party
other than those ordinary in the conduct of its business;
F. Davis Growth & Income Fund is an authorized series of the Corporation, a
Maryland corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland; and has all necessary and material
federal and state authorizations to own all of its assets and to carry on its
business as now being conducted;
G. All federal and other tax returns and reports required by law to be filed on
behalf of Davis Growth & Income Fund have been filed, and all federal and other
taxes shown due on said returns and reports have been paid or provision shall
have been made for the payment thereof, and to the best of the knowledge of
Davis Growth & Income Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the extent
such tax returns with respect to the taxable year of Davis Growth & Income Fund
ended July 31, 2001, have not been filed, such returns will be filed when
required and the amount of tax shown as due thereon shall be paid when due; and
H. The Corporation has elected to be treated as a regulated investment company
and, for each fiscal year of its operations, Davis Growth & Income Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a series of a regulated investment company and Davis Growth & Income Fund
intends to meet such requirements with respect to its current taxable year.
14. Representations of Davis New York Venture Fund. Davis New York Venture Fund
hereby represents and warrants that:
A. The financial statements of Davis New York Venture Fund as of July 31, 2001
(audited), will present fairly the financial position, results of operations,
and changes in net assets of Davis New York Venture Fund, as of that date, in
conformity with generally accepted accounting principles applied on a basis
consistent with the preceding year; and that from July 31, 2001, through the
Closing Date there will not be, any material adverse changes in the business or
financial condition of Davis New York Venture Fund, it being understood that a
decrease in the size of Davis New York Venture Fund due to a diminution in the
value of its portfolio and/or redemption of its shares shall not be considered
a material or adverse change;
B. The Davis New York Venture Prospectuses, as amended and supplemented,
contained the Corporation's Registration Statement under the 1933 Act, is true,
correct and complete, conforms to the requirements of the 1933 Act and does not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading;
C. There is no material contingent liability of Davis New York Venture Fund and
no material claim and no material legal, administrative or other proceedings
pending or, to the knowledge of Davis New York Venture Fund, threatened against
Davis New York Venture Fund, not reflected in such Prospectus;
D. Except for this Agreement, there are no material contracts outstanding to
which the Corporation, on behalf of Davis New York Venture Fund, is a party
other than those ordinary in the conduct of its business;
E. Davis New York Venture Fund is an authorized series of the Corporation, a
corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland; Davis New York Venture Fund has all necessary
and material federal and state authorizations to own all its properties and
assets and to carry on its business as now being conducted; and the Class A,
Class B, Class C and Class Y shares
of Davis New York Venture Fund which it issues to Davis Growth & Income Fund
pursuant to the Agreement will be duly authorized, validly issued, fully-paid
and non-assessable, will conform to the description thereof contained in the
Corporation's Registration Statement and will be duly registered under the 1933
Act and in the states where registration is required;
F. All federal and other tax returns and reports required by law to be filed on
behalf of Davis New York Venture Fund have been filed, and all federal and
other taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the knowledge
of Davis New York Venture Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the extent
such tax returns with respect to the taxable year of Davis New York Venture
Fund ended July 31, 2001, have not been filed, such returns will be filed when
required and the amount of tax shown as due thereon shall be paid when due;
G. The Corporation has elected to be treated as a regulated investment company
and, for each fiscal year of its operations, Davis New York Venture Fund has
met the requirements of Subchapter M of the Code for qualification and
treatment as a series of a regulated investment company and Davis New York
Venture Fund intends to meet such requirements with respect to its current
taxable year;
H. Davis New York Venture Fund has no plan or intention (i) to dispose of any
of the assets transferred by Davis Growth & Income Fund, other than in the
ordinary course of business, or (ii) to redeem or reacquire any of the Class A,
Class B, Class C and Class Y shares issued by it in the reorganization other
than pursuant to valid requests of shareholders; and
I. After consummation of the transactions contemplated by the Agreement, Davis
New York Venture Fund intends to operate its business in a substantially
unchanged manner.
15. Mutual Representations. Each Fund hereby represents to the other that no
broker or finder has been employed by it with respect to the Agreement or the
transactions contemplated hereby. Each Fund also represents and warrants to the
other that the information concerning it in the Proxy Statement and Prospectus
will not as of its date contain any untrue statement of a material fact or omit
to state a fact necessary to make the statements concerning it therein not
misleading and that the financial statements concerning it will present the
information shown fairly in accordance with generally accepted accounting
principles applied on a basis consistent with the preceding year. Each Fund
also represents and warrants to the other that the Agreement is valid, binding
and enforceable in accordance with its terms and that the execution, delivery
and performance of the Agreement will not result in any violation of, or be in
conflict with, any provision of any charter, by-laws, contract, agreement,
judgment, decree or order to which it is subject or to which it is a party.
16. Nonsurvival of Warranties; Termination of Series. The representations and
warranties in or pursuant to this Agreement shall not survive the
Reorganization. As promptly as is reasonably practicable after the liquidation
of Davis Growth & Income Fund, the authority to issue shares of Davis Growth &
Income Fund, and its classes, shall be terminated by an amendment to the
Corporation's Articles of Incorporation.
17. Termination. The Corporation, on its behalf or on behalf of either Fund,
may abandon and terminate the Agreement for any reason and there shall be no
liability for damages or other recourse available to a Fund not so terminating
this Agreement, provided, however, that in the event that a Fund shall cause
this Agreement to be terminated without reasonable cause, the Fund so
terminating shall, upon demand, reimburse the other Fund for all expenses,
including reasonable out-of-pocket expenses and fees incurred in connection
with this Agreement.
18. Counterparts. The Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all taken together shall constitute
one Agreement. The rights and obligations of each party pursuant to the
Agreement shall not be assignable.
19. Entire Agreement, Amendments. All prior or contemporaneous agreements and
representations are merged into the Agreement, which constitutes the entire
contract. No amendment or modification hereof shall be of any force and effect
unless in writing and signed by the Corporation on behalf of both Funds.
20. Directors, Officers and Shareholders Not Liable. (a) Davis New York Venture
Fund agrees that the obligations of Davis Growth & Income Fund under the
Agreement are not binding upon any director, officer or shareholder of the
Corporation personally, but bind only Davis Growth & Income Fund's property.
(b) Davis Growth & Income Fund agrees that the obligations of Davis New York
Venture Fund under the Agreement are not binding upon any director, officer or
shareholder of the Corporation personally, but bind only Davis New York Venture
Fund's property.
(c) Nothing in this Agreement, expressed or implied, is intended to confer upon
any other person or entity any rights or remedies by reason of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to be executed
and attested by its officers thereunto duly authorized on the date first set
forth above.
DAVIS NEW YORK VENTURE FUND, INC.
on behalf of its series
DAVIS GROWTH & INCOME FUND
----------------------------
By: Sharra Reed
Vice President and Treasurer
DAVIS NEW YORK VENTURE FUNDS, INC.
on behalf of its series
DAVIS NEW YORK VENTURE FUND
--------------------------
By: Thomas Tays
Vice President and Secretary
EXHIBIT D
DAVIS NEW YORK VENTURE FUND
AND
DAVIS GROWTH & INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2001
Total return assumes reinvestment of dividends and capital gain distributions.
Past performance is not a guarantee of future results. Investment return and
principal value will vary so that, when redeemed, an investor's shares may be
worth more or less than when purchased. Below are the average annual total
returns for Davis New York Venture Fund and Davis Growth & Income Fund by Class
of shares.
An explanation of the different performance calculations is set forth in the
fund's shared Statement of Additional Information.
Each fund's average annual total return includes the applicable sales charge
for Class A, Class B and Class C shares: For Class A, the current maximum
initial sales charge of 4.75%; for Class B, the contingent deferred sales
charges of 4% (1 year), 3% (3 year), 2% (5 year) and 0% (10 years or longer);
for Class C, the contingent deferred sales charge of 1% (1 year). Because the
fund's Class B shares convert to Class A shares eight years after purchase,
Class B "life-of-class" performance does not include any contingent deferred
sales charge on redemption and uses Class A performance for the period after
conversion. There is no sales charge for Class Y shares.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED MAY 31, 2001
1-YEAR 3-YEAR 5-YEAR 10-YEAR LIFE OF CLASS
------ ------ ------ ------- -------------
DNYVF CLASS A
DGIF CLASS A
DNYVF CLASS B
DGIF CLASS B
DNYVF CLASS C
DGIF CLASS C
DNYVF CLASS Y
DGIF CLASS Y
EXHIBIT E
DAVIS NEW YORK VENTURE FUND
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2001
Comparison of Change in Value of $10,000, Hypothetical Investments in: Davis
New York Venture Fund and Standard & Poor's 500 Index.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. An explanation of the different
performance calculations is in the Fund's prospectus.
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
CLASS A SHARES
[Ten Year Performance Graph of DNYVF Class A shares versus the S&P 500 Index]
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT MAY 31, 2001
1-YEAR 5-YEAR 10-YEAR LIFE OF CLASS 02/17/69
- ------------ ------------- ------------- ---------- -----------------------
DNYVF xx% xx% xx% xx%
S&P 500 xx% xx% xx% xx%
- ------------ ------------- ------------- ---------- -----------------------
Class A returns include the current maximum initial sales charge of 4.75%.
CLASS B SHARES
[Life of Class Performance Graph of DNYVF Class B shares versus the S&P 500
Index]
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT MAY 31, 2001
1-YEAR 5-YEAR 10-YEAR LIFE OF CLASS 12/01/94
- ------------ ------------- ------------- ---------- -----------------------
DNYVF xx% xx% xx% xx%
S&P 500 xx% xx% xx% xx%
- ------------ ------------- ------------- ---------- -----------------------
Class B returns include the applicable contingent deferred sales charge of 4%
(1-year), 2% (5-year) and 0% (since inception).
CLASS C SHARES
[Life of Class Performance Graph of DNYVF Class C shares versus the S&P 500
Index]
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT MAY 31, 2001
1-YEAR 5-YEAR 10-YEAR LIFE OF CLASS 12/20/94
- ------------ ------------- ------------- ---------- -----------------------
DNYVF xx% xx% xx% xx%
S&P 500 xx% xx% xx% xx%
- ------------ ------------- ------------- ---------- -----------------------
Class C returns include the contingent deferred sales charge of 1% for the
1-year period.
CLASS Y SHARES
[Life of Class Performance Graph of DNYVF Class Y shares versus the S&P 500
Index]
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT MAY 31, 2001
1-YEAR 5-YEAR 10-YEAR LIFE OF CLASS 10/02/96
- ------------ ------------- ------------- ---------- -----------------------
DNYVF xx% xx% xx% xx%
S&P 500 xx% xx% xx% xx%
- ------------ ------------- ------------- ---------- -----------------------
Class Y shares are offered only to certain institutional investors under
special agreement with the Distributor.
DAVIS NEW YORK VENTURE FUND
PROXY/PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
__XX__, 2001
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706
1.800.279.0279
This Proxy/Prospectus Statement of Additional Information is not a Prospectus.
This document contains additional information about Davis New York Venture Fund
and supplements information in the Proxy Statement and Prospectus dated __xx__,
2001. It should be read together with the Proxy Statement and Prospectus, which
may be obtained without charge by the Davis Funds at 2949 East Elvira Road,
Suite 101, Tucson, Arizona 85706 or calling Davis Funds Shareholder Services at
1.800.279.2279
This Proxy/Prospectus Statement of Additional Information of Davis New York
Venture Fund, Inc. consists of this cover page and the below listed documents.
Each of the documents is incorporated by reference to the documents filed by
Davis New York Venture Fund, Inc. (1933 Act Number 2-29858, CIK Number
0000071701) on EDGAR on the dates indicated. Shareholders may request paper
copies of each of the following documents by calling Davis Funds Shareholder
Services at 1-800-279-0279.:
1. Davis New York Venture Fund Prospectus for Class A, B, and C shares dated
December 1, 2000 (485B POS filed on Edgar 11/30/00).
2. Davis New York Venture Fund Prospectus for Class Y shares dated December 1,
2000 (485B POS filed on Edgar 11/30/00).
3. Davis Growth & Income Fund for Class A,B, and C shares dated December 1,
2000, as amended June 18, 2001 (485B POS filed on Edgar 11/30/00, 497 filed on
Edgar 06/18/01).
4. Davis Growth & Income Fund for Class Y shares dated December 1, 2000, as
amended June 18, 2001 (485B POS filed on Edgar 11/30/00, 497 filed on Edgar
06/18/01).
5. Davis New York Venture Fund and Davis Growth & Income Fund shared Statement
of Additional Information dated December 1, 2000, as amended July 23, 2001
(485B POS filed on Edgar 11/30/00, 497 filed on Edgar 06/18/01).
6. Davis New York Venture Fund Annual Report as of July 31, 2000 (N-30D filed
on Edgar 10/02/00).
7. Davis New York Venture Fund Semi-Annual Report as of January 31, 2001 (N-30D
filed on Edgar 03/29/01).
8. Davis Growth & Income Fund Annual Report as of July 31, 2000 (N-30D filed on
Edgar 10/02/00).
9. Davis Growth & Income Fund Semi-Annual Report as of January 31, 2001(N-30D
filed on Edgar 03/29/01).
DAVIS NEW YORK VENTURE FUND, INC.
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Davis New York Venture Fund, Inc.'s Articles of Incorporation indemnifies its
directors, officers and employees to the full extent permitted by Section 2-418
of the Maryland General Corporation Law, subject only to the provisions of the
Investment Company Act of 1940. The indemnification provisions of the Maryland
General Corporation Law (the "Law") 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, Davis New York Venture Fund, Inc.'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 Davis New York Venture
Fund's adviser.
In addition to the foregoing indemnification, Davis New York Venture Fund
Inc.'s Articles of Incorporation exculpate directors and officers with respect
to monetary damages except to the extent that an individual actually received
an improper benefit in money property or services or to the extent that a final
adjudication finds that the individual acted with active and deliberate
dishonesty.
Item 16. Exhibits
(1)(a) Articles of Incorporation. Amended and Restated Articles of
Incorporation of Davis New York Venture Fund, Inc., incorporated by reference
to Exhibit (1) of Registrant's registration statement 2-29858, filed on Edgar
April 4, 1996.
(1)(b) Articles of Amendment of Articles of Incorporation, limiting liability
of directors and officers, effective October 20, 1988, incorporated by
reference to Exhibit 23(a)(2) of Registrant's registration statement 2-29858,
filed on Edgar October 2, 2000.
(1)(c) Articles of Amendment, regarding stock classification, net asset value
calculation and shareholder voting, dated August 29, 1994, incorporated by
reference to Exhibit 23(a)(3) of Registrant's registration statement 2-29858,
filed on Edgar October 2, 2000.
(1)(d) Articles of Amendment, changing name from New York Venture Fund, Inc.,
to Davis New York Venture Fund, Inc., effective October 1, 1995, incorporated
by reference to Exhibit 23(a)(4) of Registrant's registration statement
2-29858, filed on Edgar October 2, 2000.
(1)(c) Articles Supplementary to Articles of Incorporation, designating the
Davis Growth & Income Fund, incorporated by reference to Exhibit 23(a)(3) of
Registrant's registration statement 2-29858, filed on Edgar November 30, 1999.
C-I
(2) By-laws. Amended and Restated Bylaws, incorporated by reference to Exhibit
(2) of Registrant's registration statement 2-29858, filed on Edgar December 1,
1997.
(3) Voting Trust Agreement. Not applicable.
(4) Copy of Agreement and Plan of Reorganization. Incorporated by reference to
Exhibit C to the Proxy Statement included in this filing.
(5) Instruments Defining Rights of Security Holders. Not applicable.
(6)(a) Copies of Investment Advisory Contracts. Investment Advisory Agreement
with Davis Selected Advisers, L.P., dated January 1, 2001. incorporated by
reference to Exhibit (d)(1) of Registrant's registration statement 2-29858,
filed on Edgar November 30, 2000.
(6)(b) Sub-Advisory Agreement between Davis Selected Advisers, L.P., and Davis
Selected Advisers - NY, Inc., dated January 1, 2001, incorporated by reference
to Exhibit (d)(2) of Registrant's registration statement 2-29858, filed on
Edgar November 30, 2000
(7)(a) Underwriting Contracts. Distributing Agreement, as amended effective
December 1, 1996, incorporated by reference to Exhibit (6) of Registrant's
registration statement 2-29858, filed on Edgar October 1, 1996.
(7)(b) Transfer and Assumption Agreement dated July 31, 1997, incorporated by
reference to Exhibit 23(6)(b) of Registrant's registration statement 2-29858,
filed on Edgar August 7, 1997.
(8) Bonus or Profit Sharing Contracts. Not applicable.
(9) Custodian Agreements. Custodian Contract, dated September 5, 2000,
incorporated by reference to Exhibit 23(g)(1) of Registrant's registration
statement 2-29858, filed on Edgar October 2, 2000.
(10) Rule 12b-1 Plan. Distribution Plans for Class A, B, and C shares, as
amended December 5, 2000. incorporated by reference to Exhibit (m)(1) of
Registrant's registration statement 2-29858, filed on Edgar November 30, 2000
(11) Legal Opinion and Consent Opinion and Consent of Counsel, (D'Ancona &
Pflaum LLC), to be filed by amendment.
(12) Tax Opinion and Consent. Tax Opinion (KPMG LLP), to be filed by amendment
(13) Material Contracts Not Made in the Ordinary Course of Business. Not
Applicable.
(14) Other Opinions. Not Applicable.
(15) Omitted Financial Statements. Not Applicable.
(16) Powers of Attorneys. Powers of Attorney for all directors to file this
Form N-1A, filed herein.
(17) Other Exhibits. Notice to shareholder letter, filed herein.
Item 17. Undertakings
(a) N/A.
(b) N/A.
C-II
DAVIS NEW YORK VENTURE FUND, INC.
SIGNATURES
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 Tucson and State of Arizona on the 12th day of July,
2001.
DAVIS NEW YORK VENTURE FUND, INC.
*By: /s/ Thomas Tays
--------------------
Thomas Tays
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
indicated.
Signature Title Date
--------- ----- ----
Christopher C. Davis* President, Chief November 28, 2000
- --------------------- Executive Officer
Christopher C. Davis
Sharra L. Reed* Principal Financial
- --------------------- Officer and Treasurer November 28, 2000
Sharr L. Reed
* By: /s/ Thomas Tays
---------------------
Thomas Tays
Attorney-in-Fact
*Thomas Tays signs this document on behalf of the Registrant and each of the
foregoing officers pursuant to the powers of attorney filed herein.
/s/ Thomas Tays
---------------------
Thomas Tays
Attorney-in-Fact
C-III
DAVIS NEW YORK VENTURE FUND, INC.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed on July 12, 2001, by the following persons in the
capacities indicated.
Signature Title
- --------- -----
Wesley E. Bass. Jr.(1) Director
- ---------------------------
Wesley E. Bass, Jr.
Jeremy H. Biggs* Director
- ---------------------------
Jeremy H. Biggs
Marc P. Blum* Director
- ---------------------------
Marc P. Blum
Andrew A. Davis* Director
- ---------------------------
Andrew A. Davis
Christopher C. Davis* Director
- ---------------------------
Christopher C. Davis
Jerry D. Geist* Director
- ---------------------------
Jerry D. Geist
D. James Guzy* Director
- ---------------------------
D. James Guzy
G. Bernard Hamilton* Director
- ---------------------------
G. Bernard Hamilton
Theodore B. Smith, Jr* Director
- ---------------------------
Theodore B. Smith, Jr.
Christian R. Sonne* Director
- ---------------------------
Christian R. Sonne
Marsha Williams* Director
- ---------------------------
Marsha Williams
* Thomas Tays signs this document on behalf of each of the foregoing persons
pursuant to the powers of attorney filed herein.
/s/ Thomas Tays
---------------------
Thomas Tays
Attorney-in-Fact
C-IV
EXHIBIT LIST
Exhibit (11) Power of Attorney
Exhibit (17) Shareholder Notice Letter